- Fourth quarter total revenue increased 13% year-over-year to
$182.1 million, meeting outlook
- Full year total revenue increased 11% year-over-year to
$697.7 million, meeting outlook
- Fourth quarter GAAP net loss was $18.7 million and Adjusted
EBITDA increased 12% year-over-year to $59.4 million, exceeding
outlook and representing 33% of total revenue
- Full year GAAP net loss was $39.1 million and Adjusted
EBITDA increased 18% to $231.9 million, exceeding outlook and
representing 33% of total revenue
- ARR* increased 18% over the prior year to $701.5 million as
of December 31, 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 fourth quarter and full fiscal year ended December 31,
2023.
“These fourth quarter results showcase the momentum we’ve seen
throughout 2023. For the year, we surpassed $700 million in ARR,
grew revenue double digits, increased our Adjusted EBITDA margin by
over 200 basis points, and reached a new record in Free Cash Flow
margin,” said Hardeep Gulati, PowerSchool CEO. “Our differentiated
platform of data-rich solutions continues to grow through the
introduction of several game changing AI-driven innovations. We are
the partner-of-choice in the K-12 ecosystem as schools, districts,
and states increasingly leverage technology to improve their
operational efficiencies, teacher effectiveness, and student
outcomes.”
Fourth Quarter 2023 Financial Highlights
- Revenue: Total revenue was $182.1 million for the three
months ended December 31, 2023, up 13% year-over-year.
- S&S Revenue: Subscriptions and support revenue was
$163.6 million, up 16% year-over-year.
- Gross Profit: GAAP gross profit was $108.6 million,
representing 60% of total revenue, and Adjusted Gross Profit* was
$128.9 million, representing 71% of total revenue.
- Net Income/Loss: GAAP net loss was $18.7 million,
representing 10% of total revenue, and Non-GAAP Net Income* was
$34.4 million, representing 19% of total revenue.
- Adjusted EBITDA: Adjusted EBITDA* was $59.4 million, up
12% year-over-year and representing 33% of total revenue.
- Earnings/Loss Per Share: GAAP net loss per diluted share
was $0.10 on 202.1 million shares outstanding. Non-GAAP Net Income
per diluted share* was $0.17 on 204.0 million shares
outstanding.
- Cash Flow: Net cash provided by operating activities was
$42.9 million, representing 24% of total revenue, and Free Cash
Flow* was $32.3 million, representing 18% of total revenue.
- ARR: Annual Recurring Revenue (ARR)* was $701.5 million,
up 18% year-over-year, and Net Revenue Retention Rate* was
106.7%.
Full Year 2023 Financial Highlights
- Revenue: Total revenue was $697.7 million for the year
ended December 31, 2023, up 11% year-over-year.
- S&S Revenue: Subscriptions and support revenue was
$600.2 million, up 10% year-over-year.
- Gross Profit: GAAP gross profit was $413.8 million,
representing 59% of total revenue, and Adjusted Gross Profit* was
$490.9 million, representing 70% of total revenue.
- Net Income/Loss: GAAP net loss was $39.1 million,
representing 6% of total revenue, and Non-GAAP Net Income* was
$165.7 million, representing 24% of total revenue.
- Adjusted EBITDA: Adjusted EBITDA* was $231.9 million, up
18% year-over-year and representing 33% of total revenue.
- Earnings/Loss Per Share: GAAP net loss per diluted share
was $0.19 on 163.0 million shares outstanding. Non-GAAP Net Income
per diluted share* was $0.82 on 201.5 million shares
outstanding.
- Cash Flow: Net cash provided by operating activities was
$170.6 million, representing 24% of total revenue, and Free Cash
Flow* was $129.9 million, representing 19% of total revenue.
* 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
- Delivering Customer Growth at Scale: Completed nearly
2,000 cross-sell and new logo transactions in 2023, including
notable wins at Los Angeles Unified School District, Miami Dade
Public Schools, and the Newark Board of Education. Gained 5 new
state- and territory-wide contracts, including Puerto Rico,
Florida, and Montana.
