Powerschool — Investor Day (September 2023)
123 slides from Powerschool's investor day presentation, Sep 14, 2023
Slide 1: 2023 Investor Day
2023 Investor Day September 14, 2023
Slide 2: Safe Harbor
Safe Harbor This presentation and the accompanying oral commentary have been prepared by PowerSchool for informational purposes only and not for any other purpose. Nothing contained in this presentation is, or should be construed as, a recommendation, promise, or representation by the presenter or P
Slide 3: Today's Agenda
Today’s Agenda 9:05 am PowerSchool’s Unique Positioning for Sustainable, Profitable Growth Hardeep Gulati | Chief Executive Officer 9:50 am Innovating for Long Term Growth Shivani Stumpf | Head of New Solutions & Innovation 10:15 am Q&A Session Exec Team 10:35 am Break 10:45 am Multiple Sales Driver
Slide 4: Uniquely Positioned For Sustainable, Profitable Growth
Uniquely Positioned For Sustainable, Profitable Growth Hardeep Gulati CEO
Slide 5: PowerSchool Brand Video
PowerSchool Brand Video [> PowerSchool
Slide 6: What Drives PowerSchool
What Drives PowerSchool 6 PowerSchool’s Mission To power the education ecosystem with unified personalized solutions that help educators and students realize their full potential PowerSchool’s Vision Personalize education for every student journey
Slide 7: PowerSchool at a Glance: Profile of a Market Leader
PowerSchool at a Glance: Profile of a Market Leader Metrics as of June 2023 7 $636M +10% y/y growth ARR $216M 33% margin Adj. EBITDA (LTM) 109% NRR RateStrong Performance Metrics 15,000+ state, district, and school customers Customers 50M+ students reached ~80% of students in U.S. and Canada Student
Slide 8: What We Are Hearing From The Street and Plan to Address Today
What We Are Hearing From The Street and Plan to Address Today 8 How do we rationalize your ~80% reach with 6% market share? How will International and Personalized Education solutions add to your growth? How do you get the 1-2 product customer to 3, 4, 5+ products? Is AI a risk or a tailwind for the
Slide 9: The PowerSchool Advantage
The PowerSchool Advantage 9 Market Leader with Strong Financial Performance Strong Growth Trajectory Well Positioned in Attractive Market Significant Future Growth Opportunities
Slide 10: The PowerSchool Advantage
The PowerSchool Advantage 10 Market Leader with Strong Financial Performance Strong Growth Trajectory Well Positioned in Attractive Market Significant Future Growth Opportunities
Slide 11: Decades of Platform Investment Creates Strong Moat
11 Decades of Platform Investment Creates Strong Moat 1997 - 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023+ SIS Enrollment Special Ed ERP Talent Assessments LMS Analytics College & Career Readiness Attendance Curriculum & Instruction Behavior Leading Student Information System (SIS) Platform Exp
Slide 12: Empowering Educators, Administrators, and Families
Empowering Educators, Administrators, and Families 12 COUNSELING STUDENT SUPPORT INSTRUCTION HR IT ADMINISTRATION
Slide 13: Unparalleled Presence in Core Markets
Unparalleled Presence in Core Markets 13 ~50M Students benefiting Student Coverage Customer Base ~80% of Students In U.S. & Canada 90%+ of top 100 districts in U.S. District Coverage 15,000+ customers In 98 countries 35+ State and territory-wide contracts
Slide 14: Improving Education Outcomes For 50M+ Students
253 Million Periods of Attendance Taken 884 Million Parent Engagements Improving Education Outcomes For 50M+ Students 186 Million Assignments in Schoology Learning 8 Million Enrollment Forms Submitted 40 Million Educator Jobs Posted 35 Million Student Sessions in Naviance 271 Million Teacher-Created
Slide 15: Demonstrating Significant Operating Leverage
$231 $429 2019 2022 $93 $196 2019 2022 $19 $104 2019 2022 Demonstrating Significant Operating Leverage 15 +20% CAGR +23% CAGR +28% CAGR +75% CAGR 63% 68% 25% 31% 5% 16% $365 $631 2019 2022 Revenue Adj Gross Profit Adj EBITDA Free Cash Flow Note: the above references Non-GAAP or key business metrics.
