- PowerSchool delivers third quarter total revenue growth of
12% to $182.2 million, exceeding the high end of the third quarter
guidance range, and increases full-year 2023 outlook for total
revenue
- GAAP net loss per diluted share improves 100% over the prior
year to $0.00, and Non-GAAP Net Income per diluted share improves
14% to $0.24
- Adjusted EBITDA* grows 19% to $62.0 million, exceeding the
high end of the third quarter guidance range, and increases
full-year 2023 outlook for Adjusted EBITDA
- ARR* increases 9% over the prior year to reach $640.4
million as of September 30, 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 third quarter ended September 30, 2023.
“These third quarter results showcase our ability to build
scale, operate with efficiency, and generate value," said
PowerSchool CEO Hardeep Gulati. "Our ongoing innovations in
data-centric AI solutions, our investments in adjacent products,
and the build out of our global footprint are increasing our total
addressable market by a factor of ten. Not only are we building a
runway for sustainable long term growth at leading levels of
profitability, we are uniquely positioned to deliver the future of
personalized education."
Third Quarter 2023 Financial Results
- Total revenue was $182.2 million for the three months ended
September 30, 2023, up 12% year-over-year
- Subscriptions and support revenue was $149.0 million, up 9%
year-over-year
- Gross profit was $110.3 million, or 61% of total revenue, and
Adjusted Gross Profit* was $129.3 million, or 71% of total
revenue
- Net loss was $1.3 million, or negative 1% of total revenue, and
Non-GAAP net income* was $49.0 million, or 27% of total
revenue
- Adjusted EBITDA* was $62.0 million, or 34% of total
revenue
- GAAP net loss per diluted share was $0.00 on 165.7 million
shares outstanding. Non-GAAP Net Income per diluted share* was
$0.24 on 203.3 million shares outstanding
- Cash flows from operations were $220.4 million, and Free Cash
Flow* was $211.2 million
- ARR* was $640.4 million, up 9% year-over-year, and NRR* rate
was 107.2%, down 150 basis points year-over-year and down 230 basis
points from 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
- Platform Expansion:
- Completed the acquisition of K-12 communication technology
company SchoolMessenger, expanding PowerSchool's platform to
include critical family communication solutions, including mass,
emergency, and two-way communications via voice, text, email, and
social media. Enables PowerSchool to centralize, enrich, and
innovate the communication processes that have been fragmented and
inefficient for both districts and parents.
- Acquired India-based K-12 ERP and administration software
provider Neverskip, immediately expanding PowerSchool's reach to
over 1.2 million students in India. Neverskip provides localized
and high-quality school and student administration products that
are scalable with PowerSchool's complementary platform of
solutions.
- International Expansion: Added 6 new strategic channel
partnerships in targeted regions across the globe:
- Middle East and Africa: CCS in Egypt and Bahwan Cybertek in
Oman and the UAE
- Asia: BeeNet in Hong Kong, Singapore, and the Philippines
- Europe: Gear Education in Greece and Cyprus
- South America: LearnBase in Brazil
- New Zealand: Glenn Cook Technologies
- Data Privacy & Security: Announced PowerSchool is
joining the K-12 Education Technology Secure by Design Pledge, a
voluntary pledge for K-12 education technology software
manufacturers, developed by the Cybersecurity and Infrastructure
Security Agency (CISA) and the U.S. Department of Education.
PowerSchool also announced new commitments to further secure the
education technology ecosystem by offering free and subsidized
security-as-a-service resources to all U.S. schools and
districts.
- EAB Partnership: Announced expanded partnership with
EAB, the leading provider of higher education research, technology,
and enrollment solutions, to provide high school students easy
access to proactive offers of college admission and financial aid.
The partnership expands the availability of EAB’s student-college
matching technology, Concourse, to the millions of high school
juniors and seniors who use PowerSchool Naviance CCLR to prepare
for college and careers.
- Product Enhancements: Announced new enhancements to
PowerSchool Naviance CCLR, part of the Student Success and
Workforce Development Clouds. The new Naviance CCLR student
experience includes a brand-new user interface and an interactive,
personalized tool called My Future Plan. This update marks the
first phase of Naviance CCLR's comprehensive updates to modernize
and enhance the student experience to deepen support for students
pursuing a variety of paths after high school.
