PWSC - Earnings call 4 2023 | PowerSchool Holdings, Inc.

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Operator

Ladies and gentlemen, Greetings, and welcome to the PowerSchool Fourth Quarter 2023 Earnings Call.

As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Shane Harrison, Senior Vice President, Investor Relations. Please go ahead.

Shane Harrison

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

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

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

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

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

With Hardeep. call turn the over to that, I'll

Hardeep Gulati

thank revenue and within guidance, Shane, and outstanding EBITDA. adjusted while Once time our innovation for delivered of everyone, XXXX was with you, Thank another today. PowerSchool quarter we again, for guidance profitability. growth execution, your that double-digit finished you, exceeding our

success cash margin points continue record basis million or expanding $XXX model, the line our we we EBITDA top crossed provided by year, adjusted to guidance into For to every revenue flow XXX December. annual quarter free we EBITDA. durable through And since our as IPO, of We And now exceeded our the a row, digits have financial XX.X%. for tenth XXXX. while quarter we recurring reaching in cash met in for our grew double the translate our and margin revenue both of

the ARR the Total subscription increased revenue support revenue will fourth grew presentation, XX%. Looking guidance. X see $XX grew and our million. EBITDA million end $XXX at you Adjusted our and ahead of XX% the of of high of XX% Slide to quarter results. was

September, and our At and Investor innovations customer advancement platform out reach our personalized growing and increase through expanding solutions. in global components of laid our building base, of we strategy. acquisitions, Day continued X Cross-selling our in investing growth large education key

and we exemplified quarter cross-sell customer X. Starting executed many traction, we new wins saw quarter several momentum platform to QX. we chose and solutions enter This the saw continued in we that comprehensive as summarized to New of fourth to several effective solution Curriculum in from third school the of largest add how cross-sell by Chicago of across driven their with evaluation all user support cloud are X we staff bring educator were differentiated Public development deals and student XXXX. product School, growth solutions, in Board Independent assessments, professional our District School effectiveness the Assessment Insights, career usage Similarly, and XX,XXX our Jersey, information enrollment Naviance insights, Education adding user added Planning our Atlantic count with of professional development. teachers within U.S. seeing products Slide and X, and City support. Wylie our system the our of X. Behavior, in our solutions, of on to logo At of their their Texas expanded and district by

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innovation a differentiation for shared significant expansion up growth this expand well PowerSchool XXXX. sets model. All and to product I competitive this achieve business our customer have and and We advantage very further overall momentum

cash consistent our of free confident durable margin drive are revenue growth, model expansion generation. and We to double-digit flow financial

We a continue clear profile. company our vertical path of leader and SaaS to category XX a best-in-class with Rule to be a the in

and With Eric? performance financial cover that, the to let to over me guidance. call Eric the pass

Eric Shander

Hardeep at of year. ahead continued above and growth Thank you, We great all quarter, the revenue delivering in objectives, expansion. guidance profitability XX%. that the of performance Both and exceeded almost us with and adjusted our as Hardeep. growth confidence This outlined, of our revenue of guidance we significantly financial gives had a initial EBITDA provided revenue margin double-digit we our XXXX guidance of were start

grew XX% our last up quarter on that XX.X%. in by line with we SchoolMessenger range growth XXX Full year. came million, results $XXX year our make our year X. full million, line total year-over-year at expanded our will points acquiring the $XXX the that EBITDA education the to Fourth help shown and representing while for XXXX, innovations successfully while rate revenue and We quarter. on international of our call. in this in accounted basis expanding achieved summary XX%, are and a personalized adjusted Fourth of our revenue all subscription of investing was in of a support guidance top and Neverskip For XX% grew and year-over-year reality. A revenue XX% total quarter Slide presence, margin provided for game-changing XX% and earnings XXXX revenue integrating

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

of Our flat services in business year-over-year. generated the $XX quarter, revenue fourth million

full For X% due is year-over-year. moderation implementation over long and term. deliver our our cycles, expected retention year, efficient accelerating services the grew to our the was customers The and driving in more business to growth services ensuring value deployment quicker and us which

relates associated Revenue License of from and Angeles Los revenue year. mainly [ revenue in Department year. our came at School year-over-year million, increase increase million year deal. $XX prior license representing with activity XX% period was Puerto in license was Other, and Full last a & District This and largely licensing Education the in ] due upfront was hardware our $X to the from which same due Rico to fees QX revenue third-party to higher Unified time over down LNR

recurring We million, with The was and SchoolMessenger, our logo performance XX%, contracted an over $XXX price increases. contribution of was the ended new increase the balance XXXX prior growth, strong typical cross-sell from continued and upsell by which an over annual revenue ARR driven year.

