PowerSchool Holdings, Inc.

Ladies and gentlemen, greetings and welcome to the PowerSchool fourth quarter 2022 earnings call. At this time, all participant lines are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce you to your host, Shane Harrison, SVP, Investor Relations. Please go ahead.

Thank you, Operator. Welcome, everyone, to PowerSchool's earnings conference call for the fourth quarter and the December 31st, 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 the call today, we have PowerSchool CEO, Hardeep Gulati, and CFO, Eric Shander. 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 of 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 and the GAAP financial information, is provided in the corresponding press release and results presentation, which are both posted on PowerSchool's Investor Relations website at investors.powerschool.com. And a replay of this call will also be posted to this same website. Let me now pass the microphone over to Arti.

Thank you, Shane, and thank you, everyone, for joining us today. We are excited to discuss our performance in Q4 and full year 2022. We had a strong close to a very successful year. We have committed to you that we will continue to deliver annual double digit top line growth coupled with margin expansion. As you see from this quarter results, we delivered this commitment in 2022 by significantly expanding our EBITDA margin and growing revenue double digits for the year. You will also see from our guidance, which Eric will discuss in more detail later, we are looking forward to another year of double-digit revenue growth and further margin expansion. As you see on slide four, fourth quarter revenue reached $161 million, growing 10% over the prior year, and our adjusted EBITDA grew 59% year over year to 53 million, representing a 32.8% margin. ARR grew 11% over the prior year to 596 million as we continued our trend of strong net revenue retention. Now looking at the specific highlights in the quarter and for the full year 2022, on slide five, our strong business momentum continued across all product lines. with breakout performance from our Unified Insights Data Analytics product suite. In this quarter, we won our largest statewide Unified Insights contract with value ramping up to $5 million per year ARR with Alabama State Department of Education to enable their learning acceleration and student support program. This adds to the state's usage of six of our other platform products which work together to benefit all students in the state. During the quarter, the Unified Insight Solution Suite also had its biggest snowflake connected intelligence win for whole child analytics at the second largest school district in the US, Los Angeles Unified School District, integrating to numerous systems. Another important cross-sell in the quarter was to Philadelphia School District, To date, a customer of our Naviance College Career and Life Readiness Tool, they are now expanding their use of our platform by implementing two of our talent solutions that will help them more efficiently evaluate, train, and develop their teachers. One key new customer win was our sale of our Unified Home Communication solution to one of the top 50 largest school districts in U.S. Jefferson County Public School in Louisville, they chose our unified home communication solution to improve their capabilities in family engagement and student attendance. These wins across the platform helped drive a record Q4 cross-sell performance, propelling our NRR rate to a record 109.1% in the quarter. while we also added over 100 new logos in the same period. I am proud of the tremendous progress we have made as a company in 2022. For the full year, we eclipsed $600 million in revenue, finished with annual revenue growth of 13%, improved our adjusted EBITDA margin by 2.2 percentage points to 31.1%, and generated $104 million of free cash flow. Our go-to-market teams were very successful during the year, adding almost 600 new customers to our base. And during the year, the number of students benefiting from our solution now exceeds 50 million. As we look at these 2022 results and our go-forward 2023 plans, I would like to give you progress update on the four key foundations, which we have reinforced with you in the past, and are the pillars of our success, strategy, and go-forward commitment. First, the resiliency of our business and the K-12 market. Second, the differentiation of our comprehensive, diversified platform. Third, our financial durability that drives predictable double-digit top-line growth coupled with consistent margin expansion. Fourth, the opportunity and the further upside through international expansion, innovation, and M&A. The first foundation is our business resiliency, a key factor in the predictability of our success. As shown on slide six, this resiliency is built by several factors. Strong customer demand of sticky, mission-critical products with robust budgets. U.S. education funding continues to be robust. As we have seen over decades, its ability to remain relatively insulated in the face of the macroeconomic headwinds. In 2022, the US Department of Education received its greatest increase in discretionary spending since the start of the pandemic. Additionally, $100 billion of federal relief ESSER funds still remains to be spent. The robust budgets are supporting the continued increase in strong demand of our products. which are fueled by the urgent and growing need of digital transformation across a variety of K-12 processes. As shown in our continued strong deal velocity and we are seeing ARR pipeline growth of nearly 25% year-over-year for the first half of the year. Reinforcing the resiliency of our business, we saw increased demand across our product portfolio. our largest and most mission-critical product line student information system center of all the technology infrastructure of any k-12 organization saw accelerated growth of arr in the low teens for the full year 2022 from many new customers large and small and 2023 is off to a great start we are very excited to share that we have been chosen for a territory-wide