Good afternoon and evening everyone, and welcome to PowerSchool's Q2 2022 earnings call. As a reminder, today's call is being recorded, and your participation implies consent to such recording. At this time, all participants are in a listen only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. With that, I would like to turn the call over to Shane Harrison, Senior Vice President of Investor Relations. Please go ahead. Thank you, operator. Thank you for joining us for PowerSchool's earnings conference call for the Q2 ended June 30, 2022. I wanted to first let you know that we posted a slide deck to the investor relations section of our website that accompanies our remarks here. On the call today we have PowerSchool CEO, Hardeep Gulati, and CFO, Eric Shander. Before we get started, I'd like to emphasize that this call, including the Q&A portion, may include forward-looking statements related to the expected future results for our company and are therefore forward-looking statements. Our actual results may differ materially from our projections due to a number of risks and uncertainties. The risks and uncertainties that forward-looking statements are subject to are described in our earnings release and other SEC filings. Today's remarks will also include references to non-GAAP financial measures. Additional information, including definitions and reconciliations between non-GAAP financial information to the GAAP financial information is provided in the corresponding press release and results presentation, which are both posted on PowerSchool's investor relations website at investors.powerschool.com. A replay of this call will also be posted to the same website. Let me now turn the call over to Hardeep. Thank you, Shane, and thank you everyone for joining us this afternoon. PowerSchool's Q2 was a resounding success that showcased the acceleration of the momentum we have been building. It was a record-setting quarter for our cross-sell strategy, and we continue to see growth in our customer base with new logo wins. Our financial performance exceeded our expectations, and we expect this strong momentum to continue for rest of the year, as reflected in our increased guidance. Our K-12 target market continues to see strong tailwinds, including the ongoing secular shift of digital transformation in education and large, stable funding sources that provide insulation from external economic factors. Our continued growth and momentum are testaments to both the strong target market and the value customers see when expanding their footprint of our unified platform. We are excited by the success we saw in Q2. I reflect on the results, three key themes come to mind. First, we saw financial momentum in expanding margins and strong growth. Second, we have great customer momentum with our strongest ever cross-sell ARR quarter. Lastly, we continued our platform momentum by capitalizing on the opportunities to further expand our comprehensive product suite. I'll begin on slide four with the financial momentum we saw in Q2. We reached total revenue of $158 million and subscription and support revenue of $135 million, which grew 11% year-over-year. Profitability also improved on a sequential basis, resulting in adjusted EBITDA of $49 million, representing a margin of 31%, the highest margin we have achieved in a full quarter since our IPO. ARR increased 10% year-over-year, and 4% sequentially. We continue to deliver a compelling combination of high visibility growth with strong profit margins. On slide 5, you will see our tremendous customer momentum in the quarter. We reached our highest ever cross-sell ARR in a quarter, even higher than the levels we saw at the onset of COVID when demand for classroom technology spiked. This growth was driven by success across the product portfolio. For example, one of the largest K-12 districts in Canada, Peel District School Board, with 151,000 students in Ontario, is an existing customer that chose to expand with us by adding 6 additional products, including our student information system. Another good example of a customer recognizing the value of our platform is Clarksville-Montgomery County School System in Tennessee. Already a customer of our SIS, Talent, Assessment, and Naviance products, they replaced a competing classroom LMS with Schoology and also added our new behavior support solution to take advantage of the full integrated suite. On the customer expansion front, we had another great quarter with over 20% year-over-year growth in new logo wins. This helped increase our customer base to over 15,000 as we increasingly see school districts embrace our integrated platform of technologies that drive operational efficiencies, advance teacher and student success, and provide powerful data insights to administrators, teachers, and families. We are seeing large new customers like Evansville Vanderburgh School Corporation in Indiana, who bought nine products, including SIS, Talent and Naviance for their 21,000 students. Additionally, our growing international team had another large win with a new customer in Saudi Arabia, Maarif Education, who purchased our comprehensive platform, including our SIS administration and full unified classroom suite. A key reason behind the decision was that PowerSchool is the only provider, even internationally, bringing all these best-in-class capabilities in one suite. This customer success shows in the sequential growth of our ARR and NRR. The ARR growth of 10% year-over-year and 4% sequentially was the best organic sequential growth we have seen since the COVID-driven mid-2020 timeframe. Our improvement in cross-selling, combined with strong customer retention, grew our NRR to 107.3%, a 60 basis point improvement from Q1 of this year. As we enter the second half, we see a significantly larger pipeline of opportunities that we have ever seen, including some large deals. With a strong funding environment boosted by ESSER stimulus funding, districts are accelerating their digital transformation plans in operations, talent management and classroom, and getting better insights into help address learning gaps for better engaged students and empowering teachers. As you will see in slide 6, since the end of Q1, we have continued the expansion of our industry-leading unified platform by introducing new organic products and completing a highly strategic tuck-in acquisition to help districts solve for their ever-evolving challenges. Last