at into State retention movement deal XXXX, the off January. decline bookings, QX the QX. Indiana XXX.X%, Insights Unified basis or win net This QX was to rolled which Our specifically of timing trailing the of the large with XX in revenue due the of in rate, a Education from Alabama calculation came of and from Department XX-month NRR, points the representing of decline of of sequential

implementation, the As we services In our arrangements to large prior continue that to us. deals be have revenue for lead variability to and I've opportunities with complex large as discussed as continued quicker customers in time-to-value the important working given these our create, improve team strategic can operations and quarters, to accelerate recognition. very capacity, my cross-sell well our which been

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

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

improvements. benefit and process We from continued scale operational greater to continue efficiency

in Looking XX.X% came expenses, R&D revenue, XX.X% at quarter Fourth with of revenue, research development non-GAAP of million, Including the at and compared operating last expense R&D $XX expenses, was total capitalized XX.X% year. in representing invested million, year. prior X% in declined compared non-GAAP XX.X% full revenue prior with an XX.X% representing compared a points. expense of XXX XX.X% year improvement in year, the with basis, the On R&D basis to $XX of

$XXX portfolio. XXX sales the in of Non-GAAP expenses, a R&D higher our million. around and product Non-GAAP SG&A of with point in sales long-term investment to full in investments XXXX. The $XX year Including expanded line XX.X% capitalized for North increased total largely points XX% was to XXXX was marketing framework. of XX.X% to and increase expense year-over-year, international an financial due expansion increased fourth America XXX across increased representing the our quarter coverage expense million, over revenue, year-over-year revenue, increase the SG&A improvement basis XX% basis

higher increased fourth exceeded $X XX% income net a quarter with in we the $XXX up compared XXX to Our and in points basis XX.X% $X.XX end points diluted of prior XXXX expenses. XX.X% the largely of fully provided noncash per which period was Full adjusted expense tax and representing diluted per share beginning and year, million, year same was margin, the guidance a the higher interest basis XXXX.Non-GAAP time $XX the range EBITDA original XX adjusted million, than share at the fourth due $X.XX our XX% representing to was of million. EBITDA quarter by high to over guidance margin

and development improved offset which EPS XXXX. XXXX, earned was was $X.XX of higher in lowered a $XXX year to working Fourth interest free margin a compared by margin non-GAAP million, free year-over-year $XX grew and quarter $X.XX improvement company, costs, capital for cash point representing a with million, expenses. a product flow free helped margin XX.X%, driven flow basis year we the of reaching cash flow Full capitalized XXX record XX% Full XX.X%. cash

We was $XX SchoolMessenger. the the in quarter and impacted Net balance of cash the Moving of at the ended X.Xx. to sheet. by debt with acquisition year equivalents leverage the end million

We us of build X.Xx X.Xx by end debt the financial in our assets level customers. platform our accretive be continue us to ample are an that for range stronger opportunity expect strategy net provides even help our XXXX. profile debt to the leverage and This our to strategic acquiring of to

growth, shown for Slide a revenue growth full the rate. As on representing with guidance XX% Other growing levels returning million, to range. part the X, in strategic of range be in to of year XXXX, midpoint revenue SNS to XXXX single the expected be This our to million total expect will $XXX and services most & stronger License is $XXX year-over-year the the we our assumes digit revenue. revenue be

adjusted we at between representing full the to EBITDA, XX.X% be For expect a $XXX midpoint. million million, $XXX year the margin to XXXX,

quarter the first a to at XXXX, million of in growth rate the $XXX expect total to representing we year-over-year million, XX% $XXX of midpoint. revenue the For deliver range

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

reminder, a to quarter first sales events that in growth are lot our marketing occur drive as intended a throughout the in-person and top-line of the Just year.

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

our gives $X us billion it revenue pathway of up heading line remarks. Q&A. we guidance, concludes confidence, XXXX our prepared in the not excited we're Operator, end please wrap the plus about will the XXXX. This XXXX, momentum reaching you our by open up in only but for as XXXX into As to business

Operator

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

Stephen Sheldon

rollout, AI kind on like out lot a tools hesitancy of just from sort digging in you But the you of how mixed stages going you their least take thinking and a you at and want your initiatives? It are be sensing of point? initiatives I get about it are are it to time do there, school at very about of district a what bit guys excitement? to seems about but these are comfort leveraging And levels? customers, this lot know customers the AI of hesitancy I your Is AI start solutions to here school think rolling initially districts in with hearing some capabilities. some the traction? little you from early are any could

Hardeep Gulati

great Stephen, Sure. question.

