- First quarter total revenue increased 16% year-over-year to
$185.0 million, meeting outlook
- First quarter GAAP net loss was $22.8 million, representing
12% of total revenue, and Adjusted EBITDA* increased 24%
year-over-year to $61.3 million, exceeding outlook and representing
33% of total revenue
- ARR* increased 18% over the prior year to $720.3 million as
of March 31, 2024
- NRR* of 107.0% improves sequentially 30 basis points from
the fourth quarter of 2023
PowerSchool Holdings, Inc. (NYSE: PWSC) ("PowerSchool" or the
“Company”), the leading provider of cloud-based software for K-12
education in North America, today announced financial results for
its first quarter ended March 31, 2024.
“We opened 2024 with a strong first quarter in which we met our
revenue guidance and exceeded the high end of our profitability
guidance. We continue to see strong market demand for our suite of
mission-critical products, which drove double-digit ARR and revenue
growth, while our continued focus on operating leverage helped
drive a 2-percentage point improvement in our adjusted EBITDA
margin," said Hardeep Gulati, PowerSchool CEO. “Our platform of
leading K-12 solutions continues to be the preferred choice for
over 17,000 school districts and states who leverage our technology
to enhance operations, empower teachers, and drive positive student
outcomes."
First Quarter 2024 Financial Highlights
- Revenue: Total revenue was $185.0 million for the three
months ended March 31, 2024, up 16% year-over-year.
- S&S Revenue: Subscriptions and support revenue was
$166.9 million, up 18% year-over-year.
- Gross Profit: GAAP gross profit was $105.1 million,
representing 57% of total revenue, and Adjusted Gross Profit* was
$127.9 million, representing 69% of total revenue.
- Net Income/Loss: GAAP net loss was $22.8 million,
representing 12% of total revenue, and Non-GAAP Net Income* was
$35.4 million, representing 19% of total revenue.
- Adjusted EBITDA: Adjusted EBITDA* was $61.3 million, up
24% year-over-year and representing 33% of total revenue.
- Earnings/Loss Per Share: GAAP net loss per diluted share
was $0.12 on 202.7 million shares outstanding. Non-GAAP net income
per diluted share* was $0.17 on 204.1 million shares
outstanding.
- Cash Flow: Net cash used in operating activities was
$89.7 million, representing 48% of total revenue, and Free Cash
Flow* was negative $102.5 million, representing 55% of total
revenue.
- ARR: Annual Recurring Revenue (ARR)* was $720.3 million,
up 18% year-over-year, and Net Revenue Retention Rate* was
107.0%.
* Definitions of the key business metrics and the non-GAAP
financial measures used in this press release and reconciliations
of such measures to the most closely comparable GAAP measures are
included below under the headings “Definitions of Certain Key
Business Metrics” and “Use and Reconciliation of Non-GAAP Financial
Measures.”
Recent Business Highlights
- Customer Momentum: Won several notable deals in the
quarter, including our largest-ever Special Programs contract, with
the Indiana Department of Education, and significant cross-sells to
Toledo Public Schools, Visalia Unified School District, San
Bernardino City Unified School District, and LEAP Social Enterprise
in Puerto Rico.
- Delivering AI: Announced general availability of two
AI-powered solutions, PowerBuddy for Learning and PowerBuddy for
Assessment, which streamline workflows, reduce teacher workload,
and enhance personalized education. These solutions integrate with
Schoology and Assessments, adhere to responsible AI principles, and
leverage Microsoft Azure's OpenAI Services technology to benefit
educators, students, and parents.
- Leading AI Readiness: Continued creating demand for AI
solutions in key markets by releasing an AI Readiness customer
assessment and hosted the inaugural 'Innovation in Education: UAE
Schools' Summit' in collaboration with Esol Education. The event
brought together top schools and education leaders from across the
UAE to discuss how to prepare for new AI solutions by implementing
a secure data lake and Responsible AI principles. Additionally,
PowerSchool hosted AI Readiness workshops in Folsom, CA, and
delivered a keynote address at the British Educational Training and
Technology Show (BETT) in January outlining guidance for the
responsible use of Generative AI in education and the evolution of
PowerSchool's AI ecosystem. Finally, PowerSchool joined the UNESCO
Global Education Coalition to support the digital transformation of
education worldwide.
