Earnings call transcript Q2 2023

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Operator

Good afternoon, ladies and gentlemen, and welcome to the PowerSchool Second 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. Thank you, sir. ahead. go Please

Shane Harrison

slide Welcome here. the operator. wanted PowerSchool’s conference that posted earnings first section Investor Thank our of quarter everyone ended for website a we that second you our I to June call the let Relations remarks you, accompanies know to deck XX, to XXXX.

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

the scheduling White change conflict the that apologies schedule today, Education but Summit had an for original at to due our a House him overlapped timing. attending We Hardeep

As been such, Q&A to for remarks Hardeep's portion remarks. of live these be recorded, prepared have to the prepared expect but these follow we available

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

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

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

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

turn over will to call the I now Hardeep.

Hardeep Gulati

with outstanding had platform solutions call. Thanks, expanded data where Shane. the Thanks strength financial to districts second-quarter of in us a results. saw great continued and our We second-quarter, innovative for everyone earnings for joining and increased our adoption PowerSchool’s drove states, we large

and review grew we delivered slide four, digit retention on rate guidance. to you of communicated another ARR million XX% previously results the $XXX year-over-year see double Revenue are at top our will second-quarter summarized The expansion. quarter of net end growth, where

another $XX customers. Net of XX% XX communicated grew exceeding grew to XX% revenue in profitability EBITDA a margin. expansion profile, quarterly our year-over-year to sales a XXX.X% continued guidance at existing on and a our retention range, our record was basis previously point coming million, Adjusted to

and reiterating expansion. significant our commitment momentum innovation, Given of margin our our business, solution for the is in increasing many result we international continued revenue seeing strong in success our business, are strength guidance in momentum This the momentum the the to digit including and in full-year. and factors growth double of platform we are bookings,

start customer our results five bookings record In I'll selling on with cross-sell business. seasonally and quarter, we new our momentum. strongest ARR saw slide for

define over in We continue a $X we deals that large ARR non-recurring which and see to million are trend in deals, as combined winning very revenue.

We've booked ARR over of to $XX non-recurring large-deal last such five record combined brings million the second and deals the first which million, $XX which year-to-date of year. a in value half compares in value quarter,

will strong array with remains pipeline we Our that of to a work opportunities the continue through in wide half. second

of excited State the new data Intelligence another Montana are with K-XX outcomes state-level new nearly Office Unified Connected contract, announce a use win to to Instruction. Public XXX,XXX to improve of We Montana, selected and public students. supercharge longitudinal of of the Insights logo the

drivers Educator Cloud, perspective, Student Cloud, Cloud. Recruitment Information and were From Development in strength by diverse our Student particular the product growth an with Success ARR the Workforce in quarter

the our our and nearly XXX% quarter, with as platform expectations of last differentiated leadership and of And with versus exceed and solutions unique prior comprehensive continue value the growth analytics of the comprehensive cloud demonstrating ARR Data Solutions capabilities. the our to year,

major innovations. customers, we the Orlando, our AI. innovation needs User seeing double that three we in particularly business EDGE At of and the are on data me summarized in regarding slide brings are to in the on our Conference as down the we ensuring six. recent In This momentum QX we innovation, analytics announced anticipating

an Connected First, service PowerSchool families; AI second, user third, data a students expansion of of and a of and generative the experience and Intelligence for My our unified expanded, platform; new capabilities as roadmap.

strong agencies XXXX developed for the Snowflake Intelligence, data Year PowerSchool managed Connected customer Cloud. a first education Growth turnkey, as service by fully demand platform, is analytics Connected award of and data June, awarded on industry's The why for we In Snowflake Snowflake, effective government for Data the powered Intelligence. their Partner

outcome. PowerSchool data education Unified gaps Intelligence limitless capabilities and providing states supporting powerful our and sources, factors, the layered, customers details districts improve systems understand data any and a longitudinal with to analytics to with Connected K-XX our are other we Combining with Insights across trends,

In Insights XXX,XXX XX and to four students. included either the excited we district with both very further are Angeles our of deals these the Intelligence the U.S., top with District, seven second Notably, of second deals Unified included Los nearly partnership School our the Unified school in largest quarter, or Connected solutions.

the of use among largest drive Ranking analytics and solutions to our Insights Connected data district their whole view Unified in and child throughout comprehensive the one deployment country, full purchased and LAUSD across their for us power sources deals capabilities needs. most of entire our insight Intelligence for

cross-sell These other products of data are also our products. supporting broader

adding Insights example, quarter, the on top New existing and assessment their and use SIS, Ecollect As second York Intelligence products. Connected the our Board Insights Unified Solution, Unified and purchased MTSS both, in of curriculum Forms along of an Education of with planning

and solutions. the our and and of purchased showcase opportunities our launch Dallas of differentiated District to to enrollment our challenges supported and products timely education deep Unified address organically special existing ability SIS in that Insights market customers. PowerSchool understanding MTSS overlay their These inorganically Independent are XX,XXX-plus critical School wins and the by and access use Additionally, needs,

is a that of XXXX seeing are the educators to a data in demand over highlighted have our based which that data education educators. they that report finding need intervention many trends products. industry, success, evaluate published on focused say one the survey only recently XX highlighted in We And X,XXX two the teaching they we supports was

how experience also announced Conference, PowerSchool our a cohesive into family's At user and with consolidates simplifies relevant all a specific information user is interaction tailored applications teachers that streamlined new how children's student, platform EDGE their personas. we single Solutions of PowerSchool, member, that a and My point My manage central students their school how families and access, a the technology leaders on based to by user or administrator. interact their is providing educator PowerSchool family schools, if with

user From families improve new the assignments will cross a and our and This our need support consolidate experience. additional PowerSchool interface. in grades and sell also includes module, all to attendance, and payments single customer information help existing My student

model. about AI excited for tremendous Finally, accelerate roadmap our opportunity we to product are and the business

of existing products, in and MTSS several learnings student are intervention including based and learning to individual deliver learning and navigation AI We our needs already goals. personalized leveraging on

