Earnings call transcript Q4 2022

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Operator

Ladies and gentlemen, greetings, and welcome to the PowerSchool Fourth Quarter 2022 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded.

It is now my pleasure to introduce you to your host, Shane Harrison, SVP, Investor Relations. Please go ahead.

Shane Harrison

Thank you, operator. Earnings XXXX. for PowerSchool ended fourth to XX, December everyone, Conference the Call quarter Welcome, to let section wanted deck that I first our to a we accompanies the slide posted Investor here. Relations remarks of website you our know that

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

our to statements. that statements expected the related call, started, company, are the forward-looking including of therefore which getting Before emphasize Q&A I'd to future like this portion, include results will

our from uncertainties projections to Our are actual SEC materially results uncertainties. our and differ of filings. number risks subject in and other that due risks release described may a statements and earnings to The are forward-looking

non-GAAP measures. references Today's remarks include will financial also to

GAAP and this is press also website financial the to corresponding Additional investor presentation, on a results in replay information of call non-GAAP including information, and the reconciliations provided release definitions are investors.powerschool.com, and relations between this PowerSchool's will both which at same posted website. posted and financial be information

Let me the Hardeep. to over now microphone pass

Hardeep Gulati

you, and today. you, Shane, us joining everyone, for Thank thank

full excited and performance successful to our We close XXXX. a in discuss year. a QX very are to had We strong year

to committed coupled that you have will annual we growth, We top double-digit line with continue to expansion. margin deliver

year. from the As our XXXX by EBITDA delivered quarter significantly this you for this see expanding double revenue margin we results, commitment digits in and growing

we our are see also further of from which detail and guidance to looking revenue forward Eric in another later, expansion. will margin You growth discuss double-digit will more year

revenue XX.X% million, ARR to year, and the XX% EBITDA million, million Fourth grew revenue prior net as trend $XXX prior retention. of XX% XX% on margin. we year-over-year representing growing over over grew X, see strong the continued adjusted Slide a quarter you to $XX $XXX year As our our reached

Unified from On lines X, the continued breakout at performance all in full suite. product strong product across highlights data the with Slide analytics business Insights our looking year for our quarter specific the and XXXX. momentum Now

to In of per and Insights largest ARR Education other the Alabama won of up with This student statewide million X $X products, acceleration this work ramping their platform together of program. which value usage benefit to state. support we year to Unified adds learning enable Department students state's quarter, our our to in contract all with State the

Snowflake the quarter, win numerous the for solution School to During the Insight child U.S. Unified Angeles integrating largest also connected the analytics whole biggest suite school district its District, had Unified second in at Los systems. intelligence

to Another Philadelphia important was School cross-sell the in District. quarter

our them teachers. of train our college now that efficiently career they by date, solutions will implementing their tool, more customer of expanding To use and develop evaluate of are a our help platform talent two their

win the largest customer solution district County home our to solution to drive in our attendance. and improve their across record unified U.S. communication XX propelling a unified was Jefferson School capabilities a Public engagement QX sale home in our one performance, NRR top new family key the communication quarter. of platform helped These student One of Louisville, rate to XXX.X% cross-sell the record wins our in in school chose they

While made we have logos as we a I in also tremendous the in added progress over XXXX. am proud the same of XXX company period. new

$XXX points million free million finished adjusted EBITDA to flow. by $XXX year, generated of XX.X%, revenue improved of full the growth percentage our annual XX%, eclipsed For cash we in margin revenue, and with X.X

of year, the the new adding number And successful Our go-to-market students during the to our XXX teams customers were solution now our $XX from benefiting very base. exceeds year, million. during almost

success, progress are to have update plans, which X strategy XXXX you and reinforced of the commitment. give a look and and As results XXXX I go-forward we in you with our key these past we like at the go-forward on our would the foundations, pillars

First, our and market. the K-XX the resiliency of business

Second, the expansion, coupled through expansion. double-digit growth consistent durability financial top differentiation M&A. Fourth, drives margin predictable our innovation of and diversified line upside third, the with international further that platform; the comprehensive, our opportunity and

first is the business success. our key foundation predictability a factor in resiliency, of our The

As shown built products demand X, factors: on is be robust mission-critical Slide U.S. by this funding with several sticky continues to of resiliency customer strong budgets. education robust.

spending As Education decades, relatively start the the of the since headwinds. ability pandemic. received to in the of we its over in have seen Department greatest remain U.S. of macroeconomic its insulated XXXX, In increase face discretionary the

demand continued $XXX funds urgent need billion of to across fueled our after be The processes. digital K-XX are in the of products, of strong of which still remains are growing transformation Additionally, a increase the federal spent. by budgets supporting variety relief robust and

our ARR strong resiliency of in of are velocity, portfolio. product we As first the for nearly the continued demand our and saw seeing year-over-year increased XX% we growth Reinforcing pipeline business, of deal the half shown across this year.

organization center K-XX large largest any of accelerated full line, of in small. the infrastructure the from customers, XXXX low product for Our new of all many most ARR technology system, and student teens saw year the and growth information mission-critical

is XXXX a to great And off start.

transform we attendance, a by tenured a our registration, creating lot We deployment SIS are KL been Puerto scheduling, as to very XXX,XXX chosen excited SIS compliance, for for education core Rico Puerto and to to infrastructure their modernize have of more for reporting, students. share power seeking Rico. is their that their Education selecting and the Department The

this initiatives and project continuity their look to forward with every improved drive critical partnering further them student operational in and territory. the outcomes on for technology education We to

strategy and is Our of differentiated platform the foundation second key our success.

