- PowerSchool delivers second quarter total revenue growth of
10% to $173.9 million, meeting the high end of the second quarter
guidance range, and reiterates full-year 2023 outlook for total
revenue
- GAAP net loss improves 33% over the prior year, and GAAP net
loss per diluted share improves 33% over the prior year to
$0.02
- Adjusted EBITDA* grows 26% to $61.2 million, exceeding the
second quarter guidance range, and full-year 2023 outlook for
Adjusted EBITDA is increased
- ARR* increases 10% over the prior year to reach $635.8
million as of June 30, 2023
- NRR* of 109.5% improves 220 basis points from the second
quarter of 2022
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 second quarter ended June 30, 2023.
“The momentum we are seeing in bookings, product innovation,
platform expansion, and market development resulted in a great
second quarter which we believe positions us well for the second
half of the year," said Hardeep Gulati, PowerSchool CEO. "Our
innovations around data are addressing key gaps our customers see
in their operations and will enable us to personalize education to
drive more efficient instruction and improve student outcomes,
which we expect will drive durable long-term growth and
returns."
Second Quarter 2023 Financial Results
- Total revenue was $173.9 million for the three months ended
June 30, 2023, up 10% year-over-year.
- Subscriptions and support revenue was $146.5 million, up 9%
year-over-year.
- Gross profit was $104.9 million, or 60% of total revenue, and
Adjusted Gross Profit* was $124.2 million, or 71% of total
revenue.
- Net loss was $4.3 million, or negative 2% of total revenue, and
Non-GAAP net income* was $46.8 million, or 27% of total
revenue.
- Adjusted EBITDA* was $61.2 million, or 35% of total
revenue.
- GAAP net loss per diluted share was $0.02 on 200.7 million
shares outstanding. Non-GAAP Net Income per diluted share* was
$0.23 on 201.9 million shares outstanding.
- Net cash used in operations was $32.7 million, and Free Cash
Flow* was negative $43.6 million.
- ARR* was $635.8 million, up 10% year-over-year, and NRR* rate
was 109.5%, up 220 basis points year-over-year and up 40 basis
points over the prior quarter.
* 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
- Unlocking the Power of K-12 Data and AI:
- Saw continued traction in the market for its data-centric
solutions, which include Unified Insights™ and Connected
Intelligence DaaS. Seven of the largest ten transactions in the
second quarter included at least one of these analytics solutions,
and four included both. These products enable districts and states
to aggregate, connect, secure, and analyze their disparate student
and systems data for more efficient operations and improved student
outcomes.
- Announced collaboration with Microsoft Azure OpenAI Service to
use OpenAI’s large language models within PowerSchool Performance
Matters and PowerSchool LearningNav, part of PowerSchool’s
Personalized Learning Cloud.
- Named Powered By Snowflake Growth Partner of the Year at
Snowflake's Summit 2023 for ingenuity in building a turnkey fully
managed data-as-a-service (DaaS) platform for education and
government agencies on the Snowflake Data Cloud.
- International Expansion: Announced a strategic
partnership with Samart Telcoms to resell and support PowerSchool
products in Thailand. The partnership is expected to extend
PowerSchool’s mission-critical Student Information Systems,
Schoology Learning, and Enrollment solutions throughout Thailand.
As part of the agreement, Samart plans to serve more than 100,000
of those students in the next year.
- Platform Expansion:
- Announced an agreement to acquire pioneering K-12 communication
technology company SchoolMessenger, which, if completed, would
expand PowerSchool's platform to include critical family
communication solutions, including mass, emergency, and two-way
communications via voice, text, email, and social media. Combining
this technology and team with PowerSchool's proven platform and
market reach is expected to centralize, enrich, and innovate the
communication processes that have been fragmented and inefficient
for both districts and parents.
- Introduced My PowerSchool, a cohesive user experience that
consolidates relevant information and applications for specific
user personas into a single, streamlined platform that is tailored
for their day-to-day needs. My PowerSchool simplifies how families
interact with their children’s school and how school technology
leaders manage their PowerSchool solutions by providing a central
point of access based on if the user is an educator, student, or
family member.
- Thought Leadership: Released the 2023 edition of the
Education Focus Report, a deep analysis on the perspectives of over
1,750 educators that delivers insights to educators and district
leaders on trends, priorities, and best-practices in the K-12
education space. Key findings include:
- 83% of educators agree that when technology systems work
together well, educators get important time back in their day
- District's top technology priority is to provide teachers with
actionable data to support students
- 80% of educators cannot say what learning and behavior
interventions are working with their students
Commenting on the Company’s financial results, Eric Shander,
PowerSchool President and CFO, added, “This was a solid quarter
highlighted by several large customer wins, broad-based solution
demand, strong net retention, and continued growth in our profit
margins. We look forward to building on our competitive
differentiators to deliver an attractive combination of growth and
profitability.”
