0001835681FALSE00018356812024-08-092024-08-09

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 8-K
 
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
Date of Report (date of earliest event reported): August 9, 2024
 
PowerSchool Holdings, Inc.
(Exact name of Registrant, as specified in its charter)
Delaware001-0432185-4166024
(State or other jurisdiction of incorporation)(Commission File Number)(I.R.S. Employer Identification Number)

150 Parkshore Drive
Folsom, California
95630
(Address of principal executive offices)(Zip Code)


(877) 873-1550
(Registrant's telephone number, including area code)
Not Applicable
(Former name or address, if changed since last report) 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions: 
☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) 
☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) 
☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) 
☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) 
Securities registered pursuant to Section 12(b) of the Act:
 
Title of Each Class
Trading Symbol(s)
Name of each exchange on which registered
Class A Common Stock, par value $0.0001 per share
PWSCThe New York Stock Exchange
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter). 
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Item 2.02.     Results of Operations and Financial Condition.



On August 9, 2024, PowerSchool Holdings, Inc. issued a press release announcing its financial results for the quarter ended June 30, 2024. A copy of the press release is furnished herewith as Exhibit 99.1.

This information contained in this Item 2.02 and in Exhibit 99.1 shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities under that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.

Item 9.01              Financial Statements and Exhibits.
 
(d) Exhibits
 
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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.


 POWERSCHOOL HOLDINGS, INC.
   
Date: August 9, 2024    
By:/s/ Eric Shander
 Name:Eric Shander
 Title:President and Chief Financial Officer

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PowerSchool Announces Second Quarter Financial Results

•Second quarter total revenue increased 10% year-over-year to $191.6 million, meeting outlook
•Second quarter GAAP net loss was $25.7 million, representing 13% of total revenue, and Adjusted EBITDA* increased 9% year-over-year to $66.6 million, meeting outlook and representing 35% of total revenue


FOLSOM, CA – August 9, 2024: 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, 2024.

“I'm pleased with our second quarter performance, which highlights our market leadership in K-12 software and the continued demand for our comprehensive platform of mission-critical products. We demonstrated continued innovation momentum with the launch of new and exciting products such as MyPowerHub and two additional modules of our AI-powered PowerBuddy platform," said Hardeep Gulati, PowerSchool CEO. "We look forward to the next chapter in PowerSchool's growth story with our partnership with Bain Capital."

Second Quarter 2024 Financial Highlights

•Revenue: Total revenue was $191.6 million for the three months ended June 30, 2024, up 10% year-over-year.
•S&S Revenue: Subscriptions and support revenue was $170.1 million, up 16% year-over-year.
•Gross Profit: GAAP gross profit was $111.8 million, representing 58% of total revenue, and Adjusted Gross Profit* was $133.6 million, representing 70% of total revenue.
•Net Income/Loss: GAAP net loss was $25.7 million, representing 13% of total revenue, and Non-GAAP Net Income* was $48.1 million, representing 25% of total revenue.
•Adjusted EBITDA: Adjusted EBITDA* was $66.6 million, up 9% year-over-year and representing 35% of total revenue.
•Earnings/Loss Per Share: GAAP net loss per diluted share was $0.12 on 203.7 million shares outstanding. Non-GAAP net income per diluted share* was $0.23 on 205.0 million shares outstanding.
•Cash Flow: Net cash used in operating activities was $47.4 million, representing 25% of total revenue.

