PowerSchool Holdings, Inc.

Good afternoon and welcome to the PowerSchool third quarter 2023 earnings conference call. All participants will be in listen only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. Please note, this event is being recorded. I would now like to turn the conference over to Shane Harrison, Senior Vice President, Investor Relations. Please go ahead.

Thank you, Operator. Welcome, everyone, to PowerSchool's earnings conference call for the third quarter ended September 30, 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 President 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 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 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 Hardy.

Thank you, Shane, and thank you, everyone, for joining us today. PowerSchool third quarter was a continuation of the momentum we have been building over the past few quarters with meaningful growth in revenue and profitability. K-12 organizations are accelerating the adoption of our platform to become more efficient and effective, and this is enhancing our ability to execute on our strategies for growth. Our third quarter results are summarized on slide four of the posted earning presentation. Revenue was up 12% year-over-year to $182 million, exceeding the high end of our guidance. Product-level growth was diversified with double-digit growth in many of our cloud solutions. Adjusted EBITDA was well ahead of our guidance, reaching $62 million, representing 19% growth over Q3 of 2022 and a 34% margin. We also saw record cash flow in the quarter while continuing to invest in our game-changing product innovations. ARR grew over 9% year-over-year and was up sequentially in Q3, which is seasonally our lowest quarter for new business as districts are focused on back-to-school opening logistics. We continue to see low double-digit growth in the ARR for the full year excluding school messengers' contributions. These results showcase the momentum we have created in driving sustainable long-term growth. Let me now discuss our customer and product momentum in the third quarter, summarized on slide five, where we had meaningful customer activity that demonstrated many of our go-to-market strategies. The biggest notable win in Q3 was with the State of Florida Department of Education for several of our talent solutions, that will help the state with their recruiting and hiring processes as the industry is experiencing a shortage of talent. The Florida Consortium Job Board will serve all 67 districts, six special school districts, and over 700 charter schools in the state of Florida to source all talent from all over the country in order to fill vacancies for all job types in the state. This is a competitive replacement of an existing solution and speaks to the strength of the innovation and the capabilities of our talent cloud offerings. Florida has a great new logo win and another key new state level contract. With the Florida win, we have now won a state or a territory level deal in nine state quarters. Additionally, we have been given vendor of choice for a state-level special education solution for another state in the Midwest which we hope to get through signature and approvals in Q4 or early Q1. These states and large deals are very strategic and provide us an opportunity to further expand our customer footprint and cross all the districts and schools in these states. The scalable nature of our platform The diverse best-in-class footprint and the differentiated innovations are driving the momentum for these state-level deals. Our strong double-digit revenue growth in the quarter was across most of our clouds, with strong performance in our Student Information Cloud, Student Success Cloud, and Talent Cloud. The mission criticality of our core platform, the organic innovations of data and insight solutions, And our timely add-on acquisitions like curriculum planning and attendance intervention are addressing the most urgent critical needs of the districts. Take, for example, year-to-date attendance intervention bookings are up 68% year-over-year. Curriculum and instruction bookings grew 200% year-over-year. And talent bookings are up 21% year-to-date versus the same period last year. As we shared during our last earnings call, as well as on our investor day, our data-centric solutions are the key part of a long-term growth algorithm. In the third quarter, five of our largest 10 means by ARR included insights or connected intelligence reports. This included cross-sells of both insights and connected intelligence to Modesto City School District, Colorado Springs School District 11, and Cherokee County School District 1. These are technology-minded districts that were already using 5 to 10 of our platform solutions and are a great example of how districts of all sizes are seeing the benefit of using our data-centric tools to aggregate, secure, analyze, and present the data for making better decisions for their students and teachers. A key value proposition for data product is also that we are enabling these districts with the data as a service platform to power their AI strategies. With our connected intelligence data lake solution, we're enabling more secure and efficient way for our customers to bring AI to their data rather than their data to the AI tools. We continue to innovate on our extensive multiple product AI-centered personalized education