- PowerSchool delivers third quarter Revenue within guidance
and reiterates the increased full-year guidance from last
quarter
- Adjusted EBITDA* exceeds guidance for the quarter, achieving
a 32% margin; guidance raised for the full year
- Subscriptions and Support revenue reaches $137.1 million in
the third quarter of 2022, representing growth of 10%
year-over-year
- ARR* increases 11% year-over-year to $585.4 million as of
September 30, 2022
- NRR* reaches 108.7% as of September 30, 2022, increasing 140
basis points on a sequential quarterly basis
- Net loss margin improves 170 basis points on a sequential
quarterly basis
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 third quarter ended September 30, 2022.
“We are thrilled with our results in the third quarter,
particularly with our revenue retention and profitability. Our ARR
grew 11% over the prior year as record renewals and continued
cross-selling momentum drove significant NRR growth. Our Adjusted
EBITDA margin improved as we benefit from the consistent scaling of
our predictable revenue streams over our operational base,” said
Hardeep Gulati, PowerSchool CEO. “We are pleased with the strength
and resilience of our addressable markets, as demonstrated through
our growing pipeline and demand for our differentiated unified
platform of best-in-class solutions. This platform puts us in a
unique position to provide mission critical solutions that help
districts manage their current challenges, such as addressing
teacher shortages through our talent management solutions,
improving learning loss with our analytics and MTSS solutions, and
enabling secure teacher-student-parent collaboration using our
student solutions.”
Third Quarter 2022 Financial Results
- Total revenue was $162.4 million for the three months ended
September 30, 2022.
- Subscriptions and Support revenues were $137.1 million, up 10%
year-over-year.
- Gross Profit was $92.6 million, or 57% of total revenue, and
Adjusted Gross Profit* was $111.1 million, or 68% of total
revenue.
- Net loss was $3.9 million, or negative 2% of total revenue, and
non-GAAP net income* was $41.9 million or 26% of total
revenue.
- Adjusted EBITDA* was $52.2 million, or 32% of total
revenue.
- GAAP net loss per basic and diluted share was $0.02 on 158.8
million shares of Class A common stock outstanding. Non-GAAP net
income per diluted share* was $0.21 on 199.0 million shares of
Class A common stock outstanding.
- Net cash flow from operations was $187.1 million, and free cash
flow* was $174.1 million.
- Annual Recurring Revenue (ARR)* was $585.4 million, up 11%
year-over-year, and Net Revenue Retention Rate (NRR)* was 108.7%,
up 140 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
- Expanding Footprint: Recorded nearly 500 new logo and
cross-sell transactions in the quarter, including several sizable
wins for our Student Information System, Unified Analytics, and
Learning Management System products.
- Leader in Virtual Learning: Online education leader
Stride, Inc. purchased PowerSchool’s Student Information System and
Enrollment solutions during the third quarter, which, when combined
with PowerSchool’s other online-focused customers, positions
PowerSchool as the leader in providing mission-critical solutions
to the growing online K-12 schooling market.
- Enabling Back-to-School: Completed over 1,750 new
product go-lives that prepared schools and districts to be ready
for the 2022-2023 school year.
- Awards: Received three awards from Tech & Learning’s
Awards of Excellence program, “The Best Tools for Back to School,”
one each for PowerSchool’s Unified Classroom, Unified Talent, and
Naviance products.
- Thought Leadership Driving Demand: Released the
2022-2023 edition of the Education Focus Report, a deep analysis on
the perspectives of over 3,500 educators that delivers insights to
educators and district leaders on trends, priorities, and
best-practices in the K-12 education space.
- Enriching Our Community: Employees donated nearly 2,000
volunteer hours as part of PowerSchool’s Volunteer Paid Time Off
program and PowerSchool’s signature back-to-school social impact
events. Also donated over 150 school supplies-filled backpacks to
elementary school students via three community partner
organizations.
- Leadership: Promoted CFO Eric Shander to the role of
President & CFO, adding oversight of PowerSchool's customer
renewal operations to his exemplary leadership of finance,
accounting, human resources, investor relations, and IT. Also added
new Chief Revenue Officer Tony Kender, who brings 30+ of experience
in building scaled global sales organizations, most recently as CRO
at FinancialForce and SVP and GM at Oracle.