month at the annual ISTE, or International Society for Technology in Education Conference, we introduced an innovative new product that offers multi-tiered system of support known as MTSS to boost student success and support educators. MTSS connects all the data to create actionable whole child view and align personalized intervention plans across all levels and types of support required for students. We are seeing great early traction with this product, which was built organically on top of our Unified Insights analytics engine that continues to see strong demand and has become a clear market leader. In Q2, we secured a $multi-million statewide contract from the Maryland Department of Education for Unified Insights that will benefit 850,000 students with rich analytics across the state. We are continuing to further differentiate our analytics offering by launching last week at our Council on Education Innovation Conference, our new Connected Intelligence solution powered by Snowflake, the first fully managed data as a service solution for K-12 schools. Having the ability to unify all data under one secure, comprehensive platform, districts and education agencies will be able to connect data from early childhood to adulthood, as well as internal and external data to position all students for lifelong success and positive social and economic futures. We further invested in our Naviance college career and life readiness solution with the acquisition of Headed2, a small but very complementary tuck-in acquisition that expands our CCLR capabilities for students of all ages, including elementary schools. This solution also supports state level CCLR initiatives providing state-specific career, military and technical education exploration, and pathway planning portals for all 50 states and initial statewide contracts with California, Nevada and Pennsylvania. This customer and platform expansion has resulted in record-breaking profitability and success in Q2, helping us exceed our financial guidance for the fourth consecutive quarter and setting us up well for a strong second half. In fact, July marked the 1-year anniversary of the PowerSchool IPO. Going public was a major step in PowerSchool journey and supports our near and long-term growth opportunity to redefine how the world educates K through twelve students. I would like to take the opportunity to summarize our progress on the four key unique differentiators we highlighted during our IPO. On slide 7, I'll start with our unmatched unified platform. Since the IPO, we have expanded the platform from 14 to 19 products, a continued progression towards our personalized learning vision. Our innovation engine and investment strategies in complementary solutions of behavior support, unified communication, curriculum management, MTSS and Connected Intelligence have further strengthened our differentiation and accelerated the adoption of our platform to address the holistic needs for districts to drive automation, efficiency and personalization. Our second key differentiator is our scaled customer base. We have amassed 15,000 customers having added nearly 3,000 since the IPO through effective go-to-market operations and high return technology investments. Tremendous market opportunity is still ahead of us, particularly with 1.2 billion K-12 students that live outside of North America. We are beginning to build capacity with feet on the ground and strategic channel partnerships outside of the U.S., and we'll be accelerating those investments further over the next 6 to 12 months. We already are seeing strong early successes in Middle East, India, Southeast Asia, and Latin American markets. For example, a Q2 channel partner in India selected Schoolity with plans for deployment across 250 schools, representing 160,000 new students in India by mid-next year. Our business model is our third key differentiator. The model's foundation is entrenched with deep enterprise-level relationships with districts and education agencies. We are providing mission-critical and efficiency-enabling solutions that are core to our customers' operations, instruction, and supporting their students and educators. Cross-selling to our existing customers is central tenet to our business model. With over 15,000 customers utilizing on average only two of our products, we have a unique and sizable runway for cross-selling. In fact, since the IPO, our cross-sell strategy resulted in the number of multi-product customers growing nearly 30%. A great example of how we can dive deeper into our customers' digital transformation needs. Lastly, on the differentiators, our financial profile is durable and has a long history of profitability and cash generation. This profile is built on a high mix of predictable recurring revenue coupled with strong margins and operating leverage. We have expanded our profitability since the IPO with our adjusted EBITDA growing 22% and adjusted EBITDA margins gaining over 400 basis points. Sustained execution around these four differentiators has been a cornerstone of our success. The strength of our sticky and resilient business model, as well as our solid financial profile, especially in an uncertain economic environment such as we see today, is enviable, and we expect heightened investments in mission-critical cloud solutions and data insights as school systems modernize, creating a tailwind for this business. I am more excited than ever about the various growth opportunities ahead of us and look forward to the coming quarters to showcase our continued momentum. Let me pass the call over to Eric to cover our Q2 financials. Eric? Thank you, Hardeep. We delivered a great Q2, continuing the business momentum from the Q1. Our teams continued to execute on the strategy, demonstrating the power of our unified platform through our cross-sell momentum, as well as adding many new customers. Our focus remained on investing in and delivering the innovation that our customers value and expect from PowerSchool. The business is performing very well from a financial perspective. Now let me get into the details of the quarter on page eight. We ended the quarter with total revenue of $157.6 million, exceeding the high end of our guidance range as we saw balanced growth across the product portfolio. Subscription and support revenue, which is our most strategic recurring revenue stream, continued to grow at a double-digit rate, coming in at $135 million