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

PowerSchool Announces Fourth Quarter and Full Year 2023 Financial Results


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

Full Year 2023 Financial Highlights

* 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 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:

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


These press releases may also interest you

at 07:10
The Travelers Companies, Inc. today reported net income of $1.123 billion, or $4.80 per diluted share, for the quarter ended March 31, 2024, compared to $975 million, or $4.13 per diluted share, in the prior year quarter. Core income in the current...

at 07:10
CDW Corporation , a leading multi-brand provider of information technology solutions to business, government, education and healthcare customers in the United States, the United Kingdom and Canada, today announced that it will host a webcast...

at 07:10
QuidelOrtho Corporation (the "Company" or "QuidelOrtho"), a global provider of innovative in vitro diagnostic technologies designed for point-of-care settings, clinical labs and transfusion medicine, announced today it will report its financial...

at 07:10
SunCoke Energy, Inc. plans to release its first quarter 2024 financial results on Wednesday, May 1, 2024, before trading opens on the New York Stock Exchange. SXC will host its quarterly earnings call at 11:30 am ET on May 1, 2024. The conference...

at 07:05
Kinaxis® Inc. , a global leader in end-to-end supply chain orchestration, today announced that it has scheduled its conference call to discuss the financial results for its first quarter ended March 31, 2024. The call will be hosted on Thursday, May...

at 07:05
KORU Medical Systems ("KORU Medical" or the "Company"), a leading medical technology company focused on development, manufacturing, and commercialization of innovative and patient-centric large volume subcutaneous infusion solutions, today announced...



News published on and distributed by: