Good morning. Welcome to the Bank of America Technology Conference. It's Tuesday, first day. Super thrilled to kick it off here with a fireside chat with the CEO of PowerSchool, Hardeep Gulati. Thank you so much for coming out. We super appreciate it. Thanks- Super excited for this conversation. Yeah. Thank you. So yeah, of course. So I guess to kick it off here, from a very, very high level, maybe for those on the webcast or in the room that aren't familiar with PowerSchool, maybe just a brief minute or two on what is PowerSchool, what do you guys do, what is the opportunity, and, and maybe a little bit about yourself. Yeah, sure. Well, I think you might have encountered PowerSchool if you have kids in school, so, or your nieces or nephew. We are the largest education technology company in North America, if not globally. We actually have presence in 80% of the North American school districts. So 80% of the North American school districts, in some shape or form, leverage PowerSchool to either run their school operations, you know, do actually manage the classrooms and the learning in the classrooms, have kids who plan college and career pathways through a Naviance tool, or even on the teacher talent management, recruiting teachers, onboarding them, substitute teachers, and professional development of teachers. So we are very comprehensive suite, in fact, the most comprehensive in the market. One of the exciting opportunities here for us is, you know, how we are really taking this even globally, and be able to have a similar presence in the global, because there's no other global company which has a similar breadth and depth of the platform in education what we have. My background, actually, I've spent almost more than 25 years in enterprise software, worked for Oracle for almost a decade, worked in talent management for corporates and higher education, and learning management system for higher educations as well. But really exciting last nine years with PowerSchool, focused on how we take all the elements of my learning from how Oracle created different vertical software platforms, and really be able to expand that, and as well as what we saw in terms of personalization, bringing that to the K-12 market, and we are kind of the not only the first, but the most comprehensive and largest to make that happen. Thank you. Thank you. You guys have a lot of products, and I'm already going off, I'm already going off my script here. That's okay. But I do wanna ask you a question. Yeah. I think it's important here, because you have a lot of products, but at the very, very core, you have SIS. Yeah ... Student Information System. I mean, maybe talk a little about, about why this is important for schools, why is it difficult, to do, and why is it once you get it, it becomes super entrenched within an organization, and, and what we think is a good landing spot to, to sell many other products into- Yeah - a district? Yeah. No, absolutely. It's. When you look at what we call Student Information Systems, so think about any school district or any charter or private school, for that matter, as well. All the elements of what kids are going to register into the school, their enrollment, their demographics, their contact information, To the actual class schedules and how the different master schedule of what courses are going to be offered and which kids are going to be assigned to what courses, what teachers are going to teach that, to the actual attendance, grades, as well as report cards, all that happens in a student information system. So teachers, parents, students, administrators are in SIS every day in and day out. It's a source of truth in a K through twelve school district. This is where every reporting to the state, federal happens, so they can get the funding from the state and federal, and they can remain compliant. So think about it, anything in K-12 that needs to understand who the students are, what classrooms and what contact, they need to talk to SIS. So every other K-12 environment or software interacts with SIS to be able to get that information. So SIS is both the ERP and a CRM of K-12. So think about manufacturing industries, service industries, right? You might have ERP as a system of record or CRM as a system of record. SIS is a kind of the main heartbeat of a K-12. What we took, to Koji's point, we had a leadership in SIS. PowerSchool started as an SIS 27 years back. We were owned by Apple and Pearson. We were the largest SIS solutions. We still today are. We have 30% of the North American school districts use our SIS. The next vendor is half or one-third of our size. We took that leadership and the SIS, and we also acquired and built 20-plus other products for all the different things, mission-critical things school districts need. And brought together a platform which can now integrate to allow to have a one-stop shop, so a parent or a student or a teacher don't have to go to multiple system to understand: Where are my grades? Where is my messaging, well, from the teacher? Where is my fee I need to pay? Or where do I need to put for lunch money? Or where do I need to understand emergency notification? All that is brought into one platform, and