Thanks everyone for joining. My name is Brian Peterson. I'm the application software analyst here at Raymond James. Very happy to have Hardeep Gulati from PowerSchool. We're going to do a fireside chat. Those in the audience, feel free to raise your hand, speak up. We'll make this interactive. So PowerSchool, very, very interesting company, dominant position in K through 12. Hardeep, maybe just kind of go through a high-level overview of the value proposition you guys are providing today. Sure. Thanks again for having me, and thanks, everyone. Brian, you know, we are the largest K-12 edtech enterprise software company in North America, not just by the size and the scale of our reach, but also in terms of the breadth and depth of our offering. We pretty much have market leadership in most of the categories we play in, all the way from our student information system cloud to classroom and Personalized Learning Cloud, talent management, career college, life readiness solutions, student success, as well as our data analytics products. So a very comprehensive suite of products. We continue to grow double-digit and have almost reached 50 million students with 15,000 districts, 30 state-level contracts and 93 of the top 100 school districts as well. So very deeply penetrated, as well as, you know, have best-in-class offerings. So, it's a pretty impressive scale. You know, I think one of the key themes investors are asking are just trying to understand the macro. Obviously, you serve a unique part of kind of the ecosystem, but, you know, what are you hearing in terms of demand and the macro impact on your customers? Sure. You know, one of the really exciting parts of our K through 12 space is very stable. Yeah. In fact, it's one of the most stable markets, even over the last 30 years, if you look at K-12 funding, hasn't really been, you know, grown down any time except for 2008 housing crisis. So very strong, doesn't have much of a macro factor from inflation or recession, for that matter. One of the exciting parts over there is that what we sell is enterprise software, not content, not services, which are more cyclical or sometimes can be impacted by budgets. Once you put in SIS systems, once you put our special ed systems or teacher PD system, you're not taking it out, so just for the budget or any other factors. So really very robust in terms of the retention. We do see a lot of exciting growth tailwinds in our business, especially after post-pandemic. We've seen huge demand, shifts happening in classroom, in data products, in teacher talent management solutions, more focused on student success, and also as recently, a lot of focus on AI. So a lot of these things are really helping drive continued double-digit growth for us. So you mentioned funding a little bit. I know that's been a debate with some investors and as we've seen more federal funding, whereas historically it's been more state and local on K-12. How big of an impact has that had, and is there still some funding that could be a tailwind for demand? Sure. So when you look at the K through 12 funding, we spend close to about $700 billion-$800 billion in North America in K through 12. That's pretty sizable when you look at from the markets of overall GDP. And federal is about 20%-30% of that, and has been consistent throughout the last 30 years. We did have ESSER money, which was another $200 billion dollars, which got spread over the few years, so call it another 3%-5% cushion in the federal funding over the last few years. And then the rest of the market is really state and local, which have been again very fairly stable as well. So last couple of years, especially with ESSER, there has been definitely help to districts on one-time buys and looking at areas of investments. We typically, our solutions are bought through multi-year contracts, so that way, we are typically go more from the normal funding environments. But the cushion definitely helps in the for the districts to focus on more digital transformation. So we've got, you know, a little bit benefit from that, and we continue to expect that benefit over the next few years. But over the long run, again, our demand is more coming from the normal funding, and we don't really see any funding pressures on the technology because the need for technology is continuing to increase as demographic shifts are happening in the districts. Old, antiquated software and the data security elements are becoming important, as well as adoption of technology to really mitigate the risk of not having enough teachers, as well as improving student outcomes. That has become almost a trend. So we don't really see technology drivers and tailwinds slowing down, from the funding is not going to be a critical factor. It's more about adoption curves. And so where are we in terms of kind of modernizing the SIS? It's obviously a big product area for educational technology, but, you know, where are we in terms of kind of a modern approach versus a legacy approach? I know it's a big product for you guys, but what are you seeing on the demand environment there? Yeah. Great question. You know, just for the benefit of everybody, SIS is the student information system. It's the heartbeat of a K-12 organization. It's