- International Expansion: Continued progress in
international markets including the signing of one of our first
partner deals through our channel partner Board Middle East (BME).
BME helped us land Knights of Knowledge International Schools in
Saudi Arabia, who purchased SIS, Schoology, and supporting modules
to benefit their students and teachers. Another notable win was
with Arabian Education Development in the UAE, an existing customer
using SIS, Schoology, Talent, Analytics, and other products, who
expanded by purchasing our Behavior solution. And in Latin America,
we broadened our presence with the International School of
Tegucigalpa, an existing Schoology customer who chose to expand
with us by purchasing SIS, Enrollment, Ecollect, and supporting
modules.
- Leadership: Added new Chief Accounting Officer Jon
Scrimshaw, who brings 20+ years of experience in developing and
managing world-class accounting, financial reporting, treasury, and
tax functions for global software and technology companies
including most recently Valencell, Inc. and Red Hat, Inc.
Commenting on the Company’s results, Eric Shander, PowerSchool
President and CFO, added, “We demonstrated continued operational
excellence and execution in line with our strategy during the first
quarter. Our leading platform is resonating with customers
worldwide and helping drive sustainable double-digit top line
growth. We believe our focus on innovative new products that solve
the K-12 ecosystem's most pressing challenges will provide
meaningful differentiation that will drive long-term value for
students, educators, employees, and shareholders."
Financial Outlook
The Company currently expects the following results:
Quarter ending June
30, 2024 (in millions)
Total revenue
$192
to
$197
Adjusted EBITDA*
$67
to
$69
Year ending December
31, 2024 (in millions)
Total revenue
$786
to
$792
Adjusted EBITDA*
$268
to
$273
* Adjusted EBITDA, a non-GAAP financial measure was not
reconciled to net income (loss), the most closely comparable GAAP
financial measure because net income (loss) is not accessible on a
forward-looking basis. The Company is unable to reconcile Adjusted
EBITDA to net loss without unreasonable efforts because the Company
is currently unable to predict with a reasonable degree of
certainty the type and extent of certain items that would be
expected to impact net income (loss) for these periods but would
not impact Adjusted EBITDA. Such items include stock-based
compensation charges, depreciation and amortization of capitalized
software costs and acquired intangible assets, severance, and other
items. The unavailable information could have a significant impact
on net income (loss). The foregoing financial outlook reflects the
Company’s expectations as of today's date. Given the number of risk
factors, uncertainties, and assumptions discussed below, actual
results may differ materially. The Company does not intend to
update its financial outlook until its next quarterly results
announcement.
Important disclosures in this earnings release about and
reconciliations of historical non-GAAP financial measures to the
most closely comparable GAAP measures are provided below under “Use
and Reconciliation of Non-GAAP Financial Measures.”
Conference Call Details
PowerSchool will host a conference call to discuss the first
quarter 2024 financial results on May 7, 2024, at 2:00 p.m. Pacific
Time (5:00 p.m. Eastern Time). Those wishing to participate via
webcast should access the call through PowerSchool’s Investor
Relations website. An archived webcast will be made available
shortly after the conference call ends.
Those wishing to participate via telephone may dial
1-844-826-3035 (USA) or 1-412-317-5195 (International) by
referencing conference ID 10187624. The telephone replay will be
available from 5:00 p.m. Pacific Time (8:00 p.m. Eastern Time) on
May 7, 2024, through May 21, 2024, by dialing 1-844-512-2921 (USA)
or 1-412-317-6671 (International) and referencing the replay
passcode 10187624.
About PowerSchool
PowerSchool (NYSE: PWSC) is the leading provider of cloud-based
software for K-12 education in North America. Its mission is to
power the education ecosystem with unified technology that helps
educators and students realize their full potential, in their way.