that's the unique part of PowerSchool. So we took our SIS leadership, where we have a very strong competitive advantage because we have 27 years of compliance and IP. We've spent more than $500 million building all that compliance. For any vendor to compete with us, they have to spend that same amount of time to go build that state certifications with each of the states. So we have a very strong competitive advantage with SIS, and we took that and also brought in all the other mission-critical systems in one platform. And that's why we have been such a strong leadership as well as growth profile, which allows us to continue to deliver that growth for many years, as well as take the same model and apply that international. Got it. No, that's super helpful. Thank you. We're asking every company here at the tech conference a question on the macro, the demand environment. It's been an explosive earnings cycle, to say the least, you know, over the past, call it, two months. And so you guys are vertical software. Yep. So maybe categorize how you're feeling about the demand environment today. How does it compare to maybe six months ago, a year ago? You know, how are you feeling overall? Yeah. So one of the best part of a K-12 industry is that we are immune to the broader macroeconomic factors. So think about inflation, recession, broader elements of the geopolitical elements. There is generally a great bipartisan support on education. Education funding between federal, state, and local hasn't seen a drop in terms of even when you talk about the Great Recession, even then, you did not see the education funding kind of really dropping. It remained flat during those 2 years, but over the 30 years, it has always increased. So you are in a factor where the funding of the K-12, which is $700 billion-plus market today, has been very stable and continues to grow. What's also exciting about that is that the technology element of that, K-12 have been a laggard in technology. So there is a lot of demand, especially post-COVID. We saw a step function change in the demand because districts realized that their systems did not have good technology to be able to handle different elements of virtual or being able to deal with all the different disruptions. So there has been a step function change in the demand as well. So technology has been growing more than 9%-10% in education K-12, and we see there is even a bigger potential because even today, it's only 2% of the total $700 billion spend. In most of the other industries, like retail or health sciences or financial, IT is almost 7%-9%. So we have a phenomenal opportunity in K-12 to take leverage technology to help more automate the processes, improve the personalization. So we are looking at education, which is one of the second or third biggest part of the GDP spend, and you have a K-12 which is largely stable and mainly immune from macroeconomic factors, and you have the huge opportunity upside in the technology growth, and that's what's exciting about our business, that we can continue to provide more stable growth. Now, as we were talking, Koji, a little earlier today, is like there are companies who can, you know, industries which are gonna grow 20, 30%. One of the, you know, elements of K-12 is that we are a double-digit grower. We are a 10% plus grower, and we are consistently delivering that growth. Consistency and also running it at a profitability is what our strength is, and we can continue doing that even as the broader macro factors change, and that's what the stability of the PowerSchool results has been. Yeah. We have almost 11 quarters to prove that as a public market. No, that's great. Wanted to ask a question on AI again. We asked this last year, and so it's been a year, you know- Yep ... since we've sat here and talked about AI and the end markets have, you know, for whatever it may be, whatever category it may be, trying to figure out what to do with AI. So really curious to hear, it's been 18 months since the introduction of or I guess, the awareness of generative AI. I mean, what are your customers saying, hearing, thinking about generative AI within the education space? Yeah. So, you know, long before even where GenAI got became cool, we have been always on this mission. The ultimate nirvana in education is personalizing education for every student journey. So I think any of you have kids or you have gone through your own experiences, every kid learns differently, has different strengths, different weak needs, different ambitions, different career paths. How do you personalize education for every child? In a classroom, we're still trying to teach one-size-fits-all. Everybody gets the same course material, same way, and how do you really drive the support every child needs based on where the individual needs are? So the need for personalization has been one of the foundational elements of education for a long time, and we have been marching on building the platform, so we understand everything about the student, we understand everything about the teacher, understand everything about what's happening in the classroom. So we have the context so we can personalize. So we've been building AI to leverage