- PowerSchool exceeds high-end of outlook for both revenue and
Adjusted EBITDA, raises outlook for full year 2022
- Subscription and Support revenue reaches $135.0 million in
the second quarter of 2022, increases 11% year-over-year
- ARR of $580.3 million as of June 30, 2022, increases 10%
year-over-year
- NRR of 107.3% as of June 30, 2022, improves 60 basis points
sequentially
- Net loss margin reaches negative 4% and Adjusted EBITDA
margin reaches 31% for the quarter
PowerSchool Holdings, Inc. (NYSE: PWSC) (“PowerSchool” or the
“Company”), the leading provider of cloud-based software for K-12
education in North America, today announced financial results for
its second quarter ended June 30, 2022.
“Our second quarter results were excellent, driven by
disciplined execution that delivered broad-based growth. We
exceeded our expectations for revenue and Adjusted EBITDA, had our
best ever quarter for cross-sell, added new state and top district
contracts, and exited the quarter with a very strong pipeline.
Since our IPO last July, our teams have done an incredible job
growing our customer base by nearly 3,000 logos, increasing the
number of multi-product customers by nearly 30%, expanding our
unified platform from 14 to 19 products, and materially
incrementing our margins,” said Hardeep Gulati, PowerSchool CEO.
“We are looking forward to building upon our first half momentum,
supported by the resilience and stability of the K-12 market we
serve and the customer growth we have seen.”
Second Quarter 2022 Financial Results
- Total revenue was $157.6 million for the three months ended
June 30, 2022.
- Subscriptions and Support revenues were $135.0 million, up 11%
year-over-year.
- Gross Profit was $89.6 million, or 57% of total revenue, and
Adjusted Gross Profit* was $107.2 million, or 68% of total
revenue.
- Net loss was $6.5 million, or negative 4% of total revenue, and
non-GAAP net income* was $42.9 million or 27% of total
revenue.
- Adjusted EBITDA* was $48.7 million, or 31% of total
revenue.
- GAAP net loss per basic and diluted share was $0.03 on 158.2
million shares of Class A common stock outstanding. Non-GAAP net
income per diluted share* was $0.22 on 198.2 million shares of
Class A common stock outstanding.
- Net cash used in operations was $15.8 million, and free cash
flow* was negative $28.2 million.
- Annual Recurring Revenue (ARR)* was $580.3 million, up 10%
year-over-year, and Net Revenue Retention Rate* was 107.3%, up 60
basis points quarter-over-quarter.
* Definitions of the key business metrics and the non-GAAP
financial measures used in this press release and reconciliations
of such measures to the most closely comparable GAAP measures are
included below under the headings “Definitions of Certain Key
Business Metrics” and “Use and Reconciliation of Non-GAAP Financial
Measures.”
Recent Business Highlights
- Continued Cross-Sell Momentum: Closed nearly 500
cross-sell transactions in the second quarter, including a major
state Department of Education that added Unified Insights and a
6-product deployment at one of the largest school districts in
Canada.
- Platform Expansion: Introduced three new products to
boost student success and to support educators:
- Connected Intelligence®, a data-as-a-service solution that
provides a unified, global, fully managed, and secure view of
school data so administrators, teachers, and students can benefit
from centralized data access and management, predictive insights,
and improved efficiencies.
- Unified Insights™ MTSS (Multi-Tiered System of Support), which
helps educators support the needs of the whole child by providing a
single solution to analyze, collaborate, and act on critical
student data.
- Unified Classroom® Curriculum and Instruction, a product from
our recent acquisition Chalk, which better connects curriculum
mapping and instructional delivery, giving teachers and students
more time to focus on teaching and learning.
- Awards: Awarded SIIA’s prestigious CODiE Award for Best
Data Management Tool and was recognized by the EdTech Breakthrough
Awards as the School Information Systems Solution Provider of the
Year.
- Acquisitions: Added Headed2, a leading career and
military readiness platform, with state-specific solutions for all
50 states and statewide contracts with California, Nevada, and
Pennsylvania. Headed2 expands Naviance’s leading college, career
and life readiness (CCLR) platform with deeper career, military,
and life readiness functionality for students of all ages.