AI functionality will significant event, the time the their At save educators latest our we EDGE in amount that generative day-to-day. of demonstrated

a that use First, automated that standard, to to we have embedded assessment are at assessments Solution Assessment our frequent aligned generator creates formative learning grade within questions teacher and level, an Performance deliver subject objective, more scale. desired Matters can the which

offer previewed talk-to-data one of the powerful generated capabilities functionality users easily. we've data Intelligence. to insight help Second, AI non-technical A will coming get that that solutions is Connected

their Microsoft generative We collaboration our language able Azure, of models. open roadmap announced AI the AI these have usage to throughout OpenAI large with been Service and accelerate recent

unique are entrenched up base in monetize with TAM. our These a stepping position opens generative to towards $XXX and solutions, opportunity given personalized very product innovations customer our our stones AI PowerSchool, significant billion for

footprint. Moving as we in business investing are to expanding as to growing expansion geographical efficient expand capital slide and continually This our highly seven, well includes our ways. platform, strategic our

SchoolMessenger, July, we in given communication and solution reminder, been acquisition K-XX a of advancement focus our announced our with communication a need As solutions Home of product has in top a further our for North tool A leading in a technologies. interaction provider Communication fragmented the to school-to-family expands America. consolidate customers, the planned significant offerings unified

classroom communication addition capabilities a our we including experience of synergies our for several for student richer data Information spans PowerSchool class clouds, see Student into with with within My The integration notification centralized of Student address the deep these cloud and personalized and improving of Cloud Schoology communication two-way families for solutions, automation. our and our within content cloud and engagement chat into and attendance Success improve Within and embedded learning to other interventions. with integrated for

in commitments neighboring continued students support regions, plans XXX,XXX very July, Thailand year. announced with who Samart latest focused key growth next we This help our our globally. from international focused partner, laser also more our expansion Telcoms, in In international us and strong continues Thailand are over in We in and will momentum. have regions than channel serve on the to strategy to partners partnership

We our in continue international see to pipeline. growth

a sales with To quarter EBITDA summarize, adjusted great beat guidance. this that record a and was our record

continues pipeline to deals. grow, Our by several supported large

consistently to continued innovation cloud expansion. demand and enabling platform differentiated in us growth deliver solutions, and investments driving and of long-term are Our margin analytic our durable expansion

to call financial cover now the second Eric, me over Let the turn quarter results. to

Eric Shander

highlighted top-line portfolio strength execution continued Hardeep. offerings. We our you, on strong expansion, in margin great product Thank delivered second quarter, by market-leading growth across our our by and and analytics demand driven consistent, data and a

in we the a in our the call. slide on provided at earnings increase summarized $XXX delivered guidance total quarter XX% we last eight, year-to-year second As of representing revenue range million, of top coming end

implement teams X% Puerto in Subscription as Education best-in-class SIS our total of was work entire grew in minimal Solution year-over-year Rico the million support the diligently revenue of revenue support and to revenue Department continue $XXX quarter quarter. territory. to Subscription XX% from accounted to for our the and for deal and the

delivered larger complex typically solution start As is whereby a lag ARR reminder, customer. in to until subscription given subscription implementation the does deals the not deliverables, revenue may revenue the these

quarter, the time $XX million from year. Revenue in period last representing totaled the over services business X% our growth same

which year. other We million our drive customers. value than in the the $X of for quarter, continue million with from implementations, the deal, to was contract $XX efficiency main Revenue approximately million more velocity in the license is $X Connected doubling license LAUSD fees. total and year The the prior three which over increases upfront period and value the time for to Intelligence totaled our exciting driver over

recurring can We on $XXX a XX% cross-sell an million, increase a previously, attract we quarterly successfully, mentioned As the representing revenue balance our maintain as new continue retention fluctuate of I've logos ended significantly year-over-year rates. with quarter to strong basis. L&O and annual revenue

record of in and points net performance. a year-over-year revenue XXX XX retention versus year. up net basis revenue This XXX.X%, points came at improving retention quarter rate Our is our first this basis

and for with improvement, point benefit the Adjusted reduced third-party driven costs profit operational LAUSD million XXX a deal. from quarter greater a scale, in through by at exciting representing came XX.X% gross margin slow basis the the year-over-year $XXX

the cost non-GAAP $XX This as we our basis XXX second to of while improved capitalized point in the million, development with reflects and representing operating a came same expense game R&D XX.X% drive was Moving the to changing of XXX last XX.X% in of with expenses, reduction revenue and R&D growth. profile XX.X% to efficiency expense year. percentage innovation research in compared point in expenses, total year, quarter last basis improvement. model, compared invested in period the long-term at of XX% invest Including time representing continue a R&D revenue revenue adjusted R&D

Non-GAAP top year. The we increase compared SG&A of line million in in fuel market quarter, XX.X% will our go and of XX.X% $XX quarter in that or revenue our representing reflects expense with activities investments future second making totaled last the the second are million sales revenue growth. organization to $XX of

than end share, EBITDA better year. the representing we last last or the up XX.X% a per income in $XX in the margin, diluted from Non-GAAP high second time $X.XX $X.XXX was of diluted in same which net quarter million, range had adjusted quarter at exceeded per X% our year. was share basis fully period $X.XX XXX guidance coming points the Second

is year. cash a negative in same flow time a which was $XX million period year. free compared renewals negative the driven is and higher the last by with given change happened networking of quarter, primarily seasonally amount in negative versus This quarter significant capital Second in flow last expense quarter third million $XX our the cash interest

period time with balance million $XX an ended and year. quarter the to cash XX% equivalence, sheet, over of the the increase last in same Moving we

