Good day, and welcome to the PowerSchool First Quarter 2024 Earnings Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on a touch-tone phone. To withdraw your question, please press star, then two. Please note, this event is being recorded. I would like now to turn the conference over to Shane Harrison, Senior Vice President of Investor Relations. Please go ahead. Thank you, operator. Welcome, everyone, to PowerSchool's Earnings Conference Call for the first quarter ended March 31, 2024. 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 President 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 for 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 Relations website at investors.powerschool.com. A replay of this call will also be posted to the same website. With that, let me now turn the call over to Hardeep. Thank you, Shane, and thank you everyone for joining us today. We are starting 2024 with continuous strong momentum, beating the midpoint of our revenue outlook and exceeding the high end of our outlook for adjusted EBITDA. ARR grew 18% year-over-year, while NRR improved 30 basis points sequentially to 107%. First quarter revenue totaled $185 million, up 16% year-over-year, and subscription and support revenue growing 18% to $167 million. Adjusted EBITDA improved 24% year-over-year to $61 million, representing a 33% margin, an expansion of over 2 percentage points year-over-year. These first quarter results showcase the robustness of software spend in K-12 market and the continued demand and stickiness of our market-leading mission-critical solutions that drive better education outcomes, empower educators, and help districts run more efficiently. These results are driven by the strength of our multiple growth vectors, which create the diversity and sustainability of our business model and enable us to deliver consistent results quarter after quarter. Now, 11 consecutive quarters since our IPO of meeting or beating guidance. I will highlight the updates in the quarter based on each of the 4 key growth vectors we have shared in the past. First, significant cross-sell and net new opportunity across North America for our comprehensive and broad 20-plus products, meeting a variety of district and state strategic initiatives. Second, our expansion and successes in the untapped large international market. Third, continued strategic M&A that expands our TAM and adds solutions that address the most important growth areas, such as our recent Allovue budgeting and planning acquisition. Fourth, launching new disruptive high-growth innovations like PowerBuddy, a K-12 industry-first AI assistant for everyone. Let's start with our first growth vectors and share with you some of the highlights of customer momentum in cross-sell and new logos with our key wins in Q1. As we briefly previewed in our last earnings calls, we are thrilled and honored to have signed in Q1, one of our largest deals in recent history, to serve the Indiana Department of Education, to provide special program solution to the state and all its districts to modernize systems, processes, and improve special education program needs for every student at every school in Indiana. Our solution replaced their existing vendor as we provide a more modern, interoperable platform with enhanced compliance for federal and state reporting requirements. We also saw several other notable cross-sell wins during the quarter, including Toledo Public Schools, who selected our SIS and ERP solutions, Visalia Unified School District, who chose our communication and our new MyPowerSchool product. San Bernardino City Unified School District, who selected our analytics and talent modules. LEAP Social Enterprise in Puerto Rico, who broadened their presence with us on multiple products, including SIS, Schoology, Enrollment, and Naviance. The volume and the types of deals across these broad solutions show our ability to meet the varying needs and priorities for districts of different sizes and across regions. During the quarter, we also added great new logos, including Manitoba First Nations Education Resource Centre, who purchased our student information system to power their district operations and reporting. In fact, one of the reasons for ongoing cross-sell and new logo successes is our key differentiator of strong, unparalleled leadership of our student information system, or SIS, along with many of our other solutions. The SIS is the heartbeat, the source of truth. It stores and manages all student data within a school district or charter school system. Schools use the SIS for compliance reporting to Department of Education and to provide reports to key stakeholders to inform decision-making to help students succeed.... PowerSchool SIS is a premium solution and a clear market leader with gross retention rates in the high 90s and a strong customer satisfaction scores. We continue to win new accounts in SIS and have brought in over 1 million new students over the past two years. We're now reaching over 20 million K-12 students globally and roughly one-third of North American students. SIS is one of the keys to cross-selling additional products, and we have much stronger win rates with customers who already use our SIS. During the first quarter, we made great progress in our second growth vector of international expansion, particularly in the high growth target markets in the Middle East, Latin America, and India. In the Middle East, through our BME partnership, we signed a new logo, Knights of Knowledge International Schools in Saudi Arabia, who purchased SIS, Schoology, and other modules to benefit all their students and teachers. We also continue to cross-sell into an international customer base with customers like Arabian Education