- Platform Expansion: Acquired Allovue, a leading provider
of K-12 financial planning, budgeting, and analytics software in
the U.S. A member of PowerSchool’s technology partner program,
Allovue provides intuitive and flexible budgeting tools to help
school districts and state education leaders allocate and manage
budgets and resources, including real-time access to all budgeting
information, budget collaboration, equitable funding formulas, and
analytics and dashboards to track and manage spending.
- AI-Driven Innovation: Announced the next evolution of
its AI-driven solutions suite with the launch of PowerSchool
PowerBuddy™, a persona-specific AI-powered virtual assistant for
everyone in education, providing each student, parent, educator,
counselor, and administrator with safe and secure access to
individualized guidance, information, and resources. PowerBuddy™
will initially be incorporated into Schoology Learning to offer
students on-demand, one-on-one assistance with their assignments,
and PowerBuddy™ will eventually be expanded across the entire
PowerSchool ecosystem. For example, teachers will be able to
leverage PowerBuddy™ to generate lesson plans, automate the
creation of quizzes and assessments, and personalize homework at
scale, and parents will be able to leverage PowerBuddy™ in the My
PowerSchool portal to inquire about their child's academic
performance, schedule, attendance, and receive proactive alerts if
their child is falling behind, fostering transparency and
empowering parents to participate in their child’s education.
- International Expansion: Finished 2023 with 14 new
strategic channel partnerships in targeted regions across the
globe, adding 4 new partners in the Latin America region in fourth
quarter: The American International Schools in the Americas
(AMISA), Edutech, SICOM, and Educatek.
- UNESCO Global Education Coalition: Announced the joining
of UNESCO’s Global Education Coalition, which brings together 200
members to provide expertise, strategic direction, resources, and
leadership around education connectivity, instruction, and
equality. In alignment with PowerSchool's mission of supporting the
digital transformation of education, PowerSchool will support the
Coalition’s objective to provide sustainable, scalable digital
transformation in education through offering our expertise,
training, and technology.
Commenting on the Company’s results, Eric Shander, PowerSchool
President and CFO, added, “I am particularly happy with our teams’
ability to hit our goals for growth while delivering significant
operating leverage in the business. We are in the early innings of
revolutionizing education through our data-centric technologies,
which will provide us a durable and sustainable path for generating
long-term student, family, customer, employee, and shareholder
value.”
Financial Outlook
The Company currently expects the following results:
First quarter ending
March 31, 2024 (in millions)
Total revenue
$183
to
$186
Adjusted EBITDA*
$56.5
to
$58.5
Year ending December
31, 2024 (in millions)
Total revenue
$786
to
$792
Adjusted EBITDA*
$267
to
$272
* 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 fourth
quarter and full year 2023 financial results on February 26, 2024,
at 2:00 p.m. Pacific 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 13743820. The telephone replay will be
available from 5:00 p.m. Pacific Time (8:00 p.m. Eastern Time) on
February 26, 2024, through March 4, 2024, by dialing 1-844-512-2921
(USA) or 1-412-317-6671 (International) and referencing the replay
passcode 13743820.
