Good afternoon, ladies and gentlemen, welcome to the PowerSchool First Quarter 2023 Earnings Call. During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a question- and- answer session. At that time, if you have a question, please press one followed by four on your telephone. If at any time during the conference you need to reach an operator, please press star and zero. As a reminder, this conference is being recorded. I would now like to turn the call over to Shane Harrison, Senior Vice President, Investor Relations. Please go ahead. Thank you, operator. Welcome everyone to PowerSchool's Earnings Conference Call for the first quarter ended March 31, 2023. 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 getting started, I'd like to emphasize that this call, including the Q&A portion, will include statements related to the expected future results of our company, which 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 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. Thank you everyone for joining us today. Our 2023 is off to a great start. In Q1, we continued to grow our ARR 10% year-over-year and significantly expanded our adjusted EBITDA margins. We also won a record amount of new logo bookings, saw continued large deal demand from districts and state-level opportunities, and made progress in our international expansion. Q1 results are summarized on Slide 4. First quarter revenue reached $159 million, with subscription and support revenue growing 9% to $141 million. Our adjusted EBITDA grew 16% to $49 million, representing a 31% margin, an expansion of nearly 3 percentage points year-over-year. Net revenue retention remains strong at 109.1%, increasing 240 basis points year-over-year, helping drive ARR to $612 million. We have shared in our previous earnings calls, there are four key foundations to our continued success: our business resilience, our differentiated platform, our growth upside from further expansion, and our financial durability. I'd like to share our Q1 progress in these four key foundations. Starting with Slide 5. First is our business resiliency. This resiliency is grounded in sticky mission-critical products that are demanded by a durable market that features robust multi-source budgets that are largely insulated from macroeconomic conditions. This market durability was proven again in the first quarter, where we saw increased demand and strong funding of our technology with record new logo bookings. One of our exciting win was our largest ever deals, an $11 million plus bookings from Puerto Rico Department of Education for digitizing their entire K-12 infrastructure, leveraging our science and enrollment solutions across the territory, supporting over 250,000 plus students. We continue to see strong demand for our core student information system product, further expanding our clear market leadership. On a trailing 12-month basis, SIS represent approximately 33% of our total new and cross-sell bookings. While these deals do have longer implementation cycles, they are very strategic as they increase our cross-sell success and TAM significantly. The market tailwinds that we have shared in the past, which include the increased need for digital transformation, enhanced data security, operational efficiency, and data insights, continue to drive demand for our solutions. In Q1, in addition to the strong new logo activity, we also saw the number of cross-sell deals increase 15% year-over-year. As we roll out our persona-specific multi-product cloud bundles, that will further support the cross-sell momentum we are seeing. Our deal velocity continues to be strong. We saw more than 50 transactions above $10,000 for at least one product within each of our 6 cloud bundles. Our pipeline grew over 20% year-over-year, which gives us confidence about our business outlook. We are reiterating our full year 2023 guidance, which Eric will discuss in more detail. Moving to Slide 6. Our differentiate platform of K-12 vertical specific solution is the second key foundation of our strategy and success. There are 3 elements of our differentiation. First, we have the most comprehensive and diverse platform in the market to be able to meet the evolving needs of the entire K-12 ecosystem. Second, we have the most unified platform to provide an integrated experience for our key personas students, teachers, parents, and administrators. Third is our ability to deliver holistic insights across all data aspects to improve education outcomes. In Q1, we continued to see broad demand across our diversified platform with SIS, talent, and our data-centric products experiencing the highest growth in our portfolio. Our data-centric solutions, ARR, grew over 70% year-over-year. One of our data products was purchased in 6 of the top 10 cross-sell deals in Q1, showing the growing importance of districts harnessing and leveraging their data to improve their outcomes. One good example is the Weber School District in Utah, which added SIS, Unified Insights and communication products to their longtime usage of our ERP and talent solutions. We're also very excited with the success we are seeing with our Connected Intelligence solution. The first fully managed Data as a Service platform for K-12 schools and government agencies that provide a centralized data lake with real-time access and insights of education data across all systems, PowerSchool or third party, within or outside the district, so they can uncover deep insights and improve their decision making in enhancing their operations and their student outcomes. In the quarter, we saw several Connected Intelligence cross-sell wins in all segments of the market, like public school districts such as Des Moines Public School District and Fairfax County Public School District. Private charter school organizations like Epic Charter Schools, and even private schools like Challenger School Foundation. As schools evaluate the support they have implemented to address learning loss, the teacher shortage and student life and workforce readiness, data analytics is rising priority for schools and government leaders to break data silos and leverage the whole child insights for surgical intervention strategies and supporting improved education outcomes for every child. We recently announced a partnership with Ellucian, the leading higher education operations software provider that will provide a very unique opportunity to bring K through twelve data together with higher education data to enable states and local education agencies to build powerful longitudinal data systems across the student life cycle to optimize educational and career success. These new data solutions successes demonstrate our ability to grow our $3 billion cross-sell TAM that exists within our existing 15,000 customers and opens up new markets for our solutions. As shown in Slide 7, our third key foundation is our growth opportunity