PowerSchool connects students, teachers, administrators, and
parents, with the shared goal of improving student outcomes. From
the office to the classroom to the home, it helps schools and
districts efficiently manage state reporting and related
compliance, special education, finance, human resources, talent,
registration, attendance, funding, learning, instruction, grading,
assessments, and analytics in one unified platform. PowerSchool
supports over 55 million students globally and more than 17,000
customers, including over 90 of the 100 largest districts by
student enrollment in the United States, and sells solutions in
over 90 countries globally. Visit www.powerschool.com to learn
more.
Forward-Looking Statements
This press release contains “forward-looking statements” within
the meaning of the safe harder provisions of the U.S. Private
Securities Litigation Reform Act of 1995. Any statements made in
this press release that are not statements of historical fact,
including statements about our beliefs and expectations, are
forward-looking statements and should be evaluated as such.
Forward-looking statements are not assurances of future performance
and may include information concerning possible or assumed future
results of operations, including our financial outlook and
descriptions of our business plan and strategies. Forward-looking
statements are based on PowerSchool management’s beliefs, as well
as assumptions made by, and information currently available to,
them. You can identify forward-looking statements by the fact that
they do not relate strictly to historical or current facts. These
statements may include words such as “anticipate,” “estimate,”
“expect,” “project,” “plan,” “intend,” “believe,” “may,” “will,”
“should,” “can have,” “likely,” and other words and terms of
similar meaning in connection with any discussion of the timing or
nature of future operating or financial performance or other
events. Because such statements are based on expectations as to
future financial and operating results and are not statements of
fact, actual results may differ materially from those projected.
Factors which may cause actual results to differ materially from
current expectations include, but are not limited to: our history
of cumulative losses; competition; our ability to attract new
customers on a cost-effective basis and the extent to which
existing customers renew and upgrade their subscriptions; our
ability to sustain and expand revenues, maintain profitability, and
to effectively manage our anticipated growth; our ability to
retain, hire, and integrate skilled personnel including our senior
management team; our ability to identify acquisition targets and to
successfully integrate and operate acquired businesses; our ability
to maintain and expand our strategic relationships with third
parties, including with state and local government entities; the
seasonality of our sales and customer growth; our reliance on
third-party software and intellectual property licenses; our
ability to obtain, maintain, protect, and enforce intellectual
property protection for our current and future solutions; the
impact of potential information technology or data security
breaches or other cyber-attacks or other disruptions; and the other
factors described under the heading “Risk Factors” in the Company’s
Annual Report on Form 10-K for the year ended December 31, 2023
(the "Annual Report"), filed with the Securities Exchange
Commission (“SEC”). Copies of the Annual Report may be obtained
from the Company or the SEC.
We caution you that the factors referenced above may not contain
all of the factors that are important to you. In addition, we
cannot assure you that we will realize the results or developments
we expect or anticipate or, even if substantially realized, that
they will result in the consequences or affect us or our operations
in the way we expect. All forward-looking statements reflect our
beliefs and assumptions only as of the date of this press release.
We undertake no obligation to publicly update forward-looking
statements, whether written or oral, to reflect future events,
future developments or circumstances, or new information.
Definitions of Certain Key Business Metrics
Annualized Recurring Revenue (“ARR”)
ARR represents the annualized value of all recurring contracts
as of the end of the period. ARR mitigates fluctuations due to
seasonality, contract term, one-time discounts given to help
customers meet their budgetary and cash flow needs, and the sales
mix for recurring and non-recurring revenue. We record ARR at the
time a customer purchases a new product or renews an existing
product, and at a value that represents the contracted annual
recurring revenue value excluding any granted one-time discounts.
ARR does not have any standardized meaning and is therefore
unlikely to be comparable to similarly titled measures presented by
other companies. ARR should be viewed independently of revenue and
deferred revenue and is not intended to be combined with or to
replace either of those items. ARR is not a forecast, and the
active contracts at the end of a reporting period used in
calculating ARR may or may not be extended or renewed by our
customers.