So a you there the to can not is on in interest broadly imagine that. K-XX of immune and AI is lot market

we In it. lot of fact, interest a seeing from K-XX are districts about

dabbling already In fact, XX% districts to the are XX% whether in the our from a itself. survey that are it, or actually, base. schools, certain with customer internal, the within interest, seeing showed certain of regions we IT almost same And

In protected differentiations ready their they data districts we also that they're at with about capacity, that them to seeing there's get their looking to their getting have a try if the fact, had data AI. make the it for we is of the than are how are roll adopting who is then data do experiment tools are out risk AI. the are is, to very bringing has the they AI responses bring and attendees one training, especially rather they secure? or to to concerned webinar, sure are taking in how AI the as to where try allowing almost Well, AI need, limited which broader well. What we we a X,XXX That but includes

their with to that that data by data and allowing is -- with to their privacy have OpenAI AI and tools, at mean actually them LLM it security. we're our make right to platform I lake looking within sure within protects bring models other right be the all their able the the What our still and firewall, control,

of the that's interest why So whole excited about, lake are AI and platform really as seeing in districts a our which well data itself. as lot one we're advantage that's

we're they is Second, of platform. out roll Stephen, a to is seeing, in interest holistic what lot that want one AI

But multiple in supplemental of college around imagine can a what's of learning full going the or interest that of there's from none the lot context those classroom. in to planning areas. other chatbots on areas, -- problem actually the from You is have

putting every to for as embed fact than across rather that AI out which such a able looking it it context have of these multiple the element comprehensive really into they're which can So products we a presence roll full of our in have third, the our product. strong a the way. And them tools, the to platform, we're allows -- base, and

be experience, they So able same better other really in Naviance as it's or in in said driving a can or a parent to as is the tools. with actually whether Assessment, My in our interact and whether of PowerSchool whether lot now that's portal products much it's conversational a that and our Schoology, AI have way, interest, within well personalized our

of So products expect early, exciting it's seeing are we Even million bought and of revenue and our going have within on. we're see the that customers couple seeing to beta it dollars there a up to from though AI already around this on tons also of do almost really interest year, start who we traction. doubling

Stephen Sheldon

large you a seems It Understood. have opportunity there. yes, clearly like, very

to As a have spear good tips America. great channel partnership study Uruguay. international lot Latin a there especially expansion, now the the follow-up, a see you of like in and to in seems case It

what resources Latin are be potential in your know how to to on reliant direct but to go-to-market? the to to add partners to want on mostly to now, in to channel your So about the -- going side, you direct And the you're add investment have sales bigger potential making before to much markets? you ready I thinking those do the product see product to a cater need there America, you would is

Hardeep Gulati

that way. With of We sure from a to year to that Middle saw that in your can well profitable last said, make great in international regions way. that a almost as expand a we we're but also exciting Stephen. effort. by field but When already critical We looking to driving as to on you well a will as it that our effort regions point, partnering see look is also expand can our channel questions, good countries international India where scale really have is with we direct we distribution this perspective, investments seeing where East, them those direct also channels profitable We really grew established, we other we're ARR want so kind is the a results Fair demand. at as have what in that, they us help broader these What's create the at going us XX%. as allows actually enabling them, traction. But expect markets we do might like be both we mass. already to angle

Operator

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

David Lustberg

way you the wanted for to you around This inorganic, the of some can SchoolMessenger? gave. is And that how versus there guidance that towards pointed guidance, any on guys I around mostly color much give Brent. guys ask the of acquisition is Lustberg organic David or quantify

Eric Shander

Eric. Yes. David, it's

in super my we're side. prepared I understand. to on So I seeing think around that it's helpful revenue excited the guidance, about as everybody it's year, double-digit full the you What think remarks, important hopefully for growth we're certainly the

services of you the so And double-digit so certainly, much being range as line is the with we in big there. business, had growth. items then levels, very back can in in As moderating kind to low you XXXX into a know, think XXXX, single-digit you revenue kind all from perspective, growth the which about piece, our strategic the L&O some of back

kind the of finish we're up how So for super year, we excited XXXX. set around we're how

then back all it going mentioned which margins, up is as continuing do to Investor we're the this XXX mind in growth, our we're with of to we but And to expand of we're in do expansion. points offering obviously, basis of September, why Day going

continuing really the intact from momentum very been then of bottom lot is to see of and the and core continuing business. And think a line business, good is the should that a So both come have which much that, top we I line there component drive articulating. to

David Lustberg

then Obviously, have year, And be also international. ask guys guys it. a up, guess have of guided if think last as maybe growth, I described year, think know it international think you I of the this I Got partners, with could I ramp adding you wanted maybe on best as to a follow-up, to lot as you you but just have just channel think year to how partners how got way partners channel are new last year. can you would would the opportunity views having get the you your and to timing And about this international about be -- this on specifically, I those that curious ramped, look year be you guys thinking of the how helpful?