Commenting on the Company’s financial results, Eric Shander,
PowerSchool President & CFO, added, “We are pleased to see our
results fulfilling our raised expectations. In the first nine
months of 2022, we delivered 14% year-over-year revenue growth and
31% Adjusted EBITDA margins, which are significantly ahead of the
long-term targets we laid out during our IPO. Our strategy
execution, operational discipline, and opportunistic investment in
technology is positioning our customers, our company, and our
shareholders for long-term success.”
Financial Outlook
The Company currently expects the following results:
Fourth quarter ending December 31, 2022
(in millions)
Total revenue
$161
to
$164
Adjusted EBITDA *
$48
to
$51
Year ending December 31, 2022 (in
millions)
Total revenue
$631
to
$634
Adjusted EBITDA *
$192
to
$195
* 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 November 7, 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
1-855-327-6837 (USA) or 1-631-891-4304 (International) by
referencing conference ID 10020512. The telephone replay will be
available from 5:00 p.m. Pacific Time (8:00 p.m. Eastern Time) on
November 7, 2022, through November 14, 2022, by dialing
1-844-512-2921 (USA) or 1-412-317-6671 (International) and
referencing the replay passcode 10020512.
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”).
For the purposes of calculating NRR, we 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 Global, Inc. 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 analytical and supplemental
informational purposes only, and should not be considered in
isolation or as 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, share-based compensation expense
and the related employer payroll tax, restructuring and
acquisition-related expenses, 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, share-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
expense, 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
September 30,
Nine Months Ended
September 30,
2022
2021
2022
2021
(unaudited)
(unaudited)
Revenue:
Subscriptions and support
$
137,095
$
124,272
$
401,870
$
349,126
Service
19,933
18,497
55,114
47,533
License and other
5,406
6,183
12,633
15,843
Total revenue
162,434
148,952
469,617
412,502
Cost of revenue:
Subscriptions and support
39,009
35,138
114,303
97,802
Service
14,852
14,482
45,585
37,971
License and other
1,087
618
2,790
1,547
Depreciation and amortization
14,839
13,094
43,069
37,696
Total cost of revenue
69,787
63,332
205,747
175,016
Gross profit
92,647
85,620
263,870
237,486
Operating expenses:
Research and development
27,821
24,400
80,528
64,874
Selling, general, and administrative
45,530
47,276
133,117
103,260
Acquisition costs
11
295
2,630
6,074
Depreciation and amortization
15,955
16,103
48,050
46,816
Total operating expenses
89,317
88,074
264,325
221,024
Income (loss) from operations
3,330
(2,454
)
(455
)
16,462
Interest expense - Net
11,158
12,857
26,923
51,416
Loss on extinguishment of debt
—
12,905
—
12,905
Other expenses (income) - Net
(3,100
)
(403
)
(3,677
)
(634
)
Loss before income taxes
(4,728
)
(27,813
)
(23,701
)
(47,225
)
Income tax expense (benefit)
(811
)
(2,685
)
794
(20,035
)
Net loss
$
(3,917
)
$
(25,128
)
$
(24,495
)
$
(27,190
)
Less: Net loss attributable to
non-controlling interest
(1,389
)
(5,752
)
(5,330
)
(5,752
)
Net loss attributable to PowerSchool
Holdings, Inc.
(2,528
)
(19,376
)
(19,165
)
(21,438
)
Net loss attributable to the PowerSchool
Holdings, Inc. per share of Class A common stock - basic and
diluted
$
(0.02
)
$
(0.12
)
$
(0.12
)
$
(0.14
)
Weighted average shares of Class A common
stock outstanding - basic and diluted
158,812,536
156,962,167
158,387,266
156,962,167
Other comprehensive income (loss) -
Foreign currency translation
(741
)
(336
)
(1,744
)
(564
)
Total other comprehensive income
(loss)
(741
)
(336
)
(1,744
)
(564
)
Less: comprehensive income (loss)
attributable to non-controlling interest
$
(149
)
$
(11
)
$
(350
)
$
(57
)
Comprehensive loss attributable to
PowerSchool Holdings, Inc.