drew $XX in same million million our reflects a revolver strong During period profile. of improving time $XX with which and draw the on cash quarter we compared our last the generation year,

off paid drawn revolver July. since million We have on $XX the

the the the year compared a net-debt leverage to Our X.Xx quarter at end earlier. of was X.Xx

excited prospect we're the platform. of SchoolMessenger our mentioned Hardeep to adding As about

split debt to the existing fund the hand purchase will close September We facilities. between with transaction and million and approximate expect even $XXX price on in cash an our

outlook Now, turning third and full our XXXX to nine. quarter year on financial slide

contribution today that has Given any closed, the not expected include yet our acquisition from not guidance SchoolMessenger. does

to plan if Day by our then. is updated Investor year in transaction we During full SchoolMessenger upcoming provide including guidance mid-September, closed for the the

our the quarter million, revenue going we consistent total $XXX expect into million $XXX model to in third XXXX. with the range of For financial

of a customarily quarter EBITDA delivery be Puerto million EDGE which the This User expect midpoint. lower We $XX XX.X% return of as leading Scanner $XX contract, carries adjusted incorporates third margin Conference, the in at the our margin range of to to a Rico profile. in the the person Component of million, representing our well as market

full XXXX, the of the delivering revenue growth, low XXXX midpoint double of year are a goal $XXX growth a our with $XXX XX% year-for-year year million guidance we stated Consistent annual EBITDA For reiterating for our representing XX% full guidance we with digit million, are $XXX rate. million midpoint. representing margin to of our increasing to million, range at $XXX adjusted the a to

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

inaugural hosting Thursday, we be City. in on September reminder, XX, As our Investor York New will a Day

excited playbook, more. to on much updates share our road financial and international map, targets strategy, product are We go-to-market long-term

order. In summary, fantastic a this was

and that growing and base, of this as data attract customers platform We software level the to new will demonstrating continue across customer state our are our platform as of deals. footprint solutions well

year, higher XXX range points provided margins initial basis February. our our committed XXXX and full which full above the guidance for year is outlook in also are by We ahead of demonstrated that driving to we as

We success, will strategies and in continue customer the on second with focus on to execute and our half innovation, growth around a profitability. go-to-market

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

Operator

Instructions]. Vruwink your the [Operator question with And Baird. of Please question. Joe with you. in comes first Thank the proceed line

Joe Vruwink

maybe Great. progress rebalancing to roadmap towards guess on speak far, PowerSchool? to just maybe causing I product or how this actually expectation Hi internal a wanted in a you everyone. to early the I the change direction is the data resources compares so start your and products. Can here of success of

growth platform And financial does at margin and from quick different so just far. been as through a data for has the follow-up, any standpoint, a framework the case the the come than unified products of rest

Hardeep Gulati

the all for market, Thanks where right map, products road Thanks data. we at systems data When we access different going districts you variety focus the Joe. be This time actually question. differentiators student of over IPO, our where of our you understanding one for we as is have to of learning state, there a and were because is highlighted the to look Hardeep. the to are, from big do are, we've the invented seeing of the in post-COVID, gaps provide lot of and the how interventions. engagements better a And is have

part, for the not even now but there's focus around career then which students. college just also a is And big pathways

states better are for visibility. looking the So

expectations product, our the Insights, focused as actually in as is So data beating It data service well the is we our platform. both products. which of terms Unified as on actually as Connected our have Intelligence a been

also One we unique in terms which extra key Unified provide be from breadth, the are in unique highlights the of districts this the well demand platform that that as state. a which well is as able as for is service have data both, as large Insights to very us as creating the to of the

to and fair We roadmap a in in of to because the are we be this to our the do interest strong resources continue. amount seeing exceptionally already continue, pipeline expect we're putting

students. we the our K-XX pathways EDGE Conference be – So can view the in so career almost on different investment, through our Intelligence. better able states for to highlighted dashboards, a have now the others as one allows longitudinal mentioned even all Connected better that and I they And really like at of elements, plan Montana across to

So here. it is a exciting lot work of

Eric Shander

Eric. Joe, And this is

Just the to margin around profile. follow-up question the on

this So we are mentioned, as reallocating investing are and resources exciting we Hardeep area. to

that the slightly margins continue making new and the to with we our to than out, investments are go more But given continues as some to So the starts as as lower scale mean products products. mature profile I that margins out, that we're any the little area, see kind revenue lower. but pick of are up margin bit in rebalance there, a of

think higher generating is the more I established, a of Again, have and beauty value are are platform the other products much having margin. that a that we

aggregate, any in don't profile. So we kind dilution margin to see of the

Joe Vruwink

That's great. Thank much. very you

Hardeep Gulati

Joe. Thanks

Operator

the of your the line with And question. from Jefferies. question proceed Brent Please Thill with next comes

Brent Thill

Thanks.

bottom for of Many seeing strength color highlighted. asking, you're wins guide year, side? what terms you're top line. Just give the these revenue you on Can on of the the you the given are the seeing that large of up. investors maintain on some brought just you line some that Why in what

Hardeep Gulati

I predictable can low always – at to and a Sure we’ve Eric is said, opportunity see look we've strength have from you – not well. double start I'll continue businesses huge guidance have but When the increased and only we've why the of we that's expansion, really, that we and here our and growth. your a in said that sustainable as jump what a growth ask Brent. But you better, as coming digit that margin well. to had margin that's also

some quarters create some sustainability beats. as Now amount well as the which deals you around of level see will quarter of large

beat that increasing. QX we're gives now and beat QX definitely expectations hey, the know why not having you know you So you a,

So creating strong last the have is largely for definitely we beat. deal, quarters, three a profile very that do which

ourselves. don't not to that's guidance, trust the where our digit, we but want market to want double upside, more Again double trying we're is predictable ahead get there to and ahead. to low digit we think of do continue We get

do give the Now as we opportunity be. we Investor the SchoolMessenger. how predict actually we an the for as year would you be year the Day have well Around with to next perspective full hopefully the

Brent Thill

of those all that larger or deals tracking Some times larger the time that won those are are that on that the implementation in wins landed, far? any delay going you you've maybe

Hardeep Gulati

can Sure, well. jump probably in I as think let I I'll and give Eric

progressing well. are We

look you right at we fact In implementations Rico, are for Puerto go-live when almost at now. actually our

So to bring almost that's go-live. territory multi XXX,XXX time actually record district whole a deployment

exceptionally well. are – are tracking those actually we So go-lives that

of whole-child was With LA some and full, element small they which at of the as analytics, with the their actually a entire portion, last did now part start year we actually them Insights. work of are Unified looking

we you So have are the very already late know much foundation.

