PWSC - Earnings call transcript Q4 2021 | PowerSchool Holdings, Inc.

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Operator

Good afternoon and evening, everyone, and welcome to PowerSchool's Fourth Quarter 2021 Earnings Conference Call.

As a reminder, today's call is being recorded and your participation implies consent to such recording. [Operator Instructions] With that, I would like to turn the call over to Alan Taylor, Investor Relations. Thank you, sir. Please begin.

Alan Taylor

you. Thank and call joining and for ended XX, everyone, financial for fiscal you December conference results the XXXX. thank evening, us for PowerSchool's year Good fourth quarter

and have CEO, we today, call Shander. the Hardeep On Gulati; CFO, Eric PowerSchool's

and a the we statements. regarding for expected portion the future This Before forward-looking include company Q&A forward-looking call, the results disclaimer may to are including statements allow statements. me of begin, therefore provide forward-looking call, related our to

due subject to differ uncertainties. earnings may materially described filings. projections will include SEC risks uncertainties from results Today's in other number actual and also a our references The that Our of forward-looking to our and non-GAAP risks to and measures. remarks statements release are are financial

and GAAP between to on the reconciliations provided in PowerSchool's information financial investors.powerschool.com. financial at press site is issues release is the corresponding non-GAAP Investor Additional which posted information information Relations

will through review Hardeep for will In available replay financials through conference this then PowerSchool's take fourth webcast to of begin call will year quarter proceed of and Q&A. you via highlights. addition, before the review full website. Eric be with same a the we a

turn made our call free presentation Events in presentation earnings Presentations section the over along with please and follow and to that, of We available now to With also Investor have I'll so an website, the Hardeep. Relations the feel download call. today's

Hardeep Gulati

fourth XX% $XXX.X of fourth an million the foundation our Alan, exceeded momentum an finishing and Thanks, revenue of our XXXX. EBITDA. for and a revenue everyone. growth of outstanding with year of end $XX.X margin quarter, million, growth for revenue EBITDA XX%. and continued into both strong delivered We adjusted top evening, quarter, for had range PowerSchool guidance laying our adjusted a and the and the good We

For revenue XX% full growth. a in record million or we $XXX year, delivered the year-over-year

our the Our durability scale margin adjusted highlight results XX%. of of and business. a EBITDA million, the These of $XXX

XXXX. we like and as XXXX. guidance spend beyond. sharing dimensions about as market, is well. changing the of a our sell K-XX cross-sell. Eric Our K-XX as XXXX to growth points differentiate us child. time other empower can our SCL base our products, more needs for to business show digitally continues which inarguable fuels of the improving many and industry-leading offerings ability that footprint leadership I'd strategy years look new customer presence vendor solutions, unified growth proof teachers, North that for our customers our momentum platform ways solution breadth, to giving in customers enter offer durable and confidence within for our SaaS exciting long-term to engine providing every match and of our today that the customers, some large outcomes integrated in results acquisition details we the for meet well We to for continue more education multiple our platform that our we No Personally, will about parents our I'll opportunity to opportunity and working financial move for educators market create depth Kickboard us our and and market, position communication for America. comprehensive to expanding platform and opportunity, best-in-class cross-sell in Kinvolved solutions K-XX share our offer approach vectors students opportunities and our can and to This and on stability, now as latest the growth including business across XX significant platform, momentum talk as adding expand more within updates to whom key transform, highlight the

we that very K-XX market. first represents in start the large the spend. resilient. key the public second an and dimension, discretionary category Let's K-XX update U.S. largest market North spend is on serve with American Education The

it and steadily products. the grown K-XX fast-growing and inflationary funding estimates grow their spending expected today. down small funding. $XX a schools is seen X% largely by CAGR spend look at further, at and districts is creating billion currently from but or K-XX in you is XXXX. budget IT billion bipartisan, environment, of from recently in Breaking our turn, over interest-related has many relatively years. this for the external external by the to in increased If pressures a insulated spend industries IT-related the for mostly U.S. protected part for Gartner Canada And largely XXXX and, $XX Education in last it noncyclical a to XX

additional will market largely ESSER in is few provide funds, the III additional still over from the the which of benefit and next billion unspent funding $XXX years. will much Additionally,

We currently We I'd end K-XX. in update million added cloud customers are X% this about X,XXX XXXX. Second, We opportunity of position, see represents spend. software growth penetration to XX on and and fuels leadership share the opportunity paper-based Gartner K-XX population processes, representing XX% we fragmented like student growth over ahead considering U.S. a we an or in cases product solutions. only This solutions continued relatively have our the customers, K-XX the for position with roughly legacy frequent platform. our our low Canada. portfolio. customers across reach the rates our incredible of XX,XXX see across mainly estimated you the the K-XX market, replacing certainly Through over enjoy reach leadership on software. the in market of these over North American since our students, clear expansive market-leading for We Even where market portfolio of

exciting we with Third, are success on to I'd seeing like strategy. our update the

working. is strategy cross-sell and platform Our

more X Over years, to that customers grew than products, the more just X,XXX in the a XX% increase over who past seen PowerSchool have from we or of a use X customers. number cohort X,XXX

which an products for across the our County stickiness creates strategy and in flywheel America. compounds North the ARR. unified platform to most fact, loyal This schools multiproduct effect other, in see increase nearly all value Utah. districts represent successes We're of a Take, these these continuing which half in the In for the Washington each customer from example, customers sizes now our of implementations as across and benefit solution.