for the quarter, representing an 11% increase over the same time period last year, and was 85.7% of total revenue for the quarter. Our services business continued to execute well, generating $19.1 million of revenue in the quarter, which was 19% higher than the same time period last year, as we experienced continued demand from our customers for our services and training to deploy and adopt our mission-critical solutions. Similar to the trend we saw in the Q1, we had more on-site engagements resulting in an accelerated closure rate for several projects. Our last and least strategic revenue stream is our license and other revenue, which came in at $3.5 million for the quarter, representing 2.2% of total revenue for the quarter and was down 54% from the same time period last year. This decline was primarily driven by a few products within the Naviance portfolio, which we had determined should have been recognized as point-in-time revenue versus their historical ratable treatment prior to us acquiring them. This contributed to an approximate $3.8 million one-time benefit to L&O revenue in the Q2 of 2021. Normalizing for this adjustment would have resulted in L&O revenue being relatively flat year-over-year. As I've mentioned before, this is and will continue to be a small and variable component of our revenue streams. We finished the Q2 with an annual recurring revenue balance of $580.3 million, representing a 10% increase over the same time period last year. As a reminder of our business seasonality, the Q2 is typically the strongest quarter due to the nature of school districts' budgets and buying patterns. Our cross-sell momentum continued as demonstrated by the number of customers that use four or more of our 19 products, increasing from 1,880 at the end of 2021 to over 2,200 at the end of this quarter, representing more than 50% of our annual recurring revenue. Our net revenue retention, or NRR, came in at 107.3%, representing a 60 basis point sequential quarterly increase. The positive trending of this metric highlights our cross-sell, as well as the retention and stability of the mission-critical solutions that we are providing to our customers. As a reminder of our business seasonality, a significant portion of our renewals occur in the Q3. While we expect this metric to continue to trend favorably for the year, the level of increase for the Q3 may moderate. Adjusted gross profit for the quarter came in at $107.2 million with a 68.1% margin, representing a 200 basis point sequential quarterly increase and a slight decline of 40 basis points from the same period last year. This year-over-year decline was driven primarily by the mix of revenue components whereby last year we had a higher proportion of our non-strategic license and other revenue, which carries a higher gross profit contribution. Now turning to operating expenses. In the Q2, our adjusted research and development expense came in at $22.2 million, representing 14.1% of revenue, which compares to 14.7% in the same period last year. Including capitalized R&D expenses, our total invested in R&D was 21.7% of revenue, highlighting the investments we are making to deliver market-differentiating innovations. As Hardeep mentioned earlier, we've announced our organic development projects on Connected Intelligence and Unified Insights MTSS, which aligns with our continued focus on delivering towards our long-term personalized learning strategy. Adjusted SG&A expense in the Q2 was $36.8 million, representing 23.3% of revenue, which compares to 19.5% in the same time period last year, which is related primarily to the various public company costs that we have taken on since our IPO. Q2 adjusted EBITDA was $48.7 million, or 30.9% margin, exceeding the high end of our guidance range for the quarter. The Q2 margin was outstanding and reflects the continued focus we have on driving both top-line growth as well as profitability. As I've mentioned in the past, we will drive operational leverage within the business as well as continue to invest in our innovation engine and go-to-market teams to achieve our long-term financial objectives. While we do not guide to it, as a reference, non-GAAP net income was $0.22 per fully diluted share. Now moving to the balance sheet. We ended the quarter with $15.4 million in cash and equivalents, reflecting the seasonality of our business. As a reminder, a substantial portion of our customers operate on a July fiscal year. Therefore, we typically see the Q2 as a period of elevated new and cross-sell activity combined with lower collections on our annual invoicing in the quarter. While the Q3 represents a higher renewal period and an increased level of cash collections. Given this seasonality, we drew an additional $40 million from our revolving credit facility during the quarter, which we have already repaid, and we expect to pay down the remaining $30 million dollar balance of the revolver by the end of the Q3. The result of this cash and revolver activity was a 0.3 times increase to our net leverage ratio from the end of the Q1. This is expected due to our business seasonality, and the Q2 is the high point for this metric. We remain well ahead of our pre-IPO delevering plan, and given the stability of the K-12 education funding environment, we are confident in our ability to service this debt over the long term. Non-GAAP free cash flow was a negative $28.2 million for the quarter, driven by our seasonality of cash collections. Also, as interest rates continued to increase, we had an approximate $1.8 million dollar impact to cash for interest paid in the quarter. Now turning to our Q3 and full-year outlook on page nine. For the Q3, we expect to deliver total revenue in the range of $162 million-$164 million, representing a 9.4% year-over-year growth rate at the midpoint. Adjusted EBITDA of $49 million-$51 million, representing a 30.7% margin at the midpoint. For the full year, we are raising the top and bottom end guidance ranges for both revenue and adjusted EBITDA, reflecting the continued business momentum, stability, and resiliency in the business. We now expect total revenue in the range of $630 million-$634 million, with the midpoint representing a 13.1% year-over-year growth rate and adjusted EBITDA of $188 million-$191 million, representing a 30% adjusted margin at the midpoint. This guidance is inclusive of our recent tuck-in acquisitions, which collectively are not expected to