So we be to do that matter that few school expect of months. they advantage the coming weeks able year, going actually, and to they are a in take in of

of the actually compared and of tracking any a are go-lives most there couple as of a So large delays. mentioned, on is deals district. little there well implementation bit concerns or a no smaller very for But you are to weeks months

So revenue, aspects, there definitely that's full to the in. committing also is year revenue you still why guidance. that we jump to want but ARR Eric, are to

Eric Shander

it you well think answered I quite Yes, Hardeep.

thing to the them year. Puerto rest start we only and and minimal for revenue then as my system kicking obviously, we in would the revenue I see over I so say remarks, the as QX of more just start Rico the for here think in I Brent to to the QX contribution will you'll in, handed prepared shortly, in quarter in the addition had in is, that

is much full going some quarter there be what important in we've focused from revenue that basis, really deals. and double from be from growth is with to the can quarter larger and very saying. the part the to these to think lumpiness reiterate – guidance. continuing a low digit year track important in on of There But is on when the thing we're we're just year been the I full of terms kicks some is

Operator

of Please And RBC with with the the next Capital line your question comes from proceed Matt question. Hedberg Markets.

Matt Hedberg

guys. in front. growth questions out you that continue Hardeep, my progress call good on taking for to international Thanks good market, Great.

walk that a how curious, to you all we you're large is the allocating What’s the but of focus through sort continue sort those – Just internationally? the resources know to domestic on plant here. taking maybe us some opportunity about it’s just of beyond huge of do of you're kind opportunity, investments of think initial and steps what of making sort seeds also sort

Hardeep Gulati

Matt. question great a Yes,

a and huge I key there point The few think back seven international opportunity, opportunity. strategy. the U.S. to it's Canada our I want right. reiterate about a the is earnings of size we, made times element It's I almost our

There because to demand large the depth big need states, we implement tackle and is countries So internationally to COVID, systems, really scale the who and large of got deal have and and who's private and the after we're of even nobody full else with increase breadth a TAM. seeing schools disruption. schools countries the had these most

are that U.S. wanted we there's right. demand, you as a out, careful also We us, for that in pointed seeing be huge to but opportunity

almost have We cross a sell TAM just X.X billion markets. U.S. our in plus

and we don't almost international. to focus be next five going lean said, is years, to our this three that in revenue. want With completely overall a want we to over the of material, sustainable So believe a on very we still XX% to growth

is commit that who with to those are very revenue are way exclusive we partnerships have allows strong with growth than who going with What as are this do to The every in aspect, us approaching markets us a to going region regions. we and and the target very have on to to concerted the those we effort, going actually each in co-invest student well. growing in are are boots our ground them going rather own partners markets building for is to where

I are half They commitment. are have already have these fact, we over in commits. to a hard terms year, with Thailand. as of They are stuff. dozen now number in as both well And partners that of over updated committing of bring in And going the actually dollars Samart But terms students. as mentioned we in

million CCS XX they technology provider K-XX CCS, region have that the and large actually a also and partner half to million par one just bring Egypt. Egypt kids we in is is committed fact actually infrastructure the schools. another has almost which on signed students of In XX over next months in in to

us be for business. way invest to grow really able and to with a that's to sustainably partnerships So that

different and track So having we strategic on about is that. goal partnerships, our these the regions for we far, on are where this XX see demand year highest in

Matt Hedberg

That's ask in I up the great. follow into a deck a I to right. I'm but NRR. you just to sort slide remarks, an of Can curious, where kind You continues but kind good could that quick that up? had of in or go with move say that your you've mean your and it prepared of stay does been things your lot record it's of trend. consistent full year what guidance assume tip-up to seen, impressive continues

Eric Shander

question Thanks for the Matt.

So to churn largest yes, you're happen to to QX. XXX.X%. with of renewal QX renewed keep were so. level is and season, of encourage certainly everybody is in mind going I and at going so thrilled XX% it, in What that QX, more in just book plus would be is have our Any of is coming typically we business our pronounced

So from XXX% metric maybe range. think see to could plus be the you slightly we believe full flat, for expect it in standpoint, the down sequentially I a and it year

sell can lot seeing leading where sticky of Look, rates, it a We're go, in cross of renewal we've the terms really some got of good industry momentum. products.

go towards. I a we years say, going beyond as refreshing bit in the we going So there, that and in suffice our be for perhaps to range think forward little XXX% in Investor certainly outlook terms Day being to working to of we're what is are this the coming out but our be

Operator

Blair. the question from And with Stephen proceed with your of comes line next the Please William question. Sheldon

Stephen Sheldon

you're any to in trend of ARR EDGE the quarter. you're about there booking. questions. Kind bit normally the Hi! just ARR so of in in we quarter. the or how was kind flat my given be around third can seasonal XQ, into sequential bookings expecting of that renewal especially Conference where sequentially trend then about of pretty side, is that about happened I little seeing you same the could if wanted a heading see support the and third for there pattern talk the kind from far there the Should be taking ask Thanks kind thinking in User on what we