As our students across with comprehensive about school using students, our largest of the in ERP, mission-critical our assessment, areas, Schoology ton they've Fourth, of monitoring our system, large strength of in school. XX% software our We the growth. during across including school-focused platform opportunity in XX,XXX Naviance high year-to-date U.S. are increase customers million PowerSchool diversified information across active extending and strategy multiple students we their a which saw our the platform of portfolio X% poster creates expand room XX is student usage, added LMS, year-over-year child using applications With of continue These with long-time of customer Naviance the over platform total, use vectors the us broad in within quite further K-XX. Maryland, reflect in capabilities to to is the systems a our of most Insights the customers X.X solution. year, our and middle They solution the time Arundel, a the formative performance seeing their their to growth Anne in into working. roughly from administrative representing QX captured XX,XXX management XX,XXX and fourth strategy. the district additional and products today for district. this Unified offer filed spend our for power a with of stories, front products success impact by college today, of solution, validate districts power XX implementation

give depth key recent conducted priorities variety to months need of XX confidence different next and us and the matter how survey customers lists K-XX our ability our challenges third-party for of grow functions. across no breadth Our evolve. in customers' a A the brand

position find You can our administrations must-have are to K-XX in we in believe presentation. address today. of critical We need earnings the unique most this a

Our customers ] identifying The districts awareness any for co-play about Insights unfinished the also to consideration PowerSchool elevated them the company. products. survey and learning, Take recognize their of brand many [ software XXXX, Assessment led double education on also focus and highest our which has shows this. of examples

for meet well needs are these student continue insights we future to and seeing needs. years, are positioned these We into

excited top U.S. a for addition school just their existing to X our products platform by district solution enrollment Matters In in Performance student fact, multiple share footprint. assessment selected to PowerSchool a in very district-wide assessment

We Department of recently Index challenges impact published key firm, saw a districts is customers COVID. from them teacher Talent shortage and retire. X equipment, retention select support all recruitment Unified seeing One and our stress well-being higher heightened student. holistic clearly manage academic, with the are to their XXXX. for system top who districts. talent our the attrition, a we for to a a behavioral the behavioral, in state behavior districts recently for acquired an focus support. emotional further special solution give Education integrated of providing of state. platform Kickboard, educator need a as of helps and that which facing staff X QX, in statewide are multi-tier priorities the of And years enable process innovating need holistic Talent in last we students third-party entire are the with view Survey from November, And shows today social hire identify our the Talent helps We're Unified to given the support teacher on also their the

community engagement and more way than time. support. this need Districts is and major equitable families the centralized, ever are challenging a with challenges that critical We student reach absenteeism are with seeing in seeing to

project mentioned earlier, us within SCL billion we workflows. a footprint Kickboard absenteeism and Our our and LMS new of assessment our system family need examples our base Kickboard last solution modern, utilizing and a need. market, most new we opportunity innovation us takes market investments and me global represents product expanding we for our cross-sell. to communication how address which turn to MTS to We recent extends February together, are competency-based of and portfolio, drive product point, growing our Kinvolved these Alongside attendance expand K-XX build in is market tie student this a learning I reducing a including latest SIS, are to addresses our to graduation X $XXX products acquisition the quickly this saw data better capabilities, All customer management have best-in-class for of student engagement their the manage a and and great addition districts for acquisition market learning as provide continue needs globally. outcome. [indiscernible] leveraging a intervention. engagement a way Kinvolved new help a capability, and massive opportunity personalized platform, the to in bringing in data continue Kinvolved and solution M&A, and to This platform SIS, the help our to Naviance launch and our academic focus and dollars formative foundations and planning across lake R&D developing improving and, to on into the these opportunity. my

the our multiple our expanding continue growth to us platform combination to the of business, game-changing The our Our transform from strategy, to the avenues leadership us lead platform drive and vision, opportunity front clear these to market, factors platform, the of the the large investments the to our allow innovation potential strong capture success, K-XX opportunity durability and in cross-sell the the to charge of shared, our position, globally. momentum speak towards education allowing and us. I the

the share and flow, platform. the key expand this evolution. accomplished. into clear (sic) our which schools XXXX rapid student With the well financial forward have Eric to data, cash pivotal guidance in of outcomes by XXXX. the better us into I'm goal and free also education all continue our I'll districts Eric? help gives and to update schools that, predictable through tools It generating I'm and over the time we real-time access about move to more to proud to it of and visibility extremely team and our and We for our to and districts invest future, to hand have growth change proud which, ability driving turn, profitable giving [XXXX] meaningful thriving to and for staff. is a unlocks provide