materially contribute to revenue or profitability in 2022. For modeling purposes, we expect capital expenditures excluding capitalized software of approximately $7 million and share-based compensation expense of approximately $55 million-$60 million for the full year. Fully diluted shares by the end of the year are expected to be in the range of 200 million-205 million shares. Overall, we delivered a great Q2. Demand for our solutions remains strong, and our unified platform approach continues to drive meaningful value for our customers. Our team has demonstrated consistent execution, and we will continue to focus on the key strategic differentiators to generate growth and a compelling profit. We're excited about the long-term growth opportunities that are in front of us as we leverage our operational scale and create long-term value for our customers, shareholders, and employees. With that, we're now happy to open the call for questions. Operator, will you please open the line for Q&A? Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Your first question comes from Saket Kalia with Barclays. Okay, great. Hey, Hardeep. Hey, Eric and team. How you doing? Hi, Saket. Hey, Saket. Hey, thanks for taking my questions here and a nice quarter. Hardeep, maybe just to start with you, great to see the cross-sell. I think you said best quarter ever on cross-sell activity. I was just wondering if you could just dig a little bit deeper into what parts of the business you're having the most success with cross-selling, and what do you think is driving it? Sure, Saket. First, saket we are in a very stable end market, right? One of the key things we are seeing is we are seeing strong tailwinds pretty much in every area of our business as districts are looking at transformation for not just classroom, but also operations, talent management. When you look at from a demand, and i'll I can give some examples, pretty much cross-sell demand is soon to be across all our product categories. Now, one of the reasons why you're seeing cross-sell growth to accelerate is what we've always talked about. The platform strategy is really key. As districts are looking for these solutions, as they're looking for areas, whether it's post-pandemic, trying to address learning gaps or trying to address their talent management needs, they're looking for integrated systems. They don't want to put another point system or niche system and having to deal with providing multiple environments to teachers and students and parents. That continues to differentiate. That's why I mentioned our number of customers who have more than one product has increased by 30%. Eric shared that customers who have more than 4+ products, that's again, like, increasing by 50%-60%. We're seeing cross-sell pretty much really very robust. Now, let's give an example or two. Like I mentioned about the Unified Insights with Maryland, one of our biggest deal of the quarter, but also for our Unified Insights. Unified Insights is definitely an area we are seeing tremendous growth. As you can imagine, a lot of districts are kind of realizing that they need better understanding of where their students are and how they can help them. That definitely is a huge growth area for cross-sell. We're also seeing strong cross-sell of talent management products. With the teacher shortage, with recruitment, with retention, with professional development, that's a big area for investment for a lot of school districts. We are seeing tremendous demand there. We are also seeing now the core modules of student information system or special ed. They are also seeing a lot of growth. Some of the projects were initially kind of put on hold during the pandemic, now we are seeing really those SIS projects coming in full-blown. We talked about Peel in my prepared remarks. We also got just a vendor of choice for an entire U.S. territory. We are definitely seeing some very strong demand on these core modules as well. Got it. That's great. Eric, maybe for you touched a little bit on the seasonality of some metrics like NRR. I know we don't guide to net new ARR, clearly some different seasonality here just given the K through 12 budget cycle. Can you just remind us how that played into this quarter and directionally, again, understanding you don't guide to net new ARR, but directionally, how do you think about that net new ARR as we look at the back half of the year? Yeah, no, that's a great question, Saket, and I appreciate the opportunity to be able to continue to just remind everybody, just the seasonality of the business. I had it in my prepared remarks. As Hardeep said, this was the best cross-sell quarter we've had adding a net $23.6 million to our ARR base. Typically, we'll see Q2 as your biggest net add in terms of ARR. As you go from Q2 to Q3, just as a reminder for everybody, Q3 is our highest renewals period. To the extent you see that we may see any kind of churn, it's going to happen in Q3. Typically we would kind of for modeling purposes encourage all of you to think about and can look at last year's I would assume the net new ARR to really essentially be flat from Q2 to Q3. Once we go from Q3 to Q4, you'll see it pick back up as you see the bookings continue to build. Hopefully that's certainly some helpful context around that. I would also say, since you brought up NRR, we're really thrilled with the 60 basis point improvement sequentially from Q1 into Q2. As you think about the impact on that metric when you go from Q2 to Q3, again, I would assume it's going to be relatively flat, and then you'll see it again pick up. We're in a really good trend to end the year ahead of where we thought we'd be. Hopefully that's helpful for everybody. Yeah, super helpful. I'll get back in queue. Thanks, guys. Thank you. Thanks, Saket. Next question, Brent Thill with Jefferies. Good afternoon. You mentioned the record pipeline. I'm just curious if you can kind of unpack what you're seeing and what the drivers are with funding that's out there. Is there been some catalyst as it relates to tools that you've seen that have helped ignite? There's the macro headwinds that everyone's worried about as well. Just kind of frame up what you're seeing overall in the pipeline and what you're anticipating in the back half. Sure, Brent. Happy to. Well, first, I guess, one of the things we have emphasized and shared is that when you look at K-12 funding environment, that's largely insulated from