PowerSchool Holdings, Inc.

Ladies and gentlemen, and welcome to the PowerSchool first quarter 2023 earnings call. During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a question and answer session. At that time, if you have a question, please press the 1 followed by the 4 on your telephone. If at any time during the conference you need to reach an operator, please press star and zero. As a reminder, this conference is being recorded. I would now like to turn the call over to Shane Harrison, Senior Vice President, Investor Relations. Please go ahead.

Thank you operator. Welcome everyone to power schools, earnings conference call for the 1st quarter ended March 31st, 2023. I wanted to 1st, let, you know that we posted a slide back to the investor relations section of our website that accompanies our remarks here on the call today. We have power school CEO hardy and CFO Eric. Before getting started, I'd like to emphasize that this call, including the Q and 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 to the GAAP financial information is provided in the corresponding press release and results presentation, which are both posted on PowerSchool's investor 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 Hardeep.

Thank you, Shane, and thank you, everyone, for joining us today. Our 2023 is off to a great start. In Q1, we continued to grow our ARR 10% year-over-year and significantly expanded our adjusted EBITDA margins. We also won a record amount of new logo bookings, saw continued large deal demand from districts and state level opportunities, and made progress in our international expansion. Q1 results are summarized on slide four. First quarter revenue reached $159 million, with subscription and support revenue growing 9% to $141 million. Our adjusted EBITDA grew 16% to $49 million, representing a 31% margin an expansion of nearly three percentage points year-over-year. Net revenue retention remains strong at 109.1%, increasing 240 basis points year-over-year, helping drive ARR to $612 million. As we have shared in our previous funding calls, there are four key foundations to our continued success. Our business resilience, our differentiated platform, our growth upside from further expansion, and our financial durability. I'd like to share our Q1 progress in these four key foundations. Starting with slide five, first is our business resiliency. This resiliency is grounded in sticky mission-critical products that are demanded by a durable market that features robust multi-source budgets that are largely insulated from macroeconomic conditions. This market durability was proven again in the first quarter, where we saw increased demand and strong funding of our technology with record new logo bookings. One of our exciting wins was our largest-ever deals and $11 million-plus bookings from Puerto Rico Department of Education for digitizing their entire K-12 infrastructure, leveraging our science and enrollment solutions across the territory, supporting over 250,000-plus students. We continue to see strong demand for our core student information system product, further expanding our clear market leadership. On a trailing 12-month basis, SIS represents approximately 33% of our total new and cross-sell bookings. While these deals do have longer implementation cycles, they are very strategic as they increase our cross-sell success and time significantly. The market tailwinds that we have shared in the past, which include the increased need for digital transformation, enhanced data security, operational efficiency, and data insights, continue to drive demand for our solutions. In Q1, in addition to the strong new logo activity, we also saw the number of cross-sell deals increase 15% year over year. As we roll out our persona-specific multi-product cloud bundles, that will further support the process and momentum we are seeing. Additionally, our deal velocity continues to be strong. We saw more than 50 transactions above $10,000 for at least one product within each of our six cloud bundles. Additionally, our pipeline grew over 20% year over year, which gives us confidence about our business outlook. We are retraining our full year 2023 guidance, which Eric will discuss in more detail. Moving to slide six, our differentiated platform of K-12 vertical-specific solutions is the second key foundation of our strategy and success. There are three elements of our differentiation. First, we have the most comprehensive and diverse platform in the market to be able to meet the evolving needs of the entire K-12 ecosystem. Second, we have the most unified platform to provide an integrated experience for our key personas, students, teachers, parents, and administrators. Third is our ability to deliver holistic insights across all data aspects to improve education outcomes. In Q1, we continue to see broad demand across our diversified platform with SIS, talent, and our data-centric products experiencing the highest growth in our portfolio. Our data-centric solutions, ARR, grew over 70% year over year. One of our data products was purchased in six of the top 10 cross-sell deals in Q1, showing the growing importance of districts harnessing and leveraging their data to improve their outcomes. one good example is the weber school district in utah which added sis unified insights and communication products to the long time usage of our erp and talent solutions we're also very excited with the success we are seeing with our connected intelligence solution the first fully managed data as a service platform for k-12 schools and government agencies that provide a centralized data lake with real-time access and insights of education data across all systems, power school or third party, within or outside the district, so they can uncover deep insights and improve their decision-making in enhancing their operations and their student