Hardeep Gulati

at seen ARR, Eric Yes, on effect looking the the we're and and QX but as comment are that. confidence growth around right, numbers. I you're we we let tracking expand more. think full and an renewals see create that I'll It of in amount we're is double-digit in from year, now I'll again, this – does actually you achieving the when to let ARR that tremendous perspective. pipeline from a a But Eric,

Eric Shander

Sure.

think rightly I see So – Steven as we’ll you flat. QX we’ll from to see QX much know, specifically pretty ARR

couple a we've Although tick the of up years seen little a last bit.

strong Hardeep lot mentioned, As QX. a really pipeline. We a see of business in momentum

on not be up QX not flat basis. see tick in will at a if sequential our expectations. ARR we be from It up would surprised I actually if So least

Stephen Sheldon

in it into to are visibility for plan that other more wanting them, wasn't have know My any etc. there've progressing. very dashboard I the And visibility them? My user received quickly Got on out administrators, before. What's experience it, I of for helpful. how question. product early PowerSchool teachers, the has have things been then kids parents types, know improvement do early, how for for potential feedback their it's kind easy user really you've to also, but for the about PowerSchool been still then parents And access a that roll parents? Maybe you to

Hardeep Gulati

question. Great

conference, we you our when actually So literally from actually user from customer unveiled, remember base when think, we I universally. we had our phenomenal excitement

parent have right now. right, that who much pretty kids is in would this got think appreciate I any school

to of or grades assignments majority check different in the might system. looking you in your go system. you a much cards Pretty school be districts one report at Any have

prevents have for parent, the for for communication you fragmented their it experience in parents aspect a forms have to systems. and different paying, to which a engage message to actually very really lines students You The that's them students. other, submit, frustrates to it's a whole systems different of enrolling go or and on phone and

that seen, the you engaged, outcomes. we've more student as better have parents are And clearly if

now ecosystem has SchoolMessenger we communication, our the a have been one in this as new as So and payments in acquisition broader a all of position requirements with our announcement solution, the in given of we platform, the launch. the with well especially product our are elements in

universally We have for something which from in customers. that our stop and is a they are end-to-end provide lot seen experience really have experience to full – and are having for parents coming able requirement where be shop, we that to as one that a

tried they that full, of communication report solutions don't provide really them to Some depth where of really we tackle kind only or the of the able on it, to of grades focus attendance or who so cards, part end-to-end of are have close elements, place. already need in different some access one of as launch. well parents things to early signed of our ability of on actually beta, We to plus up almost have all that control as the XXX customers have

with And closed, a timeline full them full of months with able our live we already actually SchoolMessenger when into we experience will a announce to a the the goal would in – as of actually have we integrate go is the next the – by lot the lot is – after we’ll that that. position is be acquisition really more detail closed and six have

stay update tuned will road detailed we and So map on on it. the more on that you

Operator

Gabriela the your from And with Sachs. Goldman question. of Please proceed the next line question Borges with comes

Callie Valenti

Gabriella. for on Valenti Callie is This Hi.

profile for for of First going SchoolMessenger products? kind growth me existing to on add pricing functionality is is any their what that comments of customers and just one like profitability or the to to who want look initial

Hardeep Gulati

in comment think on would to will given So strategic Callie, represent closed pricing. don't I'll I to we – I a just acquisition. very not a stuff. position little the we are I that it's think a the bit have I on reiterate, yes, want anything

In integrate place fact Schoology of demand our want The SIS. integrated to it's two with seen coms one we they so from deal areas one that we a hold have our to it top don't communication, chat their way this for and customers, into fragmented. into the all have unified capability, have

PowerSchool customer perspective. And on – actually you growth our a the is little the the numbers? us. demand EBITDA we bit Eric, be actually comment similar for for more So accretive. very actually growth from SchoolMessenger both, it's to and to want very high to it's and acquisition a going EBITDA and strategic actually both, a profile It's area

Eric Shander

just so company. come important I would a hit is, they just as only I a but it's profitable a strategic say last part. does company scale, What I it think asset, think you Yes, the not profitable that are

So profile will of and not be of the profit will financials. to for and very our growth think it PowerSchool dilutive be the SchoolMessenger similar

Callie Valenti

you. Thank just vision from be to And as would your customers OpenAI one great. for kind term feedback Microsoft that second longer All announcement, and your the great me, any of then what partnership. is around right, from just early get

Hardeep Gulati

Great question, Callie.

of conference, So At and OpenAI, Microsoft have benefit. at we of pathways. how couple elements last AI risk been predictability, announced, for conference, using everybody’s the have are learning the as interventions we as the we we just leveraging in for our navigation partnership on as – this systems our around create the key personalized we at actually ST announced in our previewed and learning one around where well years we there EDGE already

generative we both assessments. right AI adding the are these into kept actually performance partnership With our manner and now,

So be and lesson lesson a create through generative to of questions personalized planning. those AI, it created for and teachers lot could so saves plans items time

to more that element the like we platform, that with beta. to any also normal Connected administrator second on or are we the to almost a as use our allow a able those our user kind of can And easily questions AI that integrating into Intelligence, service insights get of generative so is, even data be actually even

analytics will even differentiator. more our of product, So that make

to allow really to so the within right supplement classroom, a changer actually the this homework, activities more we other bringing homework, unique now is terms even kids spend plan. homeworks and that right are context around leverage on don't AI them be to which asking to personalized very differentiator in areas. By the really fact really be our – and real on allowing the homework, able the around to support have generative further a of context is Where able better, you're have opportunity, be taking in they lesson learned and to the their day day-to- personalized classroom, at of have child the with game learning which to really all are not of pathways actually personalized heart in time we and the we

You're on their actually more life teachers right a easier making homework. their help and you're making day-to-day student

advantage to – being these a and grow able future, systems. opportunity So we the have all really this very a unique – by market as a again of that's we expect

Operator

with the Please next question line Kalia proceed of question. And with the Saket your from comes Barclays.