with further expansion of our platform and markets, each providing support and upside to long-term double-digit growth runway we see in our core markets today. Starting with platform expansion, you've all heard the growing conversation on the AI inflection point in many industries. We are very excited about providing embedded AI capabilities into our solutions, which leveraged in an integrated and contextual way, will provide enormous opportunities to support teachers and save them valuable time, differentiate and personalize instruction for students, and help efficiently scale school operations. As we have shared previously, we have already implemented AI into several of our solutions already being leveraged by many of our customers today. Our Student Success Cloud MTSS solution uses AI to help teachers more efficiently predict and identify students who may require additional support so the appropriate interventions can be implemented. AI is also a key element of Connected Intelligence offering, providing customer as a Data as a Service platform to create their own AI and machine learning models. With an estimated 80% of data scientists' time spent gathering and prepping data, our Connected Intelligence platform brings together data securely in a near real-time way, eliminating the biggest burden of AI projects and providing AI tools as well as build and deploy functionality. We are very excited about the launch in the last quarter of our new products, LearningNav and ContentNav, both part of our Personalized Learning Cloud. These products utilize AI to assess student mastery of subjects and automatically recommend content specific to their needs, creating a personalized learning journey. These products are key milestones in the push towards a holistic, integrated, and highly contextualized personalized learning solution, a market opportunity we estimate to be over $100 billion. We are also embedding Generative AI models to support educators across our solutions. For example, we are launching automatic content creation based on individualized student needs later this year. Other use cases like supporting administrators in curriculum planning and the launch of our PowerSchool Personalized Homework Solution next year will be further supported by Generative AI. While other industries and services may see disruption from Generative AI, we believe embedding Generative AI into our solution creates additional TAM and market expansion opportunities to enhance our growth. We plan to showcase our progress on these capabilities at our EDGE conference and Investor Day in July. Additionally, we would like to share our progress on the market expansion as we continue to make strides in our international go-to-market. We announced late last year our first sales and support office outside of North America in Dubai, which will open this summer. We just announced a new channel partner, Board Middle East, BME, that will strengthen our Middle East presence by reselling and supporting our platform with their local and established team of education technology specialists. BME will augment our reach to millions of additional students in strategic markets of Saudi Arabia, Kuwait, and Qatar. BME has committed to delivering PowerSchool solution to 750,000+ students in the first year. We also recently announced our proprietary innovative localization framework, which is a tool that enables our partners and customers to localize and tailor PowerSchool solution for their specific country and region. This localization framework enables key user experience features such as right-to-left views, multilingual translation, and localized extensions and reporting. The extensibility of our tech stack is a very strong differentiator and uniquely supports our ability to quickly expand outside of North America, leveraging different local partners. The steady nature of our customer base and our differentiated platform, combined with our operational execution capabilities to create a highly durable financial model, which is our fourth key foundation. On Slide 8, you will see that we have created an enviable business model with meaningful operating leverage, as demonstrated by the increasing profitability as you move down the PNL from adjusted gross profit to adjusted EPS. We feel this operating leverage is sustainable and will create further margin improvement, as showcased by our outperformance on adjusted EBITDA this quarter. I will let Eric speak to the financials for the quarter and the durability of our financial model. Eric? Thank you, Hardeep. We kicked off 2023 with a strong quarter of continued execution, reflecting balanced growth across our platform as our mission-critical products deliver on the key market needs across the K-12 ecosystem. As summarized on Slide 9, first quarter total revenue came in at $159 million, representing a 7% year-over-year increase and in line with the guidance range we provided on our last earnings call. Subscription and support revenue grew 9% year-over-year to $141 million and accounted for 88% of total revenue in the quarter. As our business grows, we expect to see an increase in larger strategic deals which may impact the variability of our financials from one quarter to the next. As we announced in an 8-K filing earlier this quarter, we are thrilled to have won the Puerto Rico Department of Education deal, which was signed on February 27th. This large deal represents $11 million in total value, consisting of $3 million of subscription and support revenue, approximately $3 million of services revenue, and $5 million of license and other revenue. We are anticipating customer acceptance of this large strategic implementation to occur over the summer months, which is when the subscription and support revenue will start and the majority of the services activities to occur. Revenue from our services business totaled $16 million in the quarter, representing a slight increase over the prior year. As we mentioned previously, services revenue growth rates will fluctuate quarter to quarter due to the variability that comes with large deal wins such as Puerto Rico, Alabama, L.A. Unified, and Stride. We also continue to drive the efficiency and velocity of our implementations, which increases the time to value for our customers. Revenue from license and other, which relates mainly to our third-party revenue, totaled $2 million for the quarter. As mentioned in previous earnings calls, this is our smallest and least strategic revenue stream that is highly variable on a quarterly basis. We ended the quarter with an annual recurring revenue balance of $612 million, representing a 10% increase over the same time period last year. This strong performance was driven primarily by continued strength in cross-selling activity and higher new logo bookings. Our net revenue retention rate came in at 109.1%, up 240 basis points year-over-year and consistent