Net Revenue Retention Rate (“NRR”)
We believe that our ability to retain and grow recurring
revenues from our existing customers over time strengthens the
stability and predictability of our revenue base and is reflective
of the value we deliver to them through upselling and cross selling
our solution portfolio. Typically, our customer agreements are sold
on a three-year basis with one-year rolling renewals and annual
price escalators. These annual renewal processes provide us an
additional opportunity to upsell and cross sell additional
products. We assess our performance in this area using a metric we
refer to as Net Revenue Retention Rate (“NRR”). For the purposes of
calculating NRR, we exclude from our calculation of NRR any changes
in ARR attributable to Intersect customers, as this product is sold
through our channel partnership with EAB Global, Inc. and is
pursuant to annual revenue minimums, therefore the business will
not be managed based on NRR. We calculate our dollar-based NRR as
of the end of a reporting period as follows:
- Numerator. We measure ARR from renewed and new sale
opportunities booked as of the last day of the current reporting
period from customers with associated ARR as of the last day of the
prior year comparative reporting period.
- Denominator. We measure, as of the last day of the current
reporting period, the last twelve months of ARR that was scheduled
for renewal.
The quotient obtained from this calculation is our dollar-based
net revenue retention rate. Our NRR provides insight into the
impact on current year recurring revenues of expanding adoption of
our solutions by our existing customers during the current period.
Our NRR is subject to adjustments for acquisitions, consolidations,
spin-offs, and other market activity.
Use and Reconciliation of Non-GAAP Financial Measures
In addition to our results determined in accordance with GAAP,
we believe the following non-GAAP measures are useful in evaluating
our operating performance. We believe that non-GAAP financial
information, when taken collectively, may be helpful to investors
because it provides consistency and comparability with past
financial performance and assists in comparisons with other
companies, some of which use similar non-GAAP financial information
to supplement their GAAP results. The non-GAAP financial
information is presented for analytical and supplemental
informational purposes only, and should not be considered in
isolation or as a substitute for financial information presented in
accordance with GAAP, and may be different from similarly-titled
non-GAAP measures used by other companies. A reconciliation is
provided below for each non-GAAP financial measure to the most
directly comparable financial measure stated in accordance with
GAAP. Investors are encouraged to review the related GAAP financial
measures and the reconciliation of these non-GAAP financial
measures to their most directly comparable GAAP financial
measures.
Adjusted Gross Profit: Adjusted Gross Profit is a
supplemental measure of operating performance that is not made
under GAAP and that does not represent, and should not be
considered as, an alternative to gross profit, as determined in
accordance with GAAP. We define Adjusted Gross Profit as gross
profit, adjusted for depreciation, share-based compensation expense
and the related employer payroll tax, restructuring and
acquisition-related expenses, and amortization of acquired
intangible assets and capitalized product development costs. We use
Adjusted Gross Profit to understand and evaluate our core operating
performance and trends, to prepare and approve our annual budget,
and to develop short-term and long-term operating plans. We believe
that Adjusted Gross Profit is a useful measure to us and to our
investors because it provides consistency and comparability with
our past financial performance and between fiscal periods, as the
metric generally eliminates the effects of the variability of
depreciation, share-based compensation, restructuring expense,
acquisition-related expenses, and amortization of acquired
intangibles and capitalized product development costs from period
to period, which may fluctuate for reasons unrelated to overall
operating performance. We believe that the use of this measure
enables us to more effectively evaluate our performance
period-over-period and relative to our competitors.
Non-GAAP Net Income (Loss), Non-GAAP Cost of Revenue and
Operating Expenses, and Adjusted EBITDA: Non-GAAP Net Income
(Loss), Non-GAAP Cost of Revenue, Non-GAAP Operating Expenses, and
Adjusted EBITDA are supplemental measures of operating performance
that are not made under GAAP and that do not represent, and should
not be considered as, an alternative to net income (loss), GAAP
cost of revenue, and GAAP operating expenses, as applicable. We
define Non-GAAP Net Income (Loss) as net income (loss) adjusted for
depreciation and amortization, share-based compensation expense and
the related employer payroll tax, management fees, restructuring
expense, and acquisition-related expenses. We define Non-GAAP Cost
of Revenue and Operating Expenses as their respective GAAP measures
adjusted for share-based compensation expense and the related
employer payroll tax, management fees, restructuring expense, and
acquisition-related expense. We define Adjusted EBITDA as net
income (loss) adjusted for all of the above items, net interest
expense, nonrecurring litigation expense, and provision for
(benefit from) income tax. We use Non-GAAP Net Income, Non-GAAP
Cost of Revenue, Non-GAAP Operating Expenses, and Adjusted EBITDA
to understand and evaluate our core operating performance and
trends and to develop short-term and long-term operating plans. We
believe that Non-GAAP Net Income and Adjusted EBITDA facilitate
comparison of our operating performance on a consistent basis
between periods and, when viewed in combination with our results
prepared in accordance with GAAP, help provide a broader picture of
factors and trends affecting our results of operations.
