PWSC - Earnings call 1 2023 | PowerSchool Holdings, Inc.

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Operator

Good afternoon, ladies and gentlemen, and welcome to the PowerSchool First Quarter 2023 Earnings Call.

[Operator Instructions]

As a reminder, this conference is being recorded. I would now like to turn the call over to Shane Harrison, Senior Vice President, Investor Relations. Please go ahead.

Shane Harrison

operator. you, Thank Investor PowerSchool's Ended to you call the here. to for that that our Welcome, our accompanies XX, earnings XXXX. I Quarter remarks the deck slide March posted let section wanted First of we website everyone, a conference Relations to know first

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

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

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

definitions both non-GAAP release investor corresponding on the to information, financial provided information are and press website financial investors.powerschool.com. Additional between which information posted is presentation, reconciliations GAAP the in at PowerSchool's and results including

will to A this be the replay call same website. of also posted

me to turn Let call Hardeep. the over now

Hardeep Gulati

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

great is expanded In margins. XXXX EBITDA our a and grow start. XX% to off to adjusted QX, we significantly our ARR Our continued year-over-year

a large progress and record new We also Slide expansion. QX on from X. our saw state continued results of won international bookings, deal level logo on opportunities, amount made districts demand and are summarized

with million growing revenue support reached X% million. and revenue subscription $XXX quarter $XXX First to

ARR basis million. strong a year-over-year, million, increasing margin, to drive year-over-year. XXX.X%, nearly $XX Our expansion grew revenue percentage representing XX% Net at to adjusted $XXX points remained XX% EBITDA XXX helping points X an retention of

are our success. shared in our there X foundations key to have continued As previous earning we calls,

foundations. and durability. our from key further resilience, like share progress X in our growth upside to business differentiated our QX our Our financial these I'd platform, expansion,

Starting X. with Slide

This macroeconomic demanded are a demand our business robust, insulated and first strong record our where the with increased from budgets of resiliency products again bookings. proven logo market that multi-sourced This durability mission-critical largely by was funding that market durable is in new that sticky conditions. grounded quarter, resiliency. is saw in are features technology we First

wins our $XX million from our infrastructure, solutions of digitizing an our Education their plus science largest supporting was ever K-XX entire across for of Department Rico and over leveraging One exciting territory, Puerto the students. XXX,XXX-plus enrollment bookings deal,

product, We continue our system clear to and see trailing core leadership. of new total bookings. basis, information further XX% On market demand our SIS represents student cross-sell strong for XX-month approximately a our expanding

have as success deals these are and cross-sell While do they strategic longer TAM cycles, implementation significantly. increase our very they

we shared activity, in data The data logo market number and of saw addition operational digital that tailwinds demand drive XX% the strong efficiency, insights for our solutions. enhance for to increased the deals In we cross-sell include in increase QX, have continue security, new the to the which transformation, past, need also year-over-year.

out and cloud multiproduct persona-specific the will As are bundles that we roll our momentum support we seeing. further cost

above least to Additionally, be within each bundles. one X our or We velocity of more product $XX,XXX transactions continues than XX our deal at cloud saw strong.

gives which our year-over-year, us XX% business over grew confidence pipeline our Additionally, about outlook.

Eric XXXX reiterating are will guidance, our full more which year in We detail. discuss

Moving to Slide X.

our platform key strategy are second the our and differentiated vertical-specific differentiation. Our success. elements of solutions K-XX foundation X of There of is

the First, to meet in we comprehensive evolving be have the the ecosystem. diverse able entire platform K-XX to market of most the and needs

to platform and key the most our unified provide parents integrated students, for have experience an teachers, we Second, administrators. personas,

our data-centric highest education we products broad SIS, improve in ability experiencing deliver growth outcomes. In insights data talent Third portfolio. holistic our see to to and all is the demand across aspects with continued QX, diversified our to across platform our

grew year-over-year. Our over XX% data-centric solutions ARR

leveraging the growing their in cross-sell data deals harnessing One improve and outcomes. in to purchased top the of of of was showing X their our data QX, XX districts products importance

so One of are Insights usage success talent Unified their ERP and good Weber products solutions. long-time and Communication example seeing in the to SIS, the excited like saw Intelligence District Charter school districts, our we operations party, outside by added Public wins charter within School third which School deep as and such and in Connected as Moines We're Utah, County Foundation. is provide also with cross-sell data a managed like with Intelligence fully for enhancing District Fairfax insights the decision-making all private K-XX agencies their their or insights of government access we market, and data uncover like schools student school or Challenger the the centralized district, public and in even platform data a several the of Connected solution, they PowerSchool systems, School their improve real-time Epic schools and organizations service first and that private all District, outcomes. In Des segments across Public schools lake education can quarter, our School very

address workforce a leverage and loss, supporting and teacher outcomes education for government learning life and the and shortage break data and to priority schools schools silos they to implemented whole data improved for child analytics insights strategies readiness, As the intervention student for support, leaders every evaluate the is child. rising have surgical

provide education data a very to local bring powerful with state longitudinal recently educational together build to announced data to and data optimize systems the cycle to the We agencies education enable operation higher and success. education leading software Ellucian, unique student with life provider career would K-XX across higher a partnership that opportunity

for our billion solutions successes our opens our $X grow exists that demonstrate to These within existing new data solutions. new and our TAM XX,XXX customers cross-sell ability up markets

our providing expansion foundation upside platform further to our growth X, in with in Each Slide today. is support markets double-digit our in long-term we core runway shown see markets. our and of growth opportunity key third As