Slide 16: The PowerSchool Advantage
The PowerSchool Advantage 16 Market Leader with Strong Financial Performance Strong Growth Trajectory Well Positioned in Attractive Market Significant Future Growth Opportunities
Slide 17: Significant Spending on Education Worldwide
Significant Spending on Education Worldwide 17 Vast Education Market Representing 6% of Global GDP 12% 41% 6% 30% 11% $6 Trillion $8 Trillion 2022 2030E K-12 Accounts for 53% of Market $6 Trillion (2022) K-12 Rest of World ~$2.5T K-12 U.S. ~$750B Pre-K Higher Education Corporate & Lifelong Source: M
Slide 18: Durable Market That is Underinvested in Tech
$0 $100 $200 $300 $400 $500 $600 $700 $800 Durable Market That is Underinvested in Tech 18 Global Financial Crisis U.S. Public K-12 Expenditures 1 Long Penetration Runway $Billion Steadfast U.S. Funding of $700+ Billion Salaries Benefits Instruction Student Support Operations Administration Food Tra
Slide 19: Built to Solve the Challenges Facing K-12 Education
Built to Solve the Challenges Facing K-12 Education 19 Personalize pathways for each studentStudents Student learning loss Teachers Teachers over-extended Data Security Increasing data breaches Inefficiency Inefficient operations Technology Chaotic technology strategies Streamline testing and admini
Slide 20: Our Unique Value Proposition for K-12
Our Unique Value Proposition for K-12 20 1 2 3 4 5 Most comprehensive platform One solution for all operational, classroom, teacher, and data solutions Proven, scalable, secure and extensible Scale to districts across geos/size, significant investment in security and cloud Award-winning capabilities
Slide 21: Data and Experience Silos Restrict Student and Teacher Success
Data and Experience Silos Restrict Student and Teacher Success 21 Unified platform to integrate experience and generate insights from connected data K-12 Enterprise Software Student Attendance Data ERP Talent Management SIS Compliance Reporting College Career Planning Analytics LMS Applications Asse
Slide 22: Platform Provides Distinctive Market Position
Platform Provides Distinctive Market Position 22 Administration & Finance Classroom Solutions Student Information Teacher Solutions Data Insights Communication 1 Other Companies – Limited Point Solutions PowerSchool ~20M 1) Pro forma for pending SchoolMessenger acquisition. U.S. & Canada Students Po
Slide 23: Profile of a Vertical SaaS, Not an Ed Tech Company
10% 9% 6% 33% 34% 10% 26% 30% 7% Profile of a Vertical SaaS, Not an Ed Tech Company 23 Revenue Growth Rate Adjusted EBITDA Margin Unlevered FCF Margin Profitable Vertical SaaS EdTech Profitable Vertical SaaS EdTech Profitable Vertical SaaS EdTech Note: Bars represent 2023E values per FactSet. Profit
Slide 24: The PowerSchool Advantage
The PowerSchool Advantage 24 Market Leader with Strong Financial Performance Strong Growth Trajectory Well Positioned in Attractive Market Significant Future Growth Opportunities
Slide 25: Legacy of Strong Growth
25 2015 2016 2017 2018 2019 2020 2021 2022 2023E ~$100M ~$700M 27% Revenue CAGR Legacy of Strong Growth
Slide 26: Recent Growth Drivers
26 2019 2020 2021 2022 ARR 17% CAGR $372M $596M Growth with large accounts Recent Growth Drivers Note: the above references Non-GAAP or key business metrics. See the appendix for definitions and/or reconciliations of GAAP to Non-GAAP metrics. Flywheel effect from growing platform adoption driving cr
Slide 27: Platform Adoption Driving Cross Sell & Wallet Share
~20% of Customers contributing ~60% of ARR Using Multi-Products (4+) 27 Q4`19 Q4`20 Q4`21 Q4`22 # Products 4 5 6 8+ 7 +34% CAGR in ARR from customers with 4+ products Avg. ARR Per Customer vs. Single Product Customer Q4`22 2.9x 4.8x 8.4x 10.4x 15.9x 26.7x 2 Products 3 Products 4 Products 5 Products
Slide 28: Land & Expand Successful in Existing & New Logos
ARR By Customer Size 28 Q4`19 Q4`20 Q4`21 Q4`22 Customer ARR Size <$100K $100K- $499K >$500K +33% CAGR +17% CAGR +13% CAGR Recent Growth Drivers Land & Expand Successful in Existing & New Logos Note: the above references Non-GAAP or key business metrics. See the appendix for definitions and/or recon
Slide 29: Diversified Growth Across GTM Segments & Products
ARR By Market Segment 29 Recent Growth Drivers Diversified Growth Across GTM Segments & Products Note: the above references Non-GAAP or key business metrics. See the appendix for definitions and/or reconciliations of GAAP to Non-GAAP metrics. Q4`19 Q4`20 Q4`21 Q4`22 Market Segment Strategic (50K+ st
Slide 30: The PowerSchool Advantage
The PowerSchool Advantage 30 Market Leader with Strong Financial Performance Strong Growth Trajectory Well Positioned in Attractive Market Significant Future Growth Opportunities
Slide 31: Investments Are Expanding Addressable Market
of U.S. & Canada market Investments Are Expanding Addressable Market 31 Current Revenue • Grow wallet-share within existing ~15,000 U.S. and Canada customer base Cross-Sell Opportunity 1 • Extend go-to-market to reach the 1.3 billion global K-12 students • Innovation in data and engagement tools for