* 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

•Customer Momentum: Won several notable deals in the quarter, including a data-as-a-service (DaaS) cross-sell win with the Arkansas State Department of Education and cross-sells to Springfield School District 186, Idea Public Schools, Hawthorne School District, and Orleans Parish School District.
•New Product Launch: Announced the launch of MyPowerHub, a next-generation communications platform designed to transform how schools communicate with parents, students, and staff. MyPowerHub offers a suite of features including student information such as grades, assignments, attendance, and schedules, as well as personalized notifications, event calendars, and secure messaging through a single, seamless interface, enhancing communication and collaboration within K-12 communities while generating significant cost savings for school districts by eliminating the need for multiple other software programs.
•2024 Education Focus Report: Released the PowerSchool 2024 Education Focus Report for the 2024-2025 school year, offering an in-depth analysis of key challenges and innovations shaping the U.S. education landscape. Drawing from a national survey of 1,620 educators, the report provides critical insights into the evolving needs and priorities of the education community. Key findings include: 1) personalized learning drives
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student success, 2) growing importance of AI in education, 3) bold leadership and data utilization are key priorities, 4) evolving education workforce, and 5) strengthening school-home connections.
•Delivering AI: Announced general availability of two additional AI-powered solutions, PowerBuddy for Learning Student Assistant and PowerBuddy for Data Analysis, which enhance the educational experience and streamline data analysis:
◦PowerBuddy for Learning Student Assistant: Integrated into the popular PowerSchool Schoology Learning Management System, PowerBuddy for Learning is a secure AI assistant designed to offer personalized guidance and enhance the learning experience for students. By leveraging conversational AI, PowerBuddy delivers contextually relevant prompts that are customized to each student’s grade level, lesson content, and assignments. This encourages deeper exploration of topics and ensures students receive the necessary guidance and resources aligned with district and state standards, all tailored to their individual learning styles.
◦PowerBuddy for Data Analysis: Acts as a co-pilot, revolutionizing data analysis by allowing users to access data seamlessly through natural language conversations. This cutting-edge AI assistant significantly reduces response times for data requests by removing the need for query writing, automating data visualizations, and generating comprehensive data analyses. These features enable educators and administrators to make well-informed decisions with unprecedented speed and ease.
•International Product Enhancements: Launched translated and localized products for the Middle East, which will allow educators in the region to accomplish critical administrative, classroom, and communication workflows by leveraging newly embedded Arabic translations, right-to-left interface display, Hijri calendar overlay, and more. By providing an Arabic interface, PowerSchool aims to empower educational institutions and facilitate learning for diverse communities.

Commenting on the Company’s results, Eric Shander, PowerSchool President and CFO, added, “We delivered another strong quarter consistent with our philosophy of double-digit top line growth and margin expansion. I am confident our comprehensive suite of mission-critical software products will continue to meaningfully improve school district operations and drive significant long-term value for the entire K-12 ecosystem."

In light of the proposed transaction with Bain Capital, which was announced on June 7, 2024, PowerSchool will not host an earnings conference call and is suspending its practice of providing financial guidance. PowerSchool currently expects to close the transaction in the second half of 2024.

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.”

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 60 million students globally and more than 18,000 customers, including over 90 of the 100 largest districts by student enrollment in the United States, and sells solutions in over 90 countries globally. Visit www.powerschool.com to learn more.

Forward-Looking Statements

This press release contains “forward-looking statements” within the meaning of the safe harder provisions of the U.S. Private Securities Litigation Reform Act of 1995. 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
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evaluated as such. Forward-looking statements are not assurances of future performance and may 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: 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, 2023 (the "Annual Report"), filed with the Securities Exchange Commission (“SEC”). Copies of the Annual Report 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 publicly update forward-looking statements, whether written or oral, to reflect future events, future developments or circumstances, or new information.

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, 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, share-based compensation,
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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, nonrecurring litigation expense, provision for (benefit from) income tax, and other one-time costs. 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 plus proceeds from the sale of property and equipment. 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.
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CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(unaudited)
(in thousands except per share data)
Three Months Ended
June 30,		Six Months Ended
June 30,
2024202320242023
Revenue:
Subscriptions and support170,129 146,503 $337,056 $287,576 
Service19,321 20,197 36,007 36,429 
License and other2,142 7,197 3,496 9,345 
Total revenue191,592 173,897 376,559 333,350 
Cost of revenue:
Subscriptions and support47,768 36,781 94,095 74,975 
Service12,210 15,123 25,593 29,446 
License and other1,148 1,017 2,219 1,968 
Depreciation and amortization18,705 16,108 37,785 32,129 
Total cost of revenue79,831 69,029 159,692 138,518 
Gross profit111,761 104,868 216,867 194,832 
Operating expenses:
Research and development30,616 25,862 62,267 51,283 
Selling, general, and administrative71,621 53,129 124,052 102,687 
Acquisition costs276 — 1,029 — 
Depreciation and amortization17,344 15,764 34,693 31,535 
Total operating expenses119,857 94,755 222,041 185,505 
Income (loss) from operations
(8,096)10,113 (5,174)9,327 
Interest expense—net23,193 16,101 44,189 30,130 
Other (income) expenses—net(853)31 (950)74 
Loss before income taxes
(30,436)(6,019)(48,413)(20,877)
Income tax expense (benefit)
(4,732)(1,724)139 (1,769)
Net loss
$(25,704)$(4,295)$(48,552)$(19,108)
Less: Net loss attributable to non-controlling interest(5,693)(1,100)(8,983)(4,060)
Net loss attributable to PowerSchool Holdings, Inc. (20,011)(3,195)(39,569)(15,048)
Net loss attributable to PowerSchool Holdings, Inc. Class A common stock:
Basic(20,011)(3,195)(39,569)(15,048)
Diluted(24,916)(4,080)(49,047)(15,048)
Net loss attributable to PowerSchool Holdings, Inc. per share of Class A common stock, basic$(0.12)$(0.02)$(0.24)$(0.09)
Net loss attributable to PowerSchool Holdings, Inc. per share of Class A common stock, diluted$(0.12)$(0.02)$(0.24)$(0.09)
Weighted average shares of Class A common stock:
Basic166,040,370 163,067,859 165,538,730 161,794,290 
Diluted203,694,429 200,721,918 203,192,789 161,794,290 
Other comprehensive income (loss), net of taxes:
Foreign currency translation(304)21 (1,038)108 
Change in unrealized loss on investments— — — 3 
Total other comprehensive income (loss)(304)21 (1,038)111 
Less: Other comprehensive income (loss) attributable to non-controlling interest$(56)$4 $(192)$21 
Comprehensive loss attributable to PowerSchool Holdings, Inc. $(20,259)$(3,178)$(40,415)$(14,958)