the source of truth. This is where all the way from class schedules to who are the students enrolled in what classes, what are their attendance, what are their grades, what are their behavior, all the funding reporting to federal, state, and local happens through the SIS. So it is the, both the ERP as well as the CRM, teachers, students, and parents, and system for every elements, from report cards to attendance as well. So it's a very mission-critical system, and everything in K-12 needs to talk to SIS to be able to really have the understanding of what students are going to what classrooms. We are the market leader in SIS by far, almost, you know, 20 million+ students. Our next competitors are, like, one third of our size. 40% of the market is very antiquated and legacy environments. We continue to see a movement of these legacy environments moving to more best-in-class SIS. But more importantly, what we are seeing is more adoption of the broader student cloud, not just SIS, but upgrading their entire elements of how student data is managed, all the way from data products to, you know, information around how the documents are managed or how the analytics is done. And that's what's driving a lot of our growth on our student cloud, which is in double digit, where we are able to really go to these districts, both our SIS customers as well as non-SIS customers, and be able to sell around the overall data and analytics products around it. And we have seen, you know, resounding success, given that we are the only vendor who's providing a comprehensive platform across all these different elements, but also comprehensive data analytics products. Right. It's a lot of products that are embedded in there, but I did want to ask you on LMS, too. Sure. I think that's another big product category. You know, I think there was a surge in demand when COVID, obviously, a lot more digital classroom functionality was needed. What are you seeing there? And, you know, just, just kind of wanted to get an update on the LMS side. Yeah, it's a great. So when you look at LMS, learning management systems, right? We have a product called Schoology. You know, we had 10 million students before pandemic. After pandemic, we literally added four or five million students, or just overnight, within that, year and a half. And we are now back to the demands of the... about adding 1 million students or so each year, which we continue to do that. We have added a significant customer base, even in this year- Mm-hmm ... as we even come out of the pandemic. We do expect that to continue. There's almost 50% of the market which doesn't use an enterprise LMS kind of a solution. And what we do see is the demand kind of shifting not just to adopt an LMS, but what we call the full Personalized Learning Cloud. Mm. And that's basically, think about instruction on the learning management, but a formative assessment, integrated, embedded, along with curriculum and instruction and lesson planning, and managing the whole behavior. So you can actually drive more data-driven instruction to personalize, and leveraging AI to actually now create learning pathways for each student. So a lot of the focus area for us is really not just core LMS adoption, but as adoption of our entire Personalized Learning Cloud and changing how instruction is being done, and we continue to see, you know, exciting demand on that. Yeah, so the personalized learning, big TAM number, $75 billion. Yes. Obviously, that's not gonna happen overnight. Are we seeing some early green shoots there? Is that what you're referencing, or how, how do we kind of see that evolution playing out over time? Absolutely. So again, putting into perspective, right? School districts have funding from $8,000-$14,000 per student per year from federal, state, and local. Technology is only 2%-3% of that. You know, call it about $10 billion-$20 billion, what's being spent. It's a lot. But a huge amount of, you know... That's only $100-$200 per student. Almost 80% of that funding goes to teacher salaries, and about another, you know, $500-$2,000 goes to content, services, tutoring, and everything. With Personalized Learning Cloud, what we're doing is we are taking technology and be able to really augment the teacher and, and, also make tutoring and content more surgical and be able to help to the kids who need it. Now, so imagine that's what we're able to now really be able to sell to that instructional data, the budget, as well as, you know, we have a big teacher shortage in U.S. There's not as many teacher entering the workforce. There's almost 350,000 teacher shortage each year. How do we really provide these districts additional tools through AI and everything to really augment the teacher's ability to be more efficient, as well as provide more one-on-one support for each of the child by personalizing their instruction pathway, personalizing their homework? So, huge opportunity for us to almost, you know, $100 billion global TAM, and we are in a unique position with our, not only our classroom products, but the fact that we have the understanding of the whole child. We understand how the, what the student is, their demographics, their backgrounds, what areas they need help on, their