Financial Outlook
The Company currently expects the following results, which do
not include the expected financial contribution from the pending
acquisition of SchoolMessenger, which is expected to close in
September 2023:
Quarter ending September 30, 2023 (in
millions)
Total revenue
$178
to
$181
Adjusted EBITDA *
$55
to
$57
Year ending December 31, 2023 (in
millions)
Total revenue
$688
to
$694
Adjusted EBITDA *
$226
to
$230
* 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 second
quarter 2023 results on August 7, 2023, at 3:30 p.m. Pacific Time
(6:30 p.m. Eastern Time). Those wishing to participate via webcast
should access the call through PowerSchool’s Investor Relations
website
(https://investors.powerschool.com/events-and-presentations/default.aspx).
An archived webcast will be made available shortly after the
conference call ends.
Those wishing to participate via telephone may dial
1-877-407-0792 (USA) or 1-201-689-8263 (International) by
referencing conference ID 13740013. The telephone replay will be
available from 6:30 p.m. Pacific Time (9:30 p.m. Eastern Time) on
August 7, 2023, through August 14, 2023, by dialing 1-844-512-2921
(USA) or 1-412-317-6671 (International) and referencing the replay
passcode 13740013.
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 50 million students globally and more than 15,000
customers, including over 90 of the top 100 districts by student
enrollment in the United States, and sells solutions in over 90
countries. Visit www.powerschool.com to learn more.
Forward-Looking Statements
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 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
product development and their benefits, and 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: economic uncertainty, including high inflation,
high interest rates, foreign currency exchange volatility, concerns
of economic slowdown or recession, instability of the banking
system, and reduced government spending or suspension of investment
in new or enhanced projects; 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, 2022, and our most recent Quarterly
Report on Form 10-Q, each filed with the Securities Exchange
Commission (“SEC”). Copies of such filing 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 benefits, 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 update forward-looking
statements to reflect future events or circumstances except as
required by law.
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. 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. 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:
- Denominator. We measure ARR as of the last day of the prior
year comparative reporting period.
- 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.
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, 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, 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 used in 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 June
30,
Six Months Ended June
30,
2023
2022
2023
2022
(unaudited)
(unaudited)
Revenue:
Subscriptions and support
$
146,503
$
135,010
$
287,576
$
264,775
Service
20,197
19,119
36,429
35,182
License and other
7,197
3,462
9,345
7,227
Total revenue
173,897
157,591
333,350
307,184
Cost of revenue:
Subscriptions and support
36,781
37,260
74,975
75,294
Service
15,123
15,737
29,446
30,734
License and other
1,017
717
1,968
1,703
Depreciation and amortization
16,108
14,271
32,129
28,230
Total cost of revenue
69,029
67,985
138,518
135,961
Gross profit
104,868
89,606
194,832
171,223
Operating expenses:
Research and development
25,862
26,088
51,283
52,706
Selling, general, and administrative
53,129
47,484
102,687
87,587
Acquisition costs
—
1,043
—
2,618
Depreciation and amortization
15,764
16,137
31,535
32,095
Total operating expenses
94,755
90,752
185,505
175,006
Income (loss) from operations
10,113
(1,146
)
9,327
(3,783
)
Interest expense - net
16,101
8,743
30,130
15,765
Other expenses (income) - net
31
(498
)
74
(576
)
Loss before income taxes
(6,019
)
(9,391
)
(20,877
)
(18,972
)
Income tax (benefit) expense
(1,724
)
(2,933
)
(1,769
)
1,605
Net loss
(4,295
)
(6,458
)
$
(19,108
)
$
(20,577
)
Less: Net loss attributable to
non-controlling interest
(1,100
)
(1,933
)
(4,060
)
(3,940
)
Net loss attributable to PowerSchool
Holdings, Inc.