what you're seeing, the broader macroeconomic factor, whether that's inflation or recession. We shared on the last earnings call about a 30-year data of K-12 funding, and except for the housing crisis, it pretty much has increased every year. When you look at from a perspective of the tailwinds, especially around the fact that it's a very large market, $700 billion K-12 spending in just U.S. alone, and you've got a very strong tailwind as districts coming out of the pandemic and during the pandemic realized that their more than 50% of the systems are either manual or lack of automation or legacy. Huge demand opportunity that what we are seeing, and that's what you're seeing in the pipeline. We are not only seeing some of the largest pipeline we've ever had, we're also seeing that the large deals really you know coming into the picture as well. I mentioned you know not just whole territories where we have got vendor of choice on our student information system. We're seeing some of the demand across international as well, including entire countries who are kind of excited about kind of looking forward to to improve their entire K-12 infrastructure. We could not be more excited about. The pipeline is largely very balanced. As I was mentioning to Saket earlier, you know there's a lot of interest in analytics, so that is our highest growth area, as you can imagine. We are also seeing demand in talent management product. Our classroom products continue to do exceptionally well. Take example, learning management system. We are bringing in a new territory of Guam onto our platform, a very exciting project there. But we're also seeing demand across, not just large customers, a lot of small and midsize on learning management or assessment product or special ed or behavior management, all those really playing to the critical needs that districts are dealing with right now, which is how do you engage students? How do you retain teachers? Pretty much our entire platform really comes in as one of the most important pieces to help them manage their entire operations. Yeah. I would just add obviously, we took the guidance up for the year, which just is another reinforcement of just the activity that we see in the second half and just how positive we are in terms of entering the the busiest renewal period that we have, that we're right in the middle of. Just a quick follow-up. Hardeep, anything long term to believe that you on your international you can have a split that looks and feels like other enterprise software companies over time on the international front? Is anything prohibiting you from generating 30, 40%+ from those markets, or do you feel like that's getting too zealous? No, I definitely think we would be in that position. In fact, within the next couple of years, I expect this international to become a material. I think we have always talked about our full focus has been in North America, but we have still seen tremendous proof points like the country of Uruguay with their entire Schoology platform, in the Philippines with 600,000 students. We have started paying a lot of attention with actually boots on the ground in Middle East and India. We are already seeing some very good successes. I shared that on this call about Maarif and last call about Leva. We have a partner in India who's putting about 150,000+ students on our Schoology platform. We are definitely going to see demand not just for one or two of these products, but we're actually seeing interest across the entire platform. As you can imagine, a lot of the international with 1.2 billion kids with no other vendor who actually offers them this full integrated suite, which is best in class. We're getting a lot of excitement, as they're looking at transformation, they want to look at a holistic transformation of all their systems. You would not imagine any state or any country or any new districts putting in multiple fragmented environment. They're going to want to put in more integrated aspects, so they can have one experience for a student, one experience for their teachers, and one experience for their parents. That's where we differentiate. We are expecting international demand. We are definitely going to be increasing our investment on channels there as well as boots on ground. I do expect in a matter of next few years, this would become a material contribution to our revenue. Thank you. Next question, Koji Ikeda with Bank of America. Hey, guys. Thanks for taking the questions. Just kind of wanted to follow up to Brent's prior question on the record pipeline. Thinking about sales cycles some of the other software vendors are calling out elongated sales cycles. Just thinking about the seasonality of your business are you seeing any sort of elongating cycles at all? If you are what could that potentially mean from an eventual bookings perspective? Do deals get pushed out by a month or a quarter? Or if something gets pushed, does it get pushed out for a whole year? Hi, Koji. I think great question. We actually are seeing the reverse of that. We're actually seeing our sales cycles have just accelerated coming out of the pandemic. A lot of you know we've shared during the pandemic, we saw huge demand for and adoption of our learning management and classroom products, almost added 4-5 million students on there. As the districts have come out of pandemic, and they're trying to look at more holistic transformation, we have seen a further exploration across the areas like talent management. You've written a lot about some of the teacher shortage, which is definitely driving a lot of solution buys around how districts can recruit teachers, help them onboard efficiently, manage substitute teachers, as well as professional development of those teachers, which is very critical, top of the mind. We're seeing a lot of interest there. As well as I mentioned, when you look at the holistic aspects of connecting the data and understanding what kind of support each child needs, a lot of both our core platform and some of the innovation we have talked about, like MTSS and intelligence, as well as some of the add-on tuck-ins we have done around communication and attendance intervention, curriculum, social emotional, these are top of the mind for our districts, and we are able to meet their key demands. That's actually helping us drive our sales cycles to be even more efficient and more faster. We're seeing that not just in small customer, we