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Classified in: Science and technology, Business, Covid-19 virus
Subjects: EARNINGS, Conference Call, Webcast

PowerSchool Announces Third Quarter 2021 Financial Results


PowerSchool Holdings, Inc. (NYSE: PWSC) ("PowerSchool" or the "Company"), the leading provider of cloud-based software for K-12 education, today announced financial results for its third quarter ended September 30, 2021.

"As the new school year began, K-12 educators have turned to PowerSchool's comprehensive cloud software to ensure they are ready for whatever lies ahead," said Hardeep Gulati, PowerSchool CEO. "In Q3, our cross-sell efforts helped us to achieve $527.8 million of ARR, representing 28.5% year-over-year growth. These results show that when we meet customers' needs where they are, we generate growth, as we've especially seen with the increased adoption of our Unified Insights solution. As schools and districts continue to leverage data analytics to focus on accelerating student learning gains, we have been able to reach over 1.5 million additional students through our sales efforts of Unified Insights this year so far."

Third Quarter 2021 Financial Results

* 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

Commenting on the Company's financial results, Eric Shander, PowerSchool CFO, added, "We are pleased by this quarter's results, underscored by continued revenue growth as our customers rely on the value from our solutions. As reflected in our updated guidance, we remain well-positioned to drive profitable growth through cross-selling our cloud solutions and partnering with new schools & districts to help our customers unify their K-12 technology ecosystems."

Financial Outlook

The Company currently expects the following results:

Quarter ending December 31, 2021 (in millions)

Total revenue

$139

to

$142

Adjusted EBITDA *

$28

to

$31

Year ending December 31, 2021 (in millions)

Total revenue

$552

to

$555

Adjusted EBITDA *

$156

to

$159

* Adjusted EBITDA, a non-GAAP financial measure, was not reconciled to net loss, the most closely comparable GAAP financial measure, because net 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 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 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 and Webcast Information

PowerSchool will host a conference call to discuss the third quarter 2021 financial results on November 10, 2021, at 5:00 p.m. ET. The conference call can be accessed live over the phone by dialing 877-407-0792, or for international callers 201-689-8263. A replay will be available from 8:00 p.m. ET on November 10, 2021, through November 17, 2021, by dialing 844-512-2921, or for international callers 412-317-6671. The replay passcode will be 13724190.

The call will also be webcast live from PowerSchool's investor relations website at https://investors.powerschool.com/home/. Following completion of the call, a recorded replay of the webcast will be available on the website.

About PowerSchool

PowerSchool (NYSE: PWSC) is the leading provider of cloud-based software for K-12 education. 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 45 million students globally and more than 12,000 customers, including over 90 of the top 100 districts by student enrollment in the United States, and sells solutions in over 90 countries.

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 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 prospectus dated July 27, 2021, filed with the Securities Exchange Commission ("SEC") in connection with our IPO. 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 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.

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"). Beginning in the first quarter of 2021, we intend to 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 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:

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 supplemental informational purposes only, and should not be considered 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, unit-based compensation expense, 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, unit-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.

Adjusted EBITDA: Adjusted EBITDA 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 net income (loss), as determined by GAAP. We define Adjusted EBITDA as net (loss) income adjusted for net interest expense, depreciation and amortization, provision for (benefit from) income tax, unit-based compensation expense, management fees, restructuring expense, and acquisition-related expense. We use 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 Adjusted EBITDA facilitates comparison of our operating performance on a consistent basis between periods and, when viewed in combination with our results prepared in accordance with GAAP, helps 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

September 30,

Nine Months Ended

September 30,

 

2021

2020

2021

2020

 

(unaudited)

(unaudited)

Revenue:

 

 

 

 

Subscriptions and support

$

124,272

 

$

95,118

 

$

349,126

 

$

271,372

 

Service

18,497

 

14,154

 

47,533

 

36,558

 

License and other

6,183

 

6,311

 

15,843

 

10,864

 

Total revenue

148,952

 

115,583

 

412,502

 

318,794

 

 

 

 

 

 

Cost of revenue:

 

 

 

 

Subscriptions and support

35,138

 

27,406

 

97,802

 

79,311

 

Service

14,482

 

10,471

 