Starting with platform expansion.

inflection in all on the You've conversation growing heard the AI many industries. point

To about time. appreciate excited school valuable opportunities integrated instruction are which and will to contextual and solutions, operations. personalize save providing students an efficiently into embedded We help way, leveraged provide in AI teachers scale capabilities for our and very them enormous support and

previously, have into AI have solutions, As customers many our several we being shared already by implemented leveraged already today. we of our of

more eliminating an in AI AI data, securely of data platform and models. deploy build brings help near predict interventions data-as-a-service and providing machine students, burden the support, element Connected be a and solution teachers as learning customers also Our key together real-time offering, may scientists to AI a estimated create functionality. own of Student biggest can appropriate identify Success is prepping additional efficiently AI and With Intelligence Cloud the Intelligence Connected implemented. require spent well tools of so projects XX% time data as as platform AI MTSS gathering providing to and uses a their who way, our

milestones a cloud. These products content very specific are are push the learning mastery products, over utilize student highly estimate ContentNAV, to last $XXX the to personalized key subjects integrated creating assess new We our in to automatically launch AI These LearningNAV about and of we the excited solution, towards journey. and recommend in products our quarter part of contextualized personalized learning opportunity, billion. be their both and personalized learning holistic, needs, a a market of

are solutions. embedding across our support educators We models to generative also AI

PowerSchool in will Homework on year. automated curriculum Other For are this our further Personalized year individualized creation supported administrators cases Solution launch later needs of based supporting like planning use content next generative example, and AI. be the launching student we by

market AI see additional capabilities believe Day our July. embedding Conference enhance our opportunities and plan from these We into our to showcase and on we may generative services and industries disruption progress our in creates Edge solution TAM other generative to expansion growth. While at Investor AI,

market expansion on like the would progress our share in strides make as our to we go-to-market. Additionally, to continue we international

first sales will by our which strengthen announced in specialists. to XXX,XXX-plus augment local team platform BME, of to North of channel in support late our millions additional Saudi America East We this and And first and outside Board students new Middle to partner of We just Middle year that delivering technology and announced will has Kuwait will in open last reach markets supporting Qatar. education Dubai, year. solution East, our presence reselling, with their office students summer. a of established the committed Arabia, BME and PowerSchool BME strategic our

and also proprietary, localization experience specific as reporting. left country extension uniquely such translation enables and framework This differentiator localization strong solutions to features very and our The for a PowerSchool to is views, recently enables tailor our framework, tool partners user is leveraging innovative We've stack right and quickly region. which their America, multilingual and that and announced of key our ability localized local customers a tech North extensibility localize to partners. outside of supports our expand different

The of our create which foundation. steady our model, with differentiated operational highly execution financial platform, combined and durable is key base to customer capabilities our fourth a our nature

demonstrated business leverage down sustainable will from increasing by profit EPS. margin as EBITDA we that you have X, our showcased to meaningful Slide On as will feel operating gross is on as created model further the enviable with you operating this improvement this create leverage profitability adjusted by We move an outperformance adjusted P&L quarter. adjusted and see the

the will I and our Eric Eric? quarter the financial financials durability for of to the model. let speak

Eric Shander

needs with off on mission-critical key Thank our products platform across our reflecting you, continued XXXX a deliver as strong market Hardeep. K-XX We of execution, balanced the kicked across quarter the ecosystem. growth

to on quarter. and total revenue summarized in quarter came the support our the in call. million earnings and year-over-year guidance year-over-year $XXX line grew Slide in total increase, X% representing million with a XX% $XXX Subscription for and revenue provided As first we revenue X, of X% on at range accounted last

from increase grows, to impact the financials our deals, As the which X our variability an expect in next. of quarter to see may we strategic business larger

in to quarter, of $XX total $X XX. $X revenue. deal deal, million subscription Department large which of announced signed Puerto this consisting This support February approximately on Education As revenue, an earlier won and million other services filing million thrilled revenue, we and Rico of in the of million we value, was and license represents X-K $X are of have

and which of strategic occur this over are support summer to services of the implementation anticipating months, activities customer majority to large occur. is start revenue We acceptance the when will subscription and the the

over a year. totaled prior our Services from quarter, slight in the the Revenue business $XX million representing increase

As growth such quarter-to-quarter fluctuate Services revenue the deal and wins, we as Stride. due variability Rico, will to with rates comes large mentioned LA Alabama, that unified Puerto previously,

the increases value which our time implementations, drive for efficiency to of continue velocity also and the We our customers. to

million $X other, that our is mentioned highly smallest totaled quarterly in third-party basis. least for Revenue on mainly previous our calls, revenue the is which a from and revenue, this strategic earnings as license and variable And quarter. to stream relates

an million, and XX% higher time cross-selling last This new continued by with same year. $XXX quarter in recurring activity strong strength primarily the of the ended revenue driven increase We bookings. performance was over period balance annual logo representing a

at rate basis on quarterly year-over-year up in XXX.X%, Our retention came sequential XXX consistent points a net basis. revenue and

momentum cross-sell XX-month strong driven performance trailing Our with contractual NRR was our typical increases. coupled higher by price