- Leadership: Expanded the executive leadership team with
the hiring of Grayson Williams as Chief Information Officer, who
brings over 24 years of experience directing and transforming
highly-effective IT operations at several large corporations.
Commenting on the Company’s financial results, Eric Shander,
PowerSchool CFO, added, “We are especially pleased with our
performance in the quarter, and particularly happy to see the
sequential 60-basis-point improvement in our Net Revenue Retention,
highlighting the tremendous value we provide to our customers. Our
focus on product, go-to-market, cross-selling, customer support,
and infrastructure fueled this success and will drive us well into
the future.”
Financial Outlook
The Company currently expects the following results:
Third quarter ending September 30, 2022
(in millions)
Total revenue
$162
to
$164
Adjusted EBITDA *
$49
to
$51
Year ending December 31, 2022 (in
millions)
Total revenue
$630
to
$634
Adjusted EBITDA *
$188
to
$191
* Adjusted EBITDA, a non-GAAP financial measure was not
reconciled to net loss, the most closely comparable GAAP financial
measure because net loss is not accessible on a forward-looking
basis. The Company is unable to reconcile Adjusted EBITDA to net
loss without unreasonable efforts because the Company is currently
unable to predict with a reasonable degree of certainty the type
and extent of certain items that would be expected to impact net
loss for these periods but would not impact Adjusted EBITDA. Such
items include stock-based compensation charges, depreciation and
amortization of capitalized software costs and acquired intangible
assets, severance, and other items. The unavailable information
could have a significant impact on net loss. The foregoing
financial outlook reflects the Company’s expectations as of today’s
date. Given the number of risk factors, uncertainties and
assumptions discussed below, actual results may differ materially.
The Company does not intend to update its financial outlook until
its next quarterly results announcement.
Important disclosures in this earnings release about and
reconciliations of historical non-GAAP financial measures to the
most closely comparable GAAP measures are provided below under “Use
and Reconciliation of Non-GAAP Financial Measures.”
Conference Call Details
The conference call will begin at 2:00 p.m. Pacific Time (5:00
p.m. Eastern Time) on August 8, 2022. Those wishing to participate
via webcast should access the call through PowerSchool’s Investor
Relations website. An archived webcast will be made available
shortly after the conference call ends.
Those wishing to participate via telephone may dial in at
1-877-407-0792 (USA) or 1-201-689-8263 (International) by
referencing conference ID 13731611. The telephone replay will be
available from 5:00 p.m. Pacific Time (8:00 p.m. Eastern Time) on
August 8, 2022, through August 15, 2022, by dialing 1-844-512-2921
(USA) or 1-412-317-6671 (International) and referencing the replay
passcode 13731611.
About PowerSchool
PowerSchool (NYSE: PWSC) is the leading provider of cloud-based
software for K-12 education in North America. Its mission is to
power the education ecosystem with unified technology that helps
educators and students realize their full potential, in their way.
PowerSchool connects students, teachers, administrators, and
parents, with the shared goal of improving student outcomes. From
the office to the classroom to the home, it helps schools and
districts efficiently manage state reporting and related
compliance, special education, finance, human resources, talent,
registration, attendance, funding, learning, instruction, grading,
assessments, and analytics in one unified platform. PowerSchool
supports over 45 million students globally and more than 15,000
customers, including over 90 of the top 100 districts by student
enrollment in the United States, and sells solutions in over 90
countries. Visit www.powerschool.com to learn more.