37,971

 

29,511

 

License and other

618

 

336

 

1,547

 

951

 

Depreciation and amortization

13,094

 

9,866

 

37,696

 

28,783

 

Total cost of revenue

63,332

 

48,079

 

175,016

 

138,556

 

Gross profit

85,620

 

67,504

 

237,486

 

180,238

 

 

 

 

 

 

Operating expenses:

 

 

 

 

Research and development

24,400

 

15,197

 

64,874

 

48,124

 

Selling, general, and administrative

47,276

 

21,302

 

103,260

 

67,432

 

Acquisition costs

295

 

21

 

6,074

 

23

 

Depreciation and amortization

16,103

 

13,539

 

46,816

 

41,356

 

Total operating expenses

88,074

 

50,059

 

221,024

 

156,935

 

Income (loss) from operations

(2,454

)

17,445

 

16,462

 

23,303

 

Interest expense - Net

12,857

 

15,801

 

51,416

 

52,752

 

Loss on extinguishment of debt

12,905

 

?

 

12,905

 

?

 

Other expense (income) - Net

(403

)

1,111

 

(634

)

(669

)

Income (Loss) before income taxes

(27,813

)

533

 

(47,225

)

(28,780

)

Income tax expense (benefit)

(2,685

)

106

 

(20,035

)

64

 

Net income (loss)

$

(25,128

)

$

427

 

$

(27,190

)

$

(28,844

)

Less: Net loss attributable to non-controlling interest

(5,752

)

?

 

(5,752

)

?

 

Net income (loss) attributable to PowerSchool Holdings, Inc.

(19,376

)

427

 

(21,438

)

(28,844

)

 

 

 

 

 

Net loss attributable to the PowerSchool Holdings, Inc. per share of Class A common stock - basic and diluted

$

(0.12

)

$

?

$

(0.14

)

$

?

Weighted average shares of Class A common stock outstanding - basic and diluted

156,962,167

?

156,962,167

?

 

 

 

 

 

Other comprehensive income (loss) - Foreign currency translation

(336

)

207

(564

)

(138

)

Total other comprehensive income (loss)

(336

)

207

 

(564

)

(138

)

Less: comprehensive loss attributable to non-controlling interest

$

(11

)

$

?

 

$

(57

)

$

?

 

Comprehensive income (loss) attributable to PowerSchool Holdings, Inc.

$

(19,701

)

$

634

 

$

(21,945

)

$

(28,982

)

 

 

 

 

 

CONSOLIDATED BALANCE SHEETS

(unaudited)

 

(in thousands)

September 30,

2021

December 31,

2020

Assets

 

 

Current Assets:

 

 

Cash and cash equivalents

$

91,013

 

$

52,734

 

Accounts receivable?net of allowance of $5,320 and $7,869 respectively

85,056

 

47,977

 

Prepaid expenses and other current assets

41,271

 

22,799

 

Total current assets

217,340

 

123,510

 

 

 

 

Property and equipment - net

16,030

 

17,069

 

Capitalized product development costs - net

76,573

 

58,894

 

Goodwill

2,447,357

 

2,213,367

 

Intangible assets - net

822,662

 

763,459

 

Other assets

27,731

 

24,401

 

Total assets

$

3,607,693

 

$

3,200,700

 

 

 

 

Liabilities and Members' Equity

 

 

Current Liabilities:

 

 

Accounts payable

$

10,280

 

$

11,145

 

Accrued expenses

65,471

 

53,698

 

Deferred revenue, current

344,547

 

229,622

 

Revolving credit facility

?

 

40,000

 

Current portion of long-term debt

7,750

 

8,450

 

Total current liabilities

428,048

 

342,915

 

 

 

 

Noncurrent Liabilities:

 

 

Other liabilities

7,500

 

7,535

 

Deferred taxes

301,456

 

6,483

 

Tax receivable agreement liability

403,799

 

?

 

Deferred revenue -net of current

5,471

 

5,568

 

Long-term debt, net

734,620

 

1,160,326

 

Total liabilities

1,880,894

 

1,522,827

 

 

 

 

Stockholders'/Members' Equity:

 

 

Members' investment

?