on a sequential quarterly basis. Our strong NRR performance was driven by higher trailing twelve month cross-sell momentum, coupled with our typical contractual price increases. Adjusted gross profit for the quarter came in at $109 million with a 68.1% margin, representing a 200 basis point year-over-year improvement, driven by improved operational scale, responsible hiring, and a continued focus on process efficiencies. Moving to the first quarter operating expenses. Non-GAAP research and development expense came in at $20 million, representing 12.5% of revenue, compared with 15.7% in the same time period last year. This 320 basis point reduction in adjusted R&D expense as a percentage of revenue reflects the efficiency and improved cost profile of our R&D model while still investing in our key strategic innovation priorities. Including capitalized R&D expenses, the total invested in R&D was 18.5% of revenue, compared with 21.7% last year, representing a 310 basis point improvement. non-GAAP SG&A expense totaled $39 million in the first quarter, representing 24.6% of revenue, compared with $33 million or 22% of revenue in the same time period last year. The increase reflects the expenses from our Q1 in-person sales activities, as well as our continued investments that we are making in our sales function, as well as our go-to-market activities, which we expect will continue to fuel our future growth. Our first quarter adjusted EBITDA was $49.4 million or 31% margin, exceeding the high end of our guidance range and reflects our continued commitment to margin expansion. Non-GAAP net income in the first quarter was $0.18 per fully diluted share, up $0.02 or 13% from the $0.16 per diluted share we had in the same time period last year. Increased interest expense was a headwind of approximately $0.03 to our non-GAAP earnings per share. First quarter Free Cash Flow, which is seasonally our lowest cash flow quarter, given the timing of our renewals and bonus payouts, was negative $70 million, an improvement of $5 million or 7% from the same time period last year, and was driven by improved use of working capital and reduced CapEx spending. Moving to the balance sheet. We ended the quarter with $64 million in cash and equivalents, an increase of 173% over the same time period last year. It should be noted that typically in the first quarter, we need to utilize our cash revolver. This year we did not need to use it due to the strength of our cash collections. Net debt leverage as of the end of the quarter was 3.3 x, a meaningful improvement compared with the 4.5 x a year earlier. Turning to our 2023 full year and second quarter financial outlook on Slide 10. For the full year 2023, we are reiterating our guidance with total revenue expected to be in the range of $688 million-$694 million, with the midpoint representing a 10% year-over-year growth rate, an adjusted EBITDA of $222 million-$227 million, representing a 32.5% adjusted EBITDA margin at the midpoint. For the second quarter, we expect to deliver total revenue in the range of $169 million-$174 million. This second quarter outlook factors the timing variability for the go live of the large Puerto Rico implementation, which is expected to take place this summer. For second quarter adjusted EBITDA, we expect a range of $55 million-$57 million, representing a 32.7% margin at the midpoint. For modeling purposes, we expect full year capital expenditures, including capitalized software of approximately $45 million-$52 million and share-based compensation expense of approximately $68 million-$70 million. Fully diluted shares by the end of the year are expected to be in the range of 200 million-205 million shares. Overall, we're pleased with progress in the first quarter. We remain focused on growing our top line by executing on our go-to-market strategies, driving innovation in our products, and exceeding our 15,000+ customers expectations. Our 2023 margin plans are on track while we continue to invest in our operations, product innovation, and international expansion. Finally, as a reminder, we will be hosting our first Investor Day on Tuesday, July 11th in Orlando, Florida, in conjunction with our flagship customer event, EDGE 2023. We're excited to share updates on our product roadmap, go-to-market strategy, international playbook, long-term financial targets, and much more with the opportunity to meet top customers and learn about their journey with PowerSchool. This will be our first EDGE event since the pandemic began in 2020 and our inaugural Investor Day, so we're very excited to share our latest thinking with all of you. This concludes our prepared remarks. Operator, will you please open the line for Q&A? Certainly. If you would like to register a question, you can press the one followed by the four on your telephone keypad. You will hear a three-tone prompt to acknowledge your request. If your question has been answered and you would like to withdraw your registration, please press the one followed by the three. As a reminder for everyone on the phone line, you can press one, four to register your question. Our first question is from the line of Gabriela Borges with Goldman Sachs. Please go ahead. Hi, this is Carolyn Valenti on for Gabriela. First question for me is you have a few new product enhancements around kind of the personalized learning space and recommending student-specific content and lesson plans. Can you talk a bit about what kind of type of ecosystem you're looking to create over the medium term? Hi, Callie, how are you doing? Great question. As I mentioned, we are very excited about the whole Personalized Learning space, and especially the products we have launched, really gets our foot in the door with the broader Personalized Learning. The components we talked about, there are two parts to that. One is the actual content, basically where we have almost a 4 million open education resources, as well as partnership with all the major content providers where we are able to provide a learning object repository, so we can bring in the content. One of the components I talked about in the prepared remark is that we're actually also leveraging Generative AI now to create additional content. So that allows us to even create personalized content just specific to a child. So take example. If they need help more in a question about ratios, it will take the set of questions already there and create a personalized another question for that child. The second piece of it is the learning navigation. The beauty of that learning navigation is it actually lets us monitor the different mastery levels of every student and being able to create a personalized learning pathway for every child depending upon their learning pathway. Every kid would actually have a different learning pathway and flow of content and the assessment to help them master that subject. The beauty of that is as we are