has player you and the key as cover that operations, all other product and comprehensive platform in has leadership and pillars pillars. X, of classroom and market SIS talent these industry no Slide diversified On in the all know, the

comes adoption that from ARR the $XXX thousand platform. We X of The pillars customers that are our products also million. using with of continuing more from now and are our to is of of is see further full over number or of amount customers breadth each the approaching our products

even well XXXX. in to expanded and growth with in solutions. And We a these confident Intelligence we data-centric opportunity coming further are Insights XX% strong differentiate Unified Connected leadership and over of increased Service of products the continue a Data as in years. grew

we the on cross-sell Slide our The attractiveness third still model using solutions. from paper-based within you U.S. foundation, durability. progress Canada, TAM growing legacy update with financial of the our large, on financial On outdated billion of comes and key our and percentage X, and $X market and a significant under-penetrated

having growing existing average. our customers these cross-sell over on customers offer XX products XX,XXX when growth and meaningful sustained, long-term only provides With consider durable a of accelerating platform a opportunity path you to products, a to currently

continued demonstrated platform. the in have momentum cross-selling We

of nearly or number XX% the with over of end our With X,XXX of customers more four products the to of XXXX. growing as

being of amplified by which benefit our success effect from cross-sell this seeing and products are increasing the other, suite. compounding each the customers in our further flywheel for stickiness the We value

persona-specific Six create further recently increase bundles velocity cross-sell announced Our cloud and leverage. our multiproduct will more operating

We opportunities expansion SaaS model. also business have our operating margin given other several and scalable

In operations functions in to grew now XXXX, our within all and we total India international employees company. over cover the X,XXX nearly

shown innovation upside the through key foundation as M&A, and expansion, is Slide on Our further X. international fourth

expansion. the over through growth double-digit to America international We and run continue in are long additional with North this expect delivering upside

a committed full-service several is solutions to for Africa our to bringing that improving outcome and partnership Based we to Middle our Africa. Today, provider in long-term office pipeline the Africa strong solution us support with a excited East education announced and year million in the for with XXX logo very of million across our strategic OneConnect. support I late with a and is to technology for in new over the over opening expansion opportunity will X.X Jamesburg, this in students growth in strong this am to OneConnect be We into wins PowerSchool year sub-Saharan spring support announce XXXX. students sales through Dubai

and company, Innovation content example maps. heart announcement is product is last and this our investing NAV of in road the solutions. new of An at learning recent NAV we are of our innovation month our

over personalized utilize a approved $XXX automate intelligence selection highly push that opportunity, Key learning milestones automated we pathways. support the be tools These data-centric billion. those content solution. a resources A and the artificial ease and in estimate of market towards impactful instructional pathway to student's learning to customer

our tool over an we expanding for have Kickboard, cross-sell deal success opportunities, integrated Chalk and Kimball, of been X each by models, have been our and our with our technology of important and demonstrated acquisitions. capabilities Head expanded acquisition in million. already driving each TAM of and and growth pillars the have tremendous $XXX has M&A recent outperforming growth are The

our We best-of-breed and acquiring intend technologies and presence platform to to XXXX continue enhance beyond. in global

metrics execute and takeaways, these I we have proven outlined our in As our on key goals. financial have capability to X

key our the several During company. being of X.X summer our a which in metrics, of have of communicated in for surprised we XXXX, first targets most we years our public IPO,

rate target to you On Slide quarter. will NRR surpassed in this of long-term XX, our between see XXX% XXX% fourth that reaching this XXX% year, was stated

also met our to We finishing leverage of target times year at debt three net times. long-term the four already three EBITDA, have

our were can And share. million. our Investor target speaks on targets many of Our by will that XXXX on targets and the XXXX increase commitments. perform adjusted us free beat Eric flow, And $X eclipsed. million our to cash these $XXX ability you IPO for of revenue This XXXX EBITDA unlevered deliver to and expect to we our in Day

to year provide now our expect combined the the financial another With XXXX. guidance, you and pass Eric? of see let the team to growth, for full deliver our revenue review to in details the the of low details resilient we will year and margin Eric market, call over XXXX of with these strategies, meaningful the double-digit expansion, fourth which our and our guidance quarter -- me

Eric Shander

Hardeep. you, Thank

such with are pleased a finish to quarter. We great XXXX

on of XX.X%, growth the of performance XX%, reflects margin drove Looking improvement. line of a with I'm an we point year-over-year adjusted delivered. back We top XXX the which basis EBITDA year, coupled proud

to achieved while long-term innovation growth. All of this invest for durable in continuing was

over retention increased resulted which net to year. quarter since in record in a expanded meaningful has has and our XX,XXX mid-XXXX. during base revenue in platform This customer IPO-ed performance of Our Unified each our we products the drove differentiated cross-sell improvement mission-critical rate, districts

Hardeep laid ability to IPO, time the of our of As team's testament which many a tremendous are long-term ahead already outlined, of is the execute. we well at to out we targets the

in representing came and call. range guidance year-over-year year rate we revenue $XXX and quarter million, on the at to revenue Slide in Fourth with last $XXX of Full summarized for was the results total the our growth year. line XX% Moving provided XXXX a up million, XX. earnings on XX%

revenue XX% support most of XX% grew total and and our in strategic the revenue year-over-year stream revenue, quarter. accounted Subscription for

represented of SMS XX% year, XX% For total the grew and revenue.

efficient deployment moderated increase of Our X% which implementations rates an million, growth year-over-year, services faster more of cycles. driven business period revenue our $XX generated prior has and by from

a year. year to and On from increase business XXXX. the license XX% quarter, in came Revenue $X for our a other, services full XX% over over revenue relates last basis, which grew representing million at third-party mainly our

As million, balance of over of L&O XX% our reminder, the nonmaterial strategic a total last recurring year stream annual with revenue year. is X% representing an ended revenue. We only least revenue and increase $XXX an