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CONSOLIDATED BALANCE SHEETS
(unaudited)

(in thousands)
June 30, 2024December 31, 2023
Assets
Current Assets:
Cash and cash equivalents$20,678 $39,054 
Accounts receivable—net of allowance of $7,143 and $7,930 respectively89,393 76,618 
Prepaid expenses and other current assets45,797 40,449 
Total current assets155,868 156,121 
Property and equipment - net7,773 5,003 
Operating lease right-of-use assets12,892 15,998 
Capitalized product development costs - net113,661 112,089 
Goodwill2,768,966 2,740,725 
Intangible assets - net666,591 710,635 
Other assets35,491 36,311 
Total assets$3,761,242 $3,776,882 
Liabilities and Stockholders’ Equity
Current Liabilities:
Accounts payable$14,200 $13,629 
Accrued expenses128,094 116,271 
Operating lease liabilities, current3,398 4,958 
Deferred revenue, current206,482 373,672 
Revolving credit facility187,000 — 
Current portion of long-term debt8,379 8,379 
Total current liabilities547,553 516,909 
Noncurrent Liabilities:
Other liabilities1,142 2,178 
Operating lease liabilities—net of current12,784 13,359 
Deferred taxes268,953 275,316 
Tax Receivable Agreement liability375,647 396,397 
Deferred revenue—net of current6,875 6,111 
Long-term debt, net809,669 811,325 
Total liabilities2,022,623 2,021,595 
Stockholders' Equity:
Class A common stock, $0.0001 par value per share, 500,000,000 shares authorized, 166,471,395 and 164,796,626 shares issued and outstanding as of June 30, 2024 and December 31, 2023, respectively.16 16 
Class B common stock, $0.0001 par value per share, 300,000,000 shares authorized, 37,654,059 and 37,654,059 shares issued and outstanding as of June 30, 2024 and December 31, 2023, respectively. 4 4 
Additional paid-in capital1,550,637 1,520,288 
Accumulated other comprehensive loss(3,132)(2,094)
Accumulated deficit(257,956)(218,387)
Total stockholders' equity attributable to PowerSchool Holdings, Inc. 1,289,569 1,299,827 
Non-controlling interest449,050 455,460 
Total stockholders' equity 1,738,619 1,755,287 
Total liabilities and stockholders' equity$3,761,242 $3,776,882 
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CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)