Eric Shander

Top line Thank Hardeep, XXXX. and strong, to was good everyone. you, We continued driven by strategic a M&A. our evening, had momentum performance and cross-sell great finish

future maintained adjusted revenue to costs growth, we company-related additional public included a investments EBITDA to growth. addition double-digit margin, as made well absorbing go-to-market as our In fuel strong we driving which

quarterly recurring For revenue the compensation the We of by than top organizations. our XX.X% delivered was guidance basis XX year, from versus the an company a annual end addition customer the expansion retention ended exceeded an and of our in on $X.X year our of EBITDA an Full the basis $XXX.X costs operating profit XXX.X%, net full ability an business by year-over-year, up XX.X% totaled stickiness XXX the year prior guidance X of year-over-year, basis, was million revenue, up operational line We flow the of a a which full an company-related included Margin within customer margin, the increase our and of free cloud We of revenue our margin, from the of XX.X% year. non-GAAP up rate performance, improved coupled adjusted driven support driven year million scale million. our strong $XXX prior $X.X million, top year-over-year products year was of base. which points Full our increase the XX.X% sequential gross increase year. balance public total to $XXX.X million revenue full prior with primarily points generated expenses On with year of both prior $XX.X highlighting model. XX% top XX% our stock-based higher or million and cash range or improvement point or beat million range across year, almost $XXX.X by approximately and million, profit million, $XXX.X the strength year. our was of a of or million, of expense. durability end was of on QX expand $XXX.X by operations $XXX.X and reflecting which XX% gross margin, basis, adjusted the points were

sheet, reduced significantly XX% leverage investing in our than equivalents, more business. million up In addition, in cash still $XX.X net we year and we cash our $XX.X million and significantly strengthened balance the ending prior the versus with while by our year,

driven top quarterly million, up Total guidance Services solutions. year-over-year and year-over-year, and our XX% support to across our which range. revenue the Subscription quarter margin, a for was points increased was the for improvement gross $XX.X million XX.X% fourth fourth came exceeded by Gross product quarter all were end million million, up XX% basis margin, up turning profit our year-over-year, year-over-year. $XXX.X an deployments. results, in non-GAAP On our the $XX.X quarter fourth or was of $XX.X at profit strong. the representing Now up million, totaled revenue year-over-year. $XXX.X adjusted points in by basis XX or revenue basis, XX% XX.X% growth XX of driven

or primarily from company-related fourth us R&D align quarter was and or customers million total their which operations. an to with expenses. driven on by million expense the was of for to reflects compared mission-critical $XX.X that anticipated making XX.X% was versus turning platform SG&A in expense the XX.X% year of Now public our revenue fourth costs. in we're to year support quarter the increase continued ago, capabilities the a investments a in revenue $XX.X which deliver products the XX.X% total XX.X% ago, for

at coming XX.X% or was range. end beating top $XX.X EBITDA [ ] guidance adjusted million of strong, margin, the our in Our

well over heading pleased the the profile. continue business we optimizing We few a investments company. within a on ended as us year with we into first had focus and to are the our position great a financial with stronger made fourth we XXXX and public XXXX. quarter The quarters Overall, performance

environment. We from and continue benefit a resilient to favorable funding

a product leadership fuels strategy sustainable a to have years remains market Our competitive for and come. cross-sell we that a platform broad advantage,

financial guidance. full and first turning Now to year quarter our XXXX

rate first to is for quarter We million EBITDA midpoint. $XX million, XX% the of in quarter expected million be $XX revenue the to year-over-year. of of representing a to range the the Adjusted deliver XX% million, expect first in at XX% to to growth total $XXX representing margin $XXX a

business, year, the For future. can [indiscernible] in and believe full our we range the into that guide operate continue we to well reflects the

to XX% lapped year-over-year million starting range We in representing March, growth. the expect Naviance fiscal note, in total to million, XX% Please full our of the year for of acquisition revenue the comparisons. year-over-year in $XXX we $XXX

growth, is in midpoint. primarily EBITDA representing a range million, recent adjusted of expected result, year revenue As year $XXX the organic $XXX million to margin Full our guidance given not is Kickboard adjusted Kinvolved acquisition be EBITDA most at of XX.X% a material. are and full to the

expect an flow fourth expected for another modeling improved for In the excludes million diluted shares. of million capital stage full which the the outstanding year balance cash expense debt be revenue we million million million expenditures, down of generation. PowerSchool off are of year. purposes, range shares For XXX Fully terms We our record approximately we software, capitalized year for approximately $X in share-based in that the a and compensation strong quarter significantly $XX paying cash capped to $XX for sheet, of and to XXX had closing, year generation. of setting to and

growing base environment us. platform significant as ways a have market-leading for and customer outcomes. opportunities unified systems, digitize improve resilient We and cross-sell student approach data their funding and provides remains position large K-XX for integrate to educators look our and