Our sequential NRR our increases. rate improvement cross-sell net fifth sequential driven basis of at price XX and NRR retention Year-over-year consecutive a or representing higher in was XXX.X%, contracted by XXX This our strong improvement. normal revenue basis came points. performance quarter and improved of primarily points

the ROI to expand provide reflects to success retention relationship with PowerSchool. net who our continue value and the customers we Our deep

XX.X% at in and margin, profit sequential gross came basis Adjusted improvement. quarter $XXX representing point a year-over-year a XXX point million increase XXX the a with basis for

full XXXX. For an or million improvement $XXX a representing margin, point adjusted over reached year, gross XX basis profit the XX.X%

development R&D million, $XX quarter with last expense year. was at XX% came operating with revenue in of last expenses, Looking revenue research the invested compared representing at compared in expenses, Including of capitalized XX.X% total and our fourth year. XX.X% R&D XX.X% non-GAAP

the the XXX $XX year R&D declined points SG&A revenue, last X% million. than $XX.X increased QX year grew non-GAAP representing full which to the expense X% fourth year. in XX.X% Non-GAAP lower for Full basis quarter expense XX%. XXXX year-over-year is in expense SG&A of million, Non-GAAP to of XX%

the representing million Our the guidance beginning EBITDA by points margin or quarter a and than XXXX. XX.X% exceeding margin basis than XX.X% million. XXX $X was higher end fourth year $XX our XXXX higher million, at guidance adjusted XX% of Full high of $XXX we provided and EBITDA adjusted range original the was

nearly we is higher in per net $X.XX $X.XX EPS XXXX fourth and XXXX. income Non-GAAP double which time fully the was XX% in quarter the period year. earned in per the last same share, Full diluted $X.XX the year than was diluted share $X.XX, non-GAAP

a process see driven scale, of performance focus continued will was improved a our the gross a by and by hiring responsible our on development our Center as summary efficiencies. Excellence Non-GAAP associated more XX, innovation. pace adjusted as Slide levers. The with driven XXXX multiple and accelerate operational revenue On cloud you margin bundles profit to R&D improvement is percent expense declined strong of continues India streamlined of of our

On as G&A company facilities basis revenue a adjusted our in year-over-year from cost XX on consolidation SG&A, savings process XXXX. and we savings as improvement from we spend fixed initiatives the and point XXXX saw of of brought percentage various a in rationalization public normalization costs we realize

biggest our our improving of beyond. priorities is in and continue already One margins XXXX to strong

by We on being will this do focused innovation and efficiencies initiatives. laser operational

to each basis our the is delivering almost of expect In improve before, to EBITDA target end XXX range, we high mentioned basis improvement. this of points have XXX by adjusted our exceed XXXX, I margin to XX year. points As

cash a measure, last million, and increased of period primarily Fourth XXX% or non-GAAP $XXX Full million flow revenue. was the $XX.X from profitability. free same flow, XX.X% free cash was was quarter by time driven year up year

quarter million time year cash end was to improvement increase $XXX of in the flow strong We with year, last the leverage driven ended debt three at a of cash same period times by balance an over equivalents, XX% meaningful free X.X Net earlier. a year the Moving performance. over the the sheet. the and

XX. turning quarter full first our year XXXX and Now outlook financial on to Slide

$XXX expect of million, million million, the $XXX growth a we of the rate and a adjusted range For $XXX margin XXXX, revenue at the representing midpoint to million representing full year-over-year the with adjusted EBITDA XX% to in year $XXX XX.X% total midpoint.

the revenue deliver million range of the This growth and the double-digit we X% $XXX large services recognition. impacted rate which the at to is committed growth For representing and full million, first L&O total revenue $XXX deal year the rate timing low remain end, expect growth to expectations. top we our top year-over-year being quarter, by affected delay in very QX a line of a to of

For million, a expect to $XX of the midpoint. XX.X% margin we at $XX first quarter, EBITDA, representing range the a million adjusted

as impacted first is by margin Our to in-person sales a which in the their EBITDA are adjusted kickoff, seasonal for quarter early the such year some held maximize events impact.

of XXX by million to excluding million the compensation the the range we capitalized software of Fully approximately of shares For approximately for expect shares. XXX year. and modeling expenditures, end purposes, share-based capital full $X expected $X year of expense million to $XX million million the to diluted are be in

excited also including first will excited greatest we And product which and and sessions our executive place XXXX we're top be PowerSchool team, opportunity event. goals Day, and is user in XX with hear take on July the This host our latest first will into our to will group products. conjunction the we're pandemic announce our event, the breakout Wednesday, inaugural Investor Edge began flagship all and leadership with our which XXXX to to will so Investor updated from in deeper our long-term will Attendees dive Day, our event you. edge very and share customers with and to of meet leaders attend since have

resilient In is global look closing, XXXX. and student deliver remarks. We to the large long-term of proud team growth importance and outcomes, our prepared shareholders. K-XX and our provide forward in continuing significant value the believe are the execution concludes to in our which of and durable recognizing and This we and momentum technology customers in our XXXX advancing impact positions to us market

for line please you will Q&A. open Operator, the

Operator

Please comes [Operator first go Instructions] question Kalia from ahead. Barclays. of line Saket the from Our

Saket Kalia

thanks end press my guys, you; way for of remarks believe, questions the your Hardeep, prepared Nice wins Unified I which here. couple a year. of included to or in the big for in Hey out that maybe called taking release, Insights, two and them. one you

is of and us Unified how the power I portfolio further school, how maybe product Insights priced Unified for was how just if for remind room slate your could maybe Insights broader adoption? data there is you inside offering that much broader base and wondering that complements

Hardeep Gulati

Sure, Saket.