are seeing that even with the larger customers. Some of the state opportunity I mentioned, like Maryland, which one of our biggest Unified Insights deal and literally developed and closed in a matter of a few months. Got it. Thanks, Hardeep. Just one follow-up here, if I may, for Eric. Saw you guys acquired Headed2 during the quarter. It sounds like it's going to help to drive better outcomes post-high school. That's really great to hear. Just a couple questions. If there's any revenue contribution from Headed2 added to this year what was it and what is the pricing model for that business? Thanks, guys. I'll take the revenue. Revenue is well under $1 million, so it's insignificant this year. Again, it's exciting technology. This is what we've been saying are part of our technical tuck-ins that we acquire the technology. A lot of times these companies have very little revenue to them, good technology base that we can not only build off of, but then just invest further into and then bolt it into the platform. No material revenue that contributed in 2022. If I can add, to your point about one of some of the key strategic drivers. As Naviance is already the number one college, career, and life readiness solution. Almost 40% of the North American students have access to it, and we've seen huge amount of 15% increase in usage just last year on the whole college applications. But one of the things which really prompted us for Headed2 is we are actually seeing a lot of strategic interest, not just from the districts, but actually entire states around career and you know exploration and how to provide that even earlier, not just in high school, but in middle school and all the way into elementary school. Headed2 has been an exceptional platform which has done that. it already has 50+ state portals with elementary, access as well. That's something addressing a key need we were hearing from our customers, both at the district and state level. We are very excited about this area, and we believe this can really add to the overall student success, not just from the college path space, but also in their career and different training options they have. Excellent. Thanks, Hardeep. Thanks, Eric. Thanks so much. Thank you. Yeah, thanks. Next question, Stephen Sheldon with William Blair. Hey, thanks, and really nice work in the quarter. First here, I wanted to see if you could provide some more context to the strong pipeline commentary ending the quarter. Roughly how much is the pipeline up relative to last year? Then could the stimulus funding actually shift purchasing behavior at all from a timing perspective, with maybe more potential purchasing than normal happening during the actual school year? Are you seeing any signs of that? Thanks, Stephen, and great questions. I think on the pipeline again, I would just iterate that it's not only highest pipeline what we have seen so far, but it's actually also the mix of large deals is tremendous in that. We have some of the largest deals we have ever worked on in the pipeline. We're definitely excited about that. I mentioned a little bit about a territory vendor of choice. Similarly, we had a very strong interest internationally as well. That kind of gives you enough context about the pipeline that we'd be happy to share more about these opportunities as it progresses in the next quarter or so. Now, to the second part of the question, is stimulus playing a role, and is that kind of changing some of the buying pattern? I think stimulus has definitely been a big positive for the broader K-12 industry. Even when we are not directly supporting a deal through a stimulus, it's actually providing additional funding, which is helping free up dollars for IT spend. universally we could not be in a better funding environment, and that's going to continue for the next 3-4 years as we look through the funding availability. A lot of times, as we have talked about that where we do see the buying patterns are largely based on a lot of back-to-school readiness, right? That's why you see Q2 always to be our biggest quarter. There's also, as we go into the Q4 and Q1, that a lot of districts, especially if they're larger district or midsize, they will prepare for that. We definitely see Q4 also to get a start to be pretty good and healthy. Q3 is the one quarter which always is little bit because districts are busy with back to school. That historically, we always expect that to be you know somewhat of a you know a quarter where districts are not looking at buying newer stuff. They want to kind of get go live and then they implement. I think to your point, with some of the large deals, that could change as well. We definitely are looking to, again, the second half to be strong, but I would still put Q2, Q4 to be our largest quarter. That seasonality potentially is not going to change in the short term. Got it. That's really helpful. Just follow up seems like there's lots of encouraging product announcements here. On the Unified Insights MTSS Seems like there could be high demand for this, given the need for more personalized learning and a big focus on interventions when students are falling behind. From a school district sophistication standpoint, how sophisticated do they need to be to find these solutions useful? Is there a lot of automation on your end to help them actually act on these insights, for each student? Great question, Steven. First in terms of sophistication, actually one of the beauties of how we have implemented MTSS is that irrespective of whatever systems they are using, they can use their MTSS as a layer on top of it and really take advantage of providing a more coordinated intervention plan irrespective of what technologies, whether they're manual or stuff. If you go to where we just shared this at ISTE, and we also shared with our Council on Education Innovation, the presentations of that is available on our website. You will see as we talk about MTSS and some of the customers' stories there we almost have more than double a dozen of customers who actually already selected our MTSS in a matter of last month or so, including a customer like Winston-Salem, who's our size customer, but uses actually a third-party LMS and capability, but still leveraging our MTSS to help them kind of manage that entire intervention plans. It's really automating that entire process of coordination, the meetings, the tracking of the interventions and analytics around