Our footprint into grow gives the Q&A? as our excited questions. and head now With long-term that, penetration market as you we're growth. the line please Operator, this call confidence up for opportunities XXXX. expansive share we product in low open we for happy invest us and for to I'm about ahead market will the open

Operator

William [Operator question of from Our comes first line Blair. the Sheldon with Instructions] Stephen

Stephen Sheldon

and nice here. guidance And results

demand that versus size guess, have First, capacity to of you how capacity as what a over of stood and the to you in And have and maybe the about the your this the year in now Do capitalize see XQ a can place do couple start stimulus case much the big team up sales ago? in share it at years? in next of you increase see point you start some XQ, to through pick flows system? funding, I where

Hardeep Gulati

Steve. Sure. Thanks,

You're absolutely right.

fair a there's bit demand. of think I

remember show, you every aspect of our the difference. road a from might [indiscernible] As we have

have We the a districts. largest the building way strategic

then have charter to sales entire an the [indiscernible] have within And base we We team, the enterprise and the regional. schools. results Insights selling district

you're a on [indiscernible] [indiscernible] We the is office. solution which solution key coverage sales have team, on we to also the back if based like the specific what the exciting pretty call selling

also as around resources doing We traditional have year-over-year, [indiscernible] reflecting and well. business from stock the sales and the support on coverage terms [indiscernible] core the of they're in

Stephen Sheldon

Yes, got other some catch there feedback didn't so that. just M&A there bad I to X I maybe was like It continues Okay, it. the all pipeline be strong. guess But sounds X.

So about the the how And thinking for pursue? to year? maybe this how stimulus M&A state can should investors what into school for you the targets visibility funds and potential plans decide be additional district influence

Hardeep Gulati

question. Great

our you right of As engine. of can X we that platform recent the is communication now entire really Most which really to on, our products continue second on of which the on because really, achieve how really kind grow platform. [indiscernible] expanding are our focus really is has [indiscernible] acquisitions organically is learning. expanding kind big of know, drive we intelligence the focused can that platform, continue [indiscernible] to of [indiscernible] strategically, entire and add XX The M&As system on to the

[indiscernible] catching me sorry. Hold if So on,

Stephen Sheldon

feedback echo. there's Yes, it pretty on or

Hardeep Gulati

Operator, hear us? can you

Operator

Yes.

Now we you. can hear

Hardeep Gulati

a Is there line? bad still

Operator

and [Technical and speakers. we Yes, reconnect please try still as by gentlemen, the the Difficulty] there. Ladies is stand echo

Hardeep Gulati

you hear can Operator, us?

Operator

Gentlemen, now. you're reconnected

Stephen Sheldon

Hardeep, a lot that's Yes, better.

Hardeep Gulati

right. All

glitch. technical a Definitely that. about Sorry

making to repeat Steve, both going responses. the I'll of kind sure So back

focus number sales, a sells have we solution pretty your inside accounts. that sales coverage to we seeing. the our good plus additional And to overlay year-over-year cover by team point, to solution. also team support we're and the large And enterprise So strategic people dozen your the all to one, have on have on increased continue demand a to additional staff quota-carrying we

student. XX-plus is personalized continue platform are the do second everything into our -- The that focus system building cross-sell, expand as the products organic about on part on we to we of then intelligence, going learning, question But further M&A, mentioned towards we of of your the we selling is our that how to base. kind the kind of which our or big

do and a adjacencies, which year. into we'll Hope the seeing we are options, So from both opportunity to that... in tuck-in scaled continue pursue

Operator

line with comes Hedberg question RBC of Matt next from the Our Capital.

Matthew Hedberg

the than process, seeing, a your on always upsell year. And could tap statistic. of the an opportunity? more even during remember base, I you think even but I half of IPO you really X how I comes of close additional maybe push Can about impressive Congrats talked higher strong think, into there you've opportunity. some guess from success your I of is the that customers talk had and that think, in $X.X now which to you success potential to I how about, that billion is, ARR with products, with even cross-sell indicative

Hardeep Gulati

Great point, Matt.

the billion, For more base. cross-sell continue side with into solutions the to we expand of additional Take TAM adds first, to for our $X.X the more communication That billion cross-sell bring as acquisitions. $X.X integrated and whole of to that Kinvolved. TAM close example our us

cross-sell total to So continue that expand opportunity. we

As a I customers seeing of of my are products. products, we our XX% X of year-over-year have mentioned in we prepared increase on multiple our in increase than almost as especially, more actually remarks, who shared, adoption lot also

game. XX% have see of cross-sell. our X more in an overall So acceleration about We're products. We this that still early have than definitely base only which we of customer

there have of So contribution opportunity, huge an our is to we these at a X-fold sticky just cross-sell especially increase ARR ARR motions. if X- from you point, or your those from can continuing by look still customers,

other product, strategies really internal X] our functions We just have of a X of go-to-market and products opportunity both lot add around giving cross-sell to an focus it. of customers kind [XX] our and on [plus

there that, opportunity functions upside on to an and we drive definitely go-to-market to continue it. our is there So

Matthew Hedberg

That's for earnings lower in software for margin XXXX. season strong then results has but hear. trend And this Eric, to X really guidance The been great you.

doing that. aren't guys You

sort Can remind investments? and maybe start sort to You're us how math profitability. you of think about those guiding then about of to, it talk prioritizing points And obviously if you're like, how just looks expanding the balance that improvement we growth correct. about year and between strong of is basis that about XX

Eric Shander

Yes. Thanks, Matt.