You're absolutely right.

our of given differentiated, very able the ultra-analytics, a beauties of not Insights the are is breadth the have it's to offer large only the One products of Unified we platform, so most that also opportunity. we

around products success, multiple analytics analytics insights have career within operational as student Unified student We talent essential, analytics, as as well well.

per when look that, to student. $XX of $XX you almost that's So at the breadth right,

TAM. market. a billion if base in still So that's just plus only less America, penetrated $X the North than even of XX% We our

upside So more. there significant is a

leadership a Insights. phenomenal as connected as seeing Snowflake up go whole have with we're to just counties able Unified already bringing a opening intelligence we beyond the And K-XX, and data. the the done almost actually even as workforce analytics, plus we're to where K-XX XX% investments of on our K-XX states given through around adopting opportunities growth through platform, stew today whole well some but districts by of We're of not countries to AWS even

strong and very of ahead So us. big opportunity

Saket Kalia

interesting. see really nicely. that could expanded that's expansion. just things you. my for the to expansion margin maybe already 'XX, year Great that's follow-up two within for Maybe about to maybe Yes, us year talk for you off margins Eric, of a next for

-- there? you're thinking about First, services grows just scaling, the international of in also continue investment to invest but thinking mix, Because, how margin you the then margin you're a as as impact? course, also And there about right? has that revenue gross gross how

Eric Shander

you're priorities we've that the gross really like is learning then margins, international, points. investments it's XXXX investments personalized the key basis that, basis us. been XXXX. think I as reiterating we've year-over-year, versus important let points them in this which are guide, XXX So like Within you me just for XXX mentioned, over another seeing as -- think adjusted expanded And our about

are folding that. Those still into

margin So these we're priorities. to continue manage significantly also while able we're to in expansion, the key reinvesting

important it's think priors. to continue learning. to that be investments. primary top Those personalized international are I So going are Those

large been business, When about the services that the some business you QX the was mentioned chosen all the impacts the of in revenue the as as that think prepared we've lower. driven revenue. my revenue in by services mentioned you'll had remarks, and one a Hardeep services QX have well deals as bit L&O results. guide see for, I in, will in Certainly, That's of

So I more the does to we will little strategic. some profile and margin overall it as bit manage we're lower as going still to going a larger you think variability. it's mentioned, There important to be a that see, get continue we are services come And to of margin But profile. expand. however, with

And growth. revenue and then we reiterated committed we the low impact driving the subs very driving of double-digit are remain quarter-to-quarter. of strategic to But think and prepared support, just much see it most our some absolutely Obviously, revenue will in and digits. that low services we that remarks I our revenue that is it's to piece important double committed we the from variability so our

year, because think XX%, a on important we'll know that that as certainly hit the bit obviously, So it's is full be I note I you the look to head commitment. QX going but the some lower, at guide, our right of little which the it's we're -- at

Operator

go next ahead. Jefferies. comes question Brent the from of Please Thill Our from line

Unidentified Analyst

OneConnect I David about ask on that in Africa. wanted Brent. partnership to for is guys you This the have [ph]

deploying international the doing about but of we little about a think bit talk other there, bit how the little strategy and economics going further you Just you in regions? yourself? vary of And are in should us a kind guys the it guys some how to

Hardeep Gulati

that boots of East Thank we've there. in as investment talked expansion Middle also David, ground, already in David. We've Sure, some our our on seen about offices with know there's India. you. you

This partnership. continue very to our OneConnect, exciting with partnership We is further is invest an exclusive with there. which

before multimillion major with of solutions the of commitments partnership relationships adopt government school have schools, commit, the could with regions with going We've around districts, parts got who kind that most million and with and dollar that's much international year-end, X.X were dozens not private the a of exclusive, going students tight for. we're are partner schools. who's across the partners committing looking adopting very We to globe. but a Expect for just pretty to have even local it

road X grow double So do we this we're almost million, Investor $XX up the and this some guys. years, be year. going over X million with Day to we to to walking to that with international map expect to next expect you almost through But $XXX the of

Unidentified Analyst

Got the early. follow-up, exciting to And super as That's but sorry growth obviously, I it's it's helpful. an know international pounding side, I'm keep then it. on super a maybe opportunity.

opened even offices. up haven't all You the

or you've think guys about the or you experienced, regulation. localization roadblocks as maybe of the biggest of it's some But content maybe either product

some the are roadblocks against? what coming are curious, guys that Just of up you

Hardeep Gulati

actually beauty American and private the look in local XX almost even already courses when Schoology our you that International, at and adoptions not Education schools. platform our the Schools Well, is countries, have and We right, is platform. countries, just multiple but

localize. We and content does local do need partnerships with So to invest the curriculum partners. and point, in the platform still

That's building picture exclusive turnkey integrations solutions. the come have they local to us and to as those in really these providers allows partnerships with us where invest into full

help actuate us some we're and pretty partnerships will great these quickly. So this success, seeing already

Operator

the of Please America. comes of from line question next from Our go Koji Bank Ikeda ahead.

Koji Ikeda

back and kind kind really to previous of wanted a the go line. and in actually question support about of guidance thinking revenue I honing the subscription and to on

the the . double-digit stay is, kind the to X% the range growth L&O for XXXX and guess of dip to guide at or could of kind previously commentary at that could instance So into I of -- get the kind level? subscription is like and revenue, should guidance? on Xs, services where there question this Or an looking the the revenue

Eric Shander

below do XX%. the basis thanks Koji, that. just the any year full see -- We will dip see where case Yes. on don't question. for We not absolutely We that revenue the so S&S

Koji Ikeda

Got it.

revenue retention, X we I into there, the thinking XXX.X%, what the should about to, metric super could here kind where the this have go? guidance Could XXXX? quarters helpful. plus metric? net How that's in of for you Okay. range revenue straight really be And net for for it expand then do of mean, this XXX on expansion nice assumptions the And retention XXXX? No,

Eric Shander

Yes.

really you strong that reflection see. saw gross what is the we the when of year cross-sell a well we retention So see we as finished that the as industry-leading rates

So ended that's high we I And mentioned we as my the did. the increase we've prepared why seen since nice beginning as of as a remarks, in year.