Adjusted process and scale, representing year-over-year continued for $XXX quarter million with improved the came XX.X% responsible gross a improvement, in efficiencies. a basis focus driven hiring on point at profit XXX operational margin, a by

Moving reduction expenses. of development time same to the first investing quarter innovation in our as XX.X% of profile period with reflects Non-GAAP at year. XXX in expense efficiency came percentage cost point $XX a the model, and in of revenue expense million, our last key improved strategic This compared revenue adjusted still representing basis in and XX.X% operating priorities. R&D R&D research the while

year, was invested compared expenses, XX.X% XX.X% last a R&D capitalized Including XXX the improvement. basis point of with R&D in total revenue representing

in million continue $XX year. representing or Non-GAAP $XX the increase first as from the in-person our as same SG&A million we as our that time our the XX.X% in expense go-to-market sales period QX sales revenue function last fuel reflects The we well future activities, our will with expenses quarter, revenue growth. as to of investments XX% well of totaled expect which compared continued in our activities, making are

range quarter of was Our to the or EBITDA commitment continued exceeding million end guidance XX% and reflects high first margin, margin our expansion. adjusted $XX.X our

$X.XX $X.XX in period income share, in per the or interest approximately year. time earnings was our net Increased per had the last of diluted from a diluted we share. Non-GAAP quarter headwind was $X.XX per non-GAAP XX% fully to $X.XX same first share up expense the

by of is flow and use reduced First or and the cash seasonally same period $X spending. and lowest year, free driven million our last of which the given bonus our payouts, improvement was time capital timing negative from CapEx flow, renewals was $XX X% working of an cash quarter improved quarter million,

we equivalents, cash our cash did and need to strength balance XXX% to not our quarter in that year, We quarter, this the Moving an cash last it $XX time the we same ended utilize year. should use revolver and with collections. of sheet. It period in be over due of increase noted need to the million the the first typically to

compared of a the leverage meaningful X.Xx debt X.Xx, with quarter the was as a improvement earlier. the of year end Net

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

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

quarter, second in revenue the $XXX Puerto of to which $XXX this take the expect implementation, large go-live range For we summer. deliver Rico total million. the expected place outlook timing This to the to of quarter million variability second the for factors is

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

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

Overall, first our our on executing XX,XXX-plus quarter. in go-to-market remain customers' innovation strategies, we're with line our on the and in growing top pleased expectations. products our focused by exceeding We progress driving the

continue Our operations, to and plans on XXXX innovation we are margin in expansion. while track, international invest product our

be pandemic the more to the customers journey latest meet excited on reminder, and you. to flagship Florida a Investor customer Tuesday, first financial updates This opportunity event and very about go-to-market since hosting Day, targets playbook, map, excited our we're first much Day share inaugural long-term XXXX on will with with their so with will to We're road EDGE XX, learn strategy, share all XXXX. top we Orlando, as our our in PowerSchool. in EDGE Finally, product in with began international of event thinking our our be and Investor conjunction our July

concludes you remarks. open prepared our will This Operator, the line please for Q&A.

Operator

is Borges Sachs. first Instructions] question from the Gabriela [Operator line of our And with Goldman

Unknown Analyst

[ This Gabriela. ] for Valenti is on Kelly

the to me First and term? you're for about product and create personalized plans. learning question enhancements is, of Can ecosystem have new a talk looking of what of kind medium you over type few bit a kind you space student-specific content around lesson recommending the

Hardeep Gulati

A great question.

about, to door providers is the of the to As are we One where we foot I a the able components the actual excited open we in major our education in bring content. partnership are learning content, products we as have on personalized we parts personalized object The mentioned, really almost broader with that. million stations all basically, provide are home so we X the X very especially about content launched, resources the gets have with as learning. can learning there repository, well where the talked

is to that us about child. also One create of specific a in remarks that so leveraging personalized AI the allows talked the to content now we're just generative I prepared additional content, even components to actually create

example. there an child. about create need the and take and another for a set already it'll ratios, personalized of If take question question they content in questions So the to a help more

second the upon is that learning pathway. learning different create monitor of mastery that of the depending levels navigation is The child, navigation. of The every every and actually it piece personalized their student learning it being beauty for pathway a to learning able lets

their and pathway flow of a the every them learning kid subject. assessment different actually would content have and to help So master content

are planned as integrated as now even take The for year, the classroom able this beauty teacher. and the mentioned, Homework, the taking embed of we PowerSchool next that Personalized that into lesson launching we're our to is, into are I next level, we

learning even every scrape provide navigation to homework that personalized the that child. for homework, will the teacher So have doesn't

can terms being every this the and So for of personalize in able amount supporting of the to time changes really game teachers in child. aspects save teachers, learning

slide. So next we're hopefully, see the very you this the to and innovation. get at Day share about get to Investor excited we And