So just to in with really expectations. to continue And say, guide. first, the the pleased ended I the margins, the were expansion we I signal did on certainly ahead of which we we year mean, wanted would and we where our

lot we've continue As to I've leverage. opportunity got to drive of a mentioned,

In fact, we increase even could the margins more.

we do at investments. However, choose longer-term to growth look

So ]. our continue we we margin rule growth but really to before, also be international look But the really at XX-plus want some are reserving of out opportunities. to expansion of then we [ like in as the a and it and capacity, other as I've mentioned longer-term years

certainly, So that we say next we We're in. feel expansion capacity Strong these could into longer-term total confident we perspective. to year, going year. reserving really, feel opportunities, show And good. a finish from be growth XX% to well we for this EBITDA the really really But year. margin into the are I which

Matthew Hedberg

luck. of the That's Best profitability. growth and to balanced hear, really good

Operator

of Havemeyer Our the next line Fred Macquarie. comes from with question

Frederick Havemeyer

with or distributed ESSER funding. Hardeep, think would funding I to as a your education ESSER topic the technology any more I talked they see you But customers think with past. this that funding at education plans, we with how And it's funding of know a in the schools? also churning progress this time start could continue you little purchasing you funds state-level I all or ESSER line, the I the about fully point, now bit ESSER believe, on talk and, purchased of products that some shaping about wanted do with that we've PowerSchool through risk have do after funding? ESSER [XXXX] with conversations of is

Hardeep Gulati

Great Fred. question,

at We're perspective, the focus for years over for purchases even years, which about the just well. talking nearly, about education into money few do $XXX to next the ESSER additional kind billion full almost can put it you in is purchase it's me look next X let and So next can spend of right? as they X when billion -- $XXX be a the or spent do XXXX

to going is get of it the out years. over So spread lot next

their to So can don't actually of know, as allocated. Most typically would having for additional stimulus districts or That's which solutions. it's We have buy districts our you XX% you benefit that's from as money still another typically IT additional small. And funds. the actually the see, need for our fund overall. of X% they of only these XX% fund normal spend, school or really X%,

whether it when really for tap buying readiness, college are stimulus. can management technologies, classroom must-have, So bills system for they these quick so career they not help or them based of tapping they Stimulus funds. it's kind which it they're on leverage budget are work the necessarily a while or the to it into out long-term

we not must-have. change really are of They're are because they a are solutions really sticky. any kind So in, expecting really [indiscernible] once

You're any bookings. not really nice-to-have

And of you're of once happening All take budgets. core these -- still to funding our our parents, and from students to are out. their of you them only roll majority out not going all the is teachers solutions and

Frederick Havemeyer

products is I [indiscernible] seeing then growth to in cross-sell wanted X you're more And the about here now XXXX. impressive because was that particularly that during customers looking also ask than

clicking about could ask, can cross-sell than most more really increase? your where on you this that has motion [indiscernible] to traction? now with think some been driven I your has portfolio seeing what products. to talk wanted give customers the cross-sell X So with And you you're us in also, X,XXX color

Hardeep Gulati

Great.

couple of the need One a more right? to customers flywheel more integrate Fred, The I platform. take, things. mentioned, is solutions, buy they our the So effect

they want they want student our then buy they learning Schoology want system management, want or they they analytics, as special communication. ed, So assessment,

really kind it of solutions. So creates more additional stickiness to them buy for

that. with more we of and who more effect our So are taking seeing advantage integrated that's of are a flywheel customers

about pandemic, question, a needs dependent focus analytics mentioned customers' which is areas focuses the the over Coming terms that In evolving. are lot areas and talks are we part a last which There of was of out you bit do year. your customer survey the the second the evolving. upon -- of on assessment seeing? little the study, how really are of It I in

the trying demand social, they're right the communication recruit are increased which and to to mentioned and to increased We their understanding as also huge why I really and substitute of that on seeing and family. and well talent Kinvolved. because is teachers area reach and managed interventions piece, acquired We're teachers. as the retain engage kind emotional absenteeism we seeing where management onboard well to demand address trying providing the for focus on as out as and seeing but kids We're whole a

that's of ability beauty to needs needs the So of customer what entire we're as can digital the for really really the the our evolve, to have an we journey. hit aspects platform broader manage customer that priorities. the really hitting transformation key And we on their

Operator

comes question Saket with next of the Our Barclays. Kalia line from

Saket Kalia

start. Hardeep, maybe for you just to

Given of thinking of it's next kind for what per sense? the even guide can year, the that of roughly, that student growth in revenue was balance students make you're in got And students we've Does how platform on about that end of year, you growth remind number versus us of XXXX? a next as that nice are just currently the here year-end, directionally?