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 17,000
customers, including over 90 of the top 100 districts by student
enrollment in the United States, and sells solutions in over 95
countries. 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: potential
effects on our business of the COVID-19 pandemic; 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
December 31,
Twelve Months Ended
December 31,
2023
2022
2023
2022
Revenue:
Subscriptions and support
$
163,623
$
141,574
$
600,189
$
543,444
Service
15,403
15,288
72,555
70,402
License and other
3,110
4,204
24,907
16,837
Total revenue
182,136
161,066
697,651
630,683
Cost of revenue:
Subscriptions and support
42,451
37,070
154,021
151,374
Service
12,280
13,442
55,866
59,027
License and other
1,213
904
7,788
3,694
Depreciation and amortization
17,561
15,183
66,198
58,252
Total cost of revenue
73,505
66,599
283,873
272,347
Gross profit
108,631
94,467
413,778
358,336
Operating expenses:
Research and development
27,867
26,970
105,901
107,498
Selling, general, and administrative
58,513
45,221
214,807
178,337
Acquisition costs
1,819
—
4,280
2,630
Depreciation and amortization
17,100
15,917
64,470
63,967
Total operating expenses
105,299
88,108
389,458
352,432
Income (loss) from operations
3,332
6,359
24,320
5,904
Interest expense—net
20,183
13,090
66,722
40,013
Change in Tax Receivable Agreement
liability
(3,264
)
10,130
(3,264
)
7,788
Loss on modification and extinguishment of
debt
96
—
96
—
Other (income) expenses—net
207
(6
)
314
(1,341
)
Loss before income taxes
(13,890
)
(16,855
)
(39,548
)
(40,556
)
Income tax expense (benefit)
4,767
(13,610
)
(476
)
(12,815
)
Net loss
$
(18,657
)
$
(3,245
)
$
(39,072
)
$
(27,741
)
Less: Net loss attributable to
non-controlling interest
(3,042
)
(1,625
)
(7,935
)
(6,954
)
Net loss attributable to PowerSchool
Holdings, Inc.
(15,615
)
(1,620
)
(31,137
)
(20,787
)
Net loss attributable to PowerSchool
Holdings, Inc. Class A common stock:
Basic
(15,615
)
(1,620
)
(31,137
)
(20,787
)
Diluted
(19,452
)
(3,063
)
(31,137
)
(26,807
)
Net loss attributable to PowerSchool
Holdings, Inc. per share of Class A common stock, basic
$
(0.09
)
$
(0.01
)
$
(0.19
)
$
(0.13
)
Net loss attributable to PowerSchool
Holdings, Inc. per share of Class A common stock, diluted
$
(0.10
)
$
(0.02
)
$
(0.19
)
$
(0.13
)
Weighted average shares of Class A common
stock:
Basic
164,417,080
159,485,931
162,957,390
158,664,189
Diluted
202,071,139
199,414,403
162,957,390
198,592,661
Other comprehensive income (loss):
Foreign currency translation
91
(160
)
25
(1,903
)
Change in unrealized loss on
investments
—
(3
)
3
(3
)
Total other comprehensive income
(loss)
91
(163
)
28
(1,906
)
Less: Other comprehensive income (loss)
attributable to non-controlling interest
$
17
$
(33
)
$
5
$
(382
)
Comprehensive loss attributable to
PowerSchool Holdings, Inc.
$
(15,541
)
$
(1,750
)
$
(31,114
)
$
(22,311
)
CONSOLIDATED BALANCE
SHEETS
(unaudited)
(in thousands)
December 31,
2023
December 31,
2022
Assets
Current Assets:
Cash and cash equivalents
$
39,054
$
137,471
Accounts receivable—net of allowance of
$7,930 and $4,712 respectively
76,618
54,296
Prepaid expenses and other current
assets
40,449
36,886
Total current assets
156,121
228,653
Property and equipment - net
5,003
6,173
Operating lease right-of-use assets
15,998
8,877
Capitalized product development costs -
net
112,089
100,861
Goodwill
2,740,725
2,487,007
Intangible assets - net
710,635
722,147
Other assets
36,311
29,677
Total assets
$
3,776,882
$
3,583,395
Liabilities and Stockholders’
Equity
Current Liabilities:
Accounts payable
$
13,629
$
5,878
Accrued expenses
116,271
84,270
Operating lease liabilities, current
4,958
5,263
Deferred revenue, current
373,672
310,536
Current portion of long-term debt
8,379
7,750
Total current liabilities
516,909
413,697
Noncurrent Liabilities:
Other liabilities
2,178
2,099
Operating lease liabilities—net of
current
13,359
8,053
Deferred taxes
275,316
281,314
Tax Receivable Agreement liability
396,397
410,361
Deferred revenue—net of current
6,111
5,303
Long-term debt, net
811,325
728,624
Total liabilities
2,021,595
1,849,451
Stockholders' Equity:
Class A common stock, $0.0001 par value
per share, 500,000,000 shares authorized, 164,796,626 and
159,596,001 shares issued and outstanding as of December 31, 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 December 31, 2023 and December
31, 2022, respectively.