Slide 32: Significant Cross-Sell Whitespace Substantiates a 10-Year CAGR
Significant Cross-Sell Whitespace Substantiates a 10-Year 10% CAGR 32 Continue to penetrate core markets Cross-Sell Opportunity 1 2023 2033 +10% ARR CAGR by moving existing customers from 2 to 4 products over the next decade 2 4 Total Products 19 Total Products 19 Moving From 2 to 4 Products ARR Tod
Slide 33: Further Upside with New Logos & Expansion of Product Platform
Product Penetration Rates Based on Student Count (2022) Further Upside with New Logos & Expansion of Product Platform 33 Continue to penetrate core markets U.S. & Canada Opportunity 2 Market Opportunity with Existing Platform ~30% ~25% ~20% ~10% ~20% Penetration Today $0.8B New Logo Whitespace $3.9B
Slide 34: Platform Expansion – SchoolMessenger
Platform Expansion – SchoolMessenger 34 U.S. & Canada Opportunity 2 Pioneering provider of K-12 communications platform for parents and teachers Accretive existing profitability with upside via synergies Rationale & Expected Synergies Ability to centralize communications and data on one highly-integ
Slide 35: International Expansion: 1.3 Billion Students Outside North America
International Expansion: 1.3 Billion Students Outside North America 35 Drive growth in strategic markets Meaningfully expand TAM Global Opportunity 3 Global K-12 Student Counts 5M 56M 125M 99M 52M 244M 85M 18M 256M 195M 125M 6M Prioritized expansion region Presence today 27M $80-$100M in 3-5 Years 1
Slide 36: Unique Position to Lead GenAI-Powered Personalized Education Innovation
Unique Position to Lead GenAI-Powered Personalized Education Innovation 36 Personalized Education Opportunity 4 Make personalized education a reality Connected Intelligence Unified Insights My PowerSchool Personalized Experience Personalized LearningNav and ContentNav Personalized Pathways (Life Rea
Slide 37: Long-Term Runway of Sustainable Growth
Long-Term Runway of Sustainable Growth 37 Our Core U.S. & Canada International Upside Personalized Education Upside 2023 2033 $10.5B TAM $25B TAM $100B TAM $1B+ By 2026 Note: the above references Non-GAAP or key business metrics. See the appendix for definitions and/or reconciliations of GAAP to Non
Slide 38: Driving Sustainable Growth
Driving Sustainable Growth 38 Market Leader with Strong Financial Performance Strong Growth Trajectory Well Positioned in Attractive Market Significant Future Growth Opportunities
Slide 39: Innovation For Long Term Growth
Shivani Stumpf Head of New Solutions & Innovation Innovation For Long Term Growth
Slide 40: Forming the Context Required For Personalized Education
Forming the Context Required For Personalized Education The only end-to-end platform of mission- critical solutions Built on cloud data infrastructure Broad capabilities for all personas Vertically integrated data & analytics solutions Integrated AI and ML 40
Slide 41: Forming the Context Required For Personalized Education
Forming the Context Required For Personalized Education CLASSROOM Personalized Instruction AT HOME Personalized Homework SCHOOL ADMINISTRATION Personalized Curriculum and Resources STATE OFFICIALS Workforce planning 41 Attendance Grades Demographics Regulations/Compliance Class enrollment Test score
Slide 42: Investing in R&D
42 Core R&D Scale, Quality & Delivery Compliance 10% 20% 10% 10% New Solutions/Market Innovation Investing in R&D How We Allocate Our Innovation Investments
Slide 43: Innovation to Responsible AI-Powered Personalized Education
Innovation to Responsible AI-Powered Personalized Education 43 Connected Intelligence & P20W ContentNAV Personalized Homework LearningNAV My PowerSchool • First DaaS solution in K-12 • Data lake eliminates data silos • Automated content recommendations • Content for every type of learner • Reinforce
Slide 44: 1. Unified Insights
1. Unified Insights Making Data Descriptive, Predictive, and Actionable 44 Easily combine disparate district data Improve student outcomes & optimize funding Complete view of student & teacher Track and report on longitudinal trends & custom KPIs Advantages Risk Analysis Talent Analytics Student Ana
Slide 45: 2. Connected Intelligence
2. Connected Intelligence Unlock All K-12 Data with the First Data-as-a-Service Platform 45 Secure data from traditional siloed environments with real- time access Turnkey solution built on Snowflake Data Cloud Suite of end-to-end data management and AI/ML tools AI-enabled “talk to the data” to demo
Slide 46: 2. Connected Intelligence
2. Connected Intelligence Unlock All K-12 Data with the First Data-as-a-Service Platform 46 Secure data from traditional siloed environments with real- time access Turnkey solution built on Snowflake Data Cloud Suite of end-to-end data management and AI/ML tools AI-enabled “talk to the data” to demo
Slide 47: 2. P20W Career & Workforce Planning