Free Cash Flow and Unlevered Free Cash Flow: Free Cash
Flow and Unlevered Free Cash Flow are supplemental measures of
liquidity that are not made under GAAP and that do not represent,
and should not be considered as, an alternative to cash flow from
operations, as determined by GAAP. We define Free Cash Flow as net
cash provided by operating activities less cash used for purchases
of property and equipment and capitalized product development
costs. We define Unlevered Free Cash Flow as Free Cash Flow plus
cash paid for interest on outstanding debt. We believe that Free
Cash Flow and Unlevered Free Cash Flow are useful indicators of
liquidity that provide information to management and investors
about the amount of cash generated by our operations inclusive of
that used for investments in property and equipment and capitalized
product development costs as well as cash paid for interest on
outstanding debt.
These non-GAAP financial measures have their limitations as an
analytical tool, and you should not consider them in isolation, or
as a substitute for analysis of our results as reported under GAAP.
Because of these limitations, these non-GAAP financial measures
should not be considered as a replacement for their respective
comparable financial measures, as determined by GAAP, or as a
measure of our profitability or liquidity. We compensate for these
limitations by relying primarily on our GAAP results and using
non-GAAP measures only for supplemental purposes.
For a reconciliation of these non-GAAP financial measures to the
most directly comparable GAAP financial measure, please see
“Reconciliation of GAAP to Non-GAAP Financial Measures” below.
CONSOLIDATED STATEMENTS OF
OPERATIONS AND COMPREHENSIVE LOSS
(unaudited)
(in thousands except per share data)
Three Months Ended
March 31,
2024
2023
Revenue:
Subscriptions and support
$
166,927
$
141,073
Service
16,686
16,233
License and other
1,354
2,148
Total revenue
184,967
159,454
Cost of revenue:
Subscriptions and support
46,327
38,194
Service
13,383
14,323
License and other
1,071
951
Depreciation and amortization
19,080
16,021
Total cost of revenue
79,861
69,489
Gross profit
105,106
89,965
Operating expenses:
Research and development
31,651
25,421
Selling, general, and administrative
52,432
49,558
Acquisition costs
753
—
Depreciation and amortization
17,349
15,771
Total operating expenses
102,185
90,750
Income (loss) from operations
2,921
(785
)
Interest expense—net
20,996
14,029
Other expenses (income) —net
(99
)
44
Loss before income taxes
(17,976
)
(14,858
)
Income tax expense (benefit)
4,872
(45
)
Net loss
$
(22,848
)
$
(14,813
)
Less: Net loss attributable to
non-controlling interest
(3,290
)
(2,960
)
Net loss attributable to PowerSchool
Holdings, Inc.
(19,558
)
(11,853
)
Net loss attributable to PowerSchool
Holdings, Inc. Class A common stock:
Basic
(19,558
)
(11,853
)
Diluted
(24,131
)
(11,853
)
Net loss attributable to PowerSchool
Holdings, Inc. per share of Class A common stock, basic and
diluted
$
(0.12
)
$
(0.07
)
Weighted average shares of Class A common
stock:
Basic
165,037,089
160,506,571
Diluted
202,691,148
160,506,571
Other comprehensive income (loss), net of
taxes:
Foreign currency translation
(734
)
86
Change in unrealized loss on
investments
—
3
Total other comprehensive income
(loss)
(734
)
89
Less: Other comprehensive income (loss)
attributable to non-controlling interest
$
(136
)
$
17
Comprehensive loss attributable to
PowerSchool Holdings, Inc.