4
4
Additional paid-in capital
1,520,288
1,438,019
Accumulated other comprehensive loss
(2,094
)
(2,122
)
Accumulated deficit
(218,387
)
(187,250
)
Total stockholders'/members’ equity
attributable to PowerSchool Holdings, Inc.
1,299,827
1,248,667
Non-controlling interest
455,460
485,277
Total stockholders'/members’ equity
1,755,287
1,733,944
Total liabilities and
stockholders'/members' equity
$
3,776,882
$
3,583,395
CONSOLIDATED STATEMENTS OF
CASH FLOWS
(unaudited)
Three Months Ended
December 31,
Twelve Months Ended
December 31,
(in thousands)
2023
2022
2023
2022
Cash flows from operating
activities:
Net loss
$
(18,657
)
$
(3,245
)
$
(39,072
)
$
(27,741
)
Adjustments to reconcile net loss to net
cash used in operating activities:
Loss on modification and extinguishment of
debt
96
—
96
—
Depreciation and amortization
34,660
31,100
130,667
122,219
Share-based compensation
14,244
12,166
61,147
50,267
Amortization of operating lease
right-of-use assets
974
7,239
3,584
6,050
Change in fair value of
acquisition-related contingent consideration
—
700
(273
)
(4,886
)
Amortization of debt issuance costs
1,470
895
4,215
3,552
Provision for allowance for doubtful
accounts
1,831
1,427
4,537
1,098
Gain on lease modification
—
—
(455
)
—
Write off of right-of-use assets and
disposal of property and equipment
77
162
129
8,837
Changes in operating assets and
liabilities — net of effects of acquisitions:
Accounts receivables
70,150
46,676
(12,318
)
(5,975
)
Prepaid expenses and other current
assets
(1,448
)
30
(2,353
)
1,664
Other assets
(2,183
)
(1,266
)
(5,079
)
(2,792
)
Accounts payable
(495
)
(431
)
2,492
(6,052
)
Accrued expenses
7,477
10,459
1,378
9,938
Other liabilities
(1,429
)
(6,188
)
(5,591
)
(12,137
)
Deferred taxes
3,250
(14,762
)
(3,297
)
(15,269
)
Tax receivable agreement liability
(3,015
)
10,130
(2,338
)
7,788
Deferred revenue
(64,061
)
(52,865
)
33,125
12,448
Net cash provided by operating
activities
42,941
42,227
170,594
149,009
Cash flows from investing
activities:
Purchases of property and equipment
(837
)
(808
)
(2,168
)
(3,651
)
Proceeds from sale of property and
equipment
16
—
39
—
Investment in capitalized product
development costs
(9,807
)
(8,175
)
(38,521
)
(41,460
)
Purchase of internal use software
—
—
(259
)
—
Acquisitions—net of cash acquired
(290,293
)
13
(300,046
)
(31,143
)
Payment of acquisition-related contingent
consideration
—
—
(3,528
)
(1,392
)
Net cash used in investing activities
(300,921
)
(8,970
)
(344,483
)
(77,646
)
Cash flows from financing
activities:
Taxes paid related to the net share
settlement of equity awards
(66
)
(2,363
)
(1,604
)
(11,187
)
Proceeds from Revolving Credit
Agreement
20,000
—
40,000
70,000
Proceeds from First Lien Debt
amendment
—
—
99,256
—
Repayment of Revolving Credit
Agreement
(30,000
)
—
(40,000
)
(70,000
)
Repayment of First Lien Debt
—
(1,938
)
(6,074
)
(7,750
)
Payments of deferred offering costs
—
—
—
(295
)
Payment of debt issuance costs
(15,399
)
—
(15,708
)
—
Net cash (used in) provided by financing
activities
(25,465
)
(4,301
)
75,870
(19,232
)
Effect of foreign exchange rate changes on
cash
$
(332
)
$
(358
)
$
(408
)
$
(1,141
)
Net increase in cash, cash equivalents,
and restricted cash
(283,777
)
28,598
(98,427
)
50,990
Cash, cash equivalents, and restricted
cash—Beginning of period
323,331
109,383
137,981
86,991
Cash, cash equivalents, and restricted
cash—End of period
$
39,554
$
137,981
$
39,554
$
137,981
RECONCILIATION OF GAAP TO
NON-GAAP FINANCIAL MEASURES
(unaudited)
Reconciliation of gross profit to
Adjusted Gross Profit
Three Months Ended December