taking this into the next level, as I mentioned, next year we're launching our Powerful Personalized Homework. We are able to even take that and embed that integrated into the classroom lesson plan for the teacher, so teacher doesn't even have to scrape that homework. The learning navigation will provide the personalized homework for that every child. This really changes the game in terms of amount of time teachers can save in supporting teachers and being able to personalize the learning aspect for every child. We're very excited about some major innovation, and hopefully, we get to see you at the Investor Day and get to share this live. Great. Thank you. Quick follow-up if I can. Recognize there's some concern around the impact of Generative AI in education. How are you navigating using the technology, just given the sensitivity around content in the K-12 space? That's a great question. you know, When you look at from a perspective of what we do as a software provider, right? What we are providing as a software doesn't, it's kind of more the mission-critical of providing the environments for the student, teachers and the parents and the administrator to be able to manage the school from an operations perspective, from a collaboration perspective, from teacher support and onboarding and substitute teacher management. Generative AI doesn't necessarily really impact any of our software capabilities. What it does actually is as we embed that and contextualize it into the different operations in our software, we actually can now provide a whole lot of additional content services and actually value out of our software for district. For us, it's a really exciting time because it actually now allows us to broaden our capabilities to be able to provide more turnkey experience for our school districts and user personas. We are really embracing it. As I mentioned, AI has been part of our strategy long before that with the things we've already launched, and now generative AI helps us to continue to enhance our products even more faster. Great. Thank you. Congrats on the quarter and look forward to seeing you in July. Thank you. Our next question is from the line of Stephen Sheldon with William Blair. Please go ahead. Hey, thanks. First one here, wanted to ask about maintaining the 2023 guidance. You outperformed profit expectations in the first quarter, and I think if I heard you correctly, you talked about the pipeline up 40%. I guess what kept you from increasing the full year guide? Is that mainly just being conservative as you progress through the key selling season here in 2Q, you know, maybe the pace of implementations or I guess just anything else to call out on maintaining the guidance? Sure. Hi. Hi, Steven. Why don't I kick it off, and then I'll ask Eric to jump in. As you saw, we had a pretty good quarter, right? In terms of the, not just the record new logo, new business bookings, but also in terms of a cross-sell traction. We're very excited about the results of the quarter and as well as the traction we are seeing in the market. As we did mention that, we are also, you know. Some exciting part of this is actually we're getting a lot of large deals, not just Puerto Rico, which is one of the largest deals we have seen in the recent history, but even last year, implementation of Stride, implementation of Peel at 2 major SIS implementations. We signed up two major state deals last year in Maryland as well as Alabama on Unified Insights. Some of the go-lives on that, as you can imagine, is going to go into the back end of this year as the current school year go live. It's kind of like from a revenue perspective, it is gonna be back end loaded. That's what we are kind of being cautious about from the guide and both in Q2 as well as the rest of the year. From the momentum we see, we are absolutely comfortable with the current guide and definitely are seeing great momentum for our core businesses like SIS and our new investments like Unified Insights. That gets us very excited about the opportunities going forward. I mean you answered really well, Hardeep. I think, Stephen, the key here is, you know, as you think about the larger deals, even the larger deals that we have in the pipeline, you know, we feel very confident that we will get them. The reality is, you know, you won't really start seeing the revenue on those until, you know, latter part of this year, most likely first part of next year. I think it's important as you kinda look at the skewing of the revenue, you know, you'll see especially for the deals that we signed late last year and early this year, that's when the, you know, subscription revenue will really start to pick up in the back half of this year. You know, I think it's the funnel's great, the pipeline's strong. It's just, you know, as we are, you know, reverting back to some of these more, you know, the SIS implementations which are, as you all know, extremely strategic to us, it does certainly take a little bit longer to implement these, you know, given the complexity and size of them. The revenue will lag a little bit of the booking. Got it. Makes a lot of sense. To follow up, I wanted to ask another question, I guess, about the on the AI side with LearningNav and ContentNav. Curious how, I guess, teacher reception has been to those products for those that have tried it. Sounds like it can make teachers' lives a lot easier. I think we all know teachers are spread far too thin. How big an opportunity could that be? It's a great question. One of the key things, the way we are launching all of our these initiatives is that this is meant to augment a teacher, not replace a teacher. As you can imagine, you just mentioned about the teacher's life, right? They have a lot of monotonous task. Just the whole process of assigning homework, collecting homework, grading homework, and then being able to really understand where each child is, one of the major time sinks in terms of how to just basically understand where each child is. That's the kind of flows we are augmenting. Also being able to personalize to provide that individual help each child needs. One of the beauties of this is when you look at our ability of integrating our MTSS, which we've, we have a lot of you know, like Alabama and a lot of districts leveraging, we're able to surgically provide the interventions of the child's need who are either on the academic side or on the attendance side or on the behavior side. AI is really helping just not on the learning navigation and mastery, but actually also helping identify the kids which need help, and then being able to provide the surgical intervention each kid needs. The opportunity here is tremendous in terms of really augmenting and supporting teachers and the educators. Great to hear. Thank you. Our next question is from the line of Brian Peterson with Raymond James. Please go ahead. Hi, gentlemen. Thanks for