Hardeep Gulati

Sure.

growth just was noticed, talking just to as if guess, So from Eric's also I even been you make Eric the deals. being from -- as we our reiterating had the both as we it, well license XXXX Investor as about SchoolMessenger we saw are expecting as about, factoring out, well, a you sure take software things. I point about large we subscription whole about we've growth into the in talking as back shared XXXX and One, double-digit some David, X what off Day, think,

we growth, even very So feeling that outside acquisition. on strong the still are core

as saw as the organic partnerships inorganic continue in part probably expecting the next rate in that, Now in international, the fact, We're at up are in and well. to rates look XX% international. both we that, I even on we The mentioned, growth channel the guess, I ARR. shaping growth piece definitely

pretty every activity on around of going of a it. in the much part have We lot region

on, actually we we create areas focus our not also would more not international Ivy as data to products. just system, schools bringing start is Schoology, where but selling, well be Our focus goal on just large but as the how into our schools, just can core deals,

So you -- that. this also on is where we would seeing just international would start accelerate

Operator

from UBS. Our next Hilliker with the line of question Rich comes

Richard Hilliker

me hear you Can okay?

Hardeep Gulati

Yes.

Eric Shander

Yes.

Richard Hilliker

maybe and could SchoolMessenger -- I to -- you to wondering disclose we're hit saw tease contribution revenue the maybe early was in if you on missed I more either ARR did was once nice given bit number, I and still or you Because more, if ARR I Awesome. could that wondering it, or period? little QX? in disclosure out wondering a that growth I was that

Eric Shander

Yes.

I other all we we into strategy -- we've and acquisitions to capabilities, as of immediately. our strategic Rich, look, made, really So assets is similar the as these the platform we think, integrate acquire soon them rather that

kind way platform to of us for looking a from not if -- and apart we about, customers it's of our that the it go for start really us. value the to think just get So you breaking it's the us, doesn't it market. And at piecemeal,

impact is. last my into quarter. SchoolMessenger well, we a with So as we given the, mentioned -- had kind and in make little And That -- saw range the million around ARR kind some PowerSchool, about platform we of the what the some year, the kind in integrating investments making of as so bit probably it last for of did model call to color should there. through $XX enough year then it, good we're be and as investments, to to some are we last that of think you around guys you

a some investments we guys get on-site much expect, sales But down as again, seasonal obviously, the that we continued we and But well modeling of ways as and very marketing again, were little you'll this to because events then enough some quarter. in occurring that's the the hopefully, do of think, in note margins I what quarter, SchoolMessenger bit. into some you give color And with expect in it. platform first QX our as that's

Hardeep Gulati

to the with Eric's just of in Rich, data but point, of you Yes. a our lot them some were intervention. give attendance points my SIS or or did QX, we to XXX-plus just transactions with on with almost SchoolMessenger And our either bundled PowerSchool

So a lot seeing that's exciting of why stuff. we are good,

that of completely PowerSchool integrated, overall even consolidated we My interactions where actually where two-way second itself. as part are all whole we That's to drive Now fully entire that about personalize are platform. more launching with along communication the with think half as that's going the growth of we excited chat to PowerBuddy

Richard Hilliker

Got it.

helpful. the bundle wanted touch really cloud persona-based That's on just I the opportunity, Okay. also bundles. quickly to

had we've product aware of past, spoken [ as when right, were And Rally using ], mentioned think Cry this in been you that these to customers bundles. more of sort went you've one the increasingly I you market.

you are more anything tweaked as 'XX yet? organization we in the So contributing you Have those about in sales and or beyond? I'm in more seeing potentially incentives wondering, traction any and way think

Hardeep Gulati

Great question.