2. P20W Career & Workforce Planning Connecting Data to Create a Future-Ready Workforce 47 Maximize education attainment & workforce participation Enrich pathways by aligning curricula with workforce demands Improve governmental policy & resource allocation decisions Ensure personalized student guida
Slide 48: 3. My PowerSchool
3. My PowerSchool Enhanced Ease of Use and Efficiency with a Persona- based Experience 48 Relevant information and tasks with a "single pane of glass" Simplified fees & payments Streamlined communication & engagement Launch pad for integrated offerings Advantages Latest grades Communications with te
Slide 49: 3. My PowerSchool
3. My PowerSchool Enhanced Ease of Use and Efficiency with a Persona- based Experience 49 Relevant information and tasks with a "single pane of glass" Simplified fees & payments Streamlined communication & engagement Launch pad for integrated offerings Advantages Note: Product is in development and
Slide 50: 4. ContentNAV
4. ContentNAV One-Stop AI-Powered Content Library for Every Learner's Unique Needs 50 Saves teachers 7 hours per week Automatic embedding of content into other product workflows Personalized educational content for each student Linked to district and state- approved curriculum Advantages Searchable
Slide 51: 4. ContentNAV
4. ContentNAV One-Stop AI-Powered Content Library for Every Learner's Unique Needs 51 Saves teachers 7 hours per week Automatic embedding of content into other product workflows Personalized educational content for each student Linked to district and state- approved curriculum Advantages Note: Produ
Slide 52: Beta Customer Testimonial
“This is a product which is going to revolutionize our progress monitoring of Language Learners and Dual Language Programs. The ability to build content in Spanish will help us continue to build and assess formative and divergent operations of our learners while scaffolding language strategies to en
Slide 53: 5. LearningNAV
5. LearningNAV AI-Powered Learning "GPS" For Every Student 53 Curated learning resources for each student from ContentNAV Adaptive tracking of student learning progression Individualized real-time learning pathways for each student Connected to state standards for all grade levels Advantages Real-ti
Slide 54: 5. LearningNAV
5. LearningNAV AI-Powered Learning "GPS" For Every Student 54 Curated learning resources for each student from ContentNAV Adaptive tracking of student learning progression Individualized real-time learning pathways for each student Connected to state standards for all grade levels Advantages Note: P
Slide 55: 6. Personalized Homework
6. Personalized Homework Optimizing Student’s Learning and Teacher’s Time 55 Scale teacher effectiveness to improve student achievement AI assignments adaptive to student mastery and interests Effective and engaging reinforcement of student understanding Advantages Recipients selected Homework assig
Slide 56: 7. Personalized Career Pathways
7. Personalized Career Pathways Elevating Student’s Skills and Career Alignment 56 Enhanced job projections and student's skill matching Automated educational research , relevant courses, and internships Scales effectiveness of overburdened counselors Advantages Personalized guidance and career reco
Slide 57: Innovation to Responsible AI-Powered Personalized Education
Innovation to Responsible AI-Powered Personalized Education 57 Connected Intelligence & P20W ContentNAV Personalized Homework LearningNAV My PowerSchool • First DaaS solution in K-12 • Data lake eliminates data silos • Automated content recommendations • Content for every type of learner • Reinforce
Slide 58: Key Takeaways
K E Y T A K E A W A Y S Comprehensive and Differentiated Platform – Set To Accelerate Our Growth 58 Unique capability to provide the context that powers Personalized Education Proven innovation engine road-mapping revolutionary data-driven solutions Expanding TAM to ~$100B 1 2 3
Slide 59: Multiple Sales Drivers
Multiple Sales Drivers Tony Kender Chief Revenue Officer
Slide 60: Customer Testimonials Video
60 Customer Testimonials Video
Slide 61: Agenda
Agenda 61 Go to market advantages Powerful cross-sell engine Our international playbook 01 02 03
Slide 62: Largest Sales Team in K-12, Covering Every Corner of the Market
Largest Sales Team in K-12, Covering Every Corner of the Market 62 15k+ customers 90+ of top 100 U.S. school districts 98 countries 410 S&M headcount State Level Contracts Strategic Relationships Wide BreadthDeep Reach Global 35+ state-, territory- and province-wide contracts Serving over 90 of the
Slide 63: Technology Leaders Clouds Target Specific Users and Drive Cross-Sell
Technology Leaders Clouds Target Specific Users and Drive Cross-Sell 63 Academic Directors Student Services and Support Counseling and Workforce Analysts HR: Professional Development Finance and HR T a r g e t e d C u s t o m e r U s e r s Student Information Cloud Personalized Learning Cloud Studen
Slide 64: Each of Six Clouds is a Differentiated Product Bundle