Forward-Looking Statements
Any statements made in this press release that are not
statements of historical fact, including statements about our
beliefs and expectations, are forward-looking statements and should
be evaluated as such. Forward-looking statements include
information concerning possible or assumed future results of
operations, including our financial outlook and descriptions of our
business plan and strategies. Forward-looking statements are based
on PowerSchool management’s beliefs, as well as assumptions made
by, and information currently available to, them. You can identify
forward-looking statements by the fact that they do not relate
strictly to historical or current facts. These statements may
include words such as “anticipate,” “estimate,” “expect,”
“project,” “plan,” “intend,” “believe,” “may,” “will,” “should,”
“can have,” “likely” and other words and terms of similar meaning
in connection with any discussion of the timing or nature of future
operating or financial performance or other events. Because such
statements are based on expectations as to future financial and
operating results and are not statements of fact, actual results
may differ materially from those projected. Factors which may cause
actual results to differ materially from current expectations
include, but are not limited to: potential effects on our business
of the COVID-19 pandemic; our history of cumulative losses;
competition; our ability to attract new customers on a
cost-effective basis and the extent to which existing customers
renew and upgrade their subscriptions; our ability to sustain and
expand revenues, maintain profitability, and to effectively manage
our anticipated growth; our ability to retain, hire and integrate
skilled personnel including our senior management team; our ability
to identify acquisition targets and to successfully integrate and
operate acquired businesses; our ability to maintain and expand our
strategic relationships with third parties, including with state
and local government entities; the seasonality of our sales and
customer growth; our reliance on third-party software and
intellectual property licenses; our ability to obtain, maintain,
protect and enforce intellectual property protection for our
current and future solutions; the impact of potential information
technology or data security breaches or other cyber-attacks or
other disruptions; and the other factors described under the
heading “Risk Factors” in the Company’s Annual Report on Form 10-K
for the year ended December 31, 2021, filed with the Securities
Exchange Commission (“SEC”). Copies of such filing may be obtained
from the Company or the SEC.
We caution you that the factors referenced above may not contain
all of the factors that are important to you. In addition, we
cannot assure you that we will realize the results or developments
we expect or anticipate or, even if substantially realized, that
they will result in the consequences or affect us or our operations
in the way we expect. All forward-looking statements reflect our
beliefs and assumptions only as of the date of this press release.
We undertake no obligation to update forward-looking statements to
reflect future events or circumstances.
Definitions of Certain Key Business Metrics
Annualized Recurring Revenue (“ARR”)
ARR represents the annualized value of all recurring contracts
as of the end of the period. ARR mitigates fluctuations due to
seasonality, contract term, one-time discounts given to help
customers meet their budgetary and cash flow needs and the sales
mix for recurring and non-recurring revenue. ARR does not have any
standardized meaning and is therefore unlikely to be comparable to
similarly titled measures presented by other companies. ARR should
be viewed independently of revenue and deferred revenue and is not
intended to be combined with or to replace either of those items.
ARR is not a forecast, and the active contracts at the end of a
reporting period used in calculating ARR may or may not be extended
or renewed by our customers.
Net Revenue Retention Rate (“NRR”)
We believe that our ability to retain and grow recurring
revenues from our existing customers over time strengthens the
stability and predictability of our revenue base and is reflective
of the value we deliver to them through upselling and cross selling
our solution portfolio. We assess our performance in this area
using a metric we refer to as Net Revenue Retention Rate (“NRR”).
Beginning in the first quarter of 2021, we intend to exclude from
our calculation of NRR any changes in ARR attributable to Intersect
customers, as this product is sold through our channel partnership
with EAB and is pursuant to annual revenue minimums, therefore the
business will not be managed based on NRR. We calculate our
dollar-based NRR as of the end of a reporting period as
follows:
- Denominator. We measure ARR as of the last day of the prior
year comparative reporting period.
- Numerator. We measure ARR from renewed and new sale
opportunities booked as of the last day of the current reporting
period from customers with associated ARR as of the last day of the
prior year comparative reporting period.
The quotient obtained from this calculation is our dollar-based
net revenue retention rate. Our NRR provides insight into the
impact on current year recurring revenues of expanding adoption of
our solutions by our existing customers during the current period.
Our NRR is subject to adjustments for acquisitions, consolidations,
spin-offs and other market activity.
Use and Reconciliation of Non-GAAP Financial Measures
In addition to our results determined in accordance with GAAP,
we believe the following non-GAAP measures are useful in evaluating
our operating performance. We believe that non-GAAP financial
information, when taken collectively, may be helpful to investors
because it provides consistency and comparability with past
financial performance and assists in comparisons with other
companies, some of which use similar non-GAAP financial information
to supplement their GAAP results. The non-GAAP financial
information is presented for supplemental informational purposes
only, and should not be considered a substitute for financial
information presented in accordance with GAAP, and may be different
from similarly-titled non-GAAP measures used by other companies. A
reconciliation is provided below for each non-GAAP financial
measure to the most directly comparable financial measure stated in
accordance with GAAP. Investors are encouraged to review the
related GAAP financial measures and the reconciliation of these
non-GAAP financial measures to their most directly comparable GAAP
financial measures.