across trying to know, products, the go out you critical XX-plus than to that automation mission-critical about and plus one them after have lot satisfying having their around we now buy of kind do to products right? is to rather different things almost one But products, we elements customer all personas how As product, district. figure a school the of Best-in-class were fully of them we have think allow multiple elements. of

a has from So our to of plus we been aligned go-to-market as X well launched and now GTM collateral as every our what much seeing these element clouds comms platform And AI. data the clouds. pretty our to we're is now like components

you the cloud the actually services, for have student personalized for instruction. with going So student learning would cloud

for guidance in You've similarly, CCLR the and the Student educator counselors the Success cloud. finance -- or MTSS got effectiveness for the accountability account for Cloud whole the

now it simpler what as more more our so And as within in additional to, our products now, sales buy allowed can much with together they of cloud, is relationship cloud make to so also that So to buy pretty actually is really cross-sell us effectively the for products every being has have well it customers go-to-market. the working able leverages each well, is strategy better of element personas. fact,

Eric Shander

think the the thing kind it's much Rich, to say, just efficient team cloud of go-to-market in really motion. of way effective if market the the like would one a about Hardeep you they focused think, So terms I to bundles, just right? each and said, persona, it's I more go

Operator

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

Saket Kalia

maybe the to Hardeep, state -- Hardeep, just with level with Hey, start Indiana. maybe Congrats you. contract on

this or recent deals wins quarters. state-level like actually several in You've had

just in maybe that's deal that so towards? to did right? a quick help not these That a product actually gravitating will deals contribute are QX. QX And here that what families Is to there sort And is, of ARR. question clarify,

Hardeep Gulati

not QX. That right. is did help that Yes,

the phenomenal about we've mentioned, -- an actually significant about, as of the you services exciting. though In fact, state had pretty look the quarter. as that impact a opportunities you at opportunity it is got have elements, quarters, pipeline our bit some here, every XX strategic if or in of X our much little these looks -- pretty And even we talked talked so I've QX. we've we've think I deals also on But even

it perspective, a this a see this We range. We've was with we value. [ We quarter that took around actually deal. as Puerto the to allows to be SIS was and very are large see We've us analytics seen but did because, lot other ] -- replicate logistics from that, You a broad do recruitment. only the strategic Florida, of deals what last done special also a proves just best-in-class, opportunity talent we we interest. Rico. not these not state in

one lot focus a over to really and deals Insight. as start of to bringing fact, the sales we're same In last gearing is of we our start so our strategic Enterprise to going we -- expansion up capabilities big focus year, that can on

which fact, have In to close of not last the months, shows almost we seen X just traction kind that $XX plus. XX we just are It deals, before. have million done you in

exciting and Indiana your ARR these going move is have, So around, revenue very point, come of which are opportunities, QX. but some they in but to to implications do

Saket Kalia

touched aspect wondering think you it I sort it think just for And maybe kind through on next driving I revenue Eric, Got it. sense? the delivering services for just question that's that services it. business dig in make how services Maybe sounds what's customer. you about could And longer do of remarks. is approach mean, little the the guide you. of term? services? year. I for if that maybe you super deeper helpful. faster Got in your prepared like That's time-to-value you're a the delivery into was bit coming that Does with new

Eric Shander

It does. It does.

think you business for a of many so about now. And year the actually taken know, I've services responsibility I for

the of One a things was teams were of work. packages that that restructured the doing we and we the work the actually did lot

you're across more done groups of many, lot the So many productivity, by of teams. type activities a increased what you're people same spread seeing being seeing versus is

you customer the But actually of we're I operational So it at It's obviously, look take that much as getting it's is well quicker. The right, enabling actually quicker velocity, implement would of getting revenue also recognize as the is, result a that, implication quicker the more our right? to us efficient. to encourage and certainly time-to-value margins.

these a Our 'XX up margins really how has reorganized in 'XX a of the to lot with are and of teams. versus we've do lot of that efficiency

So to I'm get they're are customers work the out look, proud technology. that super they because our of to the strategic And what value very continue most going doing. be team's the our customers enables to to of the

to with largest And I months, fast there, which team like, good SIS of did So continue Rico. before. mean, value a it's part proposition. big Puerto amount continue of we're huge And on of quality going did we X.X a of implementations the going done we this one when get the in too. we in. example XXX,XXX-plus to the never did focus lot be has been it a was in, And a across products students of to think to how I can the

So tuned. stay

strong the the obviously But we'll see high. recognition as get continued it again, side well. revenue So helps quicker. margins And you'll on as see -- as yes, subscription growth revenue less you'll you well the -- as won't see