it. The underlying interventions could still be manual, but it would still give them an ability to have better. This is even more important as districts are required, even by ESSER funding, to show 20% of that spend to be going in areas as to how they're actually improving and providing the support to the kids who are impacted. We see demand for this area already to be very high. we have already seen some great early successes. Good to hear. Thanks, guys. Thank you. Next question, Joe Vruwink with Baird. Great. Hi, everyone. Just stepping back and kinda digesting everything that's been said on the call, it seems or at least sounds very plausible that ARR growth in FY 23 is faster than FY 22. Does that seem reasonable just given some of the input assumptions we've kind of been discussing tonight, or vice versa? What might be some of the risks to consider that function as sort of an offset to the strong bookings currently and then the better pipeline going forward? Yeah. Let me just start. I mean, obviously, we don't guide to it. But I think everything you're hearing from us in terms of the strength of the pipeline, the business momentum as we exit the Q1 continued into Q2, obviously you guys are seeing it in the results. Yeah, I mean, as we get through the end of this year and then start setting up next year, I mean, we certainly could, especially as we've seen some of these technical tuck-ins that we have and those capabilities really come to market and provide additional products to our customers. We could be in a situation where for sure, as we've said in the past all of these things we're doing it de-risks our double digit, low double digit organic growth, and that's what we're really pushing for. We're super positive. Obviously we're focused on finishing this year really strong and going to focus on executing the second half. Certainly as we start to set up the following year in the Q4, I think you guys will have a better view as we will as well. Certainly very optimistic and positive for sure. Okay. That's great. I suppose similar question, just thinking of things that have changed from the initial communications with the IPO. We're now at a point where execution is driving kind of sequential gains and profitability, sitting here a year later. Any different framework for just how you think about the business on an annual basis, maybe driving margin expansion or just any more clarity what you need to invest in different areas of investment that might change the trajectory of margin improvement? Yeah. What we've been saying, Joe, is on an annual basis, expecting 50-100 basis points of growth. That I think that's still a good construct. As you noted, we are well ahead of the IPO plans we had, and the team's just executing quite well. That's not at the cost of us not investing in some of these strategic areas. As Hardeep mentioned international over the next 18 months to 36 months is an area that we're going to continue to strategically invest in, as well as we look opportunistically for additional capabilities that gets us along the personalized learning mission that we're on. We're going to continue those opportunities as well. Yeah, I think there's a lot of exciting things out there in terms of growth opportunities. Having said that, we're still going to drive the operational leverage, and the annual framework of 50-100 basis points of expansion is still valid. Okay. Thank you very much. Next question, Fred Havemeyer with Macquarie. Thank you. I just want to say congratulations on a strong quarter. I wanted to really hit again on some topics I think you've discussed throughout, you've been asked about throughout. It seems like throughout your discussions and in responses to questions, you're emphasizing record cross-sell quarter, some record deals in the pipeline potentially there. It sounds like you're using the word record quite a bit. I'd just like to ask what's driving this? Is there something going on in the market? With fiscal stimulus, just generally with digital transformation trends, with school consumption trends, is leading to such a constructive backdrop for PowerSchool and these record-setting cross-sell results that you're seeing? Fred, it's actually all of the above, right? I think we are in a very stable market, right? Which has got good stimulus to back up the funding even further. The tailwinds have been pretty strong, right? Both from coming out of the COVID as well as even prior to COVID, that digital transformation is required. Then our platform strategy is very differentiated, which is working to our advantage, that we have such a diversified portfolio that we are able to address all the different varying needs they have irrespective of what areas their priorities are, and we are able to be their partner. That's why you see cross-sell to be good, new logos to be good, as well as the pipeline to be good. It's pretty much as we've always talked about, we have a great business and a very differentiated offering in a market which is very stable. We couldn't be more excited about all of our performance and execution towards that. Thank you, Hardeep. Eric, perhaps for you, as we're in a rising interest rate environment, I wanted to just circle back around about PowerSchool's thought about both leverage and how it would consider its positioning in a rising interest rate environment. Could you provide any sort of updated view about PowerSchool's preferred leverage profile and just generally any commentary that'd be helpful also for understanding the impact of rising rates? Thank you. Even with the rates as they've risen, this quarter the rate we paid was 4.62, which is still relatively cheap cost of capital. I think as you all know, our debt instrument is variable. For every 1 full point, if you will, of interest rate increase, it's about $7.5 million of interest expense for a full year. We haven't changed our view in terms of the capital structure of the company. Obviously we're going to continue to watch interest rates. Even as we've factored in some of the expected increases for the balance of the year, we still think it's extremely attractive to have this debt instrument out there. Thank you. Next question, Matt Hedberg with RBC Capital Markets. Great. Yeah, thanks for taking my question, guys. Congrats from me as well on strong results and guidance. Hardeep, on the record cross sell, I'm curious, how much of that do you suspect is from consolidation, of