$
(3,195
)
$
(4,525
)
(15,048
)
(16,637
)
Net loss attributable to PowerSchool
Holdings, Inc. Class A common stock:
Basic
$
(3,195
)
$
(4,525
)
$
(15,048
)
$
(16,637
)
Diluted
$
(4,080
)
$
(4,525
)
$
(15,048
)
$
(16,637
)
Net loss attributable to PowerSchool
Holdings, Inc. per share of Class A common stock, basic
$
(0.02
)
$
(0.03
)
$
(0.09
)
$
(0.11
)
Net loss attributable to PowerSchool
Holdings, Inc. per share of Class A common stock, diluted
(0.02
)
(0.03
)
(0.09
)
(0.11
)
Weighted average shares of Class A common
stock:
Basic
163,067,859
158,229,171
161,794,290
158,171,056
Diluted
200,721,918
158,229,171
161,794,290
158,171,056
Other comprehensive income, net of
taxes:
Foreign currency translation
21
345
108
(125
)
Change in unrealized gain on
investments
—
—
$
3
$
—
Total other comprehensive income
(loss)
21
345
$
111
$
(125
)
Less: comprehensive income (loss)
attributable to non-controlling interest
4
70
$
21
$
(25
)
Comprehensive loss attributable to
PowerSchool Holdings, Inc.
$
(3,178
)
$
(4,250
)
$
(14,958
)
$
(16,737
)
CONSOLIDATED BALANCE
SHEETS
(unaudited)
(in thousands)
June 30, 2023
December 31, 2022
Assets
Current Assets:
Cash and cash equivalents
$ 28,394
$ 137,471
Accounts receivable - net of allowance of
$5,283 and $4,712, respectively
78,082
54,296
Prepaid expenses and other current
assets
39,563
36,886
Total current assets
146,039
228,653
Property and equipment - net
5,286
6,173
Operating lease right-of-use assets
7,173
8,877
Capitalized product development costs -
net
107,930
100,861
Goodwill
2,487,235
2,487,007
Intangible assets - net
674,843
722,147
Other assets
32,657
29,677
Total assets
$ 3,461,163
$ 3,583,395
Liabilities and Stockholders'
Equity
Current Liabilities:
Accounts payable
$ 5,652
$ 5,878
Accrued expenses
98,399
84,270
Operating lease liabilities, current
4,503
5,263
Deferred revenue, current
185,781
310,536
Revolving credit facility
10,000
—
Current portion of long-term debt
7,750
7,750
Total current liabilities
312,085
413,697
Noncurrent Liabilities:
Other liabilities
2,121
2,099
Operating lease liabilities - net of
current
5,150
8,053
Deferred taxes
270,799
281,314
Tax Receivable Agreement liability
392,671
410,361
Deferred revenue - net of current
6,096
5,303
Long-term debt, net
726,211
728,624
Total liabilities
1,715,133
1,849,451
Stockholders' Equity:
Class A common stock, $0.0001 par value
per share, 500,000,000 shares authorized, 163,456,861 and
159,596,001 shares issued and outstanding as of June 30, 2023 and
December 31, 2022, respectively.
16
16
Class B common stock, $0.0001 par value
per share, 300,000,000 shares authorized, 37,654,059 and 39,928,472
shares issued and outstanding as of June 30, 2023 and December 31,
2022, respectively.
4
4
Additional paid-in capital
1,493,586
1,438,019
Accumulated other comprehensive loss
(2,012)
(2,122)
Accumulated deficit
(202,298)
(187,250)
Total stockholders' equity attributable to
PowerSchool Holdings, Inc.