Unknown Analyst

I space? of can. recognize the follow-up, in content around just AI using quick the K-XX some if navigating around given How the are concern you in education. the a And sensitivity I generative there's impact technology

Hardeep Gulati

from teachers the environment for student, support parents collaboration to manage teacher the doesn't administrator -- kind as and school to be We -- provider, the more of when the the Great do look the what from as you software perspective perspective, are had of and it's teacher an providing from a we mission-critical what and of question. right, providing a at from able software and onboarding, a we operations management. a perspective, substitute

generative really doesn't in what we a whole provide any the actually our So AI operations into additional now lot districts. our it services is, necessarily of actually we actually as does and of our content different for can software it that out But capabilities. contextualize embed and value of software, impact software

a time allows provide for it's use for more it actually really broaden school exciting to So to us be and now because us, our to capabilities our personas. districts turnkey experience able

we embracing it. are So really

has that now our enhance us As things products before to with and more AI AI mentioned, long been already of the even part launched faster. our strategy helps to continue I we've generative

Unknown Analyst

on to and Congrats the quarter look in you July. seeing forward

Operator

Blair. the is with And question our Stephen of next William from line Sheldon

Stephen Sheldon

about maintaining First one, I guidance. wanted the to XXXX just ask

expectations talked heard I pipeline I you think you quarter. You if the about first correctly, up outperformed profit And the XX%. in

increasing from So I full guess what year the kept you guide?

in through else maintaining pace that on just just the mainly call being as of maybe season selling out guess the implementations Is here key anything conservative guidance? I the you XQ, progress or to

Hardeep Gulati

Why ask in. don't then to off, Stephen. Sure. Eric jump and I kick I'll it

new of also traction. saw, you of terms bookings, business right, not cross-sell pretty a -- the in logo terms new So the of had good as in record we quarter, just a but

one signed deals are which up Insight. the well the results getting X market. recent and that Unified part history, just not the the did implementation on to we but last We quarter even Maryland major of a actually as largest mention seen we're implementations. of seeing major of we're as large also we [indiscernible] as Puerto last of of But the is in exciting Alabama this traction Stride, we're in year, So as state in well Rico, implementation some -- the as excited we have of deals is year very about deals, SIS lot

this the into to Some of imagine, the current can school is on go-live. the that, of you year go-lives as and go end back did going year

kind it is a is of going from back-end revenue it be to like perspective, -- loaded. So

what that's of from the being about the well are as as both with new SIS absolutely very seeing of kind So we Unified investments the rest gets our QX cautious we about we momentum so our like the Insight, and definitely current are in momentum us guide forward. But the excited year. comfortable are opportunities and see, for that and the guide great businesses from core like going

Eric Shander

Yes. you answered I Hardeep. mean, really so it well,

deals, year. have you we But that latter of here the the the feel as larger won't part them. think, reality very on I of pipeline, revenue will part in So is, first most Stephen, we deals this next the about is, really likely that think you confident seeing get key even until we the year, the larger those start

kind early back the of when this will revenue, year. year pick and of the I as you'll up this So think important really that you half the of especially year, start we subscription the revenue that's look late in deals skewing last signed the for see, it's at to

-- strong. longer as to I given pipeline implement reverting these, think size these -- it's just more as back is all complexity little a funnel and bit is them. limitations, to know, take So of does the we strategic are, it are to the great, you which us, that some system of the extremely the certainly it's

So booking. lag a little the bit revenue the of will

Stephen Sheldon

lot wanted Got guess, another and to tried side been lives it. I the could have I like of reception I those sense. lot the it? LearningNAV how, ContentNAV. those teacher Makes it on to -- with sounds a a guess, It has easier. make teacher question, that follow-up A for products ask Curious about AI

And I be? are all that spread know think thin. how opportunity could big teachers an far we of too

Hardeep Gulati

It's a great question.

you things assigning augmenting. augment kind just the grading So is. as to things teachers' a in of replace our teacher. homework, able understand monotonous of homework, how of teacher, of is are we the you not And of then we one they key the child that, homework basically to lot launching can meant where this way each That's is, the whole the of flows initiatives the all just process have mentioned a of imagine, collecting each really one time [indiscernible] child to life, and about is right, being understand tasks, to where are terms major a

provide our child is of look also side. the lot when of side that able districts to which MTSS, able like personalize And on you attendance of -- integrating academic either to side behavior lot to being needs. leveraging, have surgically ability Alabama are We're and we this the individual child's on at the we're of a healthy the of a beauties one of interventions our who or need, on provide the or the from

on intervention also really AI provide identify healthy the kids, So able helping which be but surgical help, needs. the each navigation kid helping actually just the need and and mastery, then learning is not to

supporting is augmenting and opportunity tremendous and really the in of terms teachers So educators.