Operator

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

Brian Peterson

I a XXXX? look little And pipeline of XXXX. into Just want how of product portfolio. a through to on performed how head I the understand the we as market that's the SIS I'd SIS love part know big to maybe that hit bit. does

Hardeep Gulati

do Sure, said, right? -- we of XXXX, that digit into those the part school are us for Their us cross-sell, talking integration actually, strategic, to SIS, as even Again, opportunity definitely a that. SIS as our cloud, platform, be well not to We think the allows as in to data as the when it you I biggest U.S. at in leadership international. able the double district, you well. especially and most XXXX healthy, have, bigger gives is grew to also business. about strategic, that actually we It's when only AI are to very pretty looks having platform, look student comes Brian. both its expecting it to as us pipeline do continue

Brian Peterson

of I presence kind opportunity? guys the family's your you you opportunity school question effort given making a and embedded the about, marketing of perspective there? an what thinking districts. sales potentially, broaden in the maybe That's all great are you separate to just on Any kind hear. And monetization. But know have monetization as

Hardeep Gulati

question, Excellent Brian.

very for engagement X and right engagement in a but to path. that with not PowerBuddy, lesson districts for pervasive So families to the as college that level on to districts, system, understand us now driving only the itself, support we've imagine and about, need they and right? parent support take within plans, talked It's student and to able with the the to be providing be interested able be engagement, school to, having in. they students able teachers family's are create career the for better ability AI allows for So PowerBuddy counselors which on help additional homework, out to school roll any

into even So there is to whole that BXC a strong opportunity a for their commercialize families. with us

and assistance kind within in almost of tools first can that's and BXC world. we even of AI Netflix a as allows -- being provide just our us after, on to about think to the Our opportunity and PowerBuddy's $XXX families the go to within able focus base. a $X of as we close is also to like take right talked right TAM student districts, consumer where the content to $XXX the education, again, it billion services where, about, But our and per adding to TAM we us

signing what gets success, almost that TAM. to $XXX billion really is So

Operator

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

Ryan MacDonald

districts that of $XX student. you of you, about with talked be we what's you, per today, today? Is are the opportunity incremental TAM -- maybe of Or this incremental to AI would incremental $XX sort prepared of incremental new of Hardeep, should budget sales? market to And about, $XX in you unlock first for much K-XX -- driving how pockets it per from that this -- budget and how what about what the sort the in going replacing guess, TAM Can then to time? remarks, talk I comes you think about to part of terms of of $XX today creating student $XX your $XX to potentially? over

Hardeep Gulati

a my it AI assessment, prepared so perspective, as everything data our at When quizzes like for well to products with platform, ability additional as as create, create enhancing our I launched, the we from PowerBuddy the our for content are and teachers can map, your them, was even the in you content. look Sure. remarks, lake shared we've already which further with

this grow year, about volume So we our somewhere in to the we that students. $X number contracts think could range depending of monetizing end the to almost the of to what $XX $XX expect to customers a are about is of selling by be and of of what $XX, now. By already size to this

to we So all monetize the have elements.

are chunks we though in same the that context do the full entire of reason student. is trying the even it platform, it's to this has Now the

We a are be districts chunk. allowing able these to to adopt things in

have to big a So that big having budget. way, -- they secured a -- don't feel big a

Compare help have to to be might Conmigo that. on to able $XX, or right, a $XX, where take they that others to spend

differentiation, that adopt are So the that's can in using, the full of of our we still they the kind but into them platform. it embed easily chunks, benefit tools have

more what both all the everything fact take as a and teachers And elements well content, from different as need, data on can budget, the the elements, being on perspective, tutoring, them within providing so budget have that they it support this on and so students this and are engage they're surgical and more make see on reach to helps IT we the enable because more they interventions better. parents they doing able with actually already help but the to investments from

Ryan MacDonald

helpful off just that. of Super piggybacking Maybe color there.

inherent mentioned the of You opportunity tutoring with sort it.

of in to spend sort As there of to final market cases at ability in the maybe going pull or be use before of last year sort allocated? needs maybe -- ESSER in some is of you that the with year, the the some this some of access or look this it to remaining applications PowerBuddy an of funding to pools early days

that just business ESSER but fact upcoming on and know given generally, for too any and early prioritize spend core the districts paying they first the the the doesn't days before much, of the then maybe pool know changes closer schools attention selling season, they budget? I that that within to of to directly And need funding, you prioritization it are allocate sort seeing obviously impact of of in sort

Hardeep Gulati

Yes.

subscription solutions think I that there's as of perspective, recurring a -- mix basically everything we what -- But from are as our in our you're saying. base.

