PowerSchool Holdings, Inc.

Good afternoon, ladies and gentlemen, and welcome to the PowerSchool second quarter 2023 earnings call. If anyone should require operator assistance during this conference, please press star zero on your telephone keypad. 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. Thank you, sir. Please go ahead.

Thank you, operator. Welcome everyone to PowerSchool's earning conference call for the second quarter ended June 30th, 2023. 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. We apologize for the schedule change today, but Hardeep had a scheduling conflict due to him attending an education summit at the White House that overlapped our original timing. As such, Hardeep's portion of these prepared remarks have been recorded, but we expect them to be available for the live Q&A to follow these prepared remarks. 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 to 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. A replay of this call will also be posted to the same website. I will now turn the call over to Hardeep.

Thanks, Shane. Thanks to everyone for joining us for PowerSchool's second quarter earnings call. We had a great second quarter where we increased the adoption of our expanded platform with large districts and states, saw continued strength in our innovative data solutions, and drove outstanding financial results. The second quarter results are summarized on slide four, where you will see we delivered another quarter of double digit ARR growth and net revenue retention rate expansion. Revenue grew 10% year-over-year to $174 million at the top end of our previously communicated guidance. Adjusted EBITDA grew 26% year-over-year to $61 million, exceeding our previously communicated guidance range, and was a continued expansion of our profitability profile, coming in at a 35% margin. Net revenue retention grew another 40 basis point to 109.5% on a record quarterly sales to our existing customers. Given the continued strength and the strong momentum in our business, we are reiterating our commitment to double digit revenue growth and increasing our margin guidance for the full year. This success is the result of significant momentum we are seeing in many facets of our business, including momentum in bookings, solution innovation, and platform and international expansion. I'll start on slide five with our customer bookings momentum. In our seasonally strongest selling quarter, we saw record results for new and cross-sell ARR business. We continue to see a trend in winning very large deals, which we define as deals that are over $1 million in combined ARR and non-recurring revenue. We've booked a record five such deals in the second quarter, which brings our year-to-date large-deal combined ARR and non-recurring value of $31 million, which compares to $11 million in value in the first half of last year. Our pipeline remains strong with a wide array of opportunities that we will continue to work through in the second half. We are excited to announce another new state-level contract, a new logo win with the State of Montana Office of Public Instruction. Montana selected unified insights and connected intelligence to supercharge their use of longitudinal data to improve the outcomes of nearly 150,000 public K through 12 students. From an ARR by product perspective, the growth drivers in the quarter were diverse with particular strength in our student information cloud, student success cloud, educator recruitment, and workforce development clouds. And as with the prior quarter, our data solutions continue to exceed expectations where there are growth of nearly 100% versus last year, demonstrating the value and the leadership of our differentiated and comprehensive platform of cloud solutions and our unique comprehensive analytics capabilities. This brings me to the momentum in innovation that we are seeing in the business as summarized on slide six. In Q2, we doubled down on innovation, ensuring we are anticipating the needs of our customers, particularly regarding the data analytics and AI. At our recent Edge User Conference in Orlando, we announced three major innovations. First, the expansion of our connected intelligence data as a service platform. Second, our new MyPowerSchool unified user experience for students and families. And third, our expanded generative AI capabilities and roadmap. The strong customer demand for effective data analytics is why we developed Connected Intelligence, the industry's first turnkey, fully managed data as a service platform for education and government agencies on Snowflake Data Cloud. In June, Snowflake awarded PowerSchool their 2023 Powered by Snowflake Growth Partner of the Year Award for Connected Intelligence. Combining connected intelligence with our powerful unified insights analytics layer, we are supporting districts and states with K through 20 longitudinal data systems across PowerSchool and any other data sources, providing our customers with limitless capabilities to understand the trends, factors, details, and gaps to improve education outcomes. In the second quarter, seven of our top 10 deals included either Unified Insights or Connected Intelligence, and four of these deals included both solutions. Notably, we are very excited to further our partnership with the Los Angeles Unified School District, the second largest school district in the U.S. with nearly 500,000 students, ranking among one of the largest deals for us and most comprehensive deployment of our full analytics capabilities in the country LAUSD purchased our entire Unified Insights and Connected Intelligence solutions to power whole