Operator

the And James. question Brian from with line of our next Raymond Peterson is

Brian Peterson

curious, to really strong pipeline does kind know I'm know future So that? really thoughts I of curious for strong And be the some results what's how the the SIS. I specifically there? And pipeline figures. for any driving look deal wanted I'd SIS? mentioned on activity you on

Hardeep Gulati

pandemic, the factors kids as I are. assessment of is, was Absolutely, are where you classroom are know, focus which the many Great, SIS. on think, well as think there playing lot into a understanding there I as One in Brian. the

demand And even the in than What to projects higher factors. what's they what integrated we didn't are saw they having is on move we systems, SIS now on, actually were pre-pandemic And multiple it a is but happening SIS. to pandemic. the of in is have some want also that of the seen middle

core a all if take not you to that need core system, major deal really district operating realization and want is right with One to disruption. any technology to school they the the of have advantage of

So Number right security playing lot, a platform. that's ransomware your modernizing of in attacks and the not really minds chrome is fact in now that two, both increased security the everything. number of for one. and of insurance now DDoS the attacks core districts terms actually these using and It's have are to and the the infrastructure these if insurance the do companies systems still they flat files districts, they that have all right for system load data the

thing and CIOs cost another perspective, almost got upgrade that's [indiscernible] So is a they from business, that. doing to and it of the

our actually another them an giving is what's that helping now really view our full bringing system, they're putting platform, operation of a terms differentiator platform in not it's NAV is together Third also growth. the putting SIS just in is gives

in very the And SIS. X driving large really as actually on are of also the cloud are not terms have U.S. the additional So we a launched. but international seeing source taking which the student pipe in advantage platform demand all a the of we have and midsized SIS, things, these healthy solution from and are schools in just we well, small wholesome lot districts and of

Brian Peterson

follow-up That's for maybe great a you. to Eric, And hear.

summer? you may in kind guys Can that go period the seasonality. as big renewal Just you in ARR have early us how the insight remind flows And through for kind on the into renewal of just the any of year? you

Eric Shander

Yes, absolutely, Brian.

guys I it. a of good that it, own into can now give So I definitely you visibility lot

extremely ahead had expectations. is and operational in The fact, high, extremely QX. of retention our we So little in strong bit success a

busiest reminder go everybody, as got XX% and just QX. renewals for our We've we QX is of our QX, As in about a into QX happen period.

on QX team and we're that the certainly, focused the same flawlessly renewals on QX executing So getting working is X thing of one, volume. through; things: ahead and then the

about does question. is from what ARR an think and the that I As perspective, appreciate important it I you think

to amount in purposes, QX around obviously, is we happen for renewals of XX% the at because, you we've Just got QX. QX essentially our with QX offset modeling that the of given flat will attrition as in ARR net look any have, fact new any of get typically

if kind will right, ARR any of happen you material. up when is to will it'll an level perspective, to quarter from down, exiting to sequentially. from it you'll you off That's to then build but from level out see continue in certainly QX not if QX. go of But ARR will this will, QX. to go And back into QX a going kind it's attrition off, quarter-to-quarter pattern that of QX, growth

Operator

question from line with Fred Macquarie. And the Havemeyer our next of is

Frederick Havemeyer

are basis. with? summer, ESSER cycle. budgeting what more in services focusing I'm out this I these something the and across is about the upsell schools get you and deals onetime thinking way of funding across well the making some in that because the am kind board, of I've with can Do curious, including part, I'm many more that thinking software get year's executing come seeing them seeing so -- charges you've what funding that think going more towards part seen -- to it's of just facilitate the do notable ESSER, room of motion done of probably those for quarters supported that And of check it services, funding. other I'm be a for ESSER just contracts, seems in that cross-sell been PowerSchool that of costs think have as been we're help and ESSER I'm in while more part the might on services I about have by ongoing just been

Hardeep Gulati

title, panel to more some go we last you lot the talked got at the just the lot look transformational where And into the bit aspects. was aspect, second strategic. things It's the end tail there we more critical speak about the I at great a for ESSER when a I as of was chance lot on And needed. ASU innovative Fred, week members more about a for a of spend, little it's Actually, initial panelist they Halftime more question. half ESSER. the about GSV appropriate ESSER,

and XX thought So we terms of the with categories. months even can these spend seeing for a years spend are couple that of more to for in of a lot that more definitely spend with districts the

leveraging with ESSER actually think of to these we staff, example districts absolutely that that to it dollar you mentioned. as that quarter got transformation the we to implementation. ESSER I you is But at that -- that. objectives, Definitely, through still help good is one of you time, deal funding help with initial great opportunity. about the money the also right. have actually with of implementation for multimillion there legislative onetime Insights, is The you're is a of the talked approval allows can the deal, really And for right, special Puerto budget. beauties support use Alabama last the some as not ESSER Alabama Unified that, the a only same felt Rico

these overall, are in of legislative sure and are there initiatives from and of just a going making recognition critical So not for support lot is district that from these but through, education digital support ROI ESSER tremendous. of transformation support, the terms overall the the

the see and very be So that's pipeline continue to strong. the we to demand why

Frederick Havemeyer

I'd think international here we've seeing I And international, through coming Hardeep. more on as just just ask and question another been like you, Thank to deals here.

more learnings you're international scale and just finding and in and get of further you a curious rather your overseas deals can with Of international to there with highlighting international Middle as and regions? that the work take the here in go-to-market further experience you or deals are just Are more with in scale to partners deals. East. more were getting doing footprint I'm course, these establishing you quarter that