$
(3,120
)
$
(19,701
)
$
(20,559
)
$
(21,945
)
CONSOLIDATED BALANCE
SHEETS
(unaudited)
(in thousands)
September 30, 2022
December 31, 2021
Assets
Current Assets:
Cash and cash equivalents
$
108,873
$
86,479
Accounts receivable—net of allowance of
$6,160 and $4,964 respectively
102,402
48,403
Prepaid expenses and other current
assets
36,889
38,423
Total current assets
248,164
173,305
Property and equipment - net
6,793
15,676
Operating lease right-of-use assets
9,962
—
Capitalized product development costs -
net
98,338
80,611
Goodwill
2,486,423
2,454,692
Intangible assets - net
745,805
804,909
Other assets
28,562
27,489
Total assets
$
3,624,047
$
3,556,682
Liabilities and Stockholders'/Members’
Equity
Current Liabilities:
Accounts payable
$
6,509
$
12,449
Accrued expenses
73,255
71,167
Operating lease liabilities, current
6,419
—
Deferred revenue, current
363,754
294,276
Current portion of long-term debt
7,750
7,750
Total current liabilities
457,687
385,642
Noncurrent Liabilities:
Other liabilities
2,315
7,423
Operating lease liabilities—net of
current
9,241
—
Deferred taxes
294,682
295,959
Tax receivable agreement liability
397,679
404,394
Deferred revenue—net of current
4,962
6,881
Long-term debt, net
729,818
733,425
Total liabilities
1,896,384
1,833,724
Stockholders’/Members’ Equity:
Class A common stock, $0.0001 par value
per share, 500,000,000 shares authorized, 159,365,089 shares issued
and outstanding as of September 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 September 30, 2022. 39,928,472 shares issued
and outstanding as of December 31, 2021
4
4
Additional paid-in capital
1,429,664
1,399,967
Accumulated other comprehensive income
(1,960
)
(216
)
Accumulated deficit
(185,629
)
(165,026
)
Total stockholders’/members’ equity
attributable to PowerSchool Holdings, Inc.
1,242,095
1,234,745
Non-controlling interest
485,568
488,213
Total stockholders’/members’ equity
1,727,663
1,722,958
Total liabilities and
stockholders’/members’ equity
$
3,624,047
$
3,556,682
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(unaudited)
Three Months Ended
September 30,
Nine Months Ended
September 30,
2022
2021
2022
2021
(in thousands)
Cash flows from operating
activities:
Net loss
$
(3,917
)
$
(25,128
)
$
(24,495
)
$
(27,190
)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Loss on extinguishment of debt
—
12,905
—
12,905
Depreciation and amortization
30,812
29,181
91,119
84,496
Share-based compensation
12,490
10,719
38,100
13,455
Write-off of right-of-use assets and
disposal of property and equipment
—
23
8,597
27
Change in fair value of
acquisition-related contingent consideration
340
—
(5,586
)
—
Other
412
2,125
1,216
8,329
Changes in operating assets and
liabilities — net of effects of acquisitions:
Accounts receivables
(46,008
)
(28,246
)
(52,651
)
(28,982
)
Prepaid expenses and other current
assets
(1,680
)
(8,599
)
1,635
(4,333
)
Other assets
2,289
8,866
(1,526
)
(1,667
)
Accounts payable
(508
)
(4,405
)
(5,621
)
(1,995
)
Accrued expenses
7,332
(554
)
(521
)
1,246
Other liabilities
(3,073
)
(150
)
(8,290
)
(192
)
Deferred taxes
(2,086
)
(2,513
)
(507
)
(21,406
)
Deferred revenue
190,700
178,852
65,312
88,193
Net cash provided by operating
activities
$
187,103
$
173,076
$
106,782
$
122,886
Cash flows from investing
activities:
Purchases of property and equipment
(643
)
(308
)
(2,844
)
(3,222
)
Proceeds from sale of property and
equipment
—
(14
)
—
—
Investment in capitalized product