- Awards & Recognition: Received recognition from the
Globee® Awards for outstanding leadership and helping schools solve
challenges and support continuous instruction:
- PowerSchool CEO Hardeep Gulati was recognized in the 11th
Annual 2023 Globee® Awards for Leadership as the Gold Globee®
Winner in the CEO Achiever | Leader of the Year and CEO of the Year
| Cloud Computing, SaaS, or Internet categories.
- PowerSchool’s Naviance CCLR was recognized in the Secondary
category for Tech & Learning’s Awards of Excellence: Back to
School 2023, and was recognized in the Higher Education category
for its Faculty Information System.
Commenting on the Company’s financial results, Eric Shander,
PowerSchool President and CFO, added, “We are pleased to see such
consistent execution across our teams in this third quarter as we
balance our revenue growth objectives with our goals around
profitability and cash flow. This performance is benefiting our
progress in innovating our next-generation products, which we
believe will position PowerSchool, our customers, and students all
over the world for a long future of success."
Financial Outlook
The Company currently expects the following results:
Quarter ending December 31, 2023 (in
millions)
Total revenue
$182
to
$185
Adjusted EBITDA *
$56
to
$58
Year ending December 31, 2023 (in
millions)
Total revenue
$697.5
to
$700.5
Adjusted EBITDA *
$229
to
$231
* 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 third
quarter 2023 results on November 7, 2023, 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
(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
1-844-826-3035 (USA) or 1-412-317-5195 (International) by
referencing conference ID 10183327. The telephone replay will be
available from 5:00 p.m. Pacific Time (8:00 p.m. Eastern Time) on
November 7, 2023, through November 14, 2023, by dialing
1-844-512-2921 (USA) or 1-412-317-6671 (International) and
referencing the replay passcode 10183327.
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 16,000
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
September 30,
Nine Months Ended
September 30,
2023
2022
2023
2022
(unaudited)
(unaudited)
Revenue:
Subscriptions and support
$
148,990
$
137,095
$
436,566
$
401,870
Service
20,722
19,933
57,152
55,114
License and other
12,452
5,406
21,797
12,633
Total revenue
182,164
162,434
515,515
469,617
Cost of revenue:
Subscriptions and support
36,595
39,009
111,570
114,303
Service
14,140
14,852
43,586
45,585
License and other
4,608
1,087
6,575
2,790
Depreciation and amortization
16,507
14,839
48,637
43,069
Total cost of revenue
71,850
69,787
210,368
205,747
Gross profit
110,314
92,647
305,147
263,870
Operating expenses:
Research and development
26,751
27,821
78,035
80,528
Selling, general, and administrative
53,606
45,530
156,293
133,117
Acquisition costs
2,461
11
2,461
2,630
Depreciation and amortization
15,835
15,955
47,370
48,050
Total operating expenses
98,653
89,317
284,159
264,325
Income (loss) from operations
11,661
3,330
20,988
(455
)
Interest expense - net
16,409
11,158
46,539
26,923
Other expenses (income) - net
33
(3,100
)
107
(3,677
)
Loss before income taxes
(4,781
)
(4,728
)
(25,658
)
(23,701
)
Income tax (benefit) expense
(3,475
)
(811
)
(5,244
)
794
Net loss
(1,306
)
(3,917
)
(20,414
)
(24,495
)
Less: Net loss attributable to
non-controlling interest
(833
)
(1,389
)
(4,893
)
(5,330
)
Net loss attributable to PowerSchool
Holdings, Inc.
$
(473
)
$
(2,528
)
$
(15,521
)
$
(19,165
)
Net loss attributable to PowerSchool
Holdings, Inc. Class A common stock:
Basic
(473
)
(2,528
)
(15,521
)
(19,165
)
Diluted
(481
)
(2,528
)
(15,521
)
(19,165
)
Net loss attributable to PowerSchool
Holdings, Inc. per share of Class A common stock, basic
$
0.00
$
(0.02
)
$
(0.10
)
$
(0.12
)
Net loss attributable to PowerSchool
Holdings, Inc. per share of Class A common stock, diluted
$
0.00
$
(0.02
)
$
(0.10
)
$
(0.12
)
Weighted average shares of Class A common
stock:
Basic
163,785,972
158,812,536
162,465,480
158,387,266
Diluted
165,666,867
158,812,536
162,465,480
158,387,266
Other comprehensive income, net of
taxes:
Foreign currency translation
(174
)
(741
)
(66
)
(1,744
)
Change in unrealized gain on
investments
—
—
3
—
Total other comprehensive income
(loss)
(174
)
(741
)
(63
)
(1,744
)
Less: comprehensive income (loss)
attributable to non-controlling interest
(33
)
(149
)
(12
)
(350
)
Comprehensive loss attributable to
PowerSchool Holdings, Inc.