Hardeep Gulati

Absolutely, Fred.

the an extensibility the to reporting, the localization our is able as of of meeting business the requirements required but different in the it with in meet lot built able educational and the laws American comes different was that U.S. meeting of the that Schoology, especially to we and the XX when requirements even the international strengths and the to the gives experiences, strength different that PowerSchool schools, provinces, do within of in states, for is all of XX reporting opportunity of be support our already with I and all attributes. SIS world. think the schools to countries the us even private requirements system local parts to what And be just all Canada, not one the capability, a fact the

is along strength with an of ability, lot presence, points us with proven That known. which the established already brand regions we is already an giving a entering are in the

of if best are of American is in the So School Dubai, school Dubai. one the performing Education you

of So International if you're in Bangkok. Thailand, School

strong they opportunity, they private really district state schools kind to say, when they system or we look using, even an for So looks so the have replicate technology, are and at and viewpoint. or what already can same these a school that of

us the of on the support, going ground, sure we're helps make exciting. this the see individual the strong localized end international, because getting than experience that can our -- these are we is is that already what And be what we schools, going we services customer reason and appeal. very for regions, for rather -- doing strong of commitments a the you help the we we very it these are our sure the way that to are going after And boots the the we and brand is with already the getting quickly when partnership strategic in that more make is we're scale can have proven partnerships

really very So with their into skin are these partners. putting XXX of regions it's strategic, scale XX really who in us very committing rather than helping game in having regions. the This these partnerships exclusive or is and surgical, partners

are about path are we we excited the very on. So

Operator

next is line Saket question with the our from Barclays. of Kalia And

Saket Kalia

projects? just I brush, was some with PowerSchool there. earlier you And drivers types modernization the just SIS commentary of just level in about or what talk much just these and systems your really some can of you. maybe on maybe who interesting start Maybe thought in share to to how you're SIS? of just roughly Hardeep, has broad set, SIS displacing

Hardeep Gulati

look from right, students at XX market a you million platform. almost when we it share, on Saket, our Sure. SIS have

million from our market, in which perspective, North America, will SIS roughly of in put solution. XX So X/X actually a we the leverages

terms touch We are vendors that in leader. next percentage. The X combined kind market of that by of the far probably

lead of a our have competitors over market. definitely any in the we So huge

is the What still legacy XX% market actually custom-built see is of you or that do very solution.

only a also There to or students where million it only but not California, platform. leveraging highly So are are others, legacy X entire things customized like being still large a which million in in Puerto was which vendor had X there maintained. very districts their and are even on have small even districts, school Rico still school lot in of vendors, whether

of that our required, even can don't platform change AI apparatus solutions, bottom So that, ability innovation well and be districts. that's the the able to a to security to which leverage legacy driving into which the to is needs have data lot SIS what's being set you do imagine, as can the to XX% these to that the able They modernize a as the of as apparatus required, converting platform. school

Saket Kalia

for That's plenty there. great. hear. follow-up. growth That's you of great maybe for put room for to still Eric, Certainly my Then

Rico of congrats all, the Puerto great on deal, First a win.

could Can for just of maybe help But contract into X rec ones, revenue? seasonality how rev rest you SaaS. we here revenue? vast us Understanding the year model you those of talk just that majority and those the License the the maybe just the Services on is think maybe kind business plays on as of through given about the

Eric Shander

I the of strategic me And of single components, just I standpoint, most and all revenue breakout the Saket. certainly, least think about high will you, Support kind an into it. as From the We're looking strategic. actually, most Subscriptions if let you're it strategic to digits our revenue in help talk because S&S to Sure down the at now. how and model may,

the half. larger these start and deals kick support to see in we second really the As and subs

that see full growth the low You'll revenue revert year the low double-digit back into digits, the ending standpoint. double in

do at digits the in full to be in year similar said expect look quarter, last the to mid overall I high-single our for you what our Services, growth. to Services business I As the year-to-year full

getting velocity out of that? we're terms increased a Now a utilization, of has efficient our value is why more And The lot of lot the we've our a the for utilization team. in time gotten business. Certainly, lot of to increased. customers Services more

then head standpoint, see it increase all holidays, et Now what in for the down year quarter to schools fourth you'll that means implementations, see then off revenue as et taper cetera. will the increase see back-to-school further slightly And see from and and you'll you'll QX ending the you QX out a in projects and sequential QX, as services a sequentially taper start to we cetera. have

in a see high you'll up Services second then quarter, down sequentially, pick full bit third So peak the revenue single the and you'll the ending then on you'll QX down digit trail in same in fourth pickup year-over-year thing, quarter, perspective, mid- a again the little in the quarter-to-quarter slightly peak quarter in to see come year QX, see in and QX. growth. L&O, then

a component. in will, majority be our -- Just that variability around recognizing will we But flat. segment. if bit year the the the little And our next. of S&S, full for revenue expect to quarter be say smallest our revenue from strategic company most L&O to on our being growth, basis, you the strategic I one and a least least There's more would

asked next not that think the the So but looking quarter for about for year. full bit quarter hopefully, for, we a know little at are but overall and this expectations I everybody profile, of more only how hopefully, you into than revenue kind certainly it's and helps it,

Operator

And Jefferies. Brent next line of with Thill question is our from the

Brent Thill

And you had a fast suite for a Can I a quick to I Is infuse do can event? you judge AI. Is that on it actually turns when after. Eric think how a mean, out? the follow-up monetization and timing speak this you out? to a months Hardeep few year you how with AI?