$
(20,156
)
$
(11,781
)
CONSOLIDATED BALANCE
SHEETS
(unaudited)
(in thousands)
March 31, 2024
December 31, 2023
Assets
Current Assets:
Cash and cash equivalents
$
17,425
$
39,054
Accounts receivable—net of allowance of
$6,543 and $7,930 respectively
61,121
76,618
Prepaid expenses and other current
assets
51,609
40,449
Total current assets
130,155
156,121
Property and equipment - net
8,181
5,003
Operating lease right-of-use assets
15,900
15,998
Capitalized product development costs -
net
112,810
112,089
Goodwill
2,770,971
2,740,725
Intangible assets - net
692,953
710,635
Other assets
35,897
36,311
Total assets
$
3,766,867
$
3,776,882
Liabilities and Stockholders’
Equity
Current Liabilities:
Accounts payable
$
12,686
$
13,629
Accrued expenses
110,858
116,271
Operating lease liabilities, current
3,837
4,958
Deferred revenue, current
275,461
373,672
Revolving credit facility
125,000
—
Current portion of long-term debt
8,379
8,379
Total current liabilities
536,221
516,909
Noncurrent Liabilities:
Other liabilities
1,902
2,178
Operating lease liabilities—net of
current
13,461
13,359
Deferred taxes
276,629
275,316
Tax Receivable Agreement liability
375,647
396,397
Deferred revenue—net of current
8,196
6,111
Long-term debt, net
810,497
811,325
Total liabilities
2,022,553
2,021,595
Stockholders' Equity:
Class A common stock, $0.0001 par value
per share, 500,000,000 shares authorized, 165,726,673 and
164,796,626 shares issued and outstanding as of March 31, 2024 and
December 31, 2023, respectively.
16
16
Class B common stock, $0.0001 par value
per share, 300,000,000 shares authorized, 37,654,059 and 37,654,059
shares issued and outstanding as of March 31, 2024 and December 31,
2023, respectively.
4
4
Additional paid-in capital
1,532,371
1,520,288
Accumulated other comprehensive loss
(2,828
)
(2,094
)
Accumulated deficit
(237,945
)
(218,387
)
Total stockholders' equity attributable to
PowerSchool Holdings, Inc.
1,291,618
1,299,827
Non-controlling interest
452,696
455,460
Total stockholders' equity
1,744,314
1,755,287
Total liabilities and stockholders'
equity
$
3,766,867
$
3,776,882
CONSOLIDATED STATEMENTS OF
CASH FLOWS
(unaudited)
Three Months Ended
March 31,
(in thousands)
2024
2023
Cash flows from operating
activities:
Net loss
$
(22,848
)
$
(14,813
)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization
36,429
31,792
Share-based compensation
14,155
14,549
Amortization of operating lease
right-of-use assets
851
788
Change in fair value of contingent
consideration
20
(450
)
Amortization of debt issuance costs
1,487
876
(Benefit from) provision for allowance for
doubtful accounts
(1,272
)
369
Loss (gain) on lease modification
(37
)
52
Loss (gain) on sale/disposal of property
and equipment
(816
)
48
Changes in operating assets and
liabilities — net of effects of acquisitions:
Accounts receivables
17,748
8,360
Prepaid expenses and other current
assets
(9,922
)
(7,135
)
Other assets
191
(2,283
)
Accounts payable
(646
)
250
Accrued expenses
(25,371
)
(16,512
)
Other liabilities
(1,654
)
(1,753
)
Deferred taxes
4,533
(494
)
Tax Receivable Agreement liability
323
16
Deferred revenue
(102,856
)
(73,687
)
Net cash used in operating activities
(89,685
)
(60,027
)
Cash flows from investing
activities:
Purchases of property and equipment
(3,887
)
(356
)
Investment in capitalized product
development costs
(8,956
)
(9,676
)
Acquisitions—net of cash acquired
(36,062
)
—
Payment of acquisition-related deferred
consideration
(5,800
)
—
Net cash used in investing activities
(54,705
)