$
(614
)
$
(3,120
)
$
(15,572
)
$
(20,559
)
CONSOLIDATED BALANCE
SHEETS
(unaudited)
(in thousands)
September 30,
2023
December 31,
2022
Assets
Current Assets:
Cash and cash equivalents
$
322,831
$
137,471
Accounts receivable - net of allowance of
$7,331 and $4,712, respectively
134,621
54,296
Prepaid expenses and other current
assets
37,840
36,886
Total current assets
495,292
228,653
Property and equipment - net
4,823
6,173
Operating lease right-of-use assets
18,399
8,877
Capitalized product development costs -
net
109,564
100,861
Goodwill
2,492,649
2,487,007
Intangible assets - net
657,824
722,147
Other assets
32,131
29,677
Total assets
$
3,810,682
$
3,583,395
Liabilities and Stockholders'
Equity
Current Liabilities:
Accounts payable
$
9,019
$
5,878
Accrued expenses
102,464
84,270
Operating lease liabilities, current
4,271
5,263
Deferred revenue, current
407,956
310,536
Revolving credit facility
10,000
—
Current portion of long-term debt
8,797
7,750
Total current liabilities
542,507
413,697
Noncurrent Liabilities:
Other liabilities
2,152
2,099
Operating lease liabilities - net of
current
16,390
8,053
Deferred taxes
268,171
281,314
Tax Receivable Agreement liability
392,671
410,361
Deferred revenue - net of current
5,680
5,303
Long-term debt, net
822,744
728,624
Total liabilities
2,050,315
1,849,451
Stockholders' Equity:
Class A common stock, $0.0001 par value
per share, 500,000,000 shares authorized, 164,207,976 and
159,596,001 shares issued and outstanding as of September 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 September 30, 2023 and December
31, 2022, respectively.
4
4
Additional paid-in capital
1,508,256
1,438,019
Accumulated other comprehensive loss
(2,186
)
(2,122
)
Accumulated deficit
(202,771
)
(187,250
)
Total stockholders' equity attributable to
PowerSchool Holdings, Inc.
1,303,319
1,248,667
Non-controlling interest
457,048
485,277
Total stockholders' equity
1,760,367
1,733,944
Total liabilities and stockholders'
equity
$
3,810,682
$
3,583,395
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(unaudited)
Three Months Ended
September 30,
Nine Months Ended
September 30,
2023
2022
2023
2022
(in thousands)
Cash flows from operating
activities:
Net loss
$
(1,306
)
$
(3,917
)
$
(20,414
)
$
(24,495
)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization
32,342
30,812
96,007
91,119
Share-based compensation
14,860
12,490
46,904
38,100
Amortization of operating lease
right-of-use assets
1,011
(707
)
2,610
(1,189
)
Change in fair value of
acquisition-related contingent consideration
363
340
(273
)
(5,586
)
Amortization of debt issuance costs
984
895
2,745
2,656
Provision for allowance for doubtful
accounts
1,342
166
2,706
(329
)
Gain on lease modification
(508
)
—
(454
)
—
Write-off of right-of-use assets and
disposal of property and equipment
11
57
52
8,675
Changes in operating assets and
liabilities — net of effects of acquisitions:
Accounts receivables
(57,318
)
(46,008
)
(82,468
)
(52,651
)
Prepaid expenses and other current
assets
1,782
(1,680
)
(905
)
1,635
Other assets
381
2,289
(2,896
)
(1,526
)
Accounts payable
3,169
(508
)
2,986
(5,621
)
Accrued expenses
6,106
7,332
(6,101
)
(521
)
Other liabilities
(554
)
(730
)
(4,162
)
(5,948
)
Deferred taxes
(3,714
)
(2,086
)
(6,548
)
(507
)
Tax Receivable Agreement liability
291
(2,342
)
676
(2,342
)