Adjusted Gross Profit: Adjusted Gross Profit is a
supplemental measure of operating performance that is not made
under GAAP and that does not represent, and should not be
considered as, an alternative to gross profit, as determined in
accordance with GAAP. We define Adjusted Gross Profit as gross
profit, adjusted for depreciation, unit-based compensation expense,
restructuring and acquisition-related expenses and amortization of
acquired intangible assets and capitalized product development
costs. We use Adjusted Gross Profit to understand and evaluate our
core operating performance and trends, to prepare and approve our
annual budget, and to develop short-term and long-term operating
plans. We believe that Adjusted Gross Profit is a useful measure to
us and to our investors because it provides consistency and
comparability with our past financial performance and between
fiscal periods, as the metric generally eliminates the effects of
the variability of depreciation, unit-based compensation,
restructuring expense, acquisition-related expenses, and
amortization of acquired intangibles and capitalized product
development costs from period to period, which may fluctuate for
reasons unrelated to overall operating performance. We believe that
the use of this measure enables us to more effectively evaluate our
performance period-over-period and relative to our competitors.
Non-GAAP Net Income (loss), Non-GAAP Cost of Revenue and
Operating Expenses and Adjusted EBITDA: Non-GAAP Net Income
(loss), Non-GAAP Cost of Revenue, Non-GAAP Operating Expenses and
Adjusted EBITDA are supplemental measures of operating performance
that are not made under GAAP and that do not represent, and should
not be considered as, an alternative to net income (loss), GAAP
cost of revenue and GAAP operating expenses, as applicable. We
define Non-GAAP Net Income (loss) as net income (loss) adjusted for
depreciation and amortization, share-based compensation expense and
the related employer payroll tax, management fees, restructuring
and acquisition-related expenses. We define Non-GAAP Cost of
Revenue and Operating Expenses as their respective GAAP measures
adjusted for share-based compensation expense and the related
employer payroll tax, management fees, restructuring expense, and
acquisition-related expense. We define Adjusted EBITDA as net
income (loss) adjusted for all of the above items, net interest
expense and provision for (benefit from) income tax. We use
Non-GAAP Net Income, Non-GAAP Cost of Revenue, Non-GAAP Operating
Expenses and Adjusted EBITDA to understand and evaluate our core
operating performance and trends and to develop short-term and
long-term operating plans. We believe that Non-GAAP Net Income and
Adjusted EBITDA facilitate comparison of our operating performance
on a consistent basis between periods and, when viewed in
combination with our results prepared in accordance with GAAP, help
provide a broader picture of factors and trends affecting our
results of operations.
Free Cash Flow and Unlevered Free Cash Flow: Free Cash
Flow and Unlevered Free Cash Flow are supplemental measures of
liquidity that are not made under GAAP and that do not represent,
and should not be considered as, an alternative to cash flow from
operations, as determined by GAAP. We define Free Cash Flow as net
cash provided by operating activities less, cash used for purchases
of property and equipment and capitalized product development
costs. We define Unlevered Free Cash Flow as Free Cash Flow plus
cash paid for interest on outstanding debt. We believe that Free
Cash Flow and Unlevered Free Cash Flow are useful indicators of
liquidity that provide information to management and investors
about the amount of cash generated by our operations inclusive of
that used for investments in property and equipment and capitalized
product development costs as well as cash paid for interest on
outstanding debt.
These non-GAAP financial measures have their limitations as an
analytical tool, and you should not consider them in isolation, or
as a substitute for analysis of our results as reported under GAAP.
Because of these limitations, these non-GAAP financial measures
should not be considered as a replacement for their respective
comparable financial measures, as determined by GAAP, or as a
measure of our profitability or liquidity. We compensate for these
limitations by relying primarily on our GAAP results and using
non-GAAP measures only for supplemental purposes.
For a reconciliation of these non-GAAP financial measures to the
most directly comparable GAAP financial measure, please see
“Reconciliation of GAAP to Non-GAAP Financial Measures” below.