Saket Kalia

Okay, and great. me customers, we the some question you constituents from of their Especially government have sort moment fitting other Hey you see that to what I on another do in from of year those for spend any the either make here. to guess or funds funds. changes quick sense? about you a think, willingness I of guys, DC ESSER maybe school any you're earmark Hardeep, districts at Hey I are as hearing in think or that sort for here. thanks Does

Hardeep Gulati

thanks Saket everybody's timing. I No, our flexibility with Yes. appreciate delayed and

service, work done. very on forum have security. kind the able supporting of all share thanks we as we be a a To Education, with school to whole as against even will doing Homeland the are things but free cyber are just to us which security Secretary and additional in our We all, customers, how training with U.S. around what we state, or to offering which not make well First call already And of have White available actually actually of Department districts different focus threats. the really to security any Security some exciting The and them protect we Lady it House as now, cyber give work we Cardona for education show the for

of one by tools improving actually and we we provide not transformation. advantages there legacy of in a is process that points, more visual districts managing on out is, transmissions help the touch think have systems big also only there, be secure manual those of lot I those, we but

a So of opportunity. exciting lot

In speaking conference will tomorrow. fact the be we at

trying not we right. for school districts. mentioned to of all, ESSER, ESSER we There the continues Now sources last funding that, around it to of funding deal for lot visual ESSER to for solutions the do of pays point But terms because and and be is be costs, a transformation. saving in Typically we're with as one had the itself, opportunity is that of automation. without well all just by that costs is what see it, about time as having paper ROI and manual to your the and of for our as

normal – So it by funding, spend. of actually with our even of kind the the terms for systems improving funding in pay

we to see that ESSER do continues What is cushion. provide again,

looking be around where of might that, comment or other areas are would some related leveraging of there sometimes term you're because our the well a of of technology when unlike these be would we would take of thereby. ESSER, districts mid-sized as So – irrespective content as and that. will districts these elements to they large deals, is It's ESSER at they the advantage us some most lot assistants, do systems. But to deals, of – our spend short

of make the to analytics of Now, want their is as seeing spend well, more you're because most definitely one districts surgical. the reasons much

peanut [ph] to So learning surgical butter tutoring they intervention on can strategies. making content spread or available than more address gaps, rather have

that, ESSER for MTSS is that more being and like are So more seeing so spending demand we effective. their overall things

because an Now, factor, going more be are data these always intervention even have which see we to do are funding forward. to still going more and contributing norm strategies and surgical districts the be that

hope So question. answered I I that

Saket Kalia

is well. does. see Eric, working you. as to services think do there’s my lines for great implementations maybe follow-up for stuff general the I helpful a year? about on subscription the what seen just bit. you're That’s and this Great interesting with non-subscription sounds of you How services and bigger about that working ARR. of the the initiative accelerate is does, some rolling. again like based How this revenue you on revenue maybe that non-subscription out of do zooming do super machine little really think of question That we've a mean just year. some get I and How there those clearly as think – kind in you

Eric Shander

great So, question. it's a

behaved services So I, trend the trend anticipate way be we the very it similar would for to I look first as year. line year, revenue. the last at the the to

up level of it'll many as etc. year end are and it'll peaking given then QX the then back not So then we just and will of and the third down with in in revenue typically see of trail quarter the in and at QX a done terms pick QX implementations build

to that continue. So expect trend we

The leverage margins most low that in in the out because so really geared it. again enabling this is the remain customers XX% revenue the technology range, business will this and they value to training get the our towards etc., of

piece you partnership and there you revenue, smallest in of going the items the most be continues seen in And agreements. but have know as to all our be the other variable piece coming then I overall to and license think terms it's of one-time

L&O, have and service going each we quarter as think pretty color as try we'll go I we forward. and then as give it, the is So, consistent much into

Operator

proceed Brian question. line your with Please comes our from Raymond with of Peterson And next the James. question

Jonathan McCary

Thank you be for taking McCary Jonathan one There’ll Brian. be from a is question. on This tonight. us just

M&A. So I had a question on kind of

the to SchoolMessenger curious appetite Thank M&A, market then it's you. how So of just private what's latest great acquisition, additional and your could on see the for influence and kind that valuations.

Hardeep Gulati

even helps our and demand for which needs helps be us differentiated fit Yes, a top so our portfolio growth and where in accelerate are, how it profile. we customers’ also look how actually way in our term. portfolio see a how on long there to they strategically they more EBITDA are at into the based we and comprehensive these acquisitions How one that – the to accretive growth

you in look the curriculum our career whether they in pathways. tuck-ins like space or when all or of space terms at So behavior of acquisitions, are small

addressing one some You in key each of the them see the of areas market. are we're seeing that demand

As of component a critical messaging the critical of a lot school districts. one mission I said, was we for at elements see

we the and more saw having of with partner been SchoolMessenger, our So where we that the has demand platform. clearly value actually this and in

So ahead we with acquisition. of kind that's why went

profile at that but also I as well to that sure same average make same we're the We’ll continuous rationale. time fits to well. going level And as growth continue as at to time equisetic, our our it our sure – as making our with the then net strategic we're side, remain – the improve

So, Eric well. on I'll the part second as let comment

Eric Shander

of to at any Yes, rates the mean I we interest at are you're look have looking these as it's the rate, acquisitions look at, always, structure. the given capital

being of on are we our hand, with is other we which that cash very funded have, We overall debt facility. SchoolMessenger existing half debt our why with mindful our around

the So, X.Xx you of be end net the we'll work we around continue to expect levered by and that. X.Xx it know year to on

line back to But a to starting look sense. are valuation. look makes there your are really that last to them the around company for with continue question little going to And the good out we Hardeep bit that public as more said, then we come in private see markets, assets

we bit. seeing of come So some are the a expectations little down

Jonathan McCary

you. Thank

Operator

of And with proceed Please the the next line your Bank America. with Koji comes question. of Ikeda question in