Development, who expanded their deployment from Student Cloud to Personalized Learning Cloud, Talent Cloud, and now our Analytics Cloud. Another example of international cross-sell is in Latin America, where we broadened our presence with the International School of Tegucigalpa in Honduras, an existing Schoology customer, who expanded to a broader platform, including SIS, Enrollment, eCollect, and other modules. In India, we won new business with Kalgidhar Education and Eduphise, among many others. We are very excited about the international prospects this year, as our full-year international pipeline has grown over 200% year-over-year. This includes large deals and pipeline through our partner channels. Before we move to our third growth driver, I want to touch on funding and the key priorities in front of our customers. As you know, K-12 is one of the largest spend categories globally, with over $700 billion in U.S. alone and over $5 trillion globally. The core budgets are resilient and are relatively insulated from inflationary and other macroeconomic events. Budgets are funded through multiple sources, federal, state, and local, and education is a bipartisan priority. ESSER injected an additional 5%-10% per year to the overall budget, targeted towards one-time purchases and managing additional staffing, supplemental content, and services needs during the past few years. While in some cases, districts used ESSER to fund their initial implementation and rollout of K-12 technologies, districts are largely required to allocate their ongoing software contract spend from their regular core ongoing budgets. The broader tailwinds driving the software growth in K-12 has been the need for digital transformation to support more automation of their back office, eliminate costly manual tasks, reduce teacher administrative time, modernize the classroom to drive more engagement with students, and also get better insight so districts can optimize their investments to create better student outcomes. That is why education software spending is forecasted to remain one of the highest growth areas in K-12 education. In March, we conducted a survey of our annual Education Focus Report, where we received nearly 2,000 educator responses from across the U.S., from every state and U.S. territory on a wide range of questions, including top K-12 technology priorities, budgets, and much more. I'd like to share some of the preliminary results from our market research, which will be formally released in July. The top five technology priorities districts identified are integrating technology solutions, connecting data across systems, implementing attendance solutions to address chronic absenteeism, providing AI guidance and infrastructure, cybersecurity and protecting student data. Conversely, the top areas of budget management that districts identified were limiting additional staffing budget, hardware spend, and reducing tutoring spend. These survey results directly align with our solutions and platform strategy to provide secure, modern, integrated systems and data with mission-critical needs like MTSS, attendance intervention, and data insights to provide the right help efficiently and surgically based on individual student needs, and drive better attendance and engagement to help keep students in school. In fact, helping districts with budgeting and spending efficiency and efficacy was a key rationale behind our recent strategic acquisition of Allovue. As we discussed during our last earnings call, we acquired Allovue in January of this year, and we are already seeing very strong demand for its capabilities. Results from the second annual Allovue Education Financial Survey found that roughly half of the educators surveyed said that their budget tools are out of date and are in need of modernization. By adding Allovue, PowerSchool can now provide schools, districts, and state education leaders with the most comprehensive suite of K-12 data and analytics tools available to accurately plan budgets and provide clear visibility for the communities into district spending and the impact on student outcomes. This showcases how we are leveraging our third growth vector of strategic M&A expansion to drive additional growth on current district priorities. Now, turning to our fourth growth vector of differentiated innovation. In January, we announced our generative AI platform.... PowerSchool PowerBuddy, a K-12 industry-first AI-powered assistant for everyone. PowerBuddy is designed to deliver conversational, personalized, contextual, and embedded experiences for educators, students, administrators, and parents. We recently announced general availability of two new AI-powered solutions, PowerBuddy for Learning and PowerBuddy for Assessment. These two solutions are targeted for teachers to save them countless hours spent generating student assignments, lesson plans, and assessments, personalized to different reading levels, subjects, languages, and state standards. They seamlessly integrate within Schoology and Performance Matters and are built on Microsoft Azure OpenAI, but designed and fine-tuned by PowerSchool specifically for K-12, with controls for responsible AI principles and compliant with district and state standards and content. Demand for PowerBuddy has been very strong, and we already have signed dozens of customers, including Epic Charter Schools and Duval County Public Schools. We have several other PowerBuddy solutions under beta, with districts representing approximately 2 million students and have built roughly 10 million of opportunity pipeline for these solutions. Additionally, we have received impactful testimonials from teachers saying they have reduced the amount of time needed to create a standards-aligned