What provided I to would say, we and that year. if up range. long-term said would the to public we this we XXX should be we quarter-to-quarter. bit the high you you you a What But go tell guidance And I see range back is to would would little to year, this bit is XXX% variability that we what little from range is think be in went you'll tighten of XXX in I the we a the when XXX XXX tell I range.

this I XXX in XXX of to within long-term say range. would we start a the year, be level we XXX into that end as then the I guide think terms and on of go higher on little And results, the would get with say into current that future. at provide that that some beyond we'll does to it or in I of some guidance can our remaining further bit this But point, further

Operator

from Stephen go of ahead. Sheldon Blair. Our Please from the comes William line next question

Stephen Sheldon

on here. to the the year end Congrats strong

you as about we in and think the about First I talked revenue SIS, acceleration XXXX. think just question, there

talked market smaller in you've about U.S. a fragmented still by is being think share I the of legacy kind variety players. XX% of held

legacy next few higher-end doing smaller, from the of in see on expect in And districts years? the So pickup continued I guess environment? you would over holdup a this convert a solutions them to school more solution to what's type so

Hardeep Gulati

Sure, Stephen.

the cross-sell which very for broadly quarter. with record is platform your in growth about over We're base, the comments definitely success for QX. your product thanks products like is our teams. excited within almost the in about point, also, SIS, on But then the a to largest success having First,

with So what see we Puerto do with sustain. that like definitely wins that us. choosing shared We expect to the growth you Rico

around the XX%, driving start and able is those data more the that's they've challenges of with some more which data of you got are things the to see As ex-rate, needs, are districts kind around well during and drivers actually seeing why automation, of most whether as who customers transformation themselves we more pandemic, more security actually is being more the the key cope continue the a this. and visibility digital space up post went expect that's of legacy and as that pandemic are that realizing and growth accelerating kind to the pain -- through modifying to legacy as kept to all

Stephen Sheldon

towards just wanted pipeline confirm a the that. the follow-up, is about the XX% so That's is at you it. year-over-year, here. interest to And portfolio point? wanted ask across the progress then Got I of coming surprising this to different Are seeing selling I up as I helpful. that about pipeline. And we in think products as anything your key season, And up level heard I

Hardeep Gulati

Yes.

up for the even It's The visibility more half. XX% is and pipeline, we'll provide for throughout the early still year year for the you and comment. we'll my reiterating full pipeline first get that. First,

Our deal velocity, our deal the demand product across consistent. remains

the are as to strongly the the talent I the as actually SIS continues very products. bright go As well analytics, spot management transformation, mentioned, definitely classroom

all we're in pretty much product growth lines. So of our seeing major

Operator

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

Matt Hedberg

curious, think you environment? obviously, Just Have year. guess of we the I'm on one on sort it the been platform as you cross-sell bit was have standouts previously. win improved PowerSchool, of more the Hardeep, of asked but also the competitive rates we've a that strong well end Congrats me of the about dynamic. with I impressed years? little and the new play wins, the talk from NRR somebody true about competitive That can last couple the -- your is. maybe the said, that

Hardeep Gulati

is to win your there. playing up classroom Matthew rates the the Thanks talent out differentiators, from one in pieces. rate legacy of platform, themselves of a again, for to fact, especially comes those and against pillar right? is or our call well, lot core, are but is platform, actually the vendors. classroom, the And win a absolutely, one the of And which an the platform There's just improving, which has people SIS, the really the all Nobody point, it the Yes. within holding comments when who operation.

that I X-plus that at And customers who itself And you customers of points almost platform shared, actually of the a is X,XXX. product, full have from ARR. each almost $XXX data products one of the when who pillar, look have is million now in

XX% customers. business our those almost So coming from of

-- that's effect. a So flywheel and

The products well the as from platforms. are what and more can exerting realizing net hey, products, in and that's they're consolidating demand buying that . have that, new, creating we buying, who as they're outside best-in-class more really us, more their they cross-sell start

Matt Hedberg

sort Helpful. he's of Got longer, now quarter, or worth last changes making sales your that, chance Tony or quotas of sort then any it. bit or you new you kickoff to that that's a plant announced him just like And Kender noting? work CRO, the with a territories have to anything

Hardeep Gulati

with kickoff phenomenal a XXX people. We actually had almost very

at almost from here Our double look it sales years from back when just team is. is you two

So see up. all excited geared really sales we're very the to

forecasting discipline our solutions. release more of solution lot a bundling the just you bringing actually around is Tony and the selling, and is press which saw not from but And selling around commitment process

at more products same selling So the we're time. actually

a that So faster. and actually cross-sell even acquisition acquisition customer creates

a NetSuite, who What's like years with Oracle. people people Relic experience HashiCorp with brought as New public at experience CCO and and have of Tony a is like we've in like Paul, about and exciting with company Oracle

at but we now them help experience commitment and expectations businesses, example, who only of have with public scale well. company management actually Hat, not manage actually for the dollar-plus billion manage even years Red up team as Eric,

very billion the to leadership excited into So and us make where a us almost about enterprise. that team allows $X