special education, their needs, their. You know, we even understand their career and college pathways. We're bringing all that into the personalizing the cloud, and that differentiation now, not only our differentiation, the fact that we have the most breadth of the platform- Right ... we also have the most breadth of the data- Right ... and be able to really then personalize, for each child. Are there any customers that have really shown some early progress with that? I know there's some districts that have invested there. We'd love to hear any data points you have in terms of, like, what they've been able to do with your platform? Absolutely. So you know, we shared about it, that if you look at our out of our 15,000 districts, about 16% of them actually have more than four of our products, so have our you know, multiple products. And they are actually growing almost 34%, so we're really driving a huge amount of growth. So it's a flywheel effect: The more products they're buying, the more unified platform advantage it has, so they're buying additional products. And then, they're using. A lot of these customers are actually a key candidate for our data products. Mm-hmm. And now there are districts like L.A., districts like Dallas, districts like Seattle, they're implementing our data products so that can help them drive that personalization. What we're also seeing is now the adoption of AI on top of those data products. A perfect example is Charter USA, 70,000 students across almost 19 different states, and their CEO recently, in their 25th anniversary, announced that they're gonna be doing personalized learning across all their schools, leveraging PowerSchool platform. So huge amount of excitement around how we can personalize the structure on top of their already usage of Schoology and of our assessment products to help drive the AI-based personalization for every student. And maybe expand a little bit on AI, right? It wouldn't be a tech conference if we didn't flush that out a little bit. Sure. So what do you see the role of AI as across the platform? You know, are there opportunities for that, and also to use it internally to think about how you're developing some products? Yeah. You know, I firmly believe AI is a pivotal moment in education. There is actually not a better use case for AI than in education, because think, every student needs are different. Every element of the instruction should be personalized. You know, we still, a class of 30 kids get the same homework, and we expect every kid to be able to do the same homework, even though their level of understandings are different. So how do you really personalize instruction as well as homework for each child? It's a perfect use case. Also, think about parents. 50% of parents never go to the parent portals or anything and engage in the school. How do you personalize this communication with parent so you can reach them? How do you personalize to each teacher's need and support what the help they need? And then, as well as every school environment, what is the key challenge? One school might have an issue around graduation rates. Other might have dropout rates. How do you make sure that you have the right data visible to the principal leader? There's a personalization of AI element that's required for each of these personas in everything they do, all the way from data and insights dashboards, to personalization of the parent communication, to personalization of the instruction, as well as personalization of the teacher coaching and PD. We're launching AI chatbots, which allow really changing how the interface of these products are, and making them conversational, making them personalized to that persona. And that opportunity and the use case is really the nirvana most of the educators want, most of the educator, and there's a lot of excitement around this. I came from the California State Board Association, you know, of in the San Francisco last week, and part of the discussion in the keynote was around how AI is gonna really drive the future of really changing the education. So we are really at a point where we do think in the next 2-3 years, we will have a significant adoption of AI across schools. And we are at a perfect point where we have both the data and the technology to allow that to be embedded into our tools, which they are already using today. So one of the things that has seemingly been a maybe I don't want to call it a gating factor, but there's only so much a district can do every year, right? And so as they think about looking at AI, does that actually make it easier to adopt once they get over the hurdle, so they can implement more technology at a quicker pace? Absolutely. So think about districts, you know, roll out new parent portals. They want parents to be engaged. They're sending messages to engage, but they can't get enough parents to be able to be participant in that. Student engagement, student attendance is a big problem. Mm-hmm. How do you get to the kid? A lot of times I have districts who have rolled out $millions and millions for tutoring and additional content and credit recovery, but typically, the 30%-40% of the kids who need it the most, they're not even participating in that. So how