Hardeep Gulati

makes that Saket. sense, Yes,

point share all when roughly So we per [$XX,XXX-plus] when to software still which market, the you million look $XX of look we're about times, we at ARPU With they're really wallet, these terms of like about $XXX. know, about XX of funding environment, the as We're companies. -- we about student you student. students talk to that's across the the average. we spending components, almost are looking largely of talking To our your per different on are in in $XX] that's $XXX IT [between stable reaching how at of spending at almost XX% is

wallet. much a of grow more X from our as that focus student us there's perspective less of additional really per share So We on about the for product and getting about district. a room dollar lot to for

more So the that motions really way, cross-sell kind are designed more of the get platform. stickiness to of

than So the We example let with students. customer, are than talk of another products about average key on more who share them. we of districts X-plus more when now take fact, XX,XXX X-plus adoption me have

] So generally, population, X-plus broader [ that's for a leverage.

more stickiness customer and our of customers, really X-plus the now more is platform larger our our of actually That's adoption motion For we . they've get kind products base. to have with

Saket Kalia

see there on that and Eric, That's you somewhat that I talk in here Great XXXX about maybe of there you, into are just mechanics related. know are worth follow-up path go Got sort the helpful. some about. in from just retention. for revenue as everyone net it. very metric? we a stabilization the to Can reminding

Just kind of XXXX, directionally? how through that of sort progresses even

Eric Shander

appreciate opportunity. the No, Saket, absolutely.

mean, up that third I in, quarter, that the yes, XXX.X%, from the turned quarter. really at reflecting saw look, cross-sell XX we obviously, So strong was which the as was bps QX in we

expect should you point each to XXXX, of into we the will NRR to get to improvement. a pleased, think the and least improve. be at quarter end we continue year, we'll When of see increase get people As I the

other this, at had just certainly, The and mind When their thing made XX-month metric, X we we the mentioned impacted as I there items would impact PowerSchool of in as it to got that from you it. a keep weren't acquisition, NRR since look profile. high point say are as Naviance. there that impact retention is the rates have in We've of X roughly trailing

And have a which had bookings on to about another XXX%. the been added so the point in quarter. or to here X expect we when strong as have would XXXX, on to obviously, related then we XXXX, points from into continued COVID, every would were you improvement can So think you look point, about that. But of you trending trailing adjustment out at the extraordinarily

Operator

line next Brent from Our comes Jefferies. the of with question Thill

Unidentified Analyst

about for ESSER billion to I'm year] be all you will $XXX the be I on anticipate the David saw, to do The I is. yet funding by Brent. [indiscernible] ask spent. [the numbers up? still the funds period that spent is of majority time curious school that why are wanted This And the environment. is

Hardeep Gulati

Sure.

to that and you very when states than So X% from be now are what is stimulus in approval that approvals now the we there spent, look funding much of XX% to between spent. as states needs -- the from since -- less what's a the actually to point, But at of well. about have majority your progress coming only seen to the is pool -- how funding

also lot school as that. top additional using these So districts down of it a one of districts, example dollars the started A districts some trickle to to budget, of the use formative but funds implementation to from current they're here. using set who our have money going decent and chunk good mentioned to in with of assessment of I them some a ESSER platform. using the help the They're initial is is

funds can stable. spend I environment for for the something time. want don't they necessarily will period XXXX. the reiterate these districts all funding is They to it these by to do tap of overall spend It even very longer. the into is the have So over

that sell, accelerate One of must to really velocity. want of is interest the environment giving given -- deals, kind to is rate. district you to keep we of require insulated is things we help about key jolt with our factor speed But additional Stimulus to of at the which of largely the an the We're -- interest component look funding rates the a solution. discussion and of see largely, K-XX. the in are have, funding when we lot not things key helps we kind for driving but

Unidentified Analyst

COVID there Got as assuming to not XXXX, is think of it. schools half I'm would follow-up [indiscernible] in K-XX big how after and appreciated. a Would cooled obviously, are be maybe then beneficiary product it's just update a I any love big paid doing. just roughly And hear that on LMS. a but off using Obviously, during and LMS it's

Hardeep Gulati

Yes.

million-plus million talked we the still half about million You're is LMS. X you absolutely million was We've America, North see full on a look on additional LMS. we that in every students core XXXX, But do a right. platform huge best-in-class XX what we in year, the there almost amount. of seeing about added When X LMS. to have doesn't paid X adoption population at are In

room double years our is much us lot go how that come, and to products many continue and million the there for to given to students So add X to to on digit classroom still grow X a million of market opportunity

