PowerSchool Holdings, Inc.

Thank you for standing by. This is the conference operator. Welcome to the PowerSchool third quarter 2022 earnings conference call. As a reminder, all participants are in listen-only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. To join the question queue, you may press star, then 1 on your telephone keypad. Should you need assistance during the conference call, you may signal an operator by pressing star and 0. I would now like to turn the conference over to Shane Harrison, Senior Vice President of Investor Relations. Please go ahead.

Thank you, operator. Welcome, everyone, to PowerSchool's earnings conference call for the third quarter ended September 30th, 2022. I wanted to first let you know that we posted a slide deck to the investor relations section of our website that accompanies our remarks here. On today's call, we have PowerSchool CEO Hardeep Gulati and CFO Eric Schander. Before getting started, I'd like to emphasize that this call, including the Q&A portion, will include statements related to the expected future results for our company, which are therefore forward-looking statements. Our actual results may differ materially from our projections due to a number of risks and uncertainties. The risks and uncertainties that forward-looking statements are subject to are described in our earnings release and other SEC filings. Today's remarks will also include references to non-GAAP financial measures. Additional information, including definitions and reconciliations between non-GAAP financial information to the GAAP financial information, is provided in the corresponding press release and results presentation, which are both posted to PowerSchool's Investor Relations website at investors.powerschool.com. A replay of this call will also be posted to the same website. Let me now turn the call over to Hari.