(10,032
)
Cash flows from financing
activities:
Taxes paid related to the net share
settlement of equity awards
(65
)
(1,284
)
Proceeds from Revolving Credit
Agreement
140,000
—
Repayment of Revolving Credit
Agreement
(15,000
)
—
Repayment of First Lien Debt
(2,095
)
(1,938
)
Payment of contingent consideration
(245
)
—
Net cash (used in) provided by financing
activities
122,595
(3,222
)
Effect of foreign exchange rate changes on
cash
$
166
$
73
Net increase in cash, cash equivalents,
and restricted cash
(21,629
)
(73,208
)
Cash, cash equivalents, and restricted
cash—Beginning of period
39,554
137,981
Cash, cash equivalents, and restricted
cash—End of period
$
17,925
$
64,773
RECONCILIATION OF GAAP TO
NON-GAAP FINANCIAL MEASURES
(unaudited)
Reconciliation of gross profit to
Adjusted Gross Profit
Three Months Ended March
31,
(in thousands except percentages)
2024
2023
Gross profit
$
105,106
$
89,965
Depreciation
151
252
Share-based compensation (1)
2,273
2,458
Restructuring (2)
1,279
13
Acquisition-related expense (3)
173
87
Amortization
18,929
15,769
Adjusted Gross Profit
$
127,911
$
108,544
Gross Profit Margin (4)
56.8
%
56.4
%
Adjusted Gross Profit Margin (5)
69.2
%
68.1
%
______________
(1)
Refers to expenses in cost of revenue
associated with share-based compensation.
(2)
Refers to expenses in cost of revenue
related to migration of customers from legacy to core products, and
severance expense related to offshoring activities and executive
departures.
(3)
Refers to expenses in cost of revenue
incurred to execute and integrate acquisitions, including retention
awards, and severance for acquired employees.
(4)
Represents gross profit as a percentage of
revenue.
(5)
Represents Adjusted Gross Profit as a
percentage of revenue.
Reconciliation of net loss to Adjusted
EBITDA
Three Months Ended March
31,
(in thousands except percentages)
2024
2023
Net loss
$
(22,848
)
$
(14,813
)
Add:
Amortization
35,492
30,873
Depreciation
937
918
Interest expense - net (1)
20,996
14,029
Income tax expense (benefit)
4,872
(45
)
Share-based compensation
14,685
15,481
Management fees (2)
80
63
Restructuring (3)
3,858
1,366
Acquisition-related expense (4)
3,202
1,534
Adjusted EBITDA
$
61,274
$
49,406
Net loss margin
(12.4
)%
(9.3
)%
Adjusted EBITDA Margin (5)
33.1
%
31.0
%
______________
(1)
Interest expense, net of interest
income.
(2)
Refers to expense associated with
collaboration with our principal stockholders and their internal
consulting groups.
(3)
Refers to costs incurred related to
migration of customers from legacy to core products, remaining
lease obligations for abandoned facilities, severance expense
related to offshoring activities, facility closures, loss on
modification of debt, nonrecurring litigation expense, and
executive departures.
(4)
Refers to direct transaction and
debt-related fees reflected in our acquisition costs line item of
our income statement and incremental acquisition-related costs that
are incurred to perform diligence, execute and integrate
acquisitions, including retention awards and severance for acquired
employees, and other transaction and integration expenses. Also,
refers to the fair value adjustments recorded to the contingent
consideration liability related to the acquisitions of Kinvolved,
Inc. ("Kinvolved") and Chalk.com Education ULC ("Chalk"). These
incremental costs are embedded in our research and development,
selling, general and administrative, and cost of revenue line
items.
(5)
Represents Adjusted EBITDA as a percentage
of revenue.