development costs
(12,358
)
(9,141
)
(33,285
)
(28,278
)
Acquisitions—net of cash acquired
—
(406
)
(31,155
)
(319,230
)
Partial payment of acquisition-related
contingent consideration
—
—
(1,392
)
—
Net cash used in investing activities
$
(13,001
)
$
(9,869
)
$
(68,676
)
$
(350,730
)
Cash flows from financing
activities:
Taxes paid related to the net share
settlement of equity awards
(8,824
)
—
(8,824
)
—
Proceeds from Revolving Credit
Agreement
—
—
70,000
55,000
Proceeds from Bridge Loan
—
—
—
315,200
Repayment of Bridge Loan
—
(320,000
)
—
(320,000
)
Repayment of Second Lien Debt
—
(365,000
)
—
(365,000
)
Repayment of Revolving Credit
Agreement
(70,000
)
(95,000
)
(70,000
)
(95,000
)
Repayment of Incremental Facility
—
(68,425
)
—
(68,775
)
Repayment of First Lien Debt
(1,938
)
(1,938
)
(5,813
)
(5,813
)
Payments for repurchase of management
incentive units
—
—
—
(448
)
Payments of deferred offering costs
—
(9,099
)
(295
)
(11,753
)
Payment of debt issuance costs
—
(723
)
—
(2,823
)
Repayment of capital leases
—
81
—
(25
)
Proceeds from initial public offering
—
766,075
—
766,075
Net cash (used in) provided by financing
activities
$
(80,762
)
$
(94,029
)
$
(14,932
)
$
266,638
Effect of foreign exchange rate changes on
cash
88
(698
)
(782
)
(515
)
Net increase in cash, cash equivalents,
and restricted cash
93,428
68,480
22,392
38,279
Cash, cash equivalents, and restricted
cash—Beginning of period
15,955
23,045
86,991
53,246
Cash, cash equivalents, and restricted
cash—End of period
$
109,383
$
91,525
$
109,383
$
91,525
RECONCILIATION OF GAAP TO
NON-GAAP FINANCIAL MEASURES
(unaudited)
Reconciliation of Gross profit to
Adjusted gross profit
Three Months Ended
September 30,
Nine Months Ended
September 30,
(in thousands, except for percentages)
2022
2021
2022
2021
Gross profit
$
92,647
$
85,620
$
263,870
$
237,486
Depreciation
263
489
803
1,322
Share-based compensation(1)
2,144
1,324
6,458
1,486
Restructuring(2)
1,223
905
3,325
2,385
Acquisition-related expense(3)
266
233
558
484
Amortization
14,576
12,604
42,266
36,374
Adjusted Gross Profit
$
111,119
$
101,175
$
317,280
$
279,537
Gross Profit Margin(4)
57.0
%
57.5
%
56.2
%
57.6
%
Adjusted Gross Profit Margin(5)
68.4
%
67.9
%
67.6
%
67.8
%
_______________
(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
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
September 30,
Nine Months Ended
September 30,
(in thousands)
2022
2021
2022
2021
Net loss
$
(3,917
)
$
(25,128
)
$
(24,495
)
$
(27,190
)
Add:
Amortization
29,680
27,530
87,409
79,562
Depreciation
1,114
1,667
3,710
4,950
Net interest expense(1)
11,158
12,857
26,923
51,409
Loss on extinguishment of debt
—
12,905
—
12,905
Income tax expense (benefit)
(811
)
(2,685
)
794
(20,035
)
Share-based compensation
13,222
10,719
37,859
13,455
Management fees(2)
85
424
262
615
Restructuring(3)
1,523
839
11,706
3,576
Acquisition-related expense(4)
2,535
923
1,769
8,662
Other expense (income) due to tax rate
change(5)
(2,342
)
—
(2,342
)
—
Adjusted EBITDA
$
52,247
$
40,051
$
143,595
$
127,909
Net loss margin
(2.4
) %
(16.9
) %
(5.2
) %
(6.6
) %
Adjusted EBITDA margin(6)
32.2
%
26.9
%
30.6
%
31.0
%
_______________
(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)
Refers to benefit received from the remeasurement of the tax
receivable agreement liability due to a change in Pennsylvania
statutory income tax rate.
(6)
Represents Adjusted EBITDA as a percentage
of revenue.