Natalie Howe

next I Koji. few on or the for XXX,XXX to from Bart Is the Telecom one is ask over about a me. Howe student Sam partnership. that commit be want Natalie is can a Quick opportunity an this Hey, years? that addressed

Hardeep Gulati

And in as little XX next bit with terms these regions of stuff. a up and these over mentioning these typically that schools Natalie, months months, I us to to commits XX partners. of are XX hard the that allows earlier ramp was

that now So for actually pace well a But few be as we almost take countries area. broader able to a little good these ramp in up grow us of region actually to neighboring Thailand as bit we tens of already have with and the be so. that with of a thousands are market, students can the this in some to really presence

Natalie Howe

Thank it, Got you. okay.

Hardeep Gulati

Thank you.

Operator

UBS. from Claire question question. of line next comes your the the Gurdiel with proceed [ph] And with Please

Unidentified Analyst

taking the for non-subscription Eric you Similar segment. subscription in on the any updated for trends for us to segments, you there can give but so mentioned revenue earlier, growth Thanks Great. is question. that color question the

varies version the know had a and you mentioned low model previously LA But and to line. from based previously maybe just million think had second changed I those to that's that that's But then XQ that also deal. half, other license hard our bit so on as since the in if kick be you I I larger mentioned deals much. in XQ the wonder the peak. would benefit think double in Thanks. it digits $X

Eric Shander

Yes, and support. let with great questions first Claire, start so subs the me just

had minimal revenue as QX. still, and QX we attributed So the that QX, mentioned I kicking start Puerto we in from will Rico into

in do that we expect double the digit be to low So range.

kind look think too subs for at everybody I is you disaggregation revenue for the other thing the that of of that's and support. important

piece critical XX%. that's SaaS most that, to revenue, XX% the the revenue of of that growing XX% really you know the You overall that's of seeing SNS and part look you're a starting about at group –

SNS lesser the of revenue. of SNS that's part digits, in strategic the growing the maintenance the really is the component which single revenue It's low

think So that's well. of would at if you out the that I you see disaggregation can’t trend also know revenue the of I kind looking XX-Q, just so look call you're then at as important, because

of piece the right, Rico that good scanner part timing into I to and next. still of – that a of variable a we so is somewhat Rico. to We're come embedded important the classroom think that in we of you'll these And revenue quarter Puerto number, L&O, QX, pretty because future will it's was revenue, with be of which the it's overall one because items But and as modernize that's in deal for do somewhat L&O a a there going think scanner to the Puerto from we there component for in the of is see be prepared nature the our not terms that one-time remarks, expect decent. a is the In I give number specific is QX. can again it some

attributed from Rico number the going to a quarter in L&O, component. Puerto think going to lot that's the to of still the third the So be be relatively and scanner decent that's a I revenue coming

it of terms trend. giving So idea of helpful color a little where we're expecting in hopefully an that is to you

Unidentified Analyst

I you. Thank Yes, it. appreciate

Operator

Brett the your And of with Please Fitzgerald. next question. in the Knoblauch with proceed comes Cantor question line

Brett Knoblauch

gives Thank you that another communications bought I you maybe two have [inaudible] guys. question. I acquisition that guys now on think acquisition Hi this on the elaborate Can did of you or acquisition you products. solution these how the you SchoolMessenger, Kinvolved. it called solution you the called help for what about taking my should that messaging not just combined, give with guess

Hardeep Gulati

can I Hardeep, is take that. This Brett. Sure

we So when at acquired. look from the Kinvolved, when you

If it's a more intervention that, you a attendance and component. look of at actually messaging

are districts advantage truancy of very – is of where where about school taken may lot from kids in the well communication not a be delinquencies you're What of as that a attending. targeted terms as have doing

like. will this reminder, your So is you the get, next month kids third missed repercussions, you if this the and even attendance like miss is

ways So to you're able individual on track drive better understanding how to attendance.

solution. the post and engagement terms to A pandemic kids the school even very in very lot from strategic areas the demand, teachers of a and value and it's struggling seeing which this one like parents not saw such Diego, the of of out strong a districts of or rolled that amount tremendous feedback coming San about actually are school the were we of losing districts

direction teacher and emergency an as as from district, messaging also from communication at broader and from you messaging student way needs, communication well When schools well. notification, parent by look two as there's overall the

and go get under will in-app the it's and it this all messaging, intervention communication umbrella, to you SchoolMessenger place. bring don't one like to system under chaotic you will and and capabilities phone their unified alignment anywhere unique trying students our have experience, one able get What calls, a be along gives And that. into districts, around opportunity attendance the notifications My what most integrated And get with they get understand a communication, so of bring communication else PowerSchool us gives all very shop some with all you to will over comprehensive because Kinvolved to to the right one with that umbrella. parents, we are stop now element a does teachers, way chat two messaging is for different to

Brett Knoblauch

Understood. And maybe as a follow-up.

internally, I Gap]. You use There aren't right the [Audio AI of know become that's all, they can enterprise of kind team. trying to more go-to-market guess a out is whether how efficient now kind figure in

of your to think for like in expect especially kind you that view of conversations a giving was AI Are maybe seeing what Gen are with open future. you AI power, and capabilities? into Just AI. maybe about recent do announcement conversations? house curious to those AI pick-up pricing translate about thinking And and the generative AI, so How your pricing increased uplift in we schools surrounding a