Three Months Ended
June 30,		Six Months Ended
June 30,
(in thousands)
2024202320242023
Cash flows from operating activities:
Net loss$(25,704)$(4,295)$(48,552)$(19,108)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization36,049 31,873 72,477 63,664 
Share-based compensation19,013 17,494 33,168 32,043 
Amortization of operating lease right-of-use assets600 811 1,451 1,599 
Change in fair value of contingent consideration(119)(185)(99)(635)
Amortization of debt issuance costs1,487 885 2,975 1,761 
(Benefit from) provision for allowance for doubtful accounts318 995 (953)1,364 
Loss (gain) on lease modification2,329 1 2,291 53 
Loss (gain) on sale/disposal of property and equipment315 (7)(501)41 
Changes in operating assets and liabilities — net of effects of acquisitions:
Accounts receivables(28,589)(33,510)(10,841)(25,151)
Prepaid expenses and other current assets4,968 4,448 (4,954)(2,687)
Other assets185 (994)376 (3,277)
Accounts payable1,992 (433)1,346 (183)
Accrued expenses16,756 4,305 (8,615)(12,207)
Other liabilities(1,796)(1,855)(3,449)(3,607)
Deferred taxes(5,482)(2,339)(948)(2,834)
Tax Receivable Agreement liability623 370 945 385 
Deferred revenue(70,300)(50,275)(173,156)(123,962)
Net cash used in operating activities(47,355)(32,711)(137,039)(92,741)
Cash flows from investing activities:
Purchases of property and equipment(1,064)(582)(4,951)(938)
Proceeds from sale of property and equipment839 — 839 — 
Investment in capitalized product development costs(9,114)(10,272)(18,070)(19,948)
Acquisitions—net of cash acquired— — (36,062)— 
Payment of acquisition-related deferred consideration— — (5,800)— 
Net cash used in investing activities(9,339)(10,854)(64,044)(20,886)
Cash flows from financing activities:
Taxes paid related to the net share settlement of equity awards(52)(141)(117)(1,425)
Proceeds from Revolving Credit Agreement210,000 10,000 350,000 10,000 
Repayment of Revolving Credit Agreement(148,000)— (163,000)— 
Repayment of First Lien Debt(2,095)(1,938)(4,190)(3,875)
Payment of contingent consideration— — (245)— 
Net cash (used in) provided by financing activities
59,853 7,921 182,448 4,700 
Effect of foreign exchange rate changes on cash$94 $(235)$259 $(161)
Net increase in cash, cash equivalents, and restricted cash3,253 (35,879)(18,376)(109,088)
Cash, cash equivalents, and restricted cash—Beginning of period17,925 64,773 39,554 137,982 
Cash, cash equivalents, and restricted cash—End of period$21,178 $28,894 $21,178 $28,894 
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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)2024202320242023
 
Gross profit$111,761 $104,868 $216,867 $194,832 
Depreciation61163212415
Share-based compensation (1)
3,0152,6545,2885,112
Restructuring (2)
(62)5241,216537
Acquisition-related expense (3)
15847334134
Amortization18,64415,94537,57331,715
Adjusted Gross Profit$133,577 $124,201 $261,490 $232,745 
Gross Profit Margin (4)
58.3 %60.3 %57.6 %58.4 %
Adjusted Gross Profit Margin (5)
69.7 %71.4 %69.4 %69.8 %
 
(1) Refers to expenses in cost of revenue associated with share-based compensation.
(2)    Refers to expenses in cost of revenue related to migration of customers from legacy to core products, and severance expense related to offshoring activities and executive departures.
(3)    Refers to expenses in cost of revenue 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)2024202320242023
 
Net loss$(25,704)$(4,295)$(48,552)$(19,108)
Add:
Amortization35,16231,05070,65461,924
Depreciation8878221,8241,741
Interest expense - net (1)
23,19316,10144,18930,130
Income tax benefit(4,732)(1,724)139(1,769)
Share-based compensation    
20,01417,91034,69933,391
Management fees (2)
8195161158
Restructuring (3)
17,22891721,0862,283
Acquisition-related expense (4)
1,2263144,4281,848
Change in tax reserves (5)
(798)—(798)—
Adjusted EBITDA$66,557 $61,190 $127,830 $110,598 
Net loss margin(6)
(13.4)%(2.5)%(12.9)%(5.7)%
Adjusted EBITDA Margin (7)
34.7 %35.2 %33.9 %33.2 %
(1)    Interest expense, net of interest income.
(2)    Refers to expense associated with collaboration with our principal stockholders and their internal consulting groups.
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(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, loss on modification of debt, nonrecurring litigation expense, executive departures, and costs related to the Bain transaction.
(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, Chalk, and SchoolMessenger These incremental costs are embedded in our research and development, selling, general and administrative, and cost of revenue line items.
(5)    Refers to income recognized due to the change in tax reserves.
(6)    Represents net loss as a percentage of revenue.
(7)    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 per share data)2024202320242023
 