CONSOLIDATED STATEMENTS OF
OPERATIONS AND COMPREHENSIVE LOSS
(unaudited)
(in thousands except per share data)
Three Months Ended
June 30,
Six Months Ended
June 30,
2022
2021
2022
2021
(unaudited)
(unaudited)
Revenue:
Subscriptions and support
$
135,010
$
121,763
$
264,775
$
224,854
Service
19,119
16,083
35,182
29,036
License and other
3,462
7,557
7,227
9,660
Total revenue
157,591
145,403
307,184
263,550
Cost of revenue:
Subscriptions and support
37,260
33,632
75,294
62,664
Service
15,737
12,795
30,734
23,489
License and other
717
531
1,703
929
Depreciation and amortization
14,271
12,846
28,230
24,602
Total cost of revenue
67,985
59,804
135,961
111,684
Gross profit
89,606
85,599
171,223
151,866
Operating expenses:
Research and development
26,088
21,929
52,706
40,474
Selling, general, and administrative
47,484
30,653
87,587
55,984
Acquisition costs
1,043
177
2,618
5,780
Depreciation and amortization
16,137
16,154
32,095
30,713
Total operating expenses
90,752
68,913
175,006
132,951
Income (loss) from operations
(1,146
)
16,686
(3,783
)
18,915
Interest expense - Net
8,743
21,297
15,765
38,559
Other expenses (income) - Net
(498
)
(376
)
(576
)
(233
)
Loss before income taxes
(9,391
)
(4,235
)
(18,972
)
(19,411
)
Income tax expense (benefit)
(2,933
)
(1,690
)
1,605
(17,349
)
Net loss
$
(6,458
)
$
(2,545
)
$
(20,577
)
$
(2,062
)
Less: Net loss attributable to
non-controlling interest
(1,933
)
—
(3,940
)
—
Net loss attributable to PowerSchool
Holdings, Inc.
(4,525
)
(2,545
)
(16,637
)
(2,062
)
Net loss attributable to the PowerSchool
Holdings, Inc. per share of Class A common stock - basic and
diluted
$
(0.03
)
$
—
$
(0.11
)
$
—
Weighted average shares of Class A common
stock outstanding - basic and diluted
158,229,171
—
158,171,056
—
Other comprehensive income (loss) -
Foreign currency translation
345
(381
)
(125
)
(228
)
Total other comprehensive income
(loss)
345
(381
)
(125
)
(228
)
Less: comprehensive income (loss)
attributable to non-controlling interest
$
70
$
—
$
(25
)
$
—
Comprehensive loss attributable to
PowerSchool Holdings, Inc.
$
(4,250
)
$
(2,926
)
$
(16,737
)
$
(2,290
)
CONSOLIDATED BALANCE
SHEETS
(unaudited)
(in thousands)
June 30, 2022
December 31, 2021
Assets
Current Assets:
Cash and cash equivalents
$
15,445
$
86,479
Accounts receivable—net of allowance of
$3,325 and $4,964 respectively
56,559
48,403
Prepaid expenses and other current
assets
35,207
38,423
Total current assets
107,211
173,305
Property and equipment - net
7,084
15,676
Operating lease right-of-use assets
9,255
—
Capitalized product development costs -
net
92,526
80,611
Goodwill
2,487,004
2,454,692
Intangible assets - net
768,377
804,909
Other assets
31,004
27,489
Total assets
$
3,502,461
$
3,556,682
Liabilities and Stockholders'/Members’
Equity
Current Liabilities:
Accounts payable
$
6,766
$
12,449
Accrued expenses
65,595
71,167
Operating lease liabilities, current
7,094
—
Deferred revenue, current
172,992
294,276
Revolving credit facility
70,000
—
Current portion of long-term debt
7,750
7,750
Total current liabilities
330,197
385,642
Noncurrent Liabilities:
Other liabilities
2,326
7,423
Operating lease liabilities—net of
current
9,284
—
Deferred taxes
297,584
295,959
Tax receivable agreement liability
400,022
404,394
Deferred revenue—net of current
5,032
6,881
Long-term debt, net
731,013
733,425
Total liabilities
1,775,458
1,833,724
Stockholders’/Members’ Equity:
Class A common stock, $0.0001 par value
per share, 500,000,000 shares authorized, 158,266,304 shares issued
and outstanding as of June 30, 2022. 158,034,497 shares issued and
outstanding as of December 31, 2021
16
16
Class B common stock, $0.0001 par value
per share, 300,000,000 shares authorized, 39,928,472 shares issued
and outstanding as of June 30, 2022. 39,928,472 shares issued and
outstanding as of December 31, 2021
4
4
Additional paid-in capital
1,422,401
1,399,967
Accumulated other comprehensive income
(1,219
)
(216
)
Accumulated deficit
(183,101
)
(165,026
)
Total stockholders’/members’ equity
attributable to PowerSchool Holdings, Inc.