Operator

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

Joe Vruwink

Was the -- to I labeling Insights. a size more the wanted quarter to And I this of since breakout maybe been this go products. I'm the not deals. stranger your back quarter guess the to referring Certainly, in orders of quarter? it's absolute just Unified it's as of one faster-growing the your statewide on to curious

becomes starting you when and for cases thought than products started bigger broaden make the coming as maybe Insights. so like are to the use Kudu Or see together scope Unified to the about suite and be potential may this something you out

Hardeep Gulati

a great fine point, That's Joe.

look at already have when So you market some in -- we Unified leadership Insights.

new year. fact, about on not is last exciting earlier student the or multi-tier it's Maryland are support launched success we have including It's our that system MTS, contracts. talked only this XX-plus about already In the multiple the differentiation. win we analytics, actually of What's modules We Alabama product there fact last trade analytics, year. showing

support. us And analytics MTS be all as and holistic RFP selected partner an that process the who through Alabama they vendors, looked to and give through look can that

shows those that our So district. the leadership just of the bring to to we the you how strength able already innovation innovations are and and quickly

even data SIS. for And multiple then from from intelligence, you one. take connected they their system is El data They're where -- good Paso our Snowflake adopting platform use spectrum they're bringing another of another and bringing Unified, don't LA of

to quarter now very perspective. lot analytics with the be you for exciting audience. actually there's also our we're to from more a breadth Snowflake districts why shows analytics a think And go it's to And even much adopting I us connected now that able that's broader So intelligence. the a

Joe Vruwink

this high to as think on year in year still retention tend great. customers so yet up. is I as That's more logos, net logos. and your Okay. recall, in And going growth hire bringing last I of you're new new well. think guess rate was a and I I new very

to then deals getting I coverage the fair? large seem that Is the not are do question, smaller customers guess do in new necessarily the the be since scope. where question So I market fairly you And begs of smaller already. PowerSchool have it of is guess the

kind maybe really a of new think opportunity. your continuing private customers. along journey same as these about market down sounds shouldn't We like as customers moving a heritage or the into that, lesser are that's you're It

Hardeep Gulati

example buying five four platform. No, or [indiscernible] community Rhode district school Illinois. the great in not They're in point. [indiscernible] that that I in They're say we take And our actually Island, just to chart. of it's modules sits is a would buying what or District a unit

our including deals as including So well, more with to well, and schools. the your we schools multi-module are small new seeing private charter schools point, as logos of tons

got Epic at the level curriculum as solution. So buying down of well. with We've Charter adoption that happening doubled Texas successes a of in tons prep platform. Yes, our Schoology

the So we are spectrum. demand full seeing across the

Operator

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

Fred Havemeyer

PowerSchool here. entire Hardeep, Eric the Congrats, team and

point. those the the And We're as can availability some the time just frame continue to funding funding. picture we're at ESSER a where think deploy on of at time, same schools XXXX bigger of this certainly of place at ending I funds. considering

thinking and perhaps any where were purchasing just Eric, schools some of their context funds how Hardeep applied? you give in are case about . ESSER about continuing PowerSchool can

Hardeep Gulati

Yes. first them then districts relying and ongoing thing feel the fact, of fund right, adopt is still deals funding. those still business core the an adopt plus the ESSER using are are that the the on the some two ESSER. majority products [ph], deals, allocating of they all when in the it. our Thanks, We still they for would years, products for are because of They're Fred. basis budget for first on not XX% Fred, of based reservation, do

for It's sticky. They're doing it multiyear.

buying It provides they're It necessary ESSER them. does as So not the cushion. only the using them pattern. help

costs how definitely good but the a is not extract. So doing that, implementation example that's Rico initial and that. of they everything restriction. A Puerto can

ESSER. said, As billion on about you to still be $XXX spent there's

change expecting in core form. environment over growth So rate to we stable. ESSER remains or provide additional the budget cushion, this we're to budget any but that demand or adoption still feel that shape not or environment, continue

Fred Havemeyer

Got it.

deals helping sounds some those there, it Is it's really getting items. so especially just across nonrecurring And that... on line the of like

Hardeep Gulati

a comment. Yes. That's fair

Fred Havemeyer

how seeing in was frame time school among spend Back overall and is And within wallet of Awesome. terms spend. your also but targets. the schools were just of schools some the you helpful IPO really not of we IPO, versus IT achieved a it of talking the comparison initial penetrated, about software what share of just

overall to have. check you time, in seeing I at X-plus And year-over-year product here, certainly that seen just the customers substantial progress in we've XX% that wanted growth multiproduct on

Just does us time? schools? to overall where with IT respect PowerSchool where Or go about that how where to about remind think stand do presently spend over wallet you penetration you stand? And to could among can

Hardeep Gulati

Sure. when little at look has average, on customers improved. We've two a two and our said, from more you a than multi-product win like the that products, have products.

the to improved XXXX, almost who the now high was now has XXs almost customers two-plus of have in from it in the In fact, number low products XXs.

already So more already we we're multiple focused is seeing But interesting plus. enterprise on is and are what's that adoption. option strategic three that especially customers,

to our we're in focus our that sales move showing that biggest our are can we now as inside enterprise customers customers small the and actually channels translating easily and So well. the

opportunity, So improve. But also we to we do have a it and said, we as continues as that, lot new improving million we added X are also students. of

as So changing of that's -- it's kind the well. denominator

Operator

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

Brian Peterson

my echo the on congrats I'll strong quarter.

of what kind wanted market? opportunity, little you the be in But Hardeep. of bit. first to on I maybe higher-level the first, for to do in be international be on So products adopted will curious think a that kind ones two I'd hone

strong that emphasis like really guys Curious would there's on adoption you where narrative up the build look loss Africa? I are learning North curious like point there. be but initial about What in orientation, I guess a for here compliance or in would you guys if as America, like things of

Hardeep Gulati

$X the That's from our of student primary information actually student coming commitment system a And and question. is the initial Schoology adoption million great products.

where on. products our have talent are opportunity insights as those expand the we to as the the upsell two commitment main we into do products are We data and So basing well.