Reconciliation of Net Loss to Non-GAAP
Net Income
Three Months Ended
September 30,
Nine Months Ended
September 30,
(in thousands, except share and per share
data)
2022
2021
2022
2021
Net loss
$
(3,917
)
$
(25,128
)
$
(24,495
)
$
(27,190
)
Add:
Amortization
29,680
27,530
87,409
79,562
Depreciation
1,114
1,667
3,710
4,950
Share-based compensation
13,222
10,719
37,859
13,455
Management fees(1)
85
424
262
615
Restructuring(2)
1,523
839
11,706
3,576
Acquisition-related expense(3)
2,535
923
1,769
8,662
Loss on extinguishment of debt
—
12,905
—
12,905
Other expense (income) due to tax rate
change(4)
(2,342
)
—
(2,342
)
—
Non-GAAP Net Income
41,900
29,879
115,878
96,535
Weighted-average Class A common stock
outstanding used in computing GAAP net loss per share - basic
158,812,536
156,962,167
158,387,266
156,962,167
Weighted-average shares Class A common
stock outstanding used in computing Non-GAAP net income per share -
basic
158,812,536
156,962,167
158,387,266
156,962,167
Weighted-average shares Class A common
stock outstanding used in computing GAAP net loss per share -
diluted
158,812,536
156,962,167
158,387,266
156,962,167
Effect of Restricted Shares and RSUs
277,744
1,496,710
62,048
1,496,710
Effect of LLC Units
39,928,472
39,928,472
39,928,472
39,928,472
Weighted-average shares Class A common
stock outstanding used in computing Non-GAAP net income per share -
diluted
199,018,752
198,387,349
198,377,786
198,387,349
GAAP net loss attributable to the
PowerSchool Holdings, Inc. per share of Class A common stock -
basic
$
(0.02
)
$
(0.12
)
$
(0.12
)
$
(0.14
)
Non-GAAP net income per share of Class A
common stock - basic
$
0.26
$
0.19
$
0.73
$
0.62
GAAP net loss attributable to the
PowerSchool Holdings, Inc. per share of Class A common stock -
diluted
$
(0.02
)
$
(0.12
)
$
(0.12
)
$
(0.14
)
Non-GAAP net income per share of Class A
common stock - diluted
$
0.21
$
0.15
$
0.58
$
0.49
_______________
(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.
(4)
Refers to benefit received from the
remeasurement of the tax receivable agreement liability due to a
change in Pennsylvania statutory income tax rate.
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
$
39,009
$
35,138
$
114,303
$
97,802
Less:
Share-based compensation
1,501
554
3,663
573
Restructuring
(13
)
10
89
112
Acquisition-related expense
183
180
408
359
Non-GAAP Cost of Revenue - Subscription
and Support
$
37,338
$
34,394
$
110,143
$
96,758
GAAP Cost of Revenue - Services
$
14,852
$
14,482
$
45,585
$
37,971
Less:
Share-based compensation
643
770
2,795
912
Restructuring
1,236
895
3,236
2,272
Acquisition-related expense
83
54
150
126
Non-GAAP Cost of Revenue - Services
$
12,890
$
12,763
$
39,404
$
34,661
GAAP Research & Development
$
27,821
$
24,400
$
80,528
$
64,874
Less:
Share-based compensation
3,709
1,892
9,837
2,363
Restructuring
265
—
265
684
Acquisition-related expense
1,252
224
2,146
681
Non-GAAP Research & Development
$
22,595
$
22,284
$
68,280
$
61,146
GAAP Selling, General and
Administrative
$
45,530
$
47,276
$
133,117
$
103,260
Less:
Share-based compensation
7,368
7,503
21,564
9,606
Management fees
85
424
262
615
Restructuring
35
(66
)
8,116
507
Acquisition-related expense
1,005
171
(3,565
)
1,422
Non-GAAP Selling, General and
Administrative
$
37,037
$
39,244
$
106,740
$
91,110
Reconciliation of Net Cash Provided by
Operating Activities to Free Cash Flow and Unlevered Free Cash
Flow
Three Months Ended
September 30,
Nine Months Ended
September 30,
(in thousands)
2022
2021
2022
2021
Net cash provided by operating
activities
$
187,103
$
173,076
$
106,782
$
122,886
Purchases of property and equipment
(643
)
(308
)
(2,844
)
(3,222
)
Capitalized product development costs
(12,358
)
(9,141
)
(33,285
)
(28,278
)
Free Cash Flow
$
174,102
$
163,627
$
70,653
$
91,386
Add:
Cash paid for interest on outstanding
debt
10,528
13,129
24,700
44,774
Unlevered Free Cash Flow
$
184,630
$
176,756
$
95,353
$
136,160
© 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/20221107005900/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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