Deferred revenue
221,148
190,700
97,186
65,312
Net cash provided by operating
activities
$
220,390
$
187,103
$
127,651
$
106,782
Cash flows from investing
activities:
Purchases of property and equipment
(393
)
(643
)
(1,331
)
(2,844
)
Proceeds from sale of property and
equipment
23
—
23
—
Investment in capitalized product
development costs
(8,766
)
(12,358
)
(28,714
)
(33,285
)
Purchase of internal use software
(259
)
—
(259
)
—
Acquisitions—net of cash acquired
(9,753
)
—
(9,753
)
(31,155
)
Payment of acquisition-related contingent
consideration
(3,528
)
—
(3,528
)
(1,392
)
Net cash used in investing activities
$
(22,676
)
$
(13,001
)
$
(43,562
)
$
(68,676
)
Cash flows from financing
activities:
Taxes paid related to the net share
settlement of equity awards
(113
)
(8,824
)
(1,538
)
(8,824
)
Proceeds from Revolving Credit
Agreement
10,000
—
20,000
70,000
Proceeds from First Lien Debt
amendment
99,256
—
99,256
—
Repayment of Revolving Credit
Agreement
(10,000
)
(70,000
)
(10,000
)
(70,000
)
Repayment of First Lien Debt
(2,199
)
(1,938
)
(6,074
)
(5,813
)
Payment of debt issuance costs
(309
)
—
(309
)
—
Payments of deferred offering costs
—
—
—
(295
)
Net cash provided by (used in) financing
activities
$
96,635
$
(80,762
)
$
101,335
$
(14,932
)
Effect of foreign exchange rate changes on
cash
88
88
(75
)
(782
)
Net decrease in cash, cash equivalents,
and restricted cash
294,437
93,428
185,349
22,392
Cash, cash equivalents, and restricted
cash—Beginning of period
28,894
15,955
137,982
86,991
Cash, cash equivalents, and restricted
cash—End of period
$
323,331
$
109,383
$
323,331
$
109,383
RECONCILIATION OF GAAP TO
NON-GAAP FINANCIAL MEASURES
(unaudited)
Reconciliation of Gross profit to
Adjusted gross profit
Three Months Ended
September 30,
Nine Months Ended
September 30,
(in thousands, except for percentages)
2023
2022
2023
2022
Gross profit
$
110,314
$
92,647
$
305,147
$
263,870
Depreciation
153
263
567
803
Share-based compensation(1)
2,494
2,144
7,607
6,458
Restructuring(2)
(13
)
1,223
524
3,325
Acquisition-related expense(3)
—
266
134
558
Amortization
16,355
14,576
48,069
42,266
Adjusted Gross Profit
$
129,303
$
111,119
$
362,048
$
317,280
Gross Profit Margin(4)
60.6
%
57.0
%
59.2
%
56.2
%
Adjusted Gross Profit Margin(5)
71.0
%
68.4
%
70.2
%
67.6
%
(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
September 30,
Nine Months Ended
September 30,
(in thousands)
2023
2022
2023
2022
Net loss
$
(1,306
)
$
(3,917
)
$
(20,414
)
$
(24,495
)
Add:
Amortization
31,523
29,680
93,447
87,409
Depreciation
820
1,114
2,560
3,710
Net interest expense(1)
16,409
11,158
46,539
26,923
Income tax (benefit) expense
(3,475
)
(811
)
(5,244
)
794
Share-based compensation
15,297
13,222
48,688
37,859
Management fees(2)
80
85
238
262
Restructuring(3)
308
1,523
2,592
11,706
Acquisition-related expense(4)
2,319
2,535
4,167
1,769
Other expense (income) due to tax rate
change(5)
—
(2,342
)
—
(2,342
)
Adjusted EBITDA
$
61,975
$
52,247
$
172,573
$
143,595
Net loss margin(6)
(0.7
)%
(2.4
)%
(4.0
)%
(5.2
)%
Adjusted EBITDA margin(7)
34.0
%
32.2
%
33.5
%
30.6
%
(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)
Refers to impact of the remeasurement of
the tax receivable agreement liability due to a change in the
Pennsylvania statutory income tax rate.
(6)
Represents net loss as a percentage of
revenue.