roadmap. In this quarter, we are doing general availability of our first generative AI-based solution for ITEM and passive generation tool as an add-on for our performance matter assessment product after a very successful beta trial. Additionally, this month we are kicking off beta trials for two other AI products. First is the ability for educators to interact with student data sets using natural language to ask questions and uncover key insights. This functionality will be an add-on to our connected intelligence and other products, which will save educators and administrators a tremendous amount of time digging through the massive data sets to find the anomalies, focal areas, and other insights into student academic and behavior progress. Also this month, we plan to release the beta for our first version of Personalized Homework Assistant a Gen-AI tool for Schoology that understands the context of what is being taught in the classroom and provides assistance to the students who may be stuck on a homework concept. Next, I would like to update you on the progress of our recent M&A activity, as shown on slide 6. Since the end of Q2, we have acquired two companies, starting with the completion of the exciting acquisition of School Messenger in October. As with all our acquisitions, the first stage of our integration process centers on people and UI harmonization. And our particular focus with School Messenger is building the deep integration of their direct communication capabilities into our new MyPowerSchool single pane of Glass Portal for parents, students, and teachers. As most parents can attest, The communication process between teachers, families, and their schools is disjointed and often confusing. By adding School Messenger to PowerSchool, and particularly the MyPowerSchool portal, we are uniquely positioned to create the most differentiated and comprehensive portal for centralized and efficient school-parent communications. This will supercharge the parent-student-teacher communications and therefore drive meaningfully deeper engagement, a leading driver of student success. During the third quarter, we also acquired NeverSkip, an India-based K-12 ERP and administration software provider. The addition of NeverSkip provides us with a localized and high-quality ERP and SIS product for the large India K-12 market that is expandable and scalable with PowerSchool's complementary platform of solutions. This addition expands our reach in India by 1.2 million students. Turning now to our broader global international expansion on slide six. As we discussed at our investor day, we are approaching targeted regions with a direct sales model, while in others we are building our go-to-market with channel partners. Since our last earnings call in August, we are thrilled to have signed up six additional partners, bringing our total to 11 so far, well ahead on our plan to sign 12 by the end of the year. For the Middle Eastern Africa regions, we aligned with CCS for the Egypt market, and Bawan CyberTech for Oman and the UAE. In Asia, we signed an agreement with Bnet, who will resell PowerSchool products in Hong Kong, Singapore, and the Philippines. Our first partner in Europe, Gear Education, will focus on selling in Greece and Cyprus. For the Brazil market, a country with over 37 million primary and secondary school students, we are aligned with LearnBase. And finally, in the New Zealand, we selected Glen Cook Technologies as our latest channel partner. We look forward to onboarding each of these and our other partners in the coming quarters with the goal of driving meaningful growth of PowerSchool outside of North America. These third quarter successes are driven by the strategies we presented at our investor day in September, when we outlined our vision to personalize education as well as our three apart to $1 billion in revenue and adjusted EBITDA margin in the upper 30s. As summarized on slide 7, at the event, we showcase our unique and differentiated position as the most comprehensive vertical SaaS platform for a very durable K-12 end market. We discuss how we remain under-penetrated at roughly 6% of the $10.5 billion addressable U.S. and Canada K-12 software market, and how this term expands nearly 10 times to $100 billion when you consider our opportunities in international expansion and personalized education. We articulated our go-to-market strategy, reviewed key growth drivers, and detailed our playbook for expanding internationally through multiple channels. We also showed our product roadmap, including many of the exciting Gen-AI and personalized education products that we believe will transform the future of the industry. Then Eric wrapped up the day by laying out clear midterm financial targets, including the detailed levers we will employ to generate over $1 billion in revenue by 2026 while expanding EBITDA and free cash flow margins. For anyone who has not reviewed the Investor Day presentation, we encourage you to do so via our investor relation website. Q3 was a great quarter for PowerSchool. Our teams have built momentum in many facets of our business. We continue to build scale and execute efficiently, deliver meaningful value for our customers, and develop our global reach. I am confident in driving durable and efficient growth in both our top and bottom lines. With that, let me pass the call over to Eric to cover the financial performance for the quarter.