taking the question. I wanted to know on the really strong results for SIS. You know, I'd be curious what's driving that. I know you mentioned some really strong pipeline figures, but curious, you know, how does the pipeline specifically look for SIS and, you know, any thoughts on kind of the future deal activity there? Great, Brian. Absolutely. I think there are many factors which are playing into the SIS. One is, I think, as you know, in the pandemic, there was a lot of focus on classroom assessments as well as understanding where the kids are. Some of the projects around vendor license, they were also having antiquated systems, but they didn't want it to move a SIS in the middle of a pandemic. What we have seen is now the demand actually is even higher than what we saw even pre or pre-pandemic on the SIS. What's happening is multiple factor. One, the realization that you need to core the core operating system, right, of a school district if they want to take advantage of all the technology and really not have to deal with any major disruption. That's number one. It's really modernizing your core infrastructure and platform. Number two, the security is actually playing in the minds of these districts a lot, both in terms of right now the DDoS attacks and the ransomware attacks, and the fact that insurance companies have now increased the insurance for all of these districts if they do not have the right security systems, if they are still using flat files to load data across one system and everything. That's another thing from a CIO's and superintendent perspective. It's almost a cost of doing business, and they got to upgrade that. Third is actually also what's helping is our SIS differentiator in terms of really bringing the full platform together is now giving them an avenue that it's not just putting another system, we're putting entire platform and gives an opportunity growth. All those three are really driving the de-additional demand we are seeing in SIS. We actually have a very healthy pipe both in U.S. and international around the SIS, not just from the large districts in terms of things, but also a lot of mid-size and small schools as well, which are taking advantage of the platform and the wholesome student cloud solution we have launched. That's great to hear. Eric, maybe a follow-up for you just on the renewal seasonality. Can you just remind us how that kind of flows through ARR for the year and any early insight you guys may have as you kind of go into the big renewal period this summer? Thanks, guys. Absolutely, Brian. Now that I own it, I can definitely give you guys a lot of good visibility into it. You know, we had extremely strong, you know, operational success in Q1. You know, the retention is extremely high, in fact, a little bit ahead of our expectations. As we go into Q2 and Q3, you know, just as a reminder for everybody, Q3 is our busiest period. We've got about 65% of our renewals happen in Q3. You know, the team is focused on two things. One, you know, executing flawlessly on the Q2 renewals that we're working through, and then certainly, you know, same thing in getting ahead of the Q3 volume. As you think about what that does from an ARR perspective, I think it is important. I appreciate the question. Just as you look at ARR for modeling purposes, you know, typically Q2 to Q3 essentially is around flat because, you know, obviously any of the net new in Q3 will get offset with any amount of attrition we have, given the fact that we've got, you know, 65% of our renewals happen in Q3, that's when any kind of attrition is gonna happen if it's material. You'll see from an ARR perspective, exiting out of this quarter into Q2, right, you'll continue to build that up. Q2 to Q3, ARR will certainly kind of level off, if you will, not go down, but it'll level off from quarter-to-quarter sequentially, and then it'll go back to a growth pattern from Q3 to Q4. Great. Thanks, Eric. Got it. Our next question is from the line of Fred Havemeyer with Macquarie. Please go ahead. Hi. Thank you very much and great to be speaking with you all again. I am going to do probably what I've done in other quarters and just check in on in part what we're seeing with ESSER, because I think it's been notable seeing more contracts, including some of those I've seen come across for PowerSchool that have been supported in part by ESSER funding. I'm curious, it seems that many of them are focusing the ESSER funding towards services charges while making room for software as kind of part of a more ongoing basis. As I'm thinking about the summer, as I'm thinking about this year's budgeting cycle, do you think that ESSER funding might be something that can help schools get more of these deals across the board, get that services one-time cost out of the way, and just facilitate more of the cross sell and upsell motion that you've been executing so well with? Hey, hey, Fred. Great question. Actually, I got a chance to speak just last week at ASU+GSV, where I was on the panel for the appropriate title, Halftime to ESSER. We talked about with the panelist members about, you know, when you look at the initial ESSER spend, there was a little bit more about some critical things they needed. As we're going to the tail end of the second half of the ESSER, it's a lot more strategic, it's a lot more transformational aspect, a lot more innovative aspects. We are seeing definitely, with 18 months more to spend and with the thought that a lot of these districts can even spend for that for a couple of more years in terms of the spend categories, I think there is still districts have good funding to support these transformation objectives, as you mentioned. And you're absolutely right. Definitely one of the beauties of ESSER is that you can actually use it for the initial implementation stuff, right, for the one time. That allows you to really help with that. Puerto Rico is a great example of that, which leveraging some of that ESSER money to help with the implementation. We also same time, ESSER is not the only opportunity. The Alabama deal, the multimillion-dollar Alabama deal we talked about last quarter, Unified Insights, that actually got through legislative approval as a special budget. There is a lot of recognition overall, not just from, you know, ESSER support and the district support, but overall from the legislative support in terms of making sure that these digital transformation initiatives critical for education are going through. The ROI of these are tremendous. That's why we continue to see the pipeline and the demand to be very strong. Thank you, Hardeep. I think I'd like to ask another question here just on international. As we've been seeing more and more, just international deals coming through here. Of course, you were highlighting in the quarter more deals or rather deals in the Middle East. I'm curious, as you're establishing more of a