do you surgically reach out to the right kid with the right intervention, the right support, and the help they need? That's where AI can really identify, personalize, and actually be able to use that, but using it integrated with the solutions they're already using day to day, because they're already doing their homework in our Schoology. Sure. They're already doing their homework in our PowerSchool SIS. They're doing their career pathways and college planning in Naviance. By personalizing all that stuff, right, embedded into these tools, we are able to get the adoption of these technologies even easier and faster, and to your point, really allow these districts to get better ROI. You mentioned reaching out. SchoolMessenger, a recent acquisition for you guys. Talk about the value proposition there and what attracted you to that asset? So it's one of the things I think if you ask, even in the audience, how many... If you have kids, how many apps your school district uses to be able to have you be able to keep tabs on your kids' stuff? Typically, there is one app for emergency notifications and mass notifications. There's two-way chats. There's a separate place where you go check report cards, your separate place where you're doing payments, your separate place where you're doing communication around the overall, what resources and help you can get from districts. So we have, with SchoolMessenger acquisition, integrated into PowerSchool SIS and Schoology, we've launched and previewed this at our user conference earlier this, called MyPowerSchool. How do we bring all that element in one place so that you don't have to go to a messaging app, you don't have to go to a separate SIS for report cards or separate Schoology for assignments? All is going to be part of one app, and then take the element of that, that whole communication can be reached out to all the families, irrespective whether somebody has a laptop, a smartphone, or even a mobile, because we can take all that communication, put that in the chatbot and go through the SMS directly to the parent and personalize that. That's an exciting opportunity here with the SchoolMessenger. It's a very strategic communication layer and engagement layer for us across all our portfolio. So we're looking at that integration across the phase. They're already a market leader. Mm-hmm. With embedded integrations with MyPowerSchool, we really expect this to be a game changer because there's no other communication app which has all these elements in one place. How do you think about cross-sell synergies? Is it something that can happen, it really drive growth in 2024, or does it take some time? How, how do you think about the benefits of selling that back into the base? Yeah. Well, typically, in any of these acquisitions, we get some amount of cross-sell growth just from the fact that these are best-in-class applications, and we already have relationship with these school districts. So they get the benefit of putting it on the same contract- Mm-hmm ... and they have it. We already—SchoolMessenger were already a partner for the last three years. We already integrated that to SIS, so we were already working with them on joint sales, so this allows us to really accelerate that growth. By integrating to MyPowerSchool, what we announced, and we are launching it before next coming school year, we will expect a more significant demand to increase- Sure ... post-launch of that in the second quarter, with really getting it to our, to all our customers with the whole one experience. And as by later this year, as we really integrate some of the AI components, that's gonna drive our growth into 2025. So we really expect this to be a pretty strategic, growth driver for us. Maybe just kind of outline the broader M&A strategy. It's been part of the build-out over time, and how do you kind of balance building things organically versus, you know, looking at M&A? Yeah. I think one of the benefits we get is that being the largest player in the market, also in front of 80% of school districts of all shapes and sizes, with district leaders being a key strategic part of their strategic plans, we get firsthand view of what are the key drivers that these district leaders need. So, and we have been able to be very responsive, both with our organic and inorganic strategy, to be able to meet the needs of the districts. Take example, in during the pandemic, there was a big focus on, initially on the whole classroom. So with our Schoology acquisition, with Performance Matters, we were able to really partner with them. There was big focus after that to understand data. So our acquisition of Hobsons and the innovation we did with MTSS, as well as our data lake, allowed us to really power these districts with the data products that allowed them to understand where the kids are and how to provide the right help for them. We saw a lot of increase in demand on behavior issues and how new districts can improve that. So we acquired Kickboard for social-emotional, or Kinvolved for attendance interventions, as districts were struggling on attendance. Curriculum and instruction standardization is a talk in a lot of the different states, so we brought that in. So we're able to really address