Hardeep Gulati

Brett, exciting question try a an to lot is – be exciting Analyst to a to very and fact in about I'll in try a share give Day. minute. in such this cover our this topic planning a we'll But

that. actually the if of in that, the biggest lot need are because these we school one start because using it, they to are technology, to to be are a What seeing for of they generative education districts A a actually going student their clear they I'll of don't say is of anyway AI. adopt lot lot look present a see of rethink to with interest going engagement – need, kind opportunities students

product, What unique state we and effectively. and leverage to with we're that for also have the of in seeing be all for are monetize a districts system is we platform engagement, a to and system are school the of we position the intelligence that these these given us

a have we So very opportunity. exciting

share this game AI next as the going of the us, happen to going years generative that. of How we're but for a to we some fact In few – is see definitely the changer. monetization we over

Operator

And Havemeyer your question. from from of Macquarie. the line Please next the proceed with Fred question comes

Fred Havemeyer

at very high that to now what ask, are the in much. portfolio, and cycle, wanted this PowerSchools here? in you most data the biggest walk just approach point end addition a through looking to help Hardeep, just now you wanted points where you PowerSchool to schools Thank at are time. Hi. traction ask I gone as find me purchasing the major really in Can through I the take level

you're to that, since then leadership see the And in fantastic to you're and you're White in. see House, fantastic with position the DC

Just of like White now what what is Thank are and right House the you. in on the conversations focused there education. terms

Hardeep Gulati

Fred. Great

I guys which few we report the days In lot little over ED we work launched about our the to know Conference, we to of feedback White Education a put, encourage fact, bit you share you next I'll But more Report a EDGE our look put, House. we which from at is also at as customers. this actually thing Tech

of And key the I highlighted some prepared the think if in remarks I data. which you look trends, was one at around

and lot think of I of a the is position make is capabilities, sure How a leadership do MTSS the market, and lot that. their in ROI in budgets districts you lot blind. of able seeing the a we have you our unique able There kind That Connected surgical But different Intelligence, so data the that most the flying have different because the of of the to the how clearly the our and the we’re are who it? really support, to the of be help. thing that solutions you're of all really time and real a still growth have lot unique that driving see on more kids systems need initiatives. do get big market are

empowerment. area of in is of in – still we you teacher The terms the know teacher the terms area second and see around burnout

helping time, teacher So more to on innovation are where burnout tools, drag communication through well how of all they and you teachers engage their the reduce and as we easily our improved, big as so we're empowerment. all generative comps as announcements a to teacher in make that a see and has tools the improve is that's how organic around My stuff, them, with can well around improve with at side efficient as support AI PowerSchool, which

cyber we able is solutions. cyber-attacks release shared alone, one lot House press I successfully the our where our districts This White billion system. PowerSchool there today, third is of The legacy for are security. just to area our The over is – in across defend

of attacks able transformation have start the actual the So to XXx, to getting don't market, a imagine, be have states of kind opportunity probably and as digital safety. number the we would where using for this of XX% districts districts as huge cloud more that about well we and so resources, solutions those and are is and be – get modern

and sectors private help know transformation that's an districts House a, upside of have we White in ahead of a with terms actually us still the lot of putting and those are modernization So you investment as to well.

see those good effort around So to very area. concerted a

Fred Havemeyer

Thank you.

Operator

from And line next question proceed Suisse. your the question. Credit with of the Hilliker with comes Rich Please

Rich Hilliker

persona question. us EDGE at my as you strong wanted I cloud taking enter an emphasis you know here. think a sense for have Conference. how touch then if you your spring Obviously that that renewal to a also much can Thanks the the I'm contributed Hi. User bookings to in guys wondering closed into there bundle. specifically as performance, it's wondering Thanks. give was the based today. of new I I QX. lever and was first that on was this quarter how And you of a number half largest that

Hardeep Gulati

Great.

You know individual our mentioned, allows you kind as rather that does what to cloud more Rich, adopt solutions is with districts launches, than of easily multiple products.

that of there. to So all really attendance actually bring which student on we're being amount together, and demand interest we so saw strong around the seeing MTSS interventions with able a tremendous cloud, success behavior is

cloud this really our student continues cloud whole as strong. we've been Information sharing to actually be year, Our Student

the who out. Jackson Mississippi. Mississippi, and really student our to seeing districts entire So see largest great are third a It's in lot like sitting of school a I actually we about example are roll cloud district in –

is those spanning we cloud. workforce states area And This have to and career pathways. the third support clouds our view ready. whole view these then the better includes to and are So K-XX – the the be for have college able

some So of bright these seeing. spots we the clouds in which are our are

to million and learning year. adoption size in have per cloud, in which a you continue driving LMS with be plus know demand healthy assessments We a students our cloud continuously

going do elements all terms us and cross-sell. the help the we that, clouds really our to around us in expect will in So growth improve of are help

can see coming how so We will data these our more fruition. Analyst at to share guys Day, are some of you this,

Operator

turn There comments. are no further Hardeep questions any at the for to floor closing this back time, and to would I like over

Hardeep Gulati

We really changed Great. you, joining Thank you everyone for schedule. operator. and the appreciate thank flexibility with

As to strength have of to our gives and margin have a profile. have continue a profile business the we can attractive – happy to with financial a predictable us. about our better very of are And to continue us also very the and be remarks really XXXX you the saw performance that we ahead opportunity first with excited are half confidence – we growth

I are think in we excited, shows what the we strategic are have industry. the we the deals doing, leadership most

even do more innovation our further. the acquisitions will continue in further And platform. to continue a to us comprehensive growth to us to terms Our add – with to even to of allow ability strategic have our differentiate being able

about to of looking to Day with broader excited all I at We our the you forward share am are and roadmap more interacting Investor there. very

and thank joining forward for to everyone you So, more. sharing looking

Operator

conclude does conference. this gentlemen, and Ladies today's

You for at lines Thank great and participation a your may this disconnect day! your time. you have

PowerSchool (PWSC) 7 Aug 232023 Q2 Earnings call transcript