 

1,855,730

 

Class A common stock, $0.0001 par value per share, 500,000,000 shares authorized, 157,918,049 shares issued and outstanding as of September 30, 2021. No shares issued and outstanding as of December 31, 2020.

16

 

?

 

Class B common stock, $0.0001 par value per share, 300,000,000 shares authorized, 39,928,472 shares issued and outstanding as of September 30, 2021. No shares issued and outstanding as of December 31, 2020.

4

 

?

 

Additional paid-in capital

1,390,251

 

?

 

Accumulated other comprehensive income

(226

)

441

 

Accumulated deficit

(152,695

)

(178,298

)

Total stockholders'/members' equity attributable to PowerSchool Holdings, Inc.

1,237,350

 

1,677,873

 

Non-controlling interest

489,449

 

?

 

Total stockholders'/members' equity

1,726,799

 

1,677,873

 

Total liabilities and stockholders'/members' equity

$

3,607,693

 

$

3,200,700

 

 

 

 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

 

 

Three Months Ended
September 30,

Nine Months Ended
September 30,

(in thousands)

2021

2020

2021

2020

 

(unaudited)

(unaudited)

Cash flows from operating activities:

 

 

 

 

Net loss

$

(25,128

)

$

427

 

$

(27,190

)

$

(28,844

)

Adjustments to reconcile net loss to net cash provided by (used in) operating activities:

 

 

 

 

Loss on extinguishment of debt

12,905

 

?

 

12,905

 

?

 

Depreciation of property and equipment

1,670

 

1,838

 

4,954

 

5,712

 

Amortization of intangible assets

23,476

 

19,489

 

68,197

 

58,769

 

Amortization of capitalized product development costs

4,035

 

2,085

 

11,345

 

5,669

 

Loss on disposal/retirement of property and equipment

23

 

?

 

27

 

101

 

Provision for allowance for doubtful accounts

387

 

155

 

127

 

117

 

Management incentive unit-based compensation

10,719

 

1,398

 

13,455

 

4,220

 

Amortization of debt issuance costs and discount

1,738

 

1,383

 

8,202

 

4,117

 

 

 

 

 

 

Changes in operating assets and liabilities ? net of effects of acquisitions:

 

 

 

 

Accounts receivables

(28,246

)

(18,528

)

(28,982

)

(30,271

)

Prepaid expenses and other current assets

(8,599

)

(1,900

)

(4,333

)

(3,459

)

Other assets

8,866

 

(1,788

)

(1,667

)

(3,959

)

Accounts payable

(4,405

)

(10,853

)

(1,995

)

(4,330

)

Accrued expenses

(554

)

4,708

 

1,246

 

(5,028

)

Other liabilities

(150

)

(69

)

(192

)

(178

)

Deferred taxes

(2,513

)

(902

)

(21,406

)

(1,040

)

Deferred revenue

178,852

 

114,406

 

88,193

 

64,689

 

Net cash provided by operating activities

173,076

 

111,849

 

122,886

 

66,285

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

Purchases of property and equipment

(308

)

(914

)

(3,222

)

(3,019

)

Proceeds from sale of property and equipment

(14

)

?

 

?

 

3

 

Investment in capitalized product development costs

(9,141

)

(8,696

)

(28,278

)

(25,490

)

Acquisitions?net of cash acquired

(406

)

(200

)

(319,230

)

121

 

Net cash used in investing activities

(9,869

)

(9,810

)

(350,730

)

(28,385

)

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

Proceeds from Revolving Credit Agreement

?

 

?

 

55,000

 

61,000

 

Proceeds from Bridge Loan

?

 

?

 

315,200

 

?

 

Repayment of Bridge Loan

(320,000

)

?

 

(320,000

)

?

 

Repayment of Revolving Credit Agreement

(95,000

)

(61,000

)

(95,000

)

(61,000

)

Repayment of First Lien Debt

(1,938

)

(1,938

)

(5,813

)

(5,813

)

Repayment of Second Lien Debt

(365,000

)

?

 

(365,000

)

?

 

Repayment of Incremental Facility

(68,425

)

(175

)

(68,775

)

(350

)

Payments for repurchase of management incentive units

?

 

?

 

(448

)

(989

)

Payments of deferred offering costs

(9,099

)

?