(7)
Represents Adjusted EBITDA as a percentage
of revenue
Reconciliation of Net Loss to Non-GAAP
Net Income
Three Months Ended
September 30,
Nine Months Ended
September 30,
(in thousands, except share and per share
data)
2023
2022
2023
2022
Net loss
$
(1,306
)
$
(3,917
)
$
(20,414
)
$
(24,495
)
Add:
Amortization
31,523
29,680
93,447
87,409
Depreciation
820
1,114
2,560
3,710
Share-based compensation
15,297
13,222
48,688
37,859
Management fees(1)
80
85
238
262
Restructuring(2)
308
1,523
2,592
11,706
Acquisition-related expense(3)
2,319
2,535
4,167
1,769
Non-GAAP Net Income
$
49,041
$
41,900
131,278
115,878
Weighted-average Class A common stock used
in computing GAAP net loss per share - basic
163,785,972
158,812,536
162,465,480
158,387,266
Weighted-average Class A common stock used
in computing GAAP net loss per share - diluted
165,666,867
158,812,536
162,465,480
158,387,266
Weighted-average shares Class A common
stock outstanding used in computing Non-GAAP net income per share -
basic
163,785,972
158,812,536
162,465,480
158,387,266
Effect of RSAs, RSUs and MSUs
1,880,895
277,744
940,132
62,048
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
203,320,926
199,018,752
201,059,671
198,377,786
GAAP net loss attributable to the
PowerSchool Holdings, Inc. per share of Class A common stock -
basic
$
0.00
$
(0.02
)
$
(0.10
)
$
(0.12
)
Non-GAAP Net Income per share of Class A
common stock - basic
$
0.30
$
0.26
$
0.81
$
0.73
GAAP net loss attributable to the
PowerSchool Holdings, Inc. per share of Class A common stock -
diluted
$
0.00
$
(0.02
)
$
(0.10
)
$
(0.12
)
Non-GAAP Net Income per share of Class A
common stock - diluted
$
0.24
$
0.21
$
0.65
$
0.58
(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
September 30,
Nine Months Ended
September 30,
(in thousands)
2023
2022
2023
2022
GAAP Cost of Revenue - Subscription and
Support
$
36,595
$
39,009
$
111,570
$
114,303
Less:
Share-based compensation
1,637
1,501
4,893
3,663
Restructuring
(14
)
(13
)
509
89
Acquisition-related expense
—
183
61
408
Non-GAAP Cost of Revenue - Subscription
and Support
$
34,972
$
37,338
$
106,107
$
110,143
GAAP Cost of Revenue - Services
$
14,140
$
14,852
$
43,586
$
45,585
Less:
Share-based compensation
858
643
2,714
2,795
Restructuring
1
1,236
15
3,236
Acquisition-related expense
—
83
73
150
Non-GAAP Cost of Revenue - Services
$
13,281
$
12,890
$
40,784
$
39,404
GAAP Research & Development
$
26,751
$
27,821
$
78,035
$
80,528
Less:
Share-based compensation
4,116
3,709
12,863
9,837
Restructuring
84
265
197
265
Acquisition-related expense
—
1,252
1,522
2,146
Non-GAAP Research & Development
$
22,551
$
22,595
$
63,453
$
68,280
GAAP Selling, General and
Administrative
$
53,606
$
45,530
$
156,293
$
133,117
Less:
Share-based compensation
8,686
7,368
28,218
21,564
Management fees
80
85
238
262
Restructuring
238
35
1,871
8,116
Acquisition-related expense
(142
)
1,005
51
(3,565
)
Non-GAAP Selling, General and
Administrative
$
44,744
$
37,037
$
125,915
$
106,740
Reconciliation of Net Cash Provided by
Operating Activities to Free Cash Flow and Unlevered Free Cash
Flow
Three Months Ended
September 30,
Nine Months Ended
September 30,
(in thousands)
2023
2022
2023
2022
Net cash used in operating activities
$
220,390
$
187,103
$
127,651
$
106,782
Purchases of property and equipment
(393
)
(643
)
(1,331
)
(2,844
)
Capitalized product development costs
(8,766
)
(12,358
)
(28,714
)
(33,285
)
Free Cash Flow
$
211,231
$
174,102
$
97,606
$
70,653
Add:
Cash paid for interest on outstanding
debt
15,853
10,528
43,522
24,700
Unlevered Free Cash Flow
$
227,084
$
184,630
$
141,128
$
95,353
© 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/20231107070854/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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