But products entering a those then we're entering follow products the future the map. we be of and the would So the top rest the are of are with market, road when market through. typically, those kind having

in Now -- buying of we as we get are and Middle take examples seen customers have well. products example multiple where East, who

XX buying So like they're to X almost products.

products initially So these with we much we but focus Schoology. do on opportunities to apply, have pretty

Brian Peterson

deals Great. at that had to for is in some what large pay can on And some of And you analytics call that? curious, maybe that offerings. a I wanted referenced you variability look Super And the obviously, some districts follow-up clear. just today. pricing. on what the your I'm in

pricing then that just just balance needs. perspective, needs? you address Or be have smaller to given understand Are the kind maybe love maybe to they works? the would is that different I'd because larger a there I it of functionally able different and how the may on

Hardeep Gulati

Hardeep. this Yes, is

connected got think around data. analytics are the multiple you when analytics other are, core do we You've that suspect then essential about, we're have We've where and at about bring you operational that have modeling students So the to it, talking analytics analytics right? talent got there and the what are even in students. you analytics, student the to intelligence broader allows

right, to So it. there price are kind $X to points, multiple -- each of typically, of price are we these pursuant products $XX

then you're you're smaller end. you well, to take option higher kind state, that. as the paying allows large you're of or the to of these buy If end, lower get as district clouds But paying a you're you an suite, bundle, which advantage you

Day, a through bit walk guys more little can kind we clear picture. of this you Investor So a as get in our

Operator

Hilliker of next question Rich Credit Our from the from comes line Suisse.

Rich Hilliker

multiproduct your think view your love looks, this go-to-market about I persona wanted about back how the playing customers think but this, and way into I forward understand maybe on your to clouds. efforts, you was touched feels if talk little circle the would out and specific wondering and I flesh really Hardeep, new could there? strategy, you fully to buy expansion you how portfolio trajectory a bit more moving

Hardeep Gulati

question, great That's Rich. Yes.

seeing multiple time. at were people seeing think persona based we likelihood also I same when be multiple buying about that of So the what to products our we're products, are as buying in

for of on Cloud Success for solutions these spending. workforce our bundles the success learning So readiness classroom cloud college created of we Cloud on Student Student around personalized and

on to So more based solution happening. us of kind our persona are selling their a product than them we're the create all carte we and one And full ala for bundles the deals turnkey It allows and creating kind that efficiencies side the helps grow at of key these rather give problems us with a time. on is marketing. seeing how that with

right? implement together. about things creates in point Eric's to services our It And to efficiency services, also these more

customer right? receive is why great great the our That's of bring bit some our the you does revenue, do a reflection velocity that services little of it in So growth. the subscription business our overall exploration services for but lower, and actually of for cost more creating on

and hosting are already And though optimized good that's cloud rollouts. even and all a we kind and our how this, of results. processes these seeing structured development we've getting And some are around

Rich Hilliker

Excellent.

helpful. billion highlighted and I think position helps then maybe even personalized as NAV strongly NAV, really this more a That's Okay. how very the you learning you learning content for $XXX the just follow-up, And opportunity.

a wondering if I vision, bring felt lofty, this how few path it seems years average life can which towards you changes like think now but it's I little ago customer's was to this coming focus. the into a

learning? does game change the really striving how personalized this towards customers So for

Hardeep Gulati

point, great a Rich. It's

is have of have biggest have been we've talking the we biggest, As unique platform, the we about have the opportunity the system record. we we because

We personas. across have these engagement of the system

with have the intelligence the system data. of also We

using districts on pieces this able and to provide and content AI, and in through towards AI augment working more now And are we with been actually this. path building recommendation all the personalization the teacher working now learning automation to in start this achieving creating the that. we've really actually are a there We and to launching with we're unique and position recommendation

a these We're be a we still the But X -- we it's and years, one to fully fully next launch American to AI much kind base. base. customer two it X, our for position to that can North models would before be platform personalized actually across harden the have where pretty over in expect years models really of we learning able

Operator

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

Unidentified Analyst

business on This is Kelly Congrats the momentum. continued [ph] Valenti on Gabriela. for

kind address? M&A maybe road in map gaps biggest have priorities? that discussions are your can the what how informing of or you telling to organic are yet PowerSchool product and portfolio customers share you these And guys the So you

Hardeep Gulati

things see companies, doing you actually do been talking the continued the for technology we've expansion core about curriculum. tuck-in that have most that, mission-critical in other Look, adjacencies and do all well as or on The we've communication been international -- we like functionality around ask platform. we as that, pieces. we if got as the we've opportunities and district, But a

the a have and will plus do platform. us stuff Those of through road unified both another further parent map We expansion, expansion. especially that, on allow that which to expanding map payments coming like continue things around experiences be area analytics around road to M&A organic

Unidentified Analyst

competition makes any to some That continuing the as sense. get where And then more you're to Are changes you any or have you seeing of bit little leading seeing competitive, types a in deals share? a noticeable My and in so Schoology follow-up, is impression, color. trends gain it's space? management with the the system,

Hardeep Gulati

Yes.