identifying at-risk kids or personalizing learning path, pathways. What GenAI has given us is that GenAI now accelerated our ability to interact with the students in a not just conversational way, but also being able to personalize, build the context, as well as embed into every element of PowerSchool so we can create an AI assistant for everyone in education: a student, a teacher, a principal, administrator, as well as parent. So we launched our platform called PowerBuddy, leveraging the OpenAI advancements, and with PowerBuddy, with ChatGPT-4, and now we are, you know, mapping it to the newer version. We can pretty much personalize a lesson plan for teacher can create a lesson plan, create an instruction or quiz sets individually based on your reading levels, your language, even for certain subjects. We have districts like Colorado Springs using it for Spanish. We have Duval County and Montgomery County adopting it to create item assessments for CTE, for career technical pathways. So we are creating all these things on the fly, leveraging GenAI, supporting the teachers. Our next phase we are launching is what we call Talk to Your Data. So administrators can actually take advantage of being able to ask any questions. Tell me all the discipline issues I need to know before I'm entering, or all the areas where my kids need support, or there's some social emotional going." So rather than teacher going to have navigate all the data, PowerBuddy will let them know Monday morning what do they need to pay attention on and how they can investigate and probe into the data even further to understand how they can support their day job. Take that from a parent perspective, proactively reaching out to parent as well as students. So we have more than 10 PowerBuddy platforms, which we are putting on the same platform and launching this year, and that has given us almost a phenomenal amount of excitement in the market. We have almost more than 2 million students who are districts who are doing the beta with us. We have almost already signed up dozens of customers, and we have more than $10 million pipe in our second half, which we have shared on the last earnings calls, where we are actually seeing a lot of interest on the PowerBuddy. We do think this is going to be, you know, just magnitudely much higher. I shared in the Investor Day last year, we expect this to be a $100 million-$500 million opportunity because we are able to provide personalized tutoring, personalized help for everyone in education, right embedded into the PowerSchool tools, and we only have that context. So we are able to personalize and leverage that data and as well as GenAI to make that happen. Education is going to be one of the really exciting industries who's going to adopt AI. We see a tremendous amount of demand, and it will be one of the biggest proof points of GenAI technology, and we are very excited to lead that way. I have so many follow-up questions here. And you probably appreciate that. I know your wife is a teacher. She is. She, you know, need the help. She is. She is. Shout out to my wife- Yeah ... who's a public school teacher a long time. Yes, for sure. Okay, so PowerBuddy. Yeah. Lots of good initial demand. You said 2 million students, 10 million in beta. Sounds like the demand is strong, initial demand. Talk to me a little bit about, is there a particular type of school, geography of school, size of district, big, small? I mean, where, where is the demand coming from? Is it broad-based? Is it very specific? Where is that demand? We actually, we're interestingly, we're seeing the demand from public school districts like Duval and Montgomery County, who have about it, Western Placer, in the Sacramento area, who are adopting it, but also from charter schools. Epic Charter, who has rolled that out, as well as private schools like Challenger. And one of the exciting pieces of the element is that our strategy differentiator is that rather than taking your data to the AI, we are bringing AI to your data. Because there's a lot of concern on data privacy, data security, data sovereignty in K through twelve. So what we are allowing these districts is to implement their data lake using our Connected Intelligence platform, which we have partnered with Snowflake to build. We're the leading data lake platform in K-12, and we allow the districts to bring their data on which they want to be able to build the RAG architecture or build the context for the AI, and then allowing them to not just leverage PowerBuddy, but create their own AI models if they're interested in it. So Challenger is a good example, where they're creating their own AI model, leveraging our Connected Intelligence platform. We are, in fact, excited about we are doing a pilot in the country of Uruguay, where they're actually implementing Connected Intelligence. They already use our Schoology across the entire country, exactly to build that data lake and leverage AI across the country. So the use case is a tremendous amount of opportunity we're seeing both in U.S. as well as globally. Has the end market... I guess digging deeper here? Yeah. Have these customers that are trying out PowerBuddy identified a problem? I