Each of Six Clouds is a Differentiated Product Bundle 64 • PowerSchool SIS • Enrollment • Ecollect Forms • Special Programs • Community Engagement • Schoology LMS • Assessments • Curriculum & Instruction • LearningNAV • ContentNAV • Attendance Intervention • MTSS • Behavior • Connected Intelligence
Slide 65: Efficient, Effective & Differentiated Model
Efficient, Effective & Differentiated Model 65 Market Segmentation (U.S. & Canada) 3-50k Students 50k+ Students Including state DOEs <3k Students Including private schools Strategic Strategic Enterprise Small District Our Differentiators Deep experience, including former K-12 teachers and administra
Slide 66: Multiple Growth Drivers
Multiple Growth Drivers 66 1. Cross-Sell/Up-Sell 2. New Logos Cloud GTM approach drives stronger cross-sell Consultative selling deepens customer relationships 3. International $3.9B cross-sell whitespace in U.S. & Canada ~70% of customers own just 1 or 2 products Continue to win new logos in
Slide 67: Advancing Our Successful Sales Approach
Advancing Our Successful Sales Approach 67 Cross-sell to all pillars, net new focus, acquisition, int'l partner ecosystem Growth Markets Sales Model Approach Metrics U.S., Canada & international including MOEs Consultative, value, sales & forecasting methodology, sales enablement Direct, channel Org
Slide 68: Priorities to Accelerate Growth Through 2024
Priorities to Accelerate Growth Through 2024 68 Key Priorities Continue to expand market coverage, segmentation Continue to upskill talent in every role Continue to improve sales enablement & development Grow international sales team footprint and channel partners
Slide 69: Agenda
Agenda 69 Go to market advantages Powerful cross-sell engine Our international playbook 01 02 03
Slide 70: Cross-Sell Drives Sustainable Growth
Cross-Sell Drives Sustainable Growth 70 8% 9% 11% 14% 17% % of Customers with 4+ Products Q2`19 Q2`20 Q2`21 Q2`22 Q2`23 2X Focus on customers’ strategic and immediate needs Leverage proprietary algorithm to identify next most-likely-to- buy product Increase customer marketing through product &
Slide 71: Success with Cross-Sell in 2023: YTD Wins Include
Success with Cross-Sell in 2023: YTD Wins Include 71
Slide 72: Cross-Sell: Customer Case Studies
Cross-Sell: Customer Case Studies 72 Strategic Large district > 250k students + Unified Insights + Connected Intelligence + Assessment + Naviance + Talent ARR Top five school district by enrollment added 5 new products, expanding ARR by over 3x Strategic Large district > 75k students Large East
Slide 73: Agenda
Agenda 73 Go to market advantages Powerful cross-sell engine Our international playbook 01 02 03
Slide 74: Large Global Opportunity – 1.3B Students Outside N. America
Large Global Opportunity – 1.3B Students Outside N. America 74 Australia & NZ North America 125M 99M 295M 85M 6M South America Africa Europe Southeast Asia Mid East 5M 56M 27M Presence today 256M India 125M 195M China • India-based SIS/ERP • 1.2M students
Slide 75: Expanding Strategically and Opportunistically
Expanding Strategically and Opportunistically 75 Prioritizing based on • Funding environment • Student TAM • Partner ecosystem • Existing presence • Inbound demand • Regulatory/compliance environment • Competition Prioritized Regions 835 million student TAM 2 India 4 Southeast & Other Asia 3 Latin A
Slide 76: 5-year Goal: Cover Key Markets by Partner & Direct Channels
Gov’t - Private Gov’t - PublicInt’l Schools Direct InsidePartners 5-year Goal: Cover Key Markets by Partner & Direct Channels for All School Types 76 Region Middle East & Africa India Southeast Asia Latin America East Asia Europe Australia Current coverage 5Y goal coverage Sales Channels Customer Se
Slide 77: Right to Win in International Markets
Government-wide experience Proven success abroad A Partner Ecosystem Right to Win in International Markets Extensible and language-ready Data capabilities Cyber security investments State-level wins Proven compliance & reporting capability 2M+ students outside of North America Localiza
Slide 78: Multiple Sales Drivers Key Takeaways
78 Leveraging the largest & most experienced sales team in K-12 Continuous optimization of sales motions Expanding revenue through cross-sell Advancing international opportunity 1 2 3 4 K E Y T A K E A W A Y S Multiple Sales Drivers
Slide 79: Building on a Predictable & Resilient Financial Model
Building on a Predictable & Resilient Financial Model Eric Shander President & Chief Financial Officer
Slide 80: Agenda
Agenda Performance highlights Differentiated financial model Path forward 02 03 01 80
Slide 81: Outperforming Financial Targets
Outperforming Financial Targets 81 Stated Target at IPO NRR: Net leverage ratio: Revenue: Adj. EBITDA margin: Unlevered FCF: Adj. Gross margin: Adj. EBITDA margin: 109% 3.0x $631M 31% $133M 68% 31% 2022 Result 105% - 107% 3.0x - 4.0x $596M 29% $127M 67% 30% 2022 2022 2022 2023 2023 Not
Slide 82: Increasingly High Recurring Revenue