Hardeep Gulati

Sure, I remarks, AI-based components. we're which our leveraging prepared It's mentioned selling do use we pleasure we and AI again. of When a components, access those have already in solution, and to dozens customers, have my who Brent. access customers MTSS

a So already dollars solution. Unified million that's Insights we as It's monetized. something couple part of our of

are more we more continuing as to see Unified and deployments. Insights to XX% grow continue So

as to able continue to are grow well. piece We that

So that's are already piece. we already monetizing -- the

have mentioned LearningNAV in the the as piece around been actually we and IT of bought, we So can terms them. start it pilot now has ContentNAV. the our conference, for launch have on of we product additional into these phase of we that and component, some a the almost second at couple customers already we fully of which embedded EDGE to selling in decade, are in is these showcased This the of with components. based have Schoology our and and fully a And so we plan

couple large who interested. of have actually are already very a We customers

So solutions monetizing through full pathways that $XXX deals can up actually helping know, the solutions as with that real and half. year. as monetization, what we huge tutoring current will Naviance to learning opportunity. we have additional like of leveraging year, Then on the areas the these you launch almost opportunity TAM. PowerSchool of the kids the cloud will we second planning our we our open support, billion to terms things help learning. start seeing a you be well these like The some call Workforce additional Homework this this supplemental into do of Personalized the into amount to will But as add-on next it, are in is products way help The

the even start And then classroom you at of can that picture to of longer the looking even moving help. outside kind be

these a later X- monetization next year. So a half -- the already you monetization plan happening much over X-year the it's like you'll launch it's see components, to have in but and to more

Brent Thill

with going on you that to hearing, everyone's -- goal shots? bonus go of is back of is the And thanks guess you layups. the the after a then address of the you take XX riding deals. cadence antelopes? this can to this I can the it the full to close first go just to bunch kind back it Or is big going versus take raising the year [indiscernible] get Okay. elephants to concern trying to back go on of and to big the haven't you only of bigger -- out? kind quarter, we just We to over going I Eric, Great. line But seen guide, this on is

Eric Shander

doing question. What just the services I elephants big a the though, the it's is I think bagged. projects work us I It's mean, been look, and would have of great Brent, matter implemented. getting a say, already

Rico, appreciate, So you as in can the is we included is our the And one years. largest remarks, we've the teams matter had a it's the Puerto why -- of which prepared size of last deal, several the that of timing. deals in

management So a as there's executive focus. appreciate, oversight tremendous of amount you can

it's is Puerto that a second I the flywheel will would deals creates of fact right? the is a the on huge that opportunities on future, core the given Puerto on laser-focused So to And Rico, pick which Unified, start amount we're what say half. are Rico, in in then in for up a cross-sell the system big implementation the Alabama, LA see team we confident, revenue that

again, those really there, everything those especially I first revenue in. next the of say the which just guess pipeline, we've year, I part -- won't Hardeep for a standpoint, meaningfully talks to So part about, maybe about likely on is see we're start from would modeled latter you bigger most year, contribute there isn't super of excited this deal as anything which side items until is,

with deals Hardeep and So it's as of how just a I candidly, -- I we we're just strategic bigger, important while a demonstration little noise, it, get there's talk because are bit as would and of the becoming excited I it's our about think -- customers.

continue. So the the to of just half bigger going these that we are to roll confident terms in have to of second we're off going that's in rest implementations of go-live. the the year are going revenue They assured deals. But once very

Operator

line Hedberg RBC with Matt Markets. is the from our Capital question And next of

Matthew Hedberg

either one year. there's bunch parts this been about again for of sake funding how for you, flowing guess we about memory into a U.S. I COVID. our it know out of I time. the I'll to of think should coming refresh keep of moving Fed

maybe How relative of then Eric. for guidance range? to that And of kind year of midpoint specifically your the you think sort full about do

Hardeep Gulati

Sure.

So quickly from that, address Matt. I can a perspective, funding

has years. to that largely think the the I funding of funding couple at is So when last be the continued look you throughout even stable

goes component So XX% there of funding. change is XX%, to about core Federal no to the it. piece

That's we in that. be stayed seen We of back ESSER, $XXX stable. ESSER The of X is tranches across states the pretty billion have very and a local. to And top much ESSER. that on have money

work. The them have some still first and make -- it been X part of tranches been is the spent have tranche third

spend. So put still available total, mentioned, can to then can rest I XX% as you you -- roughly XX%, spent for the and districts the being

So perspective, that for even from that better. flows still for be bit another decision-making XX spend a can months little then and

So seems also with that. by funding supported further the ESSER environment be to very stable and

Eric Shander

the guidance, on it's deliver ESSER percentage. the may this specifically pretty Matt, to have a the And deals rest we small have any on Yes. dependency that funding, When assumed do ESSER to not use visibility usually funding of year. we

that didn't So things because there funded getting there's spent, of not et risk cetera. get little very

I So we've dependency on balanced, we think, for second any would ESSER haven't and say, -- the put what the half. guide, is I fairly

Operator

And Rich the from our with Credit question is of Hilliker line next Suisse.