child view and drive insights across their data sources for use throughout their district needs. These data products are also supporting broader cross-sell of our other products. As an example, in the second quarter, the Newark Board of Education purchased both Connected Intelligence and Unified Insights MTSS solution along with adding assessment and curriculum planning on top of their existing use of our SIS, e-collect forms, and Unified Insights products. Additionally, the Dallas Independent School District purchased Unified Insights and MTSS to overlay their existing use of PowerSchool SIS, enrollment, and special education solutions. These wins showcase our ability to launch timely products organically and inorganically that are differentiated and address critical market needs supported by our access and deep understanding of the challenges and opportunities in our 15,000 plus customers. We recently published a 2023 education focused report that highlighted many trends in the industry based on a survey of over 1750 educators. And one highlighted finding was that only two in 10 educators say that they have the data they need to evaluate teaching intervention success, which supports the demand we are seeing in our data products. At our EDGE conference, we also announced MyPowerSchool, a new cohesive user experience that consolidates all relevant information and applications into a single streamlined platform that is tailored to specific user personas. MyPowerSchool simplifies how families interact with their children's schools, how teachers interact with their students and families, and how school technology leaders manage their PowerSchool solutions by providing a central point of access based on if the user is a student, family member, educator, or administrator. From assignments and grades to attendance, and also includes our new payments module, MyPowerSchool will consolidate all the information families and students need in a single user interface. This will help support additional cross-sell and improve our existing customer experience. Finally, we are excited about the tremendous opportunity for AI to accelerate our product roadmap and business model. We are already leveraging AI in several of our existing products, including MTSS, and learning navigation to deliver personalized intervention and learnings based on individual student needs and learning goals. At the EDGE event, we demonstrated our latest generative AI functionality that will save educators a significant amount of time in their day-to-day. First, we have embedded within our performance matters assessment solution an automated generator that creates assessment questions that are aligned to a desired learning objective grade level subject and standard which the teacher can use to deliver more frequent formative assessments at scale second we previewed one of the generative AI capabilities that is coming to connected intelligence a talk to data functionality that will help non-technical users offer solutions get powerful data insights easily We have been able to accelerate these generative AI roadmaps throughout our recent announced collaboration with Microsoft Azure's OpenAI service and the usage of their OpenAI large language models. These product innovations are stepping stones towards a very significant opportunity for PowerSchool, given our unique position to monetize generative AI in our solutions, entrenched with our customer base, and opens up a $100 billion personalized app. Moving to slide seven, we are continually investing to expand our business in highly strategic and capital efficient ways. This expansion includes growing our platform as well as expanding our job referral footprint. As a reminder, in July, we announced a significant advancement in our home communication solutions with the planned acquisition of School Messenger, a leading provider of K through 12 communication tool in North America. A unified communication solution further expands our product offerings and has been a top focus for our customers given the need to consolidate fragmented school-to-family interaction technologies. The synergies we see with the addition of these communication capabilities span several of our clouds. including within our Student Information Cloud for deep integration of student and class data into MyPowerSchool for a centralized experience with richer communication content and automation. Within our Personalized Learning Cloud for integrated two-way chat and notification embedded into Schoology and other classroom solutions. And within our Student Success Cloud for improved engagement with families to improve attendance and at-risk interventions. We are also laser focused on our continued international growth and momentum. In July, we announced our latest international channel partner, Samart Telecoms, who will help us support expansion in Thailand and the neighboring regions with plans to serve more than 100,000 students in Thailand in next year. This continues our very focused partnership strategy to have strong commitments from our partners in key regions globally. We continue to see growth in our international pipeline. To summarize, this was a great quarter with record sales and a record-adjusted EBITDA that beat our guidance. Our pipeline continues to grow, supported by several large deals. Our investments in innovation and platform expansion are driving continued demand of our differentiated cloud and analytic solutions, enabling us to consistently deliver long-term durable growth and margin expansion. Let me now turn the call over to Eric to cover the second quarter financial results. Thank you, Hardeep.