footprint overseas and getting more experience with doing these international deals, are you finding that there are learnings here and that you can just take and further scale your international go-to-market with and work with partners to further, just get scale in international regions? Absolutely, Fred. I think one of the strengths of the PowerSchool capability, especially when it comes to our SIS and Schoology, is that we already do business in 90 countries with not just American education schools, but a lot of the international and private schools in different parts of the world. What gave us that opportunity and the strength is the fact that even within U.S., as to be able to meet the requirements of all the 50 states, even in the Canada, meeting the requirements of all the different provinces, our system was built with an extensibility to be able to support the experiences, reporting, the localization required for meeting all the local laws and the reporting requirements and different attributes. That strength is giving us an ability, along with an already established proven points in a lot of the regions we are already entering with a brand presence which is known. If you are in Dubai, one of the best-performing school is American School of Dubai. If or if you're in Thailand, International School Bangkok. When a district or state or even a private school looks for an opportunity, they look at to these schools and say what system they are using, so they can kind of really replicate that same technology, and we already have strong viewpoints. This is the reason what you see is the strong partnership commitments we are getting is because we are already proven in these regions, and we already have a very strong brand appeal. What we're doing it rather than going after the individual schools, we're going with these strategic partnerships that helps us make sure that we can scale our more quickly international. We are getting the localized help for the support, the boots on the ground, the services. That way we can make sure that the experience for the end customer is gonna be, you know, very exciting. It's rather than having 50, 100 partners, this is very surgical, very strategic, exclusive partnerships in these regions with partners who are really committing and putting their skin in the game of helping us really scale into these regions. We are very excited about the path we are on. Thank you very much. Thanks, Fred. Our next question is from the line of Saket Kalia with Barclays. Please go ahead. Okay, great. Hey, guys. Thanks for taking my questions here. Hardeep, maybe just to start with you. I thought your commentary on SIS earlier was just really interesting and some of the drivers there. Maybe just to level set, can you just talk about roughly how much share PowerSchool has in SIS and maybe just broad brush who or what types of systems you're displacing in some of these SIS modernization projects? Sure. Hi, Saket. When you look at it, from a market share, right, we have almost 20 million students on our SIS platform. In North America, from a 60 million student perspective, you will put roughly 1/3 of the market which actually leverages our SIS solution. We are by far the market leader. The next three vendors combined probably touch that kind of, in terms of that percentage. We definitely have a huge lead over any of our competitors in the market. What you do see is that 40% of the market is actually still very legacy or custom-built solution. Even things like Puerto Rico, you know, has a very small legacy vendor where they're both highly customized and being maintained. There are still not only large school districts, but also there are a lot of still school districts in whether even in California or in others which are leveraging vendors which only have 1 to 2 million students on their entire platform. As you can imagine, the innovation required, the security apparatus required, the ability to be able to set a platform which can modernize to the needs of being able to leverage data as well as even AI into these school districts, they don't have that apparatus to do that, and that's what is driving a lot of the change. The 40% bottom legacy solutions, which is, you know, converting to our SIS platform. That's great. That's great to hear. certainly still plenty of room for growth there then. Eric, maybe for you for my follow-up. First of all, congrats on the Puerto Rico deal. a great win. Can you just maybe talk about how that contract maybe plays into the seasonality for services and license revenue, understanding the vast majority of business here is SaaS. you know, just given the rev rec on those two lines, could you just maybe help us, you know, think through those as we kind of model the rest of the year on revenue? Oh, sure, Saket. Actually, if I may, let me just talk about, you know, break our revenue into the, you know, most strategic, you know, down through the least strategic components because I think it'll help, you know, all of you as you're kind of looking at the revenue and how to model it. You know, from an SNS standpoint, certainly our, you know, subscriptions and support most strategic. You know, we're in the high single digits now. As we see these larger deals and the subs and support really start to kick in the second half, you'll see that revert back into the low double digits, ending the full year in the low double digit revenue growth standpoint. As you look at our services, you know, similar to what I said last quarter, I do expect our overall services business for the full year to be in the mid- to high single digits in the full year-to-year growth. Now why is that? Certainly, we've gotten a lot more efficient in terms of our services business. You know, the velocity of time to value for our customers has increased. We're getting a lot of utilization, a lot more increased utilization out of the team. Now, what that means from a sequential standpoint, you know, you will see sequentially Q1 to Q2, you'll see the revenue and services increase, and then you'll see a further increase in Q3 as we have all the back to school implementations, et cetera. You'll see it slightly taper down in the fourth quarter as projects start to taper off and schools head out for year-ending holidays, et cetera. Sequentially, you'll see the revenue and services pick up in the second quarter, peak in the third quarter, and then trail down a little bit in the fourth quarter, ending the full year mid to high single-digit year-over-year growth. L&O, same thing, you'll see from a quarter-to-quarter perspective. You'll see it pick up in Q2, then peak in Q3, and then again come down slightly in Q4. Just recognizing L&O being our least, our smallest and least strategic revenue segment, there is a little bit more variability from one quarter to the next. I would say on a full year basis, we, you know, we expect that to be around