Operator

from of line Our the next question Goldman with Gabriela Borges Sachs. comes

Gabriela Borges

XXXX technology? commentary how to versus How in of the getting maybe bit on a the analytics structural little about and was in XXXX invest temporary much is what sense of and temporary think of education lost you happening terms reflections last do saw I there something your Maybe years. COVID permanent the couple in for saw also [indiscernible] willingness of you what on you terms in just of of you your rate we're some and see of versus as what during customers. during

Hardeep Gulati

last that the COVID, definitely we put a the have support don't just and broader factors, Gabriela. not district has to like encountered. the gone And infrastructure visibility the how X has teachers. Absolutely, The years, to right X handle is, in one districts just school about enlightenment owners the what disruptions

person a every to as that much pretty well, school for bigger role think kind. any this of help voice parent I that can can every disruptions kind of and technology play manage

XX% state standards. for begin We created discussions have state talk students superintendent Department shift are well around had learning help as transformation loss, I where XX% in understand to national were demand XX% of to insights not had the who they digital meeting about already, of the point, learning seeing a students were your on a that the with, of broader which are. Education the more that having actually the a -- additional to loss broader as while the students to

So that learning loss visibility is also pretty big.

analytics transformation, the the on the students, demand with entire on systematic we happening understanding and seeing the shift really and are that. these the of about that well So across talking on as nation as digital better we're are communicating most the things visibility

Gabriela Borges

may. a That's And follow-up, if I helpful.

creates work you're made additional of the was [indiscernible] doing analytics monetization term with with data to already doing. longer I'd that to You of thinking on love hear the a avenue opportunity couple about that you're it comments an you're warehousing accretive how and whether

Hardeep Gulati

Absolutely.

is Our have K-XX. insight we of the only findings exists in data, understanding unit the platform data, we are data, view now can bring as students child CL in most do Not impacted. well really whole the broadest engagement the can the how right achievement that the predictive

improve happen. with which their to additional education, personalize but not the just to transforms definitely, completely are the accelerating district they operational feed that and are our student understand implementation, have will kinds to of efficiency That way data, initiatives our a education. better the which in [indiscernible] all definitely Snowflake make We direction better bring is and also so the into

Operator

question comes next from the UBS. Keirstead with line Our of Karl

Karl Keirstead

guidance bps flow cash anything call the starting or that based cash your out your free 'XX, Is adjusted 'XX? look point unlevered in model is and same. free by flow EBITDA unlevered of we cash XX for you'd terms obvious as to reasonable the in grow increase an a calendar Eric, point starting margins flow at on funky in margin

Eric Shander

in is software very there. that's And I we No, in provided the expect less unusual think there reasonable of capitalized. CapEx But flow been cash thing had a use kind Yes. assumption, ratios would the cost, isn't that's similar would that that, only Karl. just costs I I to the XXXX. anything say other for product we development product And

Operator

Our next James. Peterson question comes Raymond from the line of Brian with

Brian Peterson

year. to strong the Congrats close on the

So you. Eric, just with starting maybe

looking through the metrics you revenue business, that or seasonality, terms of of think we the to as anything of that? as terms progress share Any of ahead help we there in seasonality kind As would XXXX, year? ARR you're the the of is on about course in

Eric Shander

Brian. absolutely, Yes,

is in growth. the you the you the QX say majority to QX. renewals about First, I a continue going the of appreciate very would continue similar What see because But then our the less from from you'll that QX. seasonality for our And happen is opportunity is to a upward -- saw business because of what if lot to reason to unique. around business bit remind ARR, XXXX, everybody little in growth think sequentially to I

So extent that the there's be any impacted to there. going that's churn to

year. services training declines. ARR it other of past remind then subs standpoint, L&O, -- fourth and the our are I continue revenue from all when is everybody certainly, revenue just continue of from as a majority of that. is just projects traditionally in to revenue at the as perspective, all dip least But renewals of the to quarter from think of will this as that quarters. happen around the related to happening then that QX that So the positive did license quarter, QX, of QX about in QX activity, on Schools our growth, it's But and other And terms sequential decline down the think would the the QX, as aren't because again, to a see to you to phenomenon as well And directionary projects the will momentum to just grow and color we at we'll an QX. in you see there. because QX decline services focused end big and provide continue in lighter from I not

certainly and again, opportunity we'll continue I reemphasize remind you seasonality and to quarters. to giving me just into able as that important think But So get the the I it's everybody appreciate to about asking just that the we be subsequent to question everybody.