Google canvas would Google call got than a low-end have you've LMS it's and platforms, of it, of they us two then kind which think and the district have Classroom. strong a I wants the collaboration Classroom, I to basically,

happening get we typically see as We X.X doesn't pandemic, customers and use million million X as X.X to did this students In plus was million to XX% added market we before where students. in students. kind . what that's we're of add we -- back are to Google anything Classroom So million pandemic. almost levels one about But prepandemic year, of it. be we Schoology which plus well about

Operator

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

Karl Keirstead

how for little the you very pinned me. when was large a deal I bit that expect QX to deal. revenues elaborating delay Maybe Eric, in and coming one-off Great. on close? you light the two of Am the Okay. a

Eric Shander

Yes.

the be yes. a his remarks. rather time now. It's prepared large closing any mentioned So in deal And should Hardeep deal had that

-- actually getting of So it's days matter just away it's a from closed.

the can does this kind out we're the tell -- that we some we'll start win, we're that But to tell bill that. to extent picking lot when can, I I seeing we'll times impact in the that work up of of a deals a big will Now do we of do we're you, will majority do have in to these the lot sign. help QX we you going accelerate quarters upfront confident very when

Karl Keirstead

Got it.

notice try secondly, flow XXX about cash as Okay. XXXX, EBITDA down margins And but I were bps operating to Eric, in do up margins model were cash XXX flow your bps. then we our year-over-year, your

divergence there. there a So was big

we cash modeling keep expansion? we're the as funky should you in correlated XXXX XXXX be we little to advise, the Or something is more that a when So bit pace flow? would mind margin flow, model of there out cash operating it EBITDA in

Eric Shander

Yes.

been just XXXX. is guidance, not So indicator cash a at provide would items that cash I you're obviously, if a mean, you XXXX historically more I would have operating would I dynamics favorable. what little couple Karl, to look we we what there say, had flow looking encourage look flows, as XXXX, in for at bit at do an but

So assumptions, the your I in dynamics through at you XXXX would if some offline as some of of work going assumptions. your that's say you're to And look happy in kind we're as well. helpful with terms of of modeling

Karl Keirstead

And year. That's congrats the performance past margin helpful. Okay. on this

Operator

the comes Ryan from question next line of MacDonald Needham. from Our

Ryan MacDonald

core of of being could which on Congrats support within budgets. proposed impact obviously, that nice for cuts sustained have K-XX, about, an seeing in more sense addresses an a sort but governors quarter. that state the state wanted also seeing and talk the are as we're state increase on across get We're of tax you're budgets Hardeep, to the seeing budgets now your funding states. dynamics I well,

curious, and So the just as opportunities potential could budget what how you're to pipeline about that like, I'm there. feeling XXXX upcoming XXXX and the you look about school think cycle to year

Hardeep Gulati

situation the and still is budget think strong we to What healthy. be pretty

K-XX state federal if additional especially are As tax mostly if from the and the there it or some the any budget stuff spend base that's the protected ESSER the about of cushion federal the with discretionary is you with allocation. providing the said, on has budgets anybody of concern and most level pressure

actually beauties money. what mission-critical, that right helps is save and districts do we the of one And typically, it

to lot a sustained execution. only the the side, do budget our time they for way So because of them actually, if that's gets a even adopt have actually solution

Ryan MacDonald

on that. follow-up Maybe quick helpful. a just Super

that is at main services within K-XX. the mental cited getting the of keeps state One priorities health level

in think adoption the this curious has I'm Kickboard on heading be sort or this think and focus increased what impact of that creates the offering. point 'XX into a So inflection demand offering of cycle may the you here for whether you potential not

Hardeep Gulati

there Yes, whole of some also a understand well part lot analytics the fact, also social is and emotional is just lot And is CL not on driving in because support. the child, of what's achievement as that data. bringing a focus of the to academic of the analytics the but

and And to see our the them get students. behavior the that our in aspects also with SIS and as better opportunities we be a opportunities helps communication their upgrading as as definitely understanding because that focused well parents and data

Operator

next Brett Knoblauch of comes Cantor Our question from Fitzgerald. from the line

Brett Knoblauch

to flow pay down free that consider your there? cash I long-term given up quarter. to primary the of Would using you have Or your kind on a probably target kind a debt expected maybe reached Congrats you debt gone net of of has now focus M&A is XXXX bit? guess as incremental guys leverage be bigger some that interest cash year. expense

Eric Shander

Yes, Brett, it's Eric. I appreciate question. the

be And very remains priority. from absolutely, we to opportunistic you to heard top as Hardeep, So continue M&A a are around look, M&A. going

schedule market. of its opportunities we work terms, very the likely to -- around the but We're continue down going the the are So that that's the normal feel optimistic we paying in and still a versus debt active debt. very in feel more use cash to M&A down

Brett Knoblauch

just maybe follow-up. And Perfect. one

in that no? you ARR large like or a year-end did of pushback, terms In deal that include

Eric Shander

No.

Operator

closing the Ladies to I turn you. end session, of conference Thank to would the and reached and gentlemen, the Gulati, for CEO, we over have Hardeep like comments. question-and-answer

Hardeep Gulati

Thank you.

late. questions. A of a minutes running for Sorry few lot great

double-digit really exciting is a can another quarter, is we market We poised growth durable. As fourth a operate we have phenomenal you large, but good expansion. further and had for margin year of growing see, that revenue what's even in and

with our we the really kind products, school sticky And mission-critical to are operations. essential of

has perform. ability player comprehensive a of meet are we to excited the K-XX feel about to the as poised really we needs really who to And player ecosystem. who continue platform, evolving our most only -- So

one I and on our their thank customers joining as earnings of well to our each you call employees as support. want for for

us updated for as We excited keep we'll year. you about guys ahead throughout joining expansion on all are well, them as we the you progress again for time the Thank of and today. opportunities your

Operator

participation. PowerSchool Thank has concluded. conference for your of now you. The you Thank

may disconnect You your now lines.

PowerSchool (PWSC) 22 Feb 232022 Q4 Earnings call transcript