1,238,101
1,234,745
Non-controlling interest
488,902
488,213
Total stockholders’/members’ equity
1,727,003
1,722,958
Total liabilities and
stockholders’/members’ equity
$
3,502,461
$
3,556,682
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(unaudited)
Three Months Ended June
30,
Six Months Ended June
30,
2022
2021
2022
2021
(in thousands)
Cash flows from operating
activities:
Net loss
$
(6,458
)
$
(2,545
)
$
(20,577
)
$
(2,062
)
Adjustments to reconcile net loss to net
cash provided by (used in) operating activities:
Depreciation and amortization
30,372
33,227
60,307
61,778
Share-based compensation
14,060
1,373
25,610
2,737
Write-off of right-of-use assets and
property and equipment
8,597
—
8,597
—
Change in fair value of
acquisition-related contingent consideration
(6,088
)
—
(5,926
)
—
Other
(1,511
)
(268
)
804
(258
)
Changes in operating assets and
liabilities — net of effects of acquisitions:
Accounts receivables
(11,418
)
(15,698
)
(6,643
)
(735
)
Prepaid expenses and other current
assets
8,001
8,778
3,315
4,266
Other assets
(2,365
)
(8,422
)
(3,815
)
(10,535
)
Accounts payable
1,310
4,848
(5,112
)
1,669
Accrued expenses
3,057
11,135
(7,854
)
1,800
Other liabilities
1,348
(43
)
(5,217
)
(43
)
Deferred taxes
(3,314
)
(2,672
)
1,579
(18,892
)
Deferred revenue
(51,368
)
(29,190
)
(125,387
)
(90,659
)
Net cash used in operating activities
$
(15,777
)
$
523
$
(80,319
)
$
(50,934
)
Cash flows from investing
activities:
Purchases of property and equipment
(440
)
(1,831
)
(2,201
)
(2,172
)
Proceeds from sale of property and
equipment
—
—
—
13
Investment in capitalized product
development costs
(12,007
)
(10,572
)
(20,927
)
(19,137
)
Acquisitions—net of cash acquired
(15,625
)
34
(31,155
)
(318,824
)
Partial payment of acquisition-related
contingent consideration
(1,392
)
—
(1,392
)
—
Net cash used in investing activities
$
(29,464
)
$
(12,369
)
$
(55,675
)
$
(340,120
)
Cash flows from financing
activities:
Proceeds from Revolving Credit
Agreement
40,000
$
10,000
70,000
$
55,000
Proceeds from Bridge Loan
—
$
—
$
315,200
Repayment of Incremental Facility
—
$
(175
)
$
—
$
(350
)
Repayment of First Lien Debt
(1,938
)
$
(1,938
)
(3,875
)
$
(3,875
)
Payments for repurchase of management
incentive units
—
$
—
$
—
$
(448
)
Payments of deferred offering costs
—
$
(1,268
)
(295
)
$
(2,655
)
Payment of debt issuance costs
—
$
(1,600
)
$
—
$
(2,100
)
Repayment of capital leases
—
$
(62
)
—
$
(108
)
Net cash provided by financing
activities
$
38,062
$
4,957
$
65,830
$
360,664
Effect of foreign exchange rate changes on
cash
(962
)
(178
)
(872
)
189
Net decrease in cash, cash equivalents,
and restricted cash
(8,141
)
(7,067
)
(71,036
)
(30,201
)
Cash, cash equivalents, and restricted
cash—Beginning of
24,096
30,112
86,991
53,246
Cash, cash equivalents, and restricted
cash—End of period
$
15,955
$
23,045
$
15,955
$
23,045
RECONCILIATION OF GAAP TO
NON-GAAP FINANCIAL MEASURES
(unaudited)
Reconciliation of Gross profit to
Adjusted gross profit
Three Months Ended
June 30,
Six Months Ended
June 30,
(in thousands, except for percentages)
2022
2021
2022
2021
Gross profit
$
89,606
$
85,599
$
171,223
$
151,866
Depreciation
265
439
540
832
Share-based compensation(1)
2,146
81
4,313
162
Restructuring(2)
1,129
893
2,102
1,480
Acquisition-related expense(3)
91
168
291
251
Amortization
14,005
12,407
27,690
23,769
Adjusted Gross Profit
$
107,242
$
99,587
$
206,159
$
178,360
Gross Profit Margin(4)
56.9
%
58.9
%
55.7
%
57.6
%
Adjusted Gross Profit Margin(5)
68.1
%
68.5
%
67.1
%
67.7
%
_______________
(1)
Refers to expenses flowing
through gross profit associated with share-based compensation.