assessment item by more than two-thirds. We are excited to launch additional PowerBuddy products, including PowerBuddy for Data Analysis, Custom AI, College and Career Engagement, and Coaching and Mentoring, which will be available for 2024 and 2025 school year. Given our leadership in reach, scale, breadth, and impact, we are uniquely positioned to provide generative AI solutions that personalize experiences, leveraging whole child information, and are embedded into existing solutions that students, parents, teachers, and administrators use every day, and provide a contextualized help and assistance for all their needs. We are also helping districts formalize their data platform for AI with our differentiated, Connected Intelligence data lake solution that enables districts to ensure their data sovereignty and empower their educators and students to leverage GenAI by bringing AI to their data. When it comes to data, PowerSchool leads the K-12 industry in student data privacy and data security, a responsibility we take very seriously. To that end, we are certified by industry leaders such as TrustArc and PRIVO, and we proudly adhere to all applicable federal and state laws pertaining to student data, including federal laws such as Family Educational Rights and Privacy Act, FERPA, and the Children's Online Privacy Protection Act, COPPA, as well as state regulations, including California's Student Online Personal Information Protection Act, SOPIPA, and its variants in many other states. We are also proud signatories of the Student Privacy Pledge and the White House Secure by Design initiative, a voluntary pledge developed by the Cybersecurity and Infrastructure Security Agency, CISA, and the U.S. Department of Education. We also pledged our commitment to further secure the education technology ecosystem by offering free and subsidized security resources to all U.S. schools and districts. For more information on our student privacy compliance, security investments, and our responsible AI guidelines, please refer to the accompanying earnings presentation for links to our data security policies and our Chief Compliance Officer privacy blog. PowerSchool today is a vastly larger and fundamentally different company than it was just five years ago. Since 2019, and based on the midpoint of our 2024 outlook, we will have more than doubled our revenue and nearly tripled our adjusted EBITDA while expanding our adjusted EBITDA margins by nearly 10 percentage points. Over the same period, we have acquired 11 companies and nearly doubled the number of our products in our portfolio. We have started to put boots on the ground in international markets and built out a channel partner network of 14 partners across all our targeted international markets. Delivering this kind of growth requires exemplary executive talent and high-performance culture. I'm proud to have been able to attract and retain the world-class executive leaders and team needed for PowerSchool of today, many of them drawn to the company's powerful mission. Highlighted by these strong first quarter results, we remain focused and confident about our continued success and ability to execute in line with the strategy and targets we shared at our Investor Day last year to reach $1 billion plus in revenue in the next three years. Now, I will turn over to Eric to discuss the financial results and outlook. Eric? Thank you, Hardeep. We kicked off 2024 with a strong first quarter that demonstrated continued execution in line with our strategy. We delivered double-digit top-line growth, expanded our adjusted EBITDA margin by more than 2 points over the prior year, and continued to invest in product innovation and international initiatives that will drive long-term value to our customers and to the company. First quarter total revenue came in at $185 million, representing 16% year-over-year increase, in line with the guidance range we provided on our last earnings call. Subscription and support revenue came in at 18% year-over-year to $167 million and accounted for 90% of total revenue in the quarter.... As Hardeep mentioned, we are thrilled and honored by the opportunity to serve the Indiana Department of Education with our special program solution, reaching the entire special education population of the state. This large deal represents approximately $5 million in subscription and support revenue, and approximately $9 million in services revenue that will span into 2025, given the significant scope of this opportunity. Revenue from our services business totaled $17 million in the quarter, representing a slight increase over the prior year. We continue to see more efficient deployment cycles from our implementations, which drives quicker time to value for our customers using our platform. Revenue from license and other, which relates mainly to our third-party revenue and is the smallest revenue stream, totaled $1 million for the quarter. This came in slightly below our expectations, based on the mix of third-party partner activity in the quarter. We ended the quarter with an annualized recurring revenue balance of $720 million, representing an 18% increase over the same time period last year. This strong performance was driven largely by the strongest cross-sell activity we have ever seen in a first quarter, as well as the addition of our recent acquisitions. Our net revenue retention rate came in at 107%, up 30 basis points on a sequential quarterly basis. Adjusted gross profit for the quarter came in at $128 million, with a 69.2% margin, representing a 110 basis point year-over-year improvement, driven by our continued focus on cost management and operational scale. Moving to the first quarter operating expenses. Non-GAAP research and development