Brian Peterson

Obviously, there's lot product a maybe if that really cross-sell you optimistic and great of lot following those about Hardeep, terms And you. We market the terms in guys maybe customers. That's of the this just Eric. heard the were I'm you with can feel that color, up go year. attack categories success XXXX in to But would or curious be? there what about X and the cross-sell, providing X you're the a value

Hardeep Gulati

Thanks, Brian.

just is higher we continue, was growth I touched We're XX% fact, numbers that in even and that upon analytics. we to seeing the one, number answer because need. think the the expect almost in last the So universal

not the good districts an the the most do of broader For insight. districts, understanding XX% and of of have data

I in now mentioned handle of see and to do to and So to a A attrition do how that. category well. right lot on focus recruitment management. extremely that we talent future continue

broader as information it's enrollment, as seeing whether focus aspects are growth tremendous it. we on double-digit coming well. are that whether seeing and out the school do digital that's we see products, the across increased the then definitely platform, are more But of transformation, I our our I demand ERP on mentioned, system, We COVID, seeing

is point. different different are districts a where this Now

of kind spread much our our We can customers. of and more evolving needs And kind that's meet of really of So platform. exploration different the beauty demand kind see the is grow have the we in still our do growth are of certain transformation journey. do definitely because are able there of behind of products but then all are in the districts further who to categories, we

Operator

Joe from comes Robert Vruwink of the question Baird. line with W. next Our

Joseph Vruwink

the any XX% year. on coming question customer any there from? in this I understand And growth to well? trends are existing the teens being a logos accounts, performance Are where total new that growth actually Just there maybe but commonalities logos larger? that in in in the a high the new -- customers, bookings and come contributing lot of core thinking logos as your of landing from the are new product

Hardeep Gulati

there still the question great school. So private through of school see [indiscernible] on -- are sweet deals later definitely when we public the part a example, [indiscernible]

beauty to buying overall But really kind a seeing that's view, even charter sources. lot small. so are private accounts, so of or platform, the and of and are organization the your we Jersey moving River and logos, charter also school and contributed Naviance of inside that category. platform. moving would districts kind Fall look total at broadly, the broader to directly point, you definitely and to multiple be seeing our are well, But coming SIS the districts which is typically in in they there's in who products are who the a into broad we organizations [indiscernible] are district new even multiple New when schools as from adoption school of again We gives the an you that

multiple the of well. sizes across growth different as to the customers factors able the are We address

Joseph Vruwink

at said catalyst interest the that maybe horizon. X with solutions between lines the they're read And In lines still great. and implementation. the their a most time if stimulus most take your months say is the XX little associated the new before gather Okay, needed I bit, horizon, also of the on looking the just presentation, earnings on Slide I'd you've systems, so of

consequential FY growth 'XX putting So you together, to 'XX? actually a that of than be even expect FY year would more

Hardeep Gulati

Yes.

as to do to well as helped next and our expect is be and point digital on. broader even stimulus, growth momentum we very trends derisked, is that further largely rich the seeing stable, the year for transformation, are think for environment not by our on so cross-sell I but we the this that both, own funding just year based

environment, we sitting expect So at we rates growth continue definitely continue on. to the to a to to very are comfortable those -- and be

Operator

question Ikeda comes Koji line Bank of America. next Our of with from the

Koji Ikeda

late, way back-end on on here, you could bit just was affect mean, sort of question imply that in juggling a seasonality some about the It little calls seems out? EBITDA on is here should a could throughout that question to profitability. right I help guidance to it the EBITDA looking we linearity couple me the first of if of spend actually versus there the think the Thanks It's that this year. quarter here. on full EBITDA any for so at with squeezing or us a loaded of going maybe apologies in the the be year? thinking a the the I'm asked. hopping Is seasonality about little quarterly

Eric Shander

Thanks, Yes. Koji.

QX. to subsequent you to So from going in QX the -- to quarter, it us getting QX it showing adjusted of improve is -- roughly no, QX to And XX.X%. about at continues XX% the that expansion quarter well, we EBITDA the QX or each in to look are way first in so roughly to XX% if think midpoint

we progression. continued So a see just

had some of there But margin think to company little costs a I from spread public the way back-end be they're the have bit. is loading just a just the year, probably no readjusted of the models needed -- throughout that notion may standpoint.

Operator

the I'd further remarks. closing to to Gulati are Hardeep over for There no hand questions. like back call

Hardeep Gulati

everyone. Well, our continued Thank mission. support thank and you, for your for you PowerSchool

on excited, serve can the durable. as as the tell very are opportunity beyond. you very are from we both well markets The [indiscernible] and as ahead XXXX for performance our results, in We us

and leadership, you inarguable. know, as Our is very clear

the platform, seeing us given into really have adjacencies well. platform is working, evolving cross-sell comprehensive customer different continue ability as on Our the an strategy our puts to momentum as our opportunity expand our an definitely platform as to to really you're needs, well shows meet and that we

very confident are and ahead. and Thanks again, our we So about I growth a evening. have appreciate wonderful

Operator

Ladies participation. teleconference. for Thank conclude and you this today's gentlemen, your does

may disconnect your and lines day. a You this have time, at wonderful

PowerSchool (PWSC) 4 Mar 222021 Q4 Earnings call transcript