Increasingly High Recurring Revenue 82 LTM June `23 2019 84% 86% Product Usage / Penetration Recurring % Recurring Revenue Recurring Revenue
Slide 83: Delivering Consistent Growth and Profitability
Delivering Consistent Growth and Profitability Metrics LTM June 2023 83 $657M Revenue 18% 3-yr Revenue CAGR 86% Recurring Revenue % 33% Adj. EBITDA margin 109% Net Revenue Retention Rate $136M Unlevered Free Cash Flow Strong Margin, Retention, and Free Cash Flow Consistent Revenue Growth Note: the a
Slide 84: Diversified Business Model Provides Stability
27% 50% 23%51% 26% 23% 84 Large Districts (>50K Students) 2022 ARR: SIS, Enrollment & Communities Unified Admin & Talent By Product Group By Customer SizeBy Customer Tier Top 25 Next 75 Next 900 All Other 16% 13% 38% 32% Medium Districts (3K-50K Students) Small Districts (<3K Students) Unified Class
Slide 85: Agenda
Agenda Performance highlights Differentiated financial model Path forward 02 03 01 85
Slide 86: Strong Operating Model Drives Sustainable, Profitable Growth
Strong Operating Model Drives Sustainable, Profitable Growth and Accelerating FCF 86Note: the above references Non-GAAP or key business metrics. See the appendix for definitions and/or reconciliations of GAAP to Non-GAAP metrics. Sustainable Growth Cross-sell installed base while expanding markets 1
Slide 87: Strong Operating Model Drives Sustainable, Profitable Growth
Strong Operating Model Drives Sustainable, Profitable Growth and Accelerating FCF 87Note: the above references Non-GAAP or key business metrics. See the appendix for definitions and/or reconciliations of GAAP to Non-GAAP metrics. Margin Expansion Operating leverage for GM and Adj EBITDA growth 2 Str
Slide 88: 1. Sustainable Growth: Our Durable Growth Algorithm
1. Sustainable Growth Our Durable Growth Algorithm 88 Low to mid 90s gross retention Acquiring new logos Consistent, repeatable cross-sell growth Product innovation Strategic M&A 17% ARR CAGR since 2019 1 Note: the above references Non-GAAP or key business metrics. See the appendix for definitions a
Slide 89: Accelerating Platform Adoption
89 1 Product Declining 2+ Products Growing Fast 4+ and 6+ Products Growing Faster 60% 52% Q2`19 Q2`20 Q2`21 Q2`22 Q2`23 1 Product 8% 17% 1% 6% Q2`19 Q2`20 Q2`21 Q2`22 Q2`23 6+ Products 4+ Products 40% 48% Q2`19 Q2`20 Q2`21 Q2`22 Q2`23 2+ Products # 2+ customers growing 15% CAGR # 6+ customers growin
Slide 90: Cross-Sell a Key Driver of Long-Term Growth
90 Increasing Revenue Per Student1 Highlights Cross-Sell Success Target Untapped Opportunity Remains +80% $9 $9 $11 $11 $12 $13 $14 $15 2019 2020 2021 2022 2023E 2024E 2025E 2026E 1) Share of wallet defined as ARR at end of period divided by total student count on PowerSchool products at end of peri
Slide 91: Strong Operating Model Drives Sustainable, Profitable Growth
Strong Operating Model Drives Sustainable, Profitable Growth and Accelerating FCF 91Note: the above references Non-GAAP or key business metrics. See the appendix for definitions and/or reconciliations of GAAP to Non-GAAP metrics. Sustainable Growth Cross-sell installed base while expanding markets 1
Slide 92: 2. Margin Expansion: Highly Leverageable Model
92 $365M $631M 2019 2022 Revenue 20% CAGR $93M $196M 2019 2022 Adj. EBITDA and Adj. EBITDA Margin 28% CAGR 25% 31% Note: the above references Non-GAAP or key business metrics. See the appendix for definitions and/or reconciliations of GAAP to Non-GAAP metrics. 2. Margin Expansion Highly Leverageable
Slide 93: 2. Margin Expansion: Sustainable Actions to Increment Margins
Operational scale Leveraging India COE Process efficiencies Procurement centralization Back-office systems rationalization Key Drivers of Margin Improvement Expanding Adjusted EBITDA Margins Public company costs Target + + + 93 +1100 bps 2. Margin Expansion Sustainable Actions to Increment Margins 2
Slide 94: Strong Operating Model Drives Sustainable, Profitable Growth
Strong Operating Model Drives Sustainable, Profitable Growth and Accelerating FCF 94Note: the above references Non-GAAP or key business metrics. See the appendix for definitions and/or reconciliations of GAAP to Non-GAAP metrics. Sustainable Growth Cross-sell installed base while expanding markets 1
Slide 95: 3. Strong Cash Generation: Scaling to Accelerate FCF
$19 $58 $103 $104 2019 2020 2021 2022 Goal by 2026 5% margin Generating Significant Free Cash Flow 13% margin 18% margin 16% margin $ in millions FCF Margin Expanding 20%+ margin Note: the above references Non-GAAP or key business metrics. See the appendix for definitions and/or reconciliations of G
Slide 96: Why We are Confident in Achieving a 20%+ FCF Margin
3. Strong Cash Generation Why We are Confident in Achieving a 20%+ FCF Margin 96 2022 Adj. EBITDA to FCF Margin Bridge 20%+ FCF Margin Expect capex and capitalized R&D as % of revenue to decrease 200+ bps by 2026 Change to EBITDA 2026 Goal Note: the above references Non-GAAP or key business metrics.