expense came in at $25 million, representing 13.6% of revenue, compared with 12.5% in the same time period last year. This 110 basis point increase in adjusted R&D expense as a percentage of revenue reflects our continued focus on investing in the data and AI products that will shape the future of education. Including capitalized R&D expenditures, our total invested in R&D was 18.4% of revenue, compared with 18.5% in the prior year. Non-GAAP SG&A expense totaled $42 million in the first quarter, representing 22.5% of revenue, compared with $39 million, or 24.6% of revenue in the same time period last year. This 210 basis points improvement was largely due to lower G&A expense, driven by our operational scale, which was partially offset by the investments we are making in sales and marketing, focused on go-to-market activities and our continued international build-out. First quarter adjusted EBITDA was $61 million, representing a 33.1% margin, exceeding the high end of our guidance range and reflecting our continued commitment to margin expansion. Non-GAAP net income in the first quarter was $0.17 per fully diluted share, down $0.01 from the $0.18 per fully diluted share we reported in the same time period last year. Higher interest expense was a headwind of approximately $0.03 to our non-GAAP earnings per share, and we had a non-cash tax expense related to the acquisition of Allovue, which had an impact of approximately $0.04. First quarter free cash flow, which typically reaches a seasonal low point in Q1 due to the timing of renewals and bonus payouts, was negative $103 million, compared with negative $70 million in the same time period last year. This reduction is driven by the increase in interest expense, acquisition-related costs, and the changes in working capital, which we believe to be timing related. Moving to the balance sheet. We ended the quarter with $17 million in cash and equivalents, a decrease of 73% over the same time period last year. This was due largely to the seasonality of Q1 cash flow and cash payments related to the SchoolMessenger and Allovue acquisitions, partially offset by a $125 million draw on a revolving credit facility. Net debt leverage as of the end of the quarter was 3.8 times, compared with 3.3 times a year earlier. As a reminder, our net leverage decreases in the second half of the year, given the collection seasonality. Now turning to our 2024 second quarter and full year financial outlook. For the second quarter, we expect to deliver total revenue in the range of $192 million-$197 million, and adjusted EBITDA in the range of $67 million-$69 million, representing a 35% margin at the midpoint. For the full year 2024, we are reiterating our guidance, with total revenue expected to be in the range of $786 million-$792 million, with the midpoint representing a 13% year-over-year growth rate. We are raising our full-year adjusted EBITDA guide to a range of $68 million-$73 million, representing a 34.3% adjusted EBITDA margin at the midpoint. For modeling purposes, we expect full-year capital expenditures, including capitalized software, of approximately $48 million-$52 million, and share-based compensation expense of approximately $80 million-$84 million. Fully diluted shares by the end of the year are expected to be in the range of 203 million-207 million. Overall, we're very pleased with the progress in the first quarter. We demonstrated continued execution against our strategy by delivering double-digit top-line growth and margin expansion. We are intensely focused on delivering market-leading innovation and value to our customers through our comprehensive and differentiated platform. ... This concludes our prepared remarks. Alan, will you please open the call for Q&A? We will now begin the question and answer session. To ask a question, you may press star, then one on your touchtone phone. If you're using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw it, please press star then two. At this time, we will pause momentarily to assemble our roster. Our first question comes from Matt Hedberg of RBC Capital Markets. Please go ahead. Hey, it's Dan Bergstrom for Matt Hedberg. Thanks for taking our questions. So, Eric, you called out more efficient implementations in the prepared remarks. I think that's something you've been working on. You know, are there any incremental undertakings maybe this year with the services team to accelerate implementations and time to value? Anything new or maybe incremental you want to point out there? Yeah, no, look, it's a good question. I appreciate that. And as you all have seen, we, you know, last year, we have seen a lot of success. You know, when we did Puerto Rico, which, you know, large student information system implementation, you know, the team's super proud of what they did. Did it in seven months. You know, years ago, that never would have been possible. But, you know, look, this team, and we're always focused on continuous improvement, so we are continually looking at, you know, how we're packaging up the work, you know, where the work is being placed. So I would tell you, while I'm certainly, you know, pleased with the progress, we're not done. So I would tell you, we're gonna continue to focus on efficiency levels, and then certainly, you know, the other areas will continue to, you know, build out our factory approach in India. So, you know, I guess I would say, stay tuned, 'cause we'll continue to see efficiencies there. But, you know, I'm super proud of the progress the team made last year, which was significant, and, you know, we're not gonna stop with that. That's great. Thanks. And then you mentioned Puerto Rico there. Internationally, you highlighted that as, as a key growth factor. Sounds like