maybe other vendors or is this largely sort of new business opportunity within these districts? Thanks, Matt. Good question. When you look at a majority of what we do business is actually replacement of either paper or legacy. So whether it's the analytics field, they probably don't have any environment which is homogeneous that. Whether that's take example, Peel, where they're putting up a new SIS system. They're on a very legacy platform, and they're moving to a. Along with that, they bought, like, almost 6 or 7 other products. So half of those processes were done manually or with a custom code, right? So whether it's a large deals or your small deals, majority of that is actually replacing paper, pencil or legacy environment. There's very few replacements. We do see replacement like Clarksville is a good example, you know. Largely it is a white space. Got it. That's helpful. I wanted to go back to the analytics side. I think we all see that as a huge opportunity. It's great to hear the success that you're having. I guess I'm curious since you've owned Hoonuit what are maybe some of the more interesting data points you've gotten from districts when they maybe either had funding or they said yes and they turned it on and the lights went on and they just sort of like saw those benefits. Are there anything tangible that like some of these districts are saying that you're using in sort of your new sales initiatives to convince other districts? Great question. We in fact had a lot of interest on this area. I encourage you to look, check out some of our presentation with the Council on Education Innovation on the website. Districts like Modesto, they presented with me on the keynote, along with LA Unified and Mobile County and Alabama State. Modesto talked about how the analytics was core part of their ability to not only engage students, but also look at the holistic view of where their talent operations and how they kind of really help drive the entire district. There's a lot of exciting. We have concrete measurable KPIs in terms of attendance improvements, in terms of reducing disciplinary actions, in terms of better engagement, as well as the improving of graduation rates. You've got tons of case studies on our website related to the analytics benefits. We're seeing the interest across the board, that's why on the analytics on all these different strategic metrics. Thanks, Hardeep. Congrats again. Thank you. Next question, Gabriela Borges with Goldman Sachs. Hi, this is Callie on for Gabriela Borges. Congrats on the quarter. I'll start with the opportunity with Connected Intelligence. Could you talk about that for a second? It seems super valuable. How is initial customer willingness to engage in conversations about adoption been, and how do you view this product as a game changer for schools? Great, Callie. As we talked about. We just actually launched this product last week at our conference, and we had Snowflake present with us about the opportunity and how the entire Connected Intelligence not only leverages some of the analytics we're talking about with our Unified Insights product. We're able to open up the connection to the other data, whether that's coming from systems outside PowerSchool or even outside that organization, outside that district, whether it's social services or juvenile crimes or other areas, of how to really bring all the data together, including almost a K-12 view of the students so you have a much more longitudinal view. We have a lot of exciting interest on that from not just states, but districts as well, and including some counties who have implemented our analytics platform at the county level as well. We expect we're going to have at least 50 to 100 customers who are leveraging our Unified Insights to take advantage of our Connected Intelligence by the year-end based on the demand we are seeing. Great. Thank you. Just as a follow-up, while school budgets tend to be fairly insulated from these macro impacts, I wanted to see if you've seen any impacts in hiring, especially as you build out internationally. In terms of hiring for our own company? Is that your question? Yeah, exactly. Thank you. Yes. I think we're seeing the broader talent market the way we have seen it as you can imagine with all of the companies. Though I would say that we have lately seen the environment to be much better, especially given our strategy is one we are kind of have multiple center of excellence and remote working across the US. We're also a lot of times we are bringing folks from education industry who are actually very excited about the joining because this allows them to have a bigger impact. We are seeing that to be international. If you look at our India hiring, where we have a big center of excellence, we have actually grown that by almost 100 people just in the last year itself. We continue to see, actually an attractive, given where we are mission-driven, and that really helps us attract the right talent. Great. Thank you so much. Congrats on the quarter again. Thank you. We've come to the end of our Q&A session. I would like to turn the floor over to Hardeep Gulati for closing remarks. Thank you, operator. Thank you to everyone who joined our earnings call. I'd like a chance to again thank the 3,000+ employees we have globally, as well as our 15,000 customers and partners who team up pretty much every day to drive these education improvements and impact student outcomes. In closing what I would again highlight some of the key things I talked about. We had an exceptional Q2. We highlighted by some of the highest ever cross-sell ARR. We have a strong customer momentum across the board on our entire products. Our platform expansion continues to even create that differentiation even further with new and innovative solutions balanced by a very strong profitability profile as well. Our products are very mission-critical. They're very sticky to the school operations and as well as to our end markets is very stable and non-cyclical, which allows us to continue to perform even in this macroeconomic pressures. As Eric mentioned, we're very optimistic about the massive runway ahead of us, and we well would love to share more about it in the coming quarters. Thanks again to everyone, and we look forward to talking to you again in the next quarter. This concludes today's teleconference. You may disconnect your lines at this time, and thank you for your participation.