guess where I'm going with this is, we want to fix this, and we know exactly what to do, PowerSchool, help us. Or are they just trying it out? "Hey, let's figure out if it creates content." I don't know. Yeah. Yeah. Yeah. I think it's a, it's a great question. So when—let's start with the teacher's use case, where we're seeing the initial set of demand to be very high, and I think you would appreciate, given how much time teachers take for having to create their lesson plans in terms of creating quizzes, managing that. With PowerBuddy, we're able to reduce that down to a matter of minutes versus 30 minutes to 1 hour they spend every day on some of those activities. So we're saving a significant amount of time for teachers. Yeah ... to create quality you know, better quality of life for them, as well as being able to support kids better. So it's, that is initial, we see that as a huge opportunity for supporting teachers. We see also an opportunity on the students. If you look at it, even our you know, when you look at the math levels, the reading levels, even the learning loss post-COVID, we have significant amount of gaps still. And one of the challenges districts face is that they try to throw so resources like tutoring, high-dosage tutorings, supplemental contact, summer schools, after-school programs, everything to try to support the kids who need help. But the efficacy of these programs are less than 20%-30%. In fact, I was sitting with one of the large district's superintendent, and he mentioned that the board, it was demanding answers like: "Hey, we rolled out this multimillion-dollar tutoring, and the 10% of the kids who are using it didn't need it, and the 40% of the kids who really needed it never got to that." So how do we, with PowerBuddy, we're reaching to every child as part of as they're doing their homework, as they're doing their assignments, we're embedding the PowerBuddy right in that framework, in their PowerSchool, in their Schoology, so they can see: "Hey, you're late for your homework. Can I help you? “Can I help you with this?” So rather than kid asking for help, PowerBuddy is asking them how they can interject within their routine, within their homework, and help them and support to bring them along on the areas they're struggling with. Mm-hmm. So it completely changes that one-on-one help, the intervention support, and that allows us to really address the core problem of how do we support every child. Mm-hmm. There's a huge amount of dollars which districts spend, but they don't have the right efficacy and usage. With PowerBuddy, they're able to really do it in much, much, much less. Mm-hmm. That changes the equation for these districts to why they're really adopting. And then you also have the problem of supporting a principal. Principal has, like, 60 teachers they're managing in a school. How do you get them all the data? How do you identify compliance issue? How do you identify behavior issues early on? Attendance interventions, which kids are dropping attendance? How do you deal with multiple languages and the ELL support for kids who don't have English language as their first? How do you reach those parents? So we're really bringing all to those core problems in education on personalizing. In fact, that's why we have shifted to AI first as innovation philosophy, that we believe that every element of the, the experience in our products are going to have conversational, contextual, embedded, and personalized AI system that completely allows us to engage better all the constituents in education. And we do think this is a big benefit to everything the districts have been trying to solve. Yep, yep, yep. You mentioned data. How much data unlocked do these districts have? Maybe the better question is, how much data do they not even realize is able to be unlocked? Because I think of other industries, maybe the data unlock is more obvious. Yeah. So what is the data potential here? How much data is sitting in old closets and districts that they could just be unlocked using something like PowerSchool? I think it's a great point. If you look at, think about K-12, K-12 is a very data-rich industry because you have so much information about what student is doing, what homeworks they are doing, what their different standards are. And through an assessment, you even know if the kid answered this question instead of a multiple choice from A to B, what was the conceptual gap as to why they selected B versus A? But the problem is, how do you use all the data from the kids', element, the classroom interactions, the teacher, you know, support, their career pathways, and the which colleges they're applying, what career, what projects they have done, what assignments, what interests them? So it's a huge data-rich industry, but a lot of times they don't connect the dots, right? So, you know, we—that's why we have our data products, our Unified Insights, and Connected Intelligence has been the highest growth area for us. But in bringing that data, bringing those insights, but then also leveraging it to support AI and bringing all the interactions to it. You know, we had a district, Elizabeth, which actually even had a LoJack on their laptops and