 

(11,753

)

?

 

Payment of debt issuance costs

(723

)

?

 

(2,823

)

?

 

Repayment of capital leases

81

 

?

 

(25

)

(36

)

Proceeds from Initial Public Offering

766,075

 

?

 

766,075

 

?

 

Net cash provided by (used in) financing activities

(94,029

)

(63,113

)

266,638

 

(7,188

)

 

 

 

 

 

Effect of foreign exchange rate changes on cash

$

(698

)

$

502

 

$

(515

)

$

(701

)

Net increase (decrease) in cash, cash equivalents, and restricted cash

68,480

 

39,428

 

38,279

 

30,011

 

Cash, cash equivalents, and restricted cash?Beginning of period

23,045

 

30,074

 

53,246

 

39,491

 

Cash, cash equivalents, and restricted cash?End of period

$

91,525

 

$

69,502

 

$

91,525

 

$

69,502

 

 

 

 

 

 

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)

2021

2020

2021

2020

 

 

 

 

 

Gross profit

$

85,620

 

$

67,504

 

$

237,486

 

$

180,238

 

Depreciation

489

403

1,322

1,172

Share-based compensation(1)

1,324

81

1,486

242

Restructuring(2)

905

434

2,385

851

Acquisition-related expense(3)

233

142

484

330

Amortization

12,604

9,468

36,374

27,616

Adjusted Gross Profit

$

101,175

 

$

78,032

 

$

279,537

 

$

210,449

 

Gross Profit Margin(4)

57.5

%

58.4

%

57.6

%

56.5

%

Adjusted Gross Profit Margin(5)

67.9

%

67.5

%

67.8

%

66.0

%

(1)

 

Refers to expenses flowing through gross profit associated with unit-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, facility closures 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)

2021

 

2020

 

2021

 

2020

 

 

 

 

 

 

 

 

Net loss

$

(25,128

)

 

$

427

 

 

$

(27,190

)

 

$

(28,844

)

Add:

 

 

 

 

 

 

 

Amortization

27,530

 

 

21,573

 

 

79,562

 

 

64,434

 

Depreciation

1,667

 

 

1,838

 

 

4,950

 

 

5,712

 

Net interest expense(1)

12,857

 

 

15,796

 

 

51,409

 

 

52,655

 

Loss on extinguishment of debt

12,905

 

 

?

 

 

12,905

 

 

?

 

Income tax benefit

(2,685

)

 

106

 

 

(20,035

)

 

64

 

Share-based compensation

10,719

 

 

1,398

 

 

13,455

 

 

4,220

 

Management fees(2)

424

 

 

307

 

 

615

 

 

803

 

Restructuring(3)

839

 

 

882

 

 

3,576

 

 

1,670

 

Acquisition-related expense(4)

923

 

 

551

 

 

8,662

 

 

2,890

 

 

 

 

 

 

 

 

 

Adjusted EBITDA

$

40,051

 

 

$

42,878

 

 

$

127,909

 

 

$

103,604

 

Adjusted EBITDA Margin(5)

26.9

%

 

37.1

%

 

31.0

%

 

32.5

%

(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, and event cancellation fees related to COVID-19.

(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. These incremental costs are embedded in our research and development, selling, general and administrative and cost of revenue line items.

(5)

 

Represents Adjusted EBITDA as a percentage of revenue.

 

Reconciliation of Net 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)

2021

2020

2021

2020

Net cash provided by operating activities

$

173,076

 

$

111,849

 

$

122,886

 

$

66,285

 

Less:

 

 

 

 

Purchases of property and equipment

(308

)

(914

)

(3,222

)

(3,019

)

Capitalized product development costs

(9,141

)

(8,696

)

(28,278

)

(25,490

)

 

 

 

 

 

Free Cash Flow

$

163,627

 

$

102,239

 

$

91,386

 

$

37,776

 

 

 

 

 

 

Add:

 

 

 

 

Cash paid for interest on outstanding debt

13,129

 

14,959

 

44,774

 

57,274

 

 

 

 

 

 

Unlevered Free Cash Flow

$

176,756

 

$

117,198

 

$

136,160

 

$

95,050

 

Category: PWSC-F


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