(2)
Refers to expenses flowing
through gross profit related to migration of customers from legacy
to core products, and severance expense related to offshoring
activities, facility closures and executive departures.
(3)
Refers to expenses flowing
through gross profit incurred to execute and integrate
acquisitions, including retention awards and severance for acquired
employees.
(4)
Represents gross profit as a
percentage of revenue.
(5)
Represents Adjusted Gross Profit
as a percentage of revenue.
Reconciliation of Net Loss to Adjusted
EBITDA
Three Months Ended
June 30,
Six Months Ended
June 30,
(in thousands)
2022
2021
2022
2021
Net loss
$
(6,458
)
$
(2,545
)
$
(20,577
)
$
(2,062
)
Add:
Amortization
29,075
27,337
57,728
52,031
Depreciation
1,333
1,663
2,596
3,283
Net interest expense(1)
8,743
21,297
15,765
38,552
Income tax expense (benefit)
(2,933
)
(1,690
)
1,605
(17,349
)
Share-based compensation
12,242
1,373
24,637
2,737
Management fees(2)
93
115
177
191
Restructuring(3)
10,037
1,200
10,182
2,737
Acquisition-related expense(4)
(3,393
)
1,476
(766
)
7,738
Adjusted EBITDA
$
48,739
$
50,226
$
91,347
$
87,858
Net loss margin
(4.1
)%
(1.8
)%
(6.7
)%
(0.8
)%
Adjusted EBITDA margin(5)
30.9
%
34.5
%
29.7
%
33.3
%
_______________
(1)
Interest expense, net of interest
income.
(2)
Refers to expense associated with
collaboration with our principal stockholders and their internal
consulting groups.
(3)
Refers to costs incurred related
to migration of customers from legacy to core products, remaining
lease obligations for abandoned facilities, severance expense
related to offshoring activities, facility closures, and executive
departures, and event cancellation fees related to COVID-19.
(4)
Refers to direct transaction and
debt-related fees reflected in our acquisition costs line item of
our income statement and incremental acquisition-related costs that
are incurred to perform diligence, execute and integrate
acquisitions, including retention awards and severance for acquired
employees, and other transaction and integration expenses. Also,
refers to the fair value adjustments recorded to the contingent
consideration liability related to the acquisitions of Kinvolved
and Chalk. These incremental costs are embedded in our research and
development, selling, general and administrative and cost of
revenue line items.
(5)
Represents Adjusted EBITDA as a
percentage of revenue.
Reconciliation of Net Loss to Non-GAAP
Net Income
Three Months Ended
June 30,
Six Months Ended
June 30,
(in thousands, except share and per share
data)
2022
2021
2022
2021
Net loss
$
(6,458
)
$
(2,545
)
$
(20,577
)
$
(2,062
)
Add:
Amortization
29,075
27,337
57,728
52,031
Depreciation
1,333
1,663
2,596
3,283
Share-based compensation
12,242
1,373
24,637
2,737
Management fees(1)
93
115
177
191
Restructuring(2)
10,037
1,200
10,182
2,737
Acquisition-related expense(3)
(3,393
)
1,476
(766
)
7,738
Non-GAAP Net Income
42,929
30,619
73,977
66,655
Weighted-average Class A common stock
outstanding used in computing GAAP net loss per share, basic and
diluted
158,229,171
158,171,056
Weighted-average shares Class A common
stock outstanding used in computing Non-GAAP net income, basic
158,229,171
158,171,056
Weighted-average shares Class A common
stock outstanding used in computing Non-GAAP net income,
diluted
198,209,855
198,150,174
GAAP net loss attributable to the
PowerSchool Holdings, Inc. per share of Class A common stock -
basic and diluted
$
(0.03
)
$
(0.11
)
Non-GAAP net income per share of Class A
common stock - basic
$
0.27
$
0.47
Non-GAAP net income per share of Class A
common stock - diluted
$
0.22
$
0.37
_______________
(1)
Refers to expense associated with
collaboration with our principal stockholders and their internal
consulting groups.