Thank you, Shane, and thank you, everyone, for taking the time to join us today. Our third quarter was a testament to how well our teams executed on our market differentiated strategy and business model. We continue to drive strong revenue NARR growth with the power and the breadth of our comprehensive platform that provides mission-critical solutions for K-12 organizations to help effectively manage their ongoing demands and challenges. As demonstrated this quarter, The significant cross-sell opportunity of our diverse portfolio of market-leading solutions to our captive large install base allows us to continue to deliver on the top-line growth, while our operating leverage is providing a meaningful ramp in profitability. Let me begin our review of Q3 on slide four with a summary of our financial results. Total revenue reached $162 million for the quarter, coming in line with the guidance we provided last quarter. We continue to see record pipeline that gives us confidence to reaffirm our increased full-year revenue guidance from the last quarter. In Q3, we grew our adjusted EBITDA 30% year-over-year and drove meaningful margin expansion reaching 32%. This represents our highest margin since our IPO. and exceeds the guidance from the last quarter. Additionally, we are raising further our full year guidance for profitability. Subscription and support revenue grew double digits year over year to $137 million. Our ARR increased 11% year over year with strength in our retention, cross-sell, and new business. Our consistent performance to market expectations and metrics showcase our compelling differentiated business model to operate in a highly stable and durable k-12 market largely insulated from the broader macro inflationary and recessionary factors and also it's a testament of our diverse highly predictable revenue streams that are growing materially and with increased profitability Let me share with you more details on each of our growth vectors that will help us deliver this consistent performance. Slide five shows some of the customer successes in the quarter for these different vectors. The third quarter is generally the busiest time for us as it is not only back to school, but it also the time where administrators and back office staff are starting their new fiscal year. For us, that means a heavy few months of product renewals and as well system implementation. Our renewal team had a record quarter, and our sales and customer success teams drove higher incremental new bookings from existing customer when you compare it to the prior year. Our net revenue retention rate for the 12 months ended September 30th increased 140 basis points to 108.7%. our best sequential improvement since Q2 of 2020. During the quarter, we saw great growth in all aspects of ARR, with particular improvements in retention and cross-sell increases year over year. Speaking of cross-sell and continued market expansion, we saw broad-based customer booking activities that spanned our entire product platform as we grew our wallet share with existing customers and continue to add new logos to our customer base. A great example of that is of a large deal at one of the largest online K-12 learning provider, Striding. They selected PowerSchool for the global student information system and enrollment needs for their online public and private schools and with well over 100,000 enrollments. Already a user of our Naviance and student assessment solution for a small student population, Stride wanted to modernize their homegrown back office system for their entire K-12 online infrastructure. With the expected long-term growth in virtual schooling globally in the coming years, with a very large TAM, we are excited to partner with global online companies like Stride to grow this space further. The other key growth factor for us is we have the most comprehensive and diverse portfolio of solutions that provide mission critical capabilities required for the K-12 education ecosystem. There is no shortage of headlines about the stresses in our education system around teacher shortage, learning gaps, attendance shortfalls, social emotional support, equity, and data security. Our differentiated platform with 19 plus products is becoming even more essential to help district deal with these challenges and initiatives that span across operations, talent and classroom. We are seeing continued high demand and growth in our student solutions. Our insights and MTSS capabilities, talent management and behavior and curriculum management solutions. customers of all sizes continue to select our platform as powerschool is the only proven vendor that checks all these boxes great example of this is our platform win at plano texas independent school district with over 50 000 students they were looking to replace their existing sis for an integrated platform solution adding our sis enrollment erp data insights products to already their existing implementation of several of our talent products will improve not only their internal operational efficiency but also drive better outcomes for teachers and their students we are continuing to see balanced demand across our product portfolio we recorded nearly 500 new logos and cross-sell transactions in the quarter including several sizable wins for sis unified insights talent naviance and classroom products building on our proven success in providing classroom solutions at large districts like la usd miami-dade fairfax we are excited about another large district baltimore city with 75 000 plus students selecting schoology as their lms solution this quarter With the addition of Schoology to the PowerSchool Talent and Naviance products at the district, we look forward to exceeding Baltimore City's expectations and furthering our solutions footprint within their district. As we shared, one of our newest growth vectors is our international expansion. We are seeing similar level of critical need of platform. like ours to provide unified comprehensive capabilities to help international private and even local schools in various geographies around the world our dedicated sales initiative in the middle east started earlier this year and has already shown strong success and proves the opportunity we have available to extend that model to other regions Excited to share another very strategic platform new win in the UAE at Eldar Education. An Abu Dhabi based education system that manages several charter and public schools in the region. Eldar's blueprint public school purchased multiple solutions, including SIS and Schoology from PowerSchool to provide an integrated view of their systems, students and operations. Similarly, we gained a new logo for a platform win in Egypt, the International School of Elite Education, or ISEE. One of the key aspects that is driving our growth is our scale. Proven track record and vast experience, which allows us to quickly meet and support the most critical urgent needs the districts might have. We had our most successful back-to-school in terms of customer experience and impact across different aspects of the school operations. 3 million plus professional development courses taken, 750,000 substitute teacher position filled, 1.3 million jobs posted, 46 million plus formative assessments delivered, and 900,000 plus college and career assignments completed in the quarter leveraging our platform. Our top line momentum is very compelling. given we continue to do it while also increasing our profitability. In the third quarter, we exceeded the high end of our guidance range of adjusted EBITDA and continue to expand our adjusted EBITDA margins to levels well ahead of our 2022 targets. We communicated at the beginning of the year. I will let Eric go into the more details, but the operational rigors we have applied, coupled with the growing scale we are experiencing, We expect continued expansion in our profitability going forward. Let me also share some very exciting news. Today, we announced Eric's promotion to president and CFO. In this new expanded role, Eric will assume responsibility of our customer renewal operations, having successfully built our public company reporting and GNA infrastructure, I'm excited to have Eric bring his scale and growth experience to this critical part for business. We are also announcing the addition of Tony Kender as our new Chief Revenue Officer. Tony has 30 plus years of expertise in building, scaling, and optimizing global sales organizations. Most recently as CRO at Financial Force, and prior to that as an SVP and GM at Oracle. We are excited to add him to our exec team and want to thank our current CRO, Craig Greenside, for his meaningful contribution to PowerSchool and wish him the best as he moves to his new endeavors. We are very happy with the continued business momentum we are seeing heading into the fourth quarter and look forward to finishing the year strong. Our sales pipeline continues to be very strong with 20% growth year over year, and sales velocity continues to improve overall. In the funnel, we are seeing a great mix of new customer logos, very large opportunities, and abundant cross-sell prospects, many of which we are in the pole position to win. Our confidence is further reinforced by a continued strong funding environment, further supported by a three-fourths of ESSER funding still being available for districts to spend over the next few years. It is clear that our value proposition and differentiated comprehensive platform are resonating in the market, which puts us in a better position than the niche providers. Let me pass the call over to Eric and detail the financial performance for the quarter. Eric. Thank you, Hardy.