1,289,296
1,248,667
Non-controlling interest
456,734
485,277
Total stockholders' equity
1,746,030
1,733,944
Total liabilities and stockholders'
equity
$ 3,461,163
$ 3,583,395
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(unaudited)
Three Months Ended June
30,
Six Months Ended June
30,
2023
2022
2023
2022
(in thousands)
Cash flows from operating
activities:
Net loss
$
(4,295
)
$
(6,458
)
$
(19,108
)
$
(20,577
)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization
31,873
30,372
63,664
60,307
Share-based compensation
17,494
14,060
32,043
25,610
Amortization of operating lease
right-of-use assets
811
(2,393
)
1,599
(482
)
Change in fair value of
acquisition-related contingent consideration
(185
)
(6,088
)
(635
)
(5,926
)
Amortization of debt issuance costs
885
885
1,761
1,761
Provision for allowance for doubtful
accounts
995
(19
)
1,364
(495
)
Loss on lease modification
1
—
53
—
Write-off of right-of-use assets and
property and equipment
(7
)
8,613
41
8,617
Changes in operating assets and
liabilities — net of effects of acquisitions:
Accounts receivables
(33,510
)
(11,418
)
(25,151
)
(6,643
)
Prepaid expenses and other current
assets
4,448
8,001
(2,687
)
3,315
Other assets
(994
)
(2,365
)
(3,277
)
(3,815
)
Accounts payable
(433
)
1,310
(183
)
(5,112
)
Accrued expenses
4,305
3,057
(12,207
)
(7,854
)
Other liabilities
(1,485
)
1,348
(3,222
)
(5,217
)
Deferred taxes
(2,339
)
(3,314
)
(2,834
)
1,579
Deferred revenue
(50,275
)
(51,368
)
(123,962
)
(125,387
)
Net cash used in operating activities
$
(32,711
)
$
(15,777
)
$
(92,741
)
$
(80,319
)
Cash flows from investing
activities:
Purchases of property and equipment
(582
)
(440
)
(938
)
(2,201
)
Investment in capitalized product
development costs
(10,272
)
(12,007
)
(19,948
)
(20,927
)
Acquisitions—net of cash acquired
—
(15,625
)
—
(31,155
)
Payment of acquisition-related contingent
consideration
—
(1,392
)
—
(1,392
)
Net cash used in investing activities
$
(10,854
)
$
(29,464
)
$
(20,886
)
$
(55,675
)
Cash flows from financing
activities:
Taxes paid related to the net share
settlement of equity awards
(141
)
—
(1,425
)
—
Proceeds from Revolving Credit
Agreement
10,000
40,000
10,000
70,000
Repayment of First Lien Debt
(1,938
)
(1,938
)
(3,875
)
(3,875
)
Payments of deferred offering costs
—
—
—
(295
)
Net cash provided by financing
activities
$
7,921
$
38,062
$
4,700
$
65,830
Effect of foreign exchange rate changes on
cash
(235
)
(962
)
(161
)
(872
)
Net decrease in cash, cash equivalents,
and restricted cash
(35,879
)
(8,141
)
(109,088
)
(71,036
)
Cash, cash equivalents, and restricted
cash—Beginning of period
64,773
24,096
137,982
86,991
Cash, cash equivalents, and restricted
cash—End of period
$
28,894
$
15,955
$
28,894
$
15,955
RECONCILIATION OF GAAP TO
NON-GAAP FINANCIAL MEASURES
(unaudited)
Reconciliation of Gross profit
to Adjusted gross profit
Three Months Ended June
30,
Six Months Ended June
30,
(in thousands, except for percentages)
2023
2022
2023
2022
Gross profit
$
104,868
$
89,606
$
194,832
$
171,223
Depreciation
163
265
415
540
Share-based compensation(1)
2,654
2,146
5,112
4,313
Restructuring(2)
524
1,129
537
2,102
Acquisition-related expense(3)
47
91
134
291
Amortization
15,945
14,005
31,715
27,690
Adjusted Gross Profit
$
124,201
$
107,242
$
232,745
$
206,159
Gross Profit Margin(4)
60.3
%
56.9
%
58.4
%
55.7
%
Adjusted Gross Profit Margin(5)
71.4
%
68.1
%
69.8
%
67.1
%
(1)
Refers to expenses flowing
through gross profit associated with share-based compensation.
(2)
Refers to expenses flowing
through gross profit related to migration of customers from legacy
to core products, and severance expense related to offshoring
activities and executive departures.
(3)
Refers to expenses flowing
through gross profit 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 June
30,
Six Months Ended June
30,
(in thousands)
2023
2022
2023
2022
Net loss
$
(4,295
)
$
(6,458
)
$
(19,108
)
$
(20,577
)
Add:
Amortization
31,050
29,075
61,924
57,728
Depreciation
822
1,333
1,741
2,596
Net interest expense(1)
16,101
8,743
30,130
15,765
Income tax (benefit) expense
(1,724
)
(2,933
)
(1,769
)
1,605
Share-based compensation
17,910
12,242
33,391
24,637
Management fees(2)
95
93
158
177
Restructuring(3)
917
10,037
2,283
10,182
Acquisition-related expense(4)
314
(3,393
)
1,848
(766
)
Adjusted EBITDA
$
61,190
$
48,739
$
110,598
$
91,347
Net loss margin(5)
(2.5
)%
(4.1
)%
(5.7
)%
(6.7
)%
Adjusted EBITDA margin(6)
35.2
%
30.9
%
33.2
%
29.7
%
(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, 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 net loss as a
percentage of revenue.
(6)
Represents Adjusted EBITDA as a
percentage of revenue.