Richard Hilliker

know One I at have these wanted partners freedom here quick how partnership, wondering the Exciting What BME on the OneConnect minimum and commitments. is one international. another partnership, Just have my to to go these have? see I'm end. much do

As XX-plus you you're mentioned, countries.

Are cry? you sell framework. one that they rolled Are whatever does them have? to look want? freedom You've of are it do more Is much localization able like? they with rally they out this they it kind How What bundles? pushing product, --

Hardeep Gulati

Rich, fair question. very yes,

be learning So management enrollment, is operations collaboration communicate the where need the with to school systems, the core the the and focus SIS, parent non-novel school operation, core learning on you things manage right students. the and products, run to core able international now

are So outside, insights even and up see buying LMS. is -- analytics, demand and international, of which we who also coming system actually people our

We're international. the really So all our of launching those XX-plus -- of focus area not core international. products our for us the are for

are And trained already the some with these with partner which working that's is local respects enabled, So actually Phase the the partners these most of there. where and school experience the I. the products, what are are core that's in have

Richard Hilliker

on that you -- exclusive one last of then And helpful. kind these through think really about you Can help talked us are That's partnerships. Excellent. topic.

give not digits? we're going XX And a of be time thinking to this handful? Can the these them. this going are period sense, like going see a be rolling like you to of us over out? of what Is you So it's of double to is majority

Hardeep Gulati

Yes, great question.

regions. looking consulting analysis the when have firm region. competition in at local it, We're go you in us do every We at the and actually buying to actually cover and for brought So patterns plus scenarios. about actually different different of private where XX the almost we in of trying of biggest and in kind prioritized management the student these every look terms not to And country covering we're to schools million regions. opens focused those $XXX after, partnerships within TAM and in XX strategies really are very budgets to which regions these just exclusive up go we establishing

and that's very probably throughout that to almost dozen partnerships. going next the very half then XX exclusive So a a year -- expect partnerships year this a into it's XX approach another to targeted and

Operator

question last our And line Cantor from Fitzgerald. Brett with is Knoblauch of the

Brett Knoblauch

here. quick be I'll

efficiency want to on gains seen Just the cloud. you strategy touch any now you that have with X Have [indiscernible] kind of core go-to-market that? guys the base

Hardeep Gulati

really this the have seen transactions in We've much depending XX-plus on mentioned almost of cloud. products, so the launching of clouds. remarks, prepared of Brett, I seen look things in started quarter almost you my pretty and cloud the when at each these we we the it, of one each each

student So or a our cloud whether recruitment cloud. effectiveness it's that's planning educator overage, us, a helping cloud educator or it's workforce

these sure buying -- than buying of can rather based our on individual So make launching the buying the benefit persona, kind into to really really the that they of products. things products we're customer base understand that all

we almost we really saw have have to of actually cloud are them, avenue quarter the product, full not XX-plus an the to any discourage to are is be cloud selling We're the still persona. existing they whole where did one -- that we to majority for But or cloud to their then getting able whole what full customer that. in buy trying they're them they to cloud. we see our able topped up able bought So buying when educating the customers of -- we're of products. individual either deals products have of actually take the be start the And to advantage

even this So to that's early actually on a thinking very in are start a able customers sign perspective. we with get to encouraging about that

EDGE We're at be really full the to going launch this doing of conference. a

seeing by the the really benefit half have bookings. next year new to base second for into So this expect then that of to to half the in the our coming are customer of of full later be able a alignment. going really we terms the And start

Operator

no questions this Hardeep, there now closing I And will remarks. for back further to you turn are call time. at the

Hardeep Gulati

you, Great. operator. Well, thank

education improve continued really in globally. to for our thank me Let minute our and belief and joining everyone a thanking to today outcomes employees us customers to as just take well able as our for vision be the dedication

was start we this to right, a only new also record great XXXX growth exciting but summarize, cross-sell. To our a and logo bookings, very not in had

the our Rico future of future We Insights which wins and traction expands have further ability. of it ] the were SIS, supporting as then products international core which very is part, our a mentioned, tops strategic Also, game having over Intelligence. and terms Puerto changing TAM, a And we -- terms like Connected really growth. off of [ the in expansion Unified phenomenal our data-centric cross-sell in

coupled mission really the operate and the the is tremendous -- large market. where well positioned driven a and model the very especially platform that financial are success that This learning very really and in we a with And stable we vertical we opportunity, fact are even critical strong the innovation, personalized durable growth. our growth on through a operating differentiated has for leverage. by most industry, serving And international

that us executing forward We the throughout and are excited XXXX and present opportunities on strategies to about beyond. the look

you thank again. So

Operator

That your you please that does ask conference and thank participation the call We you for disconnect. conclude today. for

PowerSchool (PWSC) 4 May 232023 Q1 Earnings call transcript