flat. And, you know, the majority of the growth, if you will, for the company will be on our SNS, our most strategic revenue component. Hopefully, I know it's a little bit more than you asked for, but hopefully that helps everybody kind of think about, you know, the overall revenue profile and how we're looking at it not only for this quarter but, you know, expectations into next quarter and certainly for the full year. Absolutely. Very helpful. We appreciate it, Eric. Thanks. You're welcome. Thanks, Saket. Our next question is from the line of Brent Thill with Jefferies. Please go ahead. Hardeep, on AI, can you speak to when you think that actually turns to a monetization event? Is this a year out? Is it a few months out? I mean, how do you judge the timing and how fast you can infuse the suite with AI? I had a quick follow-up for Eric after. Sure, Brent. Pleasure again. When I mentioned in my prepared remarks, we already do have AI-based at-risk components which we're selling to customers, we have dozens of customers who use our at-risk and MTSS solution leveraging those AI components. That's something we already monetize. It's a couple of million dollars as part of our Unified Insights solution. Something we are continuing to see as more Unified Insights continue to grow 70% and more deployments, we are able to continue to grow that piece as well. That's already, we are already monetizing that piece. The second piece of the component, as I mentioned, in terms of the LearningNav and ContentNav, this is based on some of the IP we have bought, which has already been around for almost a decade. We actually have now embedded that fully into our Schoology and product with these launch of these additional components. We are in the pilot phase with a couple of customers, and we plan to have it, you know, fully showcased in our EDGE conference so we can start selling them. We already have a couple of large customers actually who are very interested, we will start seeing some amount of these deals into the second half. The real monetization, as you know, this is almost a $100 billion TAM. The way we are monetizing it, these will be add-on products to our current clouds into this year. The next year, we will launch additional solutions like PowerSchool Precise Homework solutions. That can open up a huge opportunity. You have the opportunity to actually do things like, additional tutoring help through that, as well as in terms of helping on the areas of what we call the full learning pathway support, leveraging our Naviance and Workforce Planning to help kids with the supplemental learning. You can kind of start looking at the longer picture of even moving that to be even outside the classroom help. It's a much, it's like a, you know, three to four-year plan to launch these components, but you already have monetization, and we'll see more monetization happening over the later part in the next year. Okay, great. Eric, on the guide, I just you know, this is kind of the first quarter we haven't seen the cadence of you raising, and then you kind of go back to big deals. We can only go back to is it gonna take Stephen Sheldon to take 50 to close this out, or is it gonna take Sabonis with a bunch of layups? I guess you go back to, you know, everyone's fearing is this, is this riding on the big shots? Can you just address that concern of trying to get the full year over the goal line on going after the bigger elephants versus the antelopes? You know, I mean, look, Brent, I think it's a great question. What I would say, though, is the big elephants have already been bagged. It's just a matter of us doing the services work and getting the projects implemented. You know, it's a matter of timing, and you know, the teams. As you can appreciate, you know, Puerto Rico, the size of the deal, which is why we included it in the prepared remarks, is one of our largest deals that we've had in the last several years. As you can appreciate, there's a tremendous amount of executive oversight, management focus, and, you know, given the fact that it's a core SIS implementation, you know, in Puerto Rico, that then creates a flywheel for a huge amount of, you know, cross-sell opportunities in the future, right? What I would say is the team is laser-focused on, you know, LA Unified, on Alabama, on Puerto Rico, which are the big deals that we're confident we will start to see the revenue pick up in the second half. I guess I would just say is there isn't, you know, as Hardeep talks about the pipeline, which, you know, we're super excited about, especially in the bigger deal side there, those items from a revenue standpoint, you really won't see those start to, you know, contribute anything meaningfully until, you know, maybe latter part of this year, most likely first part of next year, which is again, everything we've modeled in. I would just, you know, while there's a little bit of noise, I think it's important and candidly as Hardeep and I, you know, talk about it, we're excited because the, as the deals get bigger, it's a demonstration of just how strategic we are becoming with our customers. We are gonna have bigger deals. They are gonna continue. You know, just rest assured that we're very confident in the second half of the year in terms of the revenue that's gonna roll off of these once the implementations go live. Great. Thanks. Our next question is from the line of Matt Hedberg with RBC Capital Markets. Please go ahead. Great guys. Thanks for my I'll just keep it to one for the sake of time. You know, I guess for either of you know, refresh our memory again about how we should think about U.S. Fed funding flowing into this year. I know there's been a bunch of moving parts, you know, coming out of COVID. Maybe specifically for Eric, you know, how do you think about that, you know, relative to sort of the midpoint of your kind of full year guidance range? Go ahead. Sure. From a funding perspective, I can quickly address that, Matt. I think the funding is largely when you look at the post-student funding, that has continued to be stable even throughout the last 2 years. There is no change to the core funding. Federal piece component goes to about 20%-30% of it. We have state and the local, and we have seen that across states and pretty much that to be very stable. The ESSER money is on top of that. That's a $200 billion ESSER, 3 tranches of ESSER. The first 2 tranches, you know, some part of them have been spent, and the 3rd tranche is still making progress. Total, you know, as I mentioned, you can put roughly 40%-50% being spent, and then the rest still available to the districts to spend. From that perspective, that still flows another 4-18 months for decision-making, and then even spend can be a little bit later. The funding environment seems to be very stable, and also with ESSER further supported by that. Yeah, Matt, specifically on the guidance, we have not assumed