Slide 97: Strong Operating Model Drives Sustainable, Profitable Growth
Strong Operating Model Drives Sustainable, Profitable Growth and Accelerating FCF 97Note: the above references Non-GAAP or key business metrics. See the appendix for definitions and/or reconciliations of GAAP to Non-GAAP metrics. Sustainable Growth Cross-sell installed base while expanding markets 1
Slide 98: Clear Capital Allocation Priorities
98 Organic Investment Strategic M&A Deleveraging 4. Disciplined Capital Allocation Clear Capital Allocation Priorities
Slide 99: Organic Investment Priorities: Innovation
99 50% 25% 10% 15% Where We Spend our R&D Dollars Core R&D Scale, Quality & Delivery Compliance 10% 20% 10% 10% New Solutions/Market Portfolio Initiatives & Integrations New Product Add-on Innovations Product-Specific Innovations Innovation 4. Disciplined Capital Allocation Organic Investment Priori
Slide 100: Strategic M&A: Disciplined M&A Screening Process
100 Strategic Fit Value Creation Financial Profile Integration Focused on scalable, cloud-based businesses with leading technology that expand platform into strategic adjacencies 1 2 3 4 Leverage PowerSchool brand, sales engine, and customer base to drive growth Targeting profiles that are accretive
Slide 101: Strategic M&A: Technology and Market Adjacencies
101 Behavior Communication Curriculum & Instruction Recent Adjacencies Other Adjacencies 4. Disciplined Capital Allocation Strategic M&A: Technology and Market Adjacencies International Payments & Cash Mgmt Wellbeing and Health Mgmt Safety & Security Data & Adaptation AIAttendance ERP (Int’l) *pendi
Slide 102: Deleveraging: Targeting 2.5x-3.0x Net Leverage Ratio
2020 Q3`21 Q2`23 Goal 102 Targeting 2.5x-3.0x Net Leverage Ratio Pre-IPO Post-IPO 2.5x - 3.0x Note: the above references Non-GAAP or key business metrics. See the appendix for definitions and/or reconciliations of GAAP to Non-GAAP metrics. 4. Disciplined Capital Allocation Deleveraging: Technology a
Slide 103: Agenda
Agenda Performance highlights Differentiated financial model Path forward 02 03 01 103
Slide 104: Our Path to $1+ Billion
Our 3 Year Path to $1+ Billion 104 20231 $691M 2026E $1B+ U.S. & Canada Cross-selling to 15,000+ installed base International Expansion ~10% of total company in 3-5 years Personalized Education Access to $100B+ market opportunity Note: the above references Non-GAAP or key business metrics. See the a
Slide 105: Our Midterm Financial Targets
Our Midterm Financial Targets 105 2022 2023 1 2026 Target Revenue Adj. Gross Margin Adj. R&D (incl Cap R&D) % of revenue Adj. SG&A % of revenue Adj. EBITDA margin Free cash flow % of revenue $631M $691M $1B+ 68% 21% 23% 31% 33% 16% 71% - 72% 15% - 18% 23% - 25% 36%+ 20-25% ~12%+ 3yr CAGR Assumptions
Slide 106: Our Midterm Financial Targets
Our Midterm Financial Targets 106 2022 2023 1 2026 Target Revenue Adj. Gross Margin Adj. R&D (incl Cap R&D) % of revenue Adj. SG&A % of revenue Adj. EBITDA margin Free cash flow % of revenue $631M $691M $1B+ 68% 21% 23% 31% 33% 16% 71% - 72% 15% - 18% 23% - 25% 36%+ 20-25% Note: the above references
Slide 107: Our Midterm Financial Targets
Our Midterm Financial Targets 107 2022 2023 1 2026 Target Revenue Adj. Gross Margin Adj. R&D (incl Cap R&D) % of revenue Adj. SG&A % of revenue Adj. EBITDA margin Free cash flow % of revenue $631M $691M $1B+ 68% 21% 23% 31% 33% 16% 71% - 72% 15% - 18% 23% - 25% 36%+ 20-25% Note: the above references
Slide 108: Our Midterm Financial Targets
Our Midterm Financial Targets 108 2022 2023 1 2026 Target Revenue Adj. Gross Margin Adj. R&D (incl Cap R&D) % of revenue Adj. SG&A % of revenue Adj. EBITDA margin Free cash flow % of revenue $631M $691M $1B+ 68% 21% 23% 31% 33% 16% 71% - 72% 15% - 18% 23% - 25% 36%+ 20-25% Note: the above references
Slide 109: Our Midterm Financial Targets