Reconciliation of Net Loss to Non-GAAP
Net Income
Three Months Ended June
30,
Six Months Ended June
30,
(in thousands, except share and per share
data)
2023
2022
2023
2022
Net loss
$
(4,295
)
$
(6,458
)
$
(19,108
)
$
(20,577
)
Add:
Amortization
31,050
29,075
61,924
57,728
Depreciation
822
1,333
1,741
2,596
Share-based compensation
17,910
12,242
33,391
24,637
Management fees(1)
95
93
158
177
Restructuring(2)
917
10,037
2,283
10,182
Acquisition-related expense(3)
314
(3,393
)
1,848
(766
)
Non-GAAP Net Income
$
46,813
$
42,929
82,237
73,977
Weighted-average Class A common stock used
in computing GAAP net loss per share - basic
163,067,859
158,229,171
161,794,290
158,171,056
Weighted-average Class A common stock used
in computing GAAP net loss per share - diluted
200,721,918
158,229,171
161,794,290
158,171,056
Weighted-average shares Class A common
stock outstanding used in computing Non-GAAP net income per share -
basic
163,067,859
158,229,171
161,794,290
158,171,056
Effect of RSAs, RSUs and MSUs
1,171,281
52,212
1,076,932
50,646
Effect of LLC Units
37,654,059
39,928,472
37,654,059
39,928,472
Weighted-average shares Class A common
stock outstanding used in computing Non-GAAP net income per share -
diluted
201,893,199
198,209,855
200,525,281
198,150,174
GAAP net loss attributable to the
PowerSchool Holdings, Inc. per share of Class A common stock -
basic
$
(0.02
)
$
(0.03
)
$
(0.09
)
$
(0.11
)
Non-GAAP Net Income per share of Class A
common stock - basic
$
0.29
$
0.27
$
0.51
$
0.47
GAAP net loss attributable to the
PowerSchool Holdings, Inc. per share of Class A common stock -
diluted
$
(0.02
)
$
(0.04
)
$
(0.09
)
$
(0.11
)
Non-GAAP Net Income per share of Class A
common stock - diluted
$
0.23
$
0.22
$
0.41
$
0.37
(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, and executive
departures.
(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 June
30,
Six Months Ended June
30,
(in thousands)
2023
2022
2023
2022
GAAP Cost of Revenue - Subscription and
Support
$
36,781
$
37,260
$
74,975
$
75,294
Less:
Share-based compensation
1,700
1,047
3,256
2,162
Restructuring
523
98
523
101
Acquisition-related expense
38
51
61
225
Non-GAAP Cost of Revenue - Subscription
and Support
$
34,520
$
36,064
$
71,135
$
72,806
GAAP Cost of Revenue - Services
$
15,123
$
15,737
$
29,446
$
30,734
Less:
Share-based compensation
954
1,100
1,856
2,151
Restructuring
1
1,031
14
2,000
Acquisition-related expense
8
41
73
67
Non-GAAP Cost of Revenue - Services
$
14,160
$
13,565
$
27,503
$
26,516
GAAP Research & Development
$
25,862
$
26,088
$
51,283
$
52,706
Less:
Share-based compensation
4,675
3,024
8,747
6,128
Restructuring
9
—
113
—
Acquisition-related expense
145
849
1,522
894
Non-GAAP Research & Development
$
21,033
$
22,215
$
40,901
$
45,684
GAAP Selling, General and
Administrative
$
53,129
$
47,484
$
102,687
$
87,587
Less:
Share-based compensation
10,580
7,071
19,532
14,196
Management fees
95
93
158
177
Restructuring
385
8,908
1,633
8,081
Acquisition-related expense
122
(5,377
)
193
(4,569
)
Non-GAAP Selling, General and
Administrative
$
41,947
$
36,789
$
81,171
$
69,702
Reconciliation of Net Cash Provided by
Operating Activities to Free Cash Flow and Unlevered Free Cash
Flow
Three Months Ended June
30,
Six Months Ended June
30,
(in thousands)
2023
2022
2023
2022
Net cash used in operating activities
$
(32,711
)
$
(15,777
)
$
(92,741
)
$
(80,319
)
Purchases of property and equipment
(582
)
(440
)
(938
)
(2,201
)
Capitalized product development costs
(10,272
)
(12,007
)
(19,948
)
(20,927
)
Free Cash Flow
$
(43,565
)
$
(28,224
)
$
(113,627
)
$
(103,447
)
Add:
Cash paid for interest on outstanding
debt
13,973
7,989
27,669
14,172
Unlevered Free Cash Flow
$
(29,592
)
$
(20,235
)
$
(85,958
)
$
(89,275
)
© 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
Source: PowerSchool Holdings, Inc.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230807990086/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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