-- They budget, have to have the they don't secure be a for see that to there dollars be sometimes, we But might right? element, what onetime their if elements that normal and implementation, districts as we're on so perspective, an on do any major not a is to a from use that from them behavior prioritized around with they buying change said, said, spend they use need to typically within those our seeing ESSER change in patterns. We ESSER. other. So

right. You're absolutely

more be these to Some PowerBuddy -- and of the to more pieces dollars spend allow them we does are selling on surgically. our data us allow

a tie them spend helping well. districts ongoing better able ROI So to from ESSER play the being better. to budgets role and these manage with especially in their also acquisition, dollar as in, do their we perspective, Allovue that allowing see to are And we that to

why on and budgeting planning. that's help So we their districts do these

Operator

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

Koji Ikeda

you your talked And ask you kind I a since to of in the wanted about prepared the beating results in the do I commentary meeting in question, guide. appreciate IPO, the and remarks, consistency cycles potential. upside times, NRR revenue, beat seems damper put be and deal But on about at which or deal really the can consistency. can thinking a side that volatile, sizes on more the it

I maybe more predictable this sizes a deal deal the the larger predictability Just bit be more offerings, little should that within seasonal EdTech was about bit think about But expanding under require a it and cycles thinking to the thinking your going vertical, category. international, assumption about could differently. and product us

some and you can the help there, of takes understand please? So us puts

Eric Shander

Yes.

it's Eric. So Koji,

So lot what not several discounting, to we've and do we're it pricing time of I doing an deals, when a had artificially to said going right? is LAUSD, not the it's now we're means particular you're and some get a into consistently Because try sort as in quarter, think just One that, of times, going cetera. right? to it going -- large be things Rico to of et do to whether we've Indiana whether and a Puerto deal unnatural is example, you

there's about when of are A these of is of there. talking which They're up They line large. that deals. to you're lot And deal, it. different it's when deals some terms a of have -- just hands we've processes out got our XX sometimes right, required state side, can these a large matter of in -- the So timing a the approvals of sight strategic. of to lot of on customer especially

a you matter cycle, were take mean timing. of we we little But approval one, as bit knew then is it it I just as to We the anticipated. kind a the of through in very approvals progresses perfect than It's the right? deal. optimistic was see that Indiana close a sometimes going had longer QX.

So full the a what articulate really going full kind year to there said from deal from just standpoint obviously committing focus of the in articulate year look, and we're impact as on to variability the when to is, and would we've it. And we're our I it say past, perspective. what is

of than think around been Indiana, like QX, that, think it to closed have the would higher of about, as ended also revenue where important in retention that something XXX being. it's you net points our right, impact think up I kind had basis

have So XX actually basis going sequential would by down versus point XX basis it shown points. a improvement

for metrics. And around have business I we're what from I of have mean, ins trying you a good But to the committed it -- the don't a into terms gives that to of quarter. again, a and where kind deals. transparent not magnitude just to It's and outs into trying just the force-fit we deal will of want these being get it of in some the is particular discounting do that just a Hardeep again, standpoint. on very spot to the So

Koji Ikeda

partners certain years? some with revenue think about Got the the the think XX XX super it, just channel for year ahead And That's Eric. goal to one the there way for PowerSchool finish here. partners of goal targets? targets? maybe about helpful. should Or XX. expanding a be follow-up reach to XX we And to is that to or partners enough your hit of the to could several a of Is then level number stretch to partner over revenue next available XXXX

Hardeep Gulati

not It's we're a And to number putting an Koji. question, fair artificial it.

markets where our in product the coverage already good they and do access ability how right be to driven have by sell to it's So solutions actually we and more have able that. targeted the

about than more will partners, absolutely. So it's There coverage more be the number.

the the partners. at also time, But quality same the of it's

and of are not XXX, -- with We see approach We then got going if XXX let's these partners sells. partners. have the are we anybody investing

to driving years. are growth, them as given that we a mature few believe continue providing in guidance the have that next can we we the to this should -- become the will We -- and we business

Operator

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

Joseph Vruwink

on clarification a core something, and think, Maybe actually in performance answer. it's just I one to Hardeep, in you organic start prior the and subscription support and mentioned

you've does an going actually double be be So growth than clear, to rate is is of FY provided, where all that guidance in organic XXXX digits 'XX and growth FY that just accurate stronger that entail statement? in and finished, in to the the 'XX