the key drivers where we see the demand curves- Mm-hmm ... both through our relationships as well as through our partner network, the fact that we understand which products are seeing the demand, we are able to both invest and also acquire to be able to drive to where the growth is in the market. So that agility, and especially now as we are seeing with messaging and AI, gives us a very strong opportunity for us to be able to meet the needs, both for our innovation as well as for acquisition. So we have grown about 10%+ organically, and then similarly about 5%-10% inorganically, and we expect that to continue to be the case. And the appetite, obviously, then for additional M&A beyond this. Yeah. And what are you seeing in terms of valuations, right? Yeah. I know it's been kind of a volatile public market over the last few years. What are you seeing in terms of the valuation side? Yeah. I think, you know, we always have the advantage, given our scale, to be able to have the cross-sell synergies, both on the top line as well as bottom line, to be able to make these acquisitions accretive to our top-line NAV and EBITDA. We also, given our large scale, we get almost a first look at most of these assets. We are very selective. We look at companies which are strong products, so they fit with our strategic plan of the growth, where we see the demand curves. We also look at strong cloud technology, so they're much more easier for us to bring into a tech stack. Mm-hmm. We also look for strong customer adoption, so that way, we can scale up, and we don't have to prove them. They're already proven products that we can scale and grow the cross-sell synergies. And we still get the benefit of an arbitrage on the multiple buyers to be better than ours, to be able to acquire and then get the... our multiplier effect on it. I'll open up to the audience if there's any questions. How are you doing on the leverage? So we, you know, we do keep in mind, especially when you look at our growth rates in the last eight years, we've almost grown 20% plus. But in since public, we have kind of reduced our M&A speed just to keep that still our leverage profile to be under 3-4x. We are very comfortable with that because that, you know, given the stickiness of our base and the predictability of our business, you know, that's one of the beauties of our business is that it's a consistency and reliability both of the top line and the profitability. And that allows us to have a very, you know, comfortable level of 3-4x leverage. All these M&As, we are still keeping to make sure that the leverage remains in that healthy numbers, and it allows us to still grow both organically and inorganically. Maybe just on the balance of growth versus profitability. The margins are high, obviously, a vertical software model. So as you're thinking about, you know, hey, reinvesting in the business and margin, how do you balance that, obviously, having the margins being pretty high already? Yeah. When you look at just last since we've gone public, we've actually beaten our all long-term public metrics of profitability and growth. We almost increased our pro- you know, EBITDA, adjusted EBITDA by 150-200 basis points, improving our free cash flow as well. What we did that in, actually, right in this room, in Investor Day, about a few months back, we actually shared that we can continue to grow our adjusted EBITDA by 100 basis point each year. So think about us to be a 12%-15% grower on the top line, and then about, you know, high thirties as the profitability over the long period. We'll be well north of Rule of 50, given the attractive proposition we have. And keep in mind, this still doesn't compromise on the investments. We're still spending in R&D, including our capitalized R&D, more than any other player in this market, because we are investing in international, we are investing in unified platform and experiences, investing in our data products, and also investing in our AI strategy. That differentiation, you know, gives us a huge long-term growth advantage, which is accretive to the growth numbers I shared with you guys. So we are investing, giving good profitability, yet investing in the long-term drivers, which further can drive additional growth and profitability for us. So we're very excited about the future and the potential for us to continue performing to the numbers and even have an upside to it. So I also want to hit on the go-to-market. I think you gave them some stats in the past on how many deals are coming from RFPs and how many are not. So they're almost not even really a competitive bake-off. So, you know, talk about the go-to-market and how competitive are some of these deals, really? Yeah. So I think the benefit of being, having some level of relationship with these 80% of school districts is that we already have an inroad to the CIOs, we already have inroad to their key buyer personas, we already have existing contracts. So when we're getting invited to every opportunity, we get the chance to be able to be proactively in as part of our renewals, as part of our quarterly business reviews, have a discussion about the digital transformation and make them aware of the breadth and depth of the pieces we, we typically