realized that part of their school students were coming from outside the district. So how do they support those kids better? Because they were a great running district, so they were actually attracting kids from outside the districts. So they wanted to support them better. Once they realized they connected the dots of the GPS data with the student, they were better able to support that. Hawaii Department of Education, which uses our Unified Insights, very quickly, next day, they were able to identify which kids were impacted by the fire and be able to go support them through the location and be able to provide that level of continuity to them. So we have significant amount of data. In fact, if you know, if we extrapolate, we talked about 5 PB of data just in the PowerSchool systems, and then our ability through Data Lake to bring all additional data the districts deal with, all the way from the different elements to help them personalize. So it's a huge potential and opportunity. I'm going to ask you one more question, and I do want to open it up to the floor to see if there's any questions from the audience. One more question on data. Thinking about data, data powers AI, it seems there's a lot of data unlocked potential within these organizations. But then I think about these are kids, K through twelve. Yeah. I think about data privacy. Yeah. Right. Data privacy for underaged or those under eighteen, much more scrutinous out there. And so how do you guys think about data privacy as for those students specifically? You know, what are you doing out there to maintain your, I guess, leadership position- Yeah ... in maintaining data privacy? A-absolutely. Yeah. We take this responsibility very seriously, both from a privacy as well as security. Let's pick security as well. In fact, we, we, you know, we I was part of the White House pledge, where we actually did security by design pledge, where we are and providing this support to the districts. And I shared in the White House panel that we almost had 1 billion cyberattacks just in a year. In fact, K-12 districts are the leading industry of cyberattacks because they're easy targets. There, a lot of their systems might be antiquated. There's a lot of human element and different data feeds going here, then there, and those becomes all the attack points from them. We have had stellar record for five years, no, security breach across our systems because we make this as a huge investment. I have 50 people dedicated just to data security elements, making sure that we are good custodians for the data for districts, and we are kind of the leader in that. We also take that responsibility to the privacy, and when we are signed privacy pledge voluntarily to make sure the district owns that data, the students and the parents own that data, and we are their custodians. Mm-hmm. We do not do any targeted advertising. We do not sell any data to anybody. We only help them support with that data to make sure that their privacy. So our privacy policies are very, very, very strong. In fact, one of the works we have done, even on the Naviance for the college, is that we have also gone point where we do allow students to opt in so they can connect with the colleges, but we make sure that we are not, you know, sending that data or selling the data. It's owned by the students, and they voluntarily put that opt-in. So we are very strong custodians, and we have been validated by, you know, a lot of agencies as well as our both internal and external controls to make sure our privacy is the best in the industry. Yep. Thank you. Any, any questions from the audience? We got one right here. Hi there. In the past, you've done strategic acquisition, next learning, replace the need to... That thing. Yeah, absolutely. So for the webcast, the question was on M&A targets and how to think about M&A philosophy. So one, one of the exciting parts as we have done over the last nine years as PowerSchool being standalone, is that we have used both organic and M&A to be able to expand our platform, to continue to have the broadest platform in the market. So all the way from student systems to enrollment, to special education, to learning management, assessments, to talent management, to college planning, attendance interventions, messaging, analytics. So we've kind of really broadened the platform both organically and inorganically. And we continue to look at a lot of adjacencies, things like payments, things around more data, security elements from understanding the kids and how they're doing, as well as international opportunities for us, where we can expand and continue to grow international. In fact, we did a recent acquisition in areas of Neverskip, which already has 2 million students in India, private schools. So it's a huge opportunity in India, where there are 50 million students in private schools, along with 230 million kids in K through 12. So one of the phenomenal opportunities for us to where there's no clear leader, nobody has the full platform. So we're taking the local acquisition and bringing our full platform, our Schoology analytics to that. So a lot of opportunity for us to both expand our platform as well as grow international