any dependency on the ESSER funding to deliver the rest of this year. You know, when we do have visibility to deals that may use ESSER funding, you know, it's usually a pretty small percentage, so there's, you know, very little risk there of, you know, things not getting funded because ESSER, you know, didn't get spent, et cetera. You know, the guide I think is fairly balanced, what I would say, and, you know, we haven't put any dependency on ESSER for the second half. Thank you very much. Thanks, Matt. Our next question is from the line of Rich Hilliker with Credit Suisse. Please go ahead. Hi, guys. Thanks for taking my question. Just wanted to have another go here at international. One quick one on my end. Exciting to see the BME partnership, the OneConnect partnership. I know these have minimum commitments. What I'm wondering is, how much freedom do these partners have? You know, as you mentioned, you're 90-plus countries. You've rolled out this localization framework. Are they able to sell whatever they want? Is it kind of that, you know, one more product rally cry? Are you pushing them with bundles? What does it look like? How much freedom do they have? Thanks. Rich, yeah, very fair question. The core focus international right now is on our core products, the SIS, the learning management systems, the enrollment, things where you need for a core school operations to be able to run the school operation, communicate, and manage learning and collaboration with the parents, students. We also see demand of actually insights and analytics, which is coming up international, even outside people who are buying our SIS and LMS. Those are the core area of focus for us for the international. We're not really launching our, all of our 20-plus products international. These are the core products which are the phase 1, and where these partners are enabled, trained, and that's what the experience is. Actually, most of the partner already have in some respect with working with the local schools there. Excellent. That's really helpful. Then last one on that topic. can you kind of help us think through, you know, you talked about these are exclusive partnerships, so it's not like we're gonna see 50 of them. Can you give us a sense, is this gonna be, like, a handful? Is this gonna be double digits? Over what period of time are you thinking of rolling the majority of these out? Thanks. Yeah, it's a great question. So, you know, when you look at it, we're not trying to go cover every country in every region. We're co-covering the biggest, you know, regions. We actually have brought in a management consulting firm to actually do the analysis for us in terms of looking at the local buying patterns and competition and the budgets and different scenarios. And we prioritized about 12 regions where we are establishing these different exclusive partnerships to kind of really go after, which actually opens up to almost a, you know, almost a 100 million plus of student TAM in just within those private schools and very focused strategies in these 12 regions. That's a very targeted approach. You know, expect that probably another half a dozen partnerships throughout this year, and then going into the next year to almost 12-15 exclusive partnerships. Excellent. Thanks so much. Thank you. Our last question is from the line of Brett Knoblauch with Cantor Fitzgerald. Please proceed with your question. Hi, guys. Thanks for taking my question. I'll be quick here. Just kinda wanna touch base. Now that you guys have into the six core clouds, have you seen, you know, any efficiency gains on the go-to-market strategy with that? Hi, Brett. When you look at it, you know, we started launching these clouds this quarter. One of the things I mentioned in my prepared remarks, we almost pretty much really, you know, have seen each of the products, depending on each of the clouds. We've almost seen 50+ transactions in each of the clouds. That's helping us, you know, whether it's a Student Success Cloud, or it's our Educator Effectiveness Cloud or Educator Recruitment Cloud or Workforce Planning Cloud. We're kind of really launching these things into our customer base to make sure that they can understand the benefit of really buying based on that persona, buying all the products rather than buying the individual products. We're not trying to discourage any of our customers to buy individual product. We're still selling majority of that, but we are able to have them start educating them. When they're buying the product, they actually have an avenue to really be able to take advantage of the full cloud for their persona. What we did see is actually we almost saw 60 plus deals in the quarter where the customer either bought the whole cloud, one of the whole clouds, or they topped off their existing products to be able to have the full cloud. That's a very encouraging sign, even with the lead on, that we are actually able to get customers to start thinking about this in a perspective. We really are gonna be doing a full launch of this at the EDGE conference, expect that by the second half for our customer base to be able to really have a full alignment. We really are gonna start seeing the benefit of this coming into the later half of the next year in terms of the new bookings. There are no further questions at this time. Hardeep, I will now turn the call back to you for closing remarks. Great. Well, thank you, operator. Let me just take a minute to thank everyone for joining us today, as well as thanking our employees and our customers for really the continued dedication and belief in our vision to be able to improve education outcomes globally. To summarize, right, this was a great start to 2023, we had not only a record new logo bookings, but also very exciting growth on our cross sell. We have phenomenal traction of our data centric products and Unified Insights and Connected Intelligence. Also, as we mentioned, the SIS, which is a very strategic core part, but which expands our cross sell TAM. Having the wins like Puerto Rico were really game changing in terms of the ability. Then international expansion further tops it off in terms of our future supporting our future growth. This success is really driven by the fact that we are the most differentiated mission-critical platform in the industry, serving a very large and stable vertical market. We operate on a very durable financial model that has a strong operating leverage and coupled with our tremendous growth opportunity, especially through international and even the personalized learning and innovation. We are really positioned well for the growth. We are excited about the opportunities that presents us and look forward to executing on the strategies throughout 2023 and beyond. Thank you again. That does conclude your conference call for today. We thank you for your participation and ask that you please disconnect your lines.