SIS deployment for Puerto Rico. The Puerto Rico Department of Education is seeking to modernize and transform their K-12 education infrastructure by selecting our SIS as the core to power their scheduling, registration, attendance, compliance, reporting, grading, and a lot more for their 250,000 students. We look forward to partnering with them on this critical project and their further technology initiatives to drive improved operational continuity and education outcomes for every student in the territory. Our differentiated platform is the second key foundation of our strategy and success. On slide seven, As you know, no other player in the industry has the comprehensive and diversified product platform that cover all the key pillars of SIS and operations, classroom, and talent, and has market leadership in all these pillars. We are also continuing to see further adoption of the full breadth of our platform, the number of customers that are using products from each of our pillar is approaching 1,000, and the amount of ARR that comes from customers with seven or more products is now over 100 million. We continue to differentiate even further with increased leadership and expanded opportunity in data-centric solutions. Unified Insights and Connected Intelligence Data as a Service grew well over 50% in 2022. And we are confident of a strong growth of these products in the coming year. On slide eight, we update you on the progress on our third key foundation, our financial durability. The attractiveness of our financial model comes from large under-penetrated and growing $3 billion cross-sell TAM within US and Canada. and with a significant percentage of the market still using outdated legacy and paper-based solutions. With over 15,000 existing customers and a growing platform of products, our accelerating cross-sell opportunity provides a meaningful path to a sustained, durable, long-term growth when you consider these customers currently only having two of our 19 products on average. We have demonstrated continued momentum in cross-selling the platform. With the number of customers with four or more of our products growing nearly 30% to over 2,400 as of the end of 2022. We are seeing this cross-sell success being further amplified by the flywheel effect. in which products benefit from each other, compounding the value for our customers and increasing the stickiness of our suite. Our recently announced six persona-specific multi-product cloud bundles will further increase our cross-sell velocity and create more operating leverage. We also have several other margin expansion opportunities given our scalable SaaS and operating business model. In 2022, we grew over international operations in India to now total over 1,200 employees and cover nearly all functions within the company. Our fourth key foundation is the further upside through international expansion, innovation, and M&A, as shown in slide nine. We are delivering double digit growth in North America and expect this to continue over the long run. With additional upside through international expansion, we announced late in the year that we will be opening our sales and support office in Dubai this spring to support growth in the Middle East with several new logo bins and a strong pipeline for 2023. Today, I am very excited to announce our expansion into Africa through our strategic partnership with One Connect. Based in Johannesburg, One Connect is a provider of full-service technology solutions in Africa and is committed to bringing PowerSchool solutions to over half a million students this year with a strong long-term opportunity for us to support improving education outcomes for over 240 million students across the Sub-Saharan Africa. Innovation is at the heart of our company, and we are investing in product roadmaps. An example of this innovation is our recent announcement last month of our new Learning Nav and Content Nav solutions, key milestones in the push towards a data-centric, automated, and highly impactful personalized learning solution. A market opportunity we estimate to be over $100 billion. These tools utilize artificial intelligence to automate a student's learning pathway and ease the selection of customer-approved content resources that support those instructional pathways. M&A has been an important tool for expanding our technology capabilities and growth opportunities and we have demonstrated tremendous success with each of our acquisitions. The recent acquisition of Kickboard, Kinwald, Chalk, and Headed 2 have already been integrated and are outperforming our deal models, driving growth in each of the pillars, and have expanded our cross-sell time by over $500 million. We intend to continue acquiring best-of-breed technologies to enhance our platform and global presence in 2023 and beyond. As I have outlined in these four key takeaways, we have proven our capability to execute on our financial metrics and goals. During our IPO in the summer of 2021, we communicated several targets for our key metrics, most of which we have surpassed in our first one and a half years of being a public company. On slide 10, you will see that our stated long-term target NRR rate of between 105 to 107% was surpassed this year, reaching 109% in this fourth quarter. We also have already met our long-term net debt leverage target of three to four times EBITDA, finishing the year at three times. Our IPO targets for 2022 revenue and adjusted EBITDA were eclipsed. And on the unlevered free cash flow, we beat our 2022 target of $127 million by $6 million. This speaks to our ability to perform and deliver on our commitments. And you can expect us to increase many of these targets in our 2023 Investor Day that Eric will share. With these strategies, our team and our resilient markets We expect to deliver another year of low double-digit revenue growth combined with a meaningful margin expansion, which you will see in our guidance. Let me now pass the call over to Eric to review the financial details of the fourth quarter and the full year 2022 and provide the details of our guidance for 2023. Eric? Thank you, Hardy.