do. So if you're sitting with a superintendent or CIO, your question would be, "Hey, I'm struggling getting this report to the board," or, "I'm having equity issues, and I need to address that," or, "This is my strategic plan for the next three years." We typically would lay out our digital transformation roadmap through us, with all the pieces that will fit in. Typically, these districts would say, "Oh, great, I didn't know that you guys have this," or, "This is exactly I'm interested. Let me go look at that." And what that does is you know, translates into, here's an integration with the current product. So it's not a new solution you're rolling out. You're already... Teachers are already logging into the systems. Parents, students are already logging into one of the systems. So it's additive to that. So it's you're not throwing in new logins and new technology for stuff. It's additive to the user experience as they are doing it. That allows us to really run these processes very non-competitive. So 80% of the time, we are not participating and winning these things based on RFPs. We are actually just participating, being the single choice, trusted vendor, where they're already extending their current solutions or contract to be able to take advantage of the breadth and the depth we provide. That shows how strategic you are with a lot of these customers. Exactly. The scale, really, you know, if you look at even, you know, other public companies, like Instructure and all that, in K-12... you know, our scale in K-12 is almost four or five times of any of these competitors. That scale really gives us an advantage to have these kind of strategic dialogue with these, with these, you know, leaders. I know we're coming up on time here, but just on international, I know that's a big opportunity. There's been some new partnerships that you've announced. Give us an update on what you're seeing there, and how should we be thinking about that business long term? Yeah, so when you look at, you know, just the U.S. opportunity for us, right? It's a $10-$15 billion enterprise software spend. We are only 6%-7% of that. Our cross-sell TAM with our, just our current solutions is about $4.5 billion. So we have a huge runway for us to go double, triple in North America and continue doing double digit. What we also see is that in the U.S. and Canada has about 60 million students, international, there's 1.3 billion kids, and especially in pandemic, there was a wake-up moment for most of the countries that they needed more technology to be able to handle these kind of disruptions. We're also seeing huge student growth, population growth centers, which are opening up new schools, new public schools, new private schools. These are, you know, that means they, and when they're putting these new schools, they want technology to, you know, help start them in the right way. So we are seeing a lot of inbound across international. So to be able to tap into that demand and prove that our solution actually does, we already have beachheads in, like, the entire country of Uruguay uses us for all the digital learning and classroom instruction throughout the country. We have a few hundred thousand students in Philippines. We already know that our solutions can meet the global needs, so what we're doing is now establishing a whole partner channel. This year, we have almost signed up already 13 different partners in all these growth areas, especially in India, where we have also acquired a company, so we can actually even have more boots on the ground in India and Middle East. And that has given us an opportunity to really bring our solutions to these markets where we saw a huge amount of demand and potential. Our goal is to, that international would become a material business for us in the next 3-5 years, with the current trajectory of adding a couple of million students each year. That's what's exciting about it, is that I think it does, you know, as we make our solutions even more robust, with more unified experiences, with AI, we have an opportunity in a couple of years to really grow our international even at a faster rate. What are the catalysts for growth there? I mean, I know you have the partnerships, and you mentioned the 13 partners, but demand or, you know, are there certain aspects of those students and those needs that are catalyzing a lot of this? Yeah, so big factors we are seeing is around, again, if there are new schools, new private school chains, which are, you know, growing, as well as public districts who are looking at more data, or they're trying to modernize, or they're trying to put more digital content, they're using our platform, either SIS or Schoology or Analytics, or even Teacher PD to kind of really drive that. So those are the different demand areas we see international. We even see, well, demands coming from country-level opportunities as well- Mm ... where the entire countries are looking at how they can automate that. So there's a lot of opportunity here, and I do see that as we build the proof points, we should see an accelerating growth path there. Looking forward to that. Yeah, absolutely. Hardeep, thanks so much. Appreciate it, everyone. Yeah. Thank you. Thank you, everyone. Thanks.