Net loss$(25,704)$(4,295)$(48,552)$(19,108)
Add:
Amortization35,16231,05070,65461,924
Depreciation8878221,8241,741
Share-based compensation    
20,014 17,91034,69933,391
Management fees (1)
8195161158
Restructuring (2)
17,22891721,0862,283
Acquisition-related expense (3)
1,2263144,4281,848
Change in tax reserves (4)
(798)—(798)—
Non-GAAP Net Income$48,096$46,813$83,502$82,237
Weighted-average Class A common stock used in computing GAAP net loss per share, basic166,040,370163,067,859165,538,730161,794,290
Weighted-average Class A common stock used in computing GAAP net loss per share, diluted203,694,429200,721,918203,192,789161,794,290
Weighted-average shares Class A common stock used in computing Non-GAAP net income, basic166,040,370163,067,859165,538,730161,794,290
Dilutive impact of LLC Units37,654,05937,654,05937,654,05937,654,059
Dilutive impact of Restricted Shares and RSUs410,051708,939485,059832,748
Dilutive impact of Market-share units941,558—462,342725,936244,184
Weighted-average shares Class A common stock used in computing Non-GAAP net income per share - diluted205,046,038201,893,199204,403,784200,525,281
GAAP net loss attributable to the PowerSchool Holdings, Inc. per share of Class A common stock - basic$(0.12)$(0.02)$(0.24)$(0.09)
Non-GAAP net income attributable to the PowerSchool Holdings, Inc. per share of Class A common stock - basic$0.29$0.29$0.50$0.51
GAAP net loss attributable to the PowerSchool Holdings, Inc. per share of Class A common stock - diluted$(0.12)$(0.02)$(0.24)$(0.09)
Non-GAAP net income attributable to the PowerSchool Holdings, Inc. per share of Class A common stock - diluted$0.23$0.23$0.41$0.41
9
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(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, executive departures, loss on modification of debt, nonrecurring litigation expense, and costs related to the Bain transaction.
(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, Chalk, and SchoolMessenger. These incremental costs are embedded in our research and development, selling, general and administrative, and cost of revenue line items.
(4)    Refers to income recognized due to the change in tax reserves.

 

10
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Reconciliation of GAAP to Non-GAAP Cost of Revenue and Operating Expenses

 Three Months Ended June 30,Six Months Ended June 30,
 (in thousands)2024202320242023
 
GAAP Cost of Revenue - Subscription and Support$47,768 $36,781 $94,095 $74,975 
Less:
Share-based compensation2,1471,7003,6963,256
Restructuring (62)523959523
Acquisition-related expense1213825761
Non-GAAP Cost of Revenue - Subscription and Support$45,562$34,520$89,183$71,135
GAAP Cost of Revenue - Services$12,210 $15,123 $25,593 $29,446 
Less:
Share-based compensation8689541,5911,856
Restructuring—125714
Acquisition-related expense3787873
Non-GAAP Cost of Revenue - Services$11,305$14,160$23,667$27,503
GAAP Research & Development$30,616 $25,862 $62,267 $51,283 
Less:
Share-based compensation5,1384,6758,7748,747
Restructuring(103)92,293113
Acquisition-related expense5491451,0421,522
Non-GAAP Research & Development$25,032$21,033$50,158$40,901
GAAP Selling, General and Administrative$71,621 $53,129 $124,052 $102,687 
Less:
Share-based compensation11,86110,58020,63819,532
Management fees8195161158
Restructuring17,39338517,5761,633
Acquisition-related expense2431222,023193
Non-GAAP Selling, General and Administrative$42,043$41,947$83,655$81,171
Reconciliation of Net Cash Provided by Operating Activities to Free Cash Flow and Unlevered Free Cash Flow
 
Three Months Ended June 30,Six Months Ended June 30,
 (in thousands)2024202320242023
Net cash used in operating activities
$(47,355)$(32,711)$(137,039)$(92,741)
Proceeds from the sale of property and equipment839 — 839 — 
Purchases of property and equipment(1,064)(582)(4,951)(938)
Capitalized product development costs(9,114)(10,272)(18,070)(19,948)
Free Cash Flow$(56,694)$(43,565)$(159,220)$(113,627)
Add:
Cash paid for interest on outstanding debt20,64113,97339,77027,669
Unlevered Free Cash Flow$(36,053)$(29,592)$(119,450)$(85,958)
    

© 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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Investor Contact:
Shane Harrison
investor.relations@powerschool.com
855-707-5100

Media Contact:
Beth Keebler
publicrelations@powerschool.com
503-702-4230

Source: PowerSchool Holdings, Inc.









12
v3.24.2.u1
Cover page
Aug. 09, 2024
Cover [Abstract]  
Document Type 8-K
Document Period End Date Aug. 09, 2024
Entity Registrant Name PowerSchool Holdings, Inc.
Entity Incorporation, State or Country Code DE
Entity File Number 001-04321
Entity Tax Identification Number 85-4166024
Entity Address, Address Line One 150 Parkshore Drive
Entity Address, City or Town Folsom
Entity Address, State or Province CA
Entity Address, Postal Zip Code 95630
City Area Code 877
Local Phone Number 873-1550
Written Communications false
Soliciting Material false
Pre-commencement Tender Offer false
Pre-commencement Issuer Tender Offer false
Title of 12(b) Security Class A Common Stock, par value $0.0001 per share
Trading Symbol PWSC
Security Exchange Name NYSE
Entity Emerging Growth Company false
Entity Central Index Key 0001835681
Amendment Flag false
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