Reconciliation of net loss to Non-GAAP
Net Income
Three Months Ended March
31,
(in thousands, except per share data)
2024
2023
Net loss
$
(22,848
)
$
(14,813
)
Add:
Amortization
35,492
30,873
Depreciation
937
918
Share-based compensation
14,685
15,481
Management fees (1)
80
63
Restructuring (2)
3,858
1,366
Acquisition-related expense (3)
3,202
1,534
Non-GAAP Net Income
$
35,407
$
35,422
Weighted-average Class A common stock used
in computing GAAP net loss per share, basic
165,037,089
160,506,571
Weighted-average Class A common stock used
in computing GAAP net loss per share, diluted
202,691,148
160,506,571
Weighted-average shares Class A common
stock used in computing Non-GAAP net income, basic
165,037,089
160,506,571
Dilutive impact of LLC Units
37,654,059
37,654,059
Dilutive impact of Restricted Shares and
RSUs
926,215
1,262,790
Dilutive impact of Market-share units
510,314
26,027
Weighted-average shares Class A common
stock used in computing Non-GAAP net income per share, diluted
204,127,677
199,449,447
GAAP net loss attributable to the
PowerSchool Holdings, Inc. per share of Class A common stock,
basic
$
(0.12
)
$
(0.07
)
Non-GAAP net income attributable to the
PowerSchool Holdings, Inc. per share of Class A common stock,
basic
$
0.21
$
0.22
GAAP net loss attributable to the
PowerSchool Holdings, Inc. per share of Class A common stock,
diluted
$
(0.12
)
$
(0.07
)
Non-GAAP net income attributable to the
PowerSchool Holdings, Inc. per share of Class A common stock,
diluted
$
0.17
$
0.18
______________
(1)
Refers to expense associated with
collaboration with our principal stockholders and their internal
consulting groups.
(2)
Refers to costs incurred related to
migration of customers from legacy to core products, remaining
lease obligations for abandoned facilities, severance expense
related to offshoring activities, facility closures, executive
departures, loss on modification of debt, and nonrecurring
litigation expense.
(3)
Refers to direct transaction and
debt-related fees reflected in our acquisition costs line item of
our income statement and incremental acquisition-related costs that
are incurred to perform diligence, execute and integrate
acquisitions, including retention awards and severance for acquired
employees, and other transaction and integration expenses. Also,
refers to the fair value adjustments recorded to the contingent
consideration liability related to the acquisitions of Kinvolved
and Chalk. These incremental costs are embedded in our research and
development, selling, general and administrative, and cost of
revenue line items.
Reconciliation of GAAP to Non-GAAP Cost
of Revenue and Operating Expenses
Three Months Ended March
31,
(in thousands)
2024
2023
GAAP Cost of Revenue - Subscriptions and
Support
$
46,327
$
38,194
Less:
Share-based compensation
1,549
1,556
Restructuring
1,021
—
Acquisition-related expense
136
22
Non-GAAP Cost of Revenue - Subscription
and Support
$
43,621
$
36,616
GAAP Cost of Revenue - Service
$
13,383
$
14,323
Less:
Share-based compensation
723
902
Restructuring
257
13
Acquisition-related expense
40
65
Non-GAAP Cost of Revenue - Service
$
12,363
$
13,343
GAAP Research & Development
$
31,651
$
25,421
Less:
Share-based compensation
3,636
4,072
Restructuring
2,396
105
Acquisition-related expense
493
1,376
Non-GAAP Research & Development
$
25,126
$
19,868
GAAP Selling, General and
Administrative
$
52,432
$
49,558
Less:
Share-based compensation
8,777
8,951
Management fees
80
63
Restructuring
145
1,248
Acquisition-related expense
1,780
70
Non-GAAP Selling, General and
Administrative
$
41,650
$
39,226
Reconciliation of Net Cash Used in
Operating Activities to Free Cash Flow and Unlevered Free Cash
Flow
Three Months Ended March
31,
(in thousands)
2024
2023
Net cash used in operating activities
$
(89,685
)
$
(60,027
)
Purchases of property and equipment
(3,887
)
(356
)
Capitalized product development costs
(8,956
)
(9,676
)
Free Cash Flow
$
(102,527
)
$
(70,059
)
Add:
Cash paid for interest on outstanding
debt
19,129
13,695
Unlevered Free Cash Flow
$
(83,398
)
$
(56,364
)
© PowerSchool. PowerSchool and other PowerSchool marks are
trademarks of PowerSchool Holdings, Inc., or its subsidiaries.
Other names and brands may be claimed as the property of
others.
PWSC-F
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240507890237/en/
Investor Contact: Shane Harrison
investor.relations@PowerSchool.com 855-707-5100
Media Contact: Beth Keebler
public.relations@powerschool.com 503-702-4230
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