31,
Year Ended December
31,
(in thousands)
2023
2022
2023
2022
Gross profit
$
108,631
$
94,467
$
413,778
$
358,336
Depreciation
152
253
720
1,056
Share-based compensation (1)
2,422
2,099
10,029
8,557
Restructuring (2)
—
155
524
3,480
Acquisition-related expense (3)
261
105
394
663
Amortization
17,409
14,930
65,478
57,196
Adjusted Gross Profit
$
128,875
$
112,009
$
490,923
$
429,288
Gross Profit Margin (4)
59.6
%
58.7
%
59.3
%
56.8
%
Adjusted Gross Profit Margin (5)
70.8
%
69.5
%
70.4
%
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 December
31,
Year Ended December
31,
(in thousands)
2023
2022
2023
2022
Net loss
$
(18,657
)
$
(3,245
)
$
(39,072
)
$
(27,741
)
Add:
Amortization
33,845
30,035
127,292
117,444
Depreciation
815
1,065
3,375
4,775
Interest expense - net (1)
20,183
13,090
66,722
40,013
Income tax benefit
4,767
(13,610
)
(476
)
(12,815
)
Share-based compensation
14,528
12,360
63,216
50,219
Management fees (2)
80
128
318
390
Restructuring (3)
3,062
607
5,653
12,312
Acquisition-related expense (4)
4,006
2,236
8,174
4,005
Change in Tax Receivable Agreement
liability (5)
(3,264
)
10,130
(3,264
)
7,788
Adjusted EBITDA
$
59,365
$
52,796
$
231,938
$
196,390
Net loss margin
(10.2
)%
(2.0
)%
(5.6
)%
(4.4
)%
Adjusted EBITDA Margin (6)
32.6
%
32.8
%
33.2
%
31.1
%
(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)
Refers to impact of the remeasurement of
the Tax Receivable Agreement liability.
(6)
Represents Adjusted EBITDA as a percentage
of revenue.
Reconciliation of net loss to Non-GAAP
Net Income
Three Months Ended December
31,
Year Ended December
31,
(in thousands, except per share data)
2023
2022
2023
2022
Net loss
$
(18,657
)
$
(3,245
)
$
(39,072
)
$
(27,741
)
Add:
Amortization
33,845
30,035
127,292
117,444
Depreciation
815
1,065
3,375
4,775
Share-based compensation
14,528
12,360
63,216
50,219
Management fees (1)
80
128
318
390
Restructuring (2)
3,062
607
5,653
12,312
Acquisition-related expense (3)
4,006
2,236
8,174
4,005
Change in Tax Receivable Agreement
liability (4)
(3,264
)
10,130
(3,264
)
7,788
Non-GAAP Net Income
34,415
53,316
165,693
169,192
Weighted-average Class A common stock used
in computing GAAP net loss per share, basic
164,417,080
159,485,931
162,957,390
158,664,189
Weighted-average Class A common stock used
in computing GAAP net loss per share, diluted
202,071,139
199,414,403
162,957,390
198,592,661
Weighted-average shares Class A common
stock used in computing Non-GAAP net income, basic
164,417,080
159,485,931
162,957,390
158,664,189
Dilutive impact of LLC Units
37,654,059
39,928,472
37,654,059
39,928,472
Dilutive impact of Restricted Shares and
RSUs
1,317,236
1,282,178
463,730
225,386
Dilutive impact of Market-share units
572,594
—
398,785
—
Weighted-average shares Class A common
stock used in computing Non-GAAP net income per share - diluted
203,960,969
200,696,581
201,473,964
198,818,047
GAAP net loss attributable to the
PowerSchool Holdings, Inc. per share of Class A common stock -
basic
$
(0.09
)
$
(0.01
)
$
(0.19
)
$
(0.13
)
Non-GAAP net income attributable to the
PowerSchool Holdings, Inc. per share of Class A common stock -
basic
$
0.21
$
0.33
$
1.02
$
1.07
GAAP net loss attributable to the
PowerSchool Holdings, Inc. per share of Class A common stock -
diluted
$
(0.10
)
$
(0.02
)
$
(0.19
)
$
(0.13
)
Non-GAAP net income attributable to the
PowerSchool Holdings, Inc. per share of Class A common stock -
diluted
$
0.17
$
0.27
$
0.82
$
0.85
(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, nonrecurring litigation
expense, and event cancellation fees related to the COVID-19
pandemic.