Our Midterm Financial Targets 109 2022 2023 1 2026 Target Revenue Adj. Gross Margin Adj. R&D (incl Cap R&D) % of revenue Adj. SG&A % of revenue Adj. EBITDA margin Free cash flow % of revenue $631M $691M $1B+ 68% 21% 23% 31% 33% 16% 71% - 72% 15% - 18% 23% - 25% 36%+ 20-25% Note: the above references
Slide 110: Our Midterm Financial Targets
Our Midterm Financial Targets 110 2022 2023 1 2026 Target Revenue Adj. Gross Margin Adj. R&D (incl Cap R&D) % of revenue Adj. SG&A % of revenue Adj. EBITDA margin Free cash flow % of revenue $631M $691M $1B+ 68% 21% 23% 31% 33% 16% 71% - 72% 15% - 18% 23% - 25% 36%+ 20-25% Note: the above references
Slide 111: Our Midterm Financial Targets
Our Midterm Financial Targets 111 2022 2023 1 2026 Target Revenue Adj. Gross Margin Adj. R&D (incl Cap R&D) % of revenue Adj. SG&A % of revenue Adj. EBITDA margin Free cash flow % of revenue $631M $691M $1B+ 68% 21% 23% 31% 33% 16% 71% - 72% 15% - 18% 23% - 25% 36%+ 20-25% Note: the above references
Slide 112: Translating Revenue Growth with Operating Leverage
Translating Revenue Growth with Operating Leverage 112 Adjusted EBITDA Margin Free Cash Flow Margin 25% 31% 36%+ 2019 2022 2026 21%+ CAGR 5% 16% 20%+ 2019 2022 2026 40%+ CAGR Note: the above references Non-GAAP or key business metrics. See the appendix for definitions and/or reconciliations of GAAP
Slide 113: Key Takeaways: Step Change in Future Growth Profile
K E Y T A K E A W A Y S Step Change in Future Growth Profile 113 Step change in growth profile driven by cross- sell, international, and personalized education Line of sight to $1B+ revenue by 2026 Committed to disciplined capital allocation and continued debt reduction Leverageable business model w
Slide 114: Uniquely Positioned For Sustainable, Profitable Growth
Uniquely Positioned For Sustainable, Profitable Growth Hardeep Gulati CEO
Slide 115: What We Are Hearing From The Street and What We Addressed Today
What We Are Hearing From The Street and What We Addressed Today Doubling our market share from 6% to 12% provides double digit growth for a decade International and Personalized Education solutions add material growth in 5 years Increasing average product count to 3-4 products per customer through c
Slide 116: Driving Sustainable Growth
Driving Sustainable Growth 116 Market Leader with Strong Financial Performance Strong Growth Trajectory Well Positioned in Attractive Market Significant Future Growth Opportunities
Slide 117: Thank You and Feedback
Thank You and Feedback Thank you for your time in joining us for our 2023 Investor Day 117 Your feedback will be very valuable to us, so we’d appreciate if you could fill out a quick survey - it should take only 2-3 minutes. The answers are all anonymous. Feedback Survey Link: https://forms.office.c
Slide 118: Appendix
Appendix 118
Slide 119: Use and Reconciliation of Non-GAAP Financial Measures
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
Slide 120: Definitions of Key Business Metrics
Definitions of 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
Slide 121: Non-GAAP Reconciliations
Non-GAAP Reconciliations 121 Reconciliation of Gross Profit to Adjusted Gross Profit (in thousands) Q2 2023 Q1 2023 Q4 2022 Q3 2022 Q2 2022 Q1 2022 FY 2022 FY 2021 FY 2020 FY 2019 Gross profit $104,868 $89,965 $94,467 $92,647 $89,606 $81,615 $358,336 $317,740 $243,086 $195,005 Add: Amortization 15,9
Slide 122: Non-GAAP Reconciliations
Non-GAAP Reconciliations 122 Reconciliation of Net Loss to Non-GAAP Net Income (in thousands, except share and per share data) Q2 2023 Q1 2023 Q4 2022 Q3 2022 Q2 2022 Q1 2022 FY 2022 FY 2021 FY 2020 FY 2019 Net loss ($4,295) ($14,813) ($3,245) ($3,917) ($6,458) ($14,120) ($27,741) ($43,065) ($46,648
Slide 123: Non-GAAP Reconciliations
Non-GAAP Reconciliations 123 Reconciliation of GAAP to Non-GAAP Cost of Revenue and Operating Expenses (in thousands) Q2 2023 Q1 2023 Q4 2022 Q3 2022 Q2 2022 Q1 2022 FY 2022 FY 2021 FY 2020 GAAP Research & Development $25,862 $25,421 $26,970 $27,821 $26,088 $26,618 $107,498 $92,740 $70,673 Less: Sha