Eric Shander

also strategic I kind thing up at if for then strategic you yes, our absolutely. you see as even for that subscription calling is absolutely support account very pick transaction, into a were strategic accurate. bit get the in kind and the little talked being LAUSD big growth And deal, that about of low the software and were that double-digit Yes, that's XXXX. also look we've to software we And of also think right, being important, we're what more so a activity, XXXX, as we a Joe,

Joseph Vruwink

maybe going give apples guilty next of This but great. a That's is and oranges try. question it to I'll Okay. analysis, be

in Day, made think about X% about Investor your maybe to TAM I I the your share comment million the $X at being a or products, they PowerSchool, midterm think a of associated high very the terms would in could you're as revenue the so these with talking be $XXX horizon. was So that the maybe billion simple at Today, market defined. potential suites, than that share, TAM, approach products. math Obviously, product much of operate when it's higher AI here

early? the K-XX that and pragmatic uptake to analysis? is the is products guess, are factor you setting get about maybe super of because I to in? trying your And being AI you you're what's just embedded reaction there observation yourself ahead don't to and it Or want of maybe some

Hardeep Gulati

you're think Yes, I right.

transformation time, as early all and conversational all it's are -- it -- We think do tools, get these of PowerBuddies, ahead and ourself. everything prepared of that the to get the our see $XX remarks, kind million. been they are to that tremendous start almost personalization invest to we education us sure to start built, launch how element getting how with to And that now real believe in AI you this, $XX to Almost trying these big with you especially these be able I such to expect them the And see mentioned in parents' persona broadly that. our being persona that is monetizing and of of integrated significantly and student value, AI personalized kind if we our communicating. been really -- principal why changes here. right let in big. This which my don't our be to this element kind valuable. And competitors, around we we're think do the want K-XX, how actually in able to engage are of why has early capitalized actually -- being us about, And our compared have reason which investing time, data counting whole our R&D. it, which we have are million proactively on, districts we of are pragmatic, in a are opportunity so products is platform, that teacher make R&D able see and we the in time, interest, to the phenomenal see to showing that's been seeing, we time, profitability, allowing we allows products about start in from -- We

Operator

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

Carolyn Valenti

for Valenti This on is Gabriela. Callie

versus how and asset content that things? an for wanted kind to I up partnering the you potentially idea on one education. me If think about follow of of of you think of that, with First is being on before we the do about what side side said acquiring Netflix the of content

Hardeep Gulati

a a both to or from having the absolutely a provide It's about HBO think content a services content kind of or model. the being Callie, partnership lot able right. model It's of providers, both strategic you're a Prime right -- context. just with a about within Netflix and

based imagine need, So support the kid's has a efficacy content which child. most on providing you're to right the that

have child's engagement well targeted and of right? provide have them, like context. services to intelligence that need, being the with able the as because We we tutoring As to system

have us more of this as, acquisitions, in So well. well will as cases, some to is as those which partnership, both content targeted kind allow

Carolyn Valenti

like, the a most? number. you me logo, sense. seeing are the like, growth of also new out new that logos Are called kind drive what makes just logo markets Curious, come-and-land? growth you you ARR any via one And core very in second data Is products market? products versus would is seeing just the for America new then some in international trends in That you North impressive call of SIS? And out

Hardeep Gulati

most Pretty of balanced in of products. our terms

products data selling we're when they're growth, the products customers. course, even seeing student not products, talked think -- are data about, we've I good same of the very which our

things our We then actually well. higher intervention reflective -- new and logo are even with -- like cloud well. also very been Talent be to share, with creating to doing are little it's our logos seeing, And is attendance again, student continues as well. exceptionally very And do products all actually new market a opportunities. that being on the

Operator

session. like That remarks. Gulati it back closing to concludes our for to Hardeep I'd question-and-answer hand

Hardeep Gulati

appreciate earnings Thank everybody you, staying this for I everyone. call.

business which only shows I we both As exciting U.S. we what's Eric exciting to as we and able shared, larger is the and very use able support the has exciting to with as a as deals as being looking innovation everybody's an to are our a of quarter platform, growth, in customer, well the a And the being in being performing the guiding comprehensive within just to forward about of have you of stability, able our terms our continue well be terms you, being all well everyone. well XXXX. it to to both to internationally business. most to appreciate exciting the been sell robustness to as provides secure able double-digit needs as diversified so as also as the platform, Thank an this double-digit record year. different double-digit this model differentiations growth, Not and of platform growth,

Operator

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

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

PowerSchool (PWSC) 26 Feb 242023 Q4 Earnings call transcript