(2)
Refers to costs incurred related
to migration of customers from legacy to core products, remaining
lease obligations for abandoned facilities, severance expense
related to offshoring activities, facility closures, and executive
departures, and event cancellation fees related to the COVID-19
pandemic.
(3)
Refers to direct transaction and
debt-related fees reflected in our acquisition costs line item of
our income statement and incremental acquisition-related costs that
are incurred to perform diligence, execute and integrate
acquisitions, including retention awards and severance for acquired
employees, and other transaction and integration expenses. Also,
refers to the fair value adjustments recorded to the contingent
consideration liability related to the acquisitions of Kinvolved
and Chalk. These incremental costs are embedded in our research and
development, selling, general and administrative and cost of
revenue line items.
Reconciliation of GAAP to Non-GAAP Cost
of Revenue and Operating Expenses
Three Months Ended June
30,
Six Months Ended June
30,
(in thousands)
2022
2021
2022
2021
GAAP Cost of Revenue - Subscription and
Support
$
37,260
$
33,632
$
75,294
$
62,664
Less:
Share-based compensation
1,047
10
2,162
19
Restructuring
98
39
101
102
Acquisition-related expense
51
119
225
179
Non-GAAP Cost of Revenue - Subscription
and Support
$
36,064
$
33,464
$
72,806
$
62,364
GAAP Cost of Revenue - Services
$
15,737
$
12,795
$
30,734
$
23,489
Less:
Share-based compensation
1,100
72
2,151
142
Restructuring
1,031
854
2,000
1,377
Acquisition-related expense
41
49
67
72
Non-GAAP Cost of Revenue - Services
$
13,565
$
11,820
$
26,516
$
21,898
GAAP Research & Development
$
26,088
$
21,929
$
52,706
$
40,474
Less:
Share-based compensation
3,024
234
6,128
471
Restructuring
$
–
—
—
684
Acquisition-related expense
849
322
894
457
Non-GAAP Research & Development
$
22,215
$
21,373
$
45,684
$
38,862
GAAP Selling, General and
Administrative
$
47,484
$
30,653
$
87,587
$
55,984
Less:
Share-based compensation
7,071
1,058
14,196
2,104
Management fees
93
115
177
191
Restructuring
8,908
307
8,081
573
Acquisition-related expense
(5,377
)
810
(4,569
)
1,251
Non-GAAP Selling, General and
Administrative
$
36,789
$
28,363
$
69,702
$
51,865
Reconciliation of Net Cash Used in
Operating Activities to Free Cash Flow and Unlevered Free Cash
Flow
Three Months Ended June
30,
Six Months Ended June
30,
(in thousands)
2022
2021
2022
2021
Net cash used in operating activities
$
(15,777
)
$
523
$
(80,319
)
$
(50,934
)
Less:
Purchases of property and equipment
(440
)
(1,831
)
(2,201
)
(2,172
)
Capitalized product development costs
(12,007
)
(10,572
)
(20,927
)
(19,137
)
Free Cash Flow
$
(28,224
)
$
(11,880
)
$
(103,447
)
$
(72,243
)
Add:
Cash paid for interest on outstanding
debt
7,989
17,457
14,172
31,645
Unlevered Free Cash Flow
$
(20,235
)
$
5,577
$
(89,275
)
$
(40,598
)
© PowerSchool. PowerSchool and other PowerSchool marks are
trademarks of PowerSchool Holdings, Inc. or its subsidiaries. Other
names and brands may be claimed as the property of others.
PWSC-F
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version on businesswire.com: https://www.businesswire.com/news/home/20220808005542/en/
Investor Contact: Shane Harrison
investor.relations@PowerSchool.com 855-707-5100
Media Contact: Kari Sherrodd
public.relations@PowerSchool.com 206-295-2826
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