(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.
(4)
Refers to impact of the remeasurement of
the Tax Receivable Agreement liability.
Reconciliation of GAAP to Non-GAAP Cost
of Revenue and Operating Expenses
Three Months Ended December
31,
Year Ended December
31,
(in thousands)
2023
2022
2023
2022
GAAP Cost of Revenue - Subscription and
Support
$
42,451
$
37,070
$
154,021
$
151,374
Less:
Share-based compensation
1,615
1,439
6,508
5,102
Restructuring
—
18
509
106
Acquisition-related expense
176
30
236
438
Non-GAAP Cost of Revenue - Subscription
and Support
40,660
35,583
146,768
145,728
GAAP Cost of Revenue - Services
$
12,280
$
13,442
$
55,866
$
59,027
Less:
Share-based compensation
808
660
3,521
3,454
Restructuring
—
138
15
3,374
Acquisition-related expense
85
75
158
225
Non-GAAP Cost of Revenue - Services
11,387
12,569
52,172
51,974
GAAP Research & Development
$
27,867
$
26,970
$
105,901
$
107,498
Less:
Share-based compensation
3,207
3,277
16,070
13,114
Restructuring
—
395
197
659
Acquisition-related expense
657
1,075
2,179
3,221
Non-GAAP Research & Development
24,003
22,223
87,455
90,504
GAAP Selling, General and
Administrative
$
58,513
$
45,221
$
214,807
$
178,337
Less:
Share-based compensation
8,898
6,984
37,117
28,548
Management fees
80
128
318
390
Restructuring
2,965
57
4,836
8,173
Acquisition-related expense
1,270
1,056
1,321
(2,509
)
Non-GAAP Selling, General and
Administrative
45,300
36,996
171,215
143,735
Reconciliation of Net Cash Provided by
Operating Activities to Free Cash Flow and Unlevered Free Cash
Flow
Three Months Ended December
31,
Year Ended December
31,
(in thousands)
2023
2022
2023
2022
Net cash provided by operating
activities
$
42,941
$
42,227
$
170,594
$
149,009
Purchases of property and equipment
(837
)
(808
)
(2,168
)
(3,651
)
Capitalized product development costs
(9,807
)
(8,175
)
(38,521
)
(41,460
)
Free Cash Flow
$
32,297
$
33,244
$
129,905
$
103,898
Add:
Cash paid for interest on outstanding
debt
18,138
4,247
61,660
28,948
Unlevered Free Cash Flow
$
50,435
$
37,491
$
191,565
$
132,846
© 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/20240225048628/en/
Investor Contact: Shane Harrison
investor.relations@PowerSchool.com 855-707-5100
Media Contact: Beth Keebler
publicrelations@powerschool.com 503-702-4230
PowerSchool (NYSE:PWSC)
Historical Stock Chart
From Apr 2024 to May 2024
PowerSchool (NYSE:PWSC)
Historical Stock Chart
From May 2023 to May 2024