outcomes. In the quarter, we saw several connected intelligence cross-sell wins in all segments of the market, like public school districts, such as Des Moines Public School District and Fairfax County Public School District, private charter school organizations like Epic Charter Schools, and even private schools like Challenger School Foundation. As schools evaluate the support they have implemented to address learning loss, the teacher shortage, and student life and workforce neediness, data analytics is rising priority for schools and government leaders to break data silos and leverage the whole child insights for surgical intervention strategies and supporting improved education outcomes for every child. We recently announced a partnership with Ellucian, the leading higher education operations software provider that will provide a very unique opportunity to bring K-12 data together with higher education data to enable states and local education agencies to build powerful longitudinal data systems across the student life cycle to optimize educational and career success. These new data solutions' successes demonstrate our ability to grow our $3 billion cross-sell term that exists within our existing 15,000 customers and opens up new markets for our solutions. As shown in slide seven, our third key foundation is our growth opportunity with further expansion of our platform in markets. each providing support and upside to long-term double-digit growth runway we see in our core markets today. Starting with platform expansion, you've all heard the growing conversation on the AI infection point in many industries. We are very excited about providing embedded AI capabilities into our solutions, which leverage in an integrated and contextual way will provide enormous opportunities to support teachers and save them valuable time, differentiate and personalize instruction for students, and help efficiently scale school operations. As we have shared previously, we have already implemented AI into several of our solutions, already being leveraged by many of our customers today. Our Student Success Cloud MTSS solution uses AI to help teachers more efficiently predict and identify students who may require additional support so the appropriate interventions can be implemented. AI is also a key element of connected intelligence offering, providing customer as a data as a service platform to create their own AI and machine learning models. With an estimated 80% of data scientist time spent gathering and prepping data, our connected intelligence platform brings together data securely in a near real-time way, eliminating the biggest burden of AI projects and providing AI tools as well as build and deploy functionality. We are very excited about the launch in the last quarter of our new products, Learning Map and Content Map, both part of our personalized learning cloud, These products utilize AI to assess student mastery of subjects and automatically recommend content specific to their needs, creating a personalized learning journey. These products are key milestones in the push towards a holistic, integrated, and highly contextualized personalized learning solution, a market opportunity we estimate to be over $100 billion. We are also embedding generative AI models to support educators across our solutions. For example, we are launching automatic content creation based on individualized student needs later this year. Other use cases like supporting administrators in curriculum planning and the launch of our Power of School personalized homework solution next year will be further supported by generative AI. While other industries and services may see disruption from generative AI, We believe embedding generative AI into our solution creates additional TAM and market expansion opportunities to enhance our growth. We plan to showcase our progress on these capabilities at our Edge Conference and Investor Day in July. Additionally, we would like to share our progress on the market expansion as we continue to make strides in our international go-to-market. We announced late last year our first sales and support office outside of North America and Dubai, which will open this summer. We just announced a new channel partner, Board Middle East, BME, that will strengthen our Middle East presence by reselling and supporting our platform with their local and established team of education technology specialists. BME will augment our reach to millions of additional students in strategic markets of Saudi Arabia, Kuwait, and Qatar. And BME has committed to delivering PowerSchool solution to 750,000 plus students in the first year. We also recently announced our proprietary innovative localization framework, which is a tool that enables our partners and customers to localize and tailor PowerSchool solution for their specific country and region. This localization framework enables key user experience features such as right-to-left views, multilingual translation, and localized extensions and reporting. The extensibility of our tech stack is a very strong differentiator and uniquely supports our ability to quickly expand outside of North America, leveraging different local partners. The steady nature of our customer base and our differentiate platform combined with our operational execution capabilities to create a highly durable financial model which is our fourth key foundation on slide eight you will see that we have created an enviable business model with meaningful operating leverage as demonstrated by the increasing profitability as you move down the p l from adjusted gross profit to adjusted eps We feel this operating leverage is sustainable and will create further margin improvement as showcased by our outperformance on adjusted EBITDA this quarter. I will let Eric speak to the financials for the quarter and the durability of our financial model. Eric?