market share, and we will continue to be acquisitive. That's one of our core competencies. We have done very well. The way we look at the, we are very confident about our double-digit growth profile organically, and acquisitions and some of our international and other elements can sit on top of it. So we continue to drive higher growth profile through those additional growth vectors. That also gives us long-term more expansion. So I shared investor day, we are targeting about $1 billion+ in revenue just based on the current trajectory, and in the next three years, and we expect M&A would further increase that significantly. Question in the back? Just talking about the competition, do you typically displace a vendor when you go on to other people? Yeah. Yeah, the question for the webcast is about competition, replacements, all that kind of stuff. So thank you. Sure. Yeah. So what's exciting about this is that not only we're one of the largest K-12 industries into, if you look at—we talked about North America to be $700 billion. Internationally, it's close to $6 trillion in K-12 spending, but we are the largest. Most of the competitors we have are niche providers, and they're half our size. They don't have even remotely even the breadth or depth. They might have one or two pillars. We have almost the full clouds for, you know, all the different personas and the mission-critical ERP elements. And I, you know, as I said, there are two advantages. One is our SIS leadership. The fact that we are so strong in the SIS and we have 30% of the market, that has allowed us to have the stickiness to be able to cross-sell all the different pieces and grow that, as well as we had a strong backing that allows to continue even growing or inorganically and continue to expand that platform. So we have a very robust competitive profile. That is, even globally, we don't see anybody who's got the full mission-critical tech platform. You might see content providers or you might see assessment providers, but we partner with them and integrate them. We don't really compete with them, and that continues to be the one of the exciting parts of PowerSchool, is that we are a clear leader in the market in terms of the mission-critical software. Any other questions? I got lots. It's all good. Sure. So you talked a little bit about penetration on SIS right there, 30%. And so when I think about vertical softwares, I know investors at times sometimes get a little hesitant when they hear 30, 40, 50% penetration, and so definitely with PowerSchool education, you get the SIS, you're absolutely best positioned to win it all. And so how do you think about increasing that penetration rate, 30%, 40%-50% and higher? Yeah. On SIS specifically? Yeah, so great point, and in fact, maybe the part of the tail end of the question also was answers that, the last question, too, is, so think about, you know, we talked about $700 billion of spend in K-12. IT is still 2% of that. Yeah. So call it, you know, $20 billion market. $10 billion of that is for mission-critical software. You know, our projections for this year puts us about $790 million of revenue. So think about we are about 7% or 8% of the market still. So there is a huge market that still is ahead of us. So even though we have presence with one of the modules in 80% of school districts, we have 20+ modules. Just the cross-sell opportunity in our base is more than $4 billion, just to sell additional modules. If you just-- you know, we support 50 million students in North America. If we just get $1, a little over $1 per student per year, we actually grow 10%. So, half the market, by the way, is not even a niche provider or anything. We're replacing paper, pencil, or custom. So huge opportunity when we are be able to go and sell more modern tech solutions, automation, that allows them to save money on other factors because they're putting in, technology there. So from a growth perspective, we have a lot of runway to that. Now, we do replace competitors as well. There are a lot of niche providers who do not have the platform or not modern. So take example, and even in SIS, we have 30%+ of the market, which is mom-and-pop shops, like small, you know. So a huge opportunity for us to go displace that. International, that's even huge. There's, you know, no, no large vendor except for some of the mature Western Europe markets. We see phenomenal opportunity across the globe. So there's a lot of greenfield here, and with our cross-sell and the overall penetration, you know, in terms of our ability to really grow, so we can double up and yet still be only 15% of the total market share. Yep. Yep. Nope, that makes sense. Oh, yes. Yeah. Yeah. Yeah, now, 85%-90% of our business is recurring, so that's all subscription-based, and we do have some maintenance revenue for some of the products in the original which had that, but it's also recurring revenue. We don't really sell license-based, you know, with maybe 1 or 2 exceptions, but 99% of all of our sales are all, and these are full cloud products. Awesome. We are all out of time. Hardeep, thank you so much. That was a fun conversation. Yeah. Thank you so much. Thank you for having me. Yes, well said, yeah.