the pipeline's building nicely there. I think you had a lot of success last year adding new international partners. I guess, looking at this year, are you targeting maybe adding a similar level of partners or more focusing on the ramp of what you signed up so far? Sure, Dan, this is. I'll jump in on that then. Overall, you know, we're very excited about the international. I think, as we look at the mention of the pipeline, we are almost seeing 200% growth in the pipeline with some especially good-sized large deals, helped by the partners, the 14+ partners channels we have built across the entire globe. What's also exciting is that we are still expecting almost 50% growth on international this year as well. So we are definitely have built a pretty strong engine through the partner as well as of our own management team. Especially, we did brought in a new GM of international, and we have seen a very lot of success, both in terms of improving our partner channel pipeline, as well as our own execution about bringing these deals in. We do expect to sign more partners, but we've also have a pretty good coverage of these partner in the most focused agents. As we expand it to Southeast Asia, some of the Eastern Europe, you're gonna see a little bit more coverage on the partners in Africa as well, and we will continue to develop that. But the big focus is actually the partners we do have, kind of enabling and bringing their pipeline and actually executing and closing those. That's great. Thanks. Thank you. The next question comes from Brian Peterson of Raymond James. Please go ahead. Hi, this is Jessica An for Brian. Start off with, in 2024, are there any particular product sets that you're prioritizing for cross-sell? And, like, what has the most success selling back into the customer base? Okay, Jessica, great question. So one of the exciting part of our breadth of the platform is that we have really all these different solution addressing all the variety of needs. So when we're looking at the demand we see on the cross-sell and where we are focusing on, what we call is an X block. We will work with the customer, identify each of these customers' key pain points, where are the critical needs, and with the, as you can imagine, with the 20-plus solutions and the different elements, whether it's in their back office, whether it's their talent management needs, whether it's in their classroom, whether it's in terms of improving graduation rates or overall funding, we really help drive the right solution to the key priorities these districts face and be able to bring a solution to them. So our cross-sell motions actually are across the globe. We have the largest K-12 software sales channel in the whole country. We are engaging with these districts on all levels, all the way from CIOs to their chief academic officers, such as the principals, and as well as the CFOs and HR, and building that core transformation plan from them based on what are the key strategic plans. Now, we do see certain levels of areas which are really at the high demand of this for this year as well. One, as we in continuation of what we have seen in the last year, data analytics products are a big focus, especially as these districts deal with how do they manage more with the limited investment on supplemental learning, but reaching out to every specific kid, we are able to help them with the data to identify which kids need what help and how they can optimize their funding and spend, so they can reach every child based on their need. We also, as I mentioned in the prepared remarks, Allovue is a big growth area for us this year. We're seeing a lot of exciting demand of that with a pipeline of above $10 million, where we are seeing the need for budgeting solutions that they can actually help manage all the different elements. Parent engagement and communication remains one of the top priorities. That's why SchoolMessenger, along with our MyPowerSchool, is one of our big growth areas as well. And then, as I mentioned, we are actually very excited about the demand we are seeing on the AI. We have been doing about 40-plus luncheon and series with our customers across the nation, and we are really excited about the pipeline that we are seeing from districts.... We're pretty much universally seeing almost 20% of the districts have shown interest, or they're already started looking at how the AI can be brought into their districts. So we are expecting that to be a phenomenal growth area as well. That's really cool. And just, like, digging further into what you're saying just now about your AI. With the rollout of the PowerBuddy's generative AI capabilities, what is some of the early user feedback so far? Like, how do you view PowerBuddy's potential for further increasing the product stickiness with schools? Yeah, you know, as I was mentioning, that there is already, you know, the feedback we're getting quantitatively, that this is a significant time saving for districts, especially for teachers, to create lesson plans and items. The beta of some of the elements which we are launching around Data Insights as well as custom AI, allows them to actually create better efficiency and understanding of their data and how they can get in front of all the principals and teachers and their boards in real time. There's also value of, you know, the MyPowerSchool and the college career as well as coaching, where the PowerBuddy helps you drive efficiency in across. So the feedback across all these different PowerBuddies, which we have generative ability as well as the ones in the beta, has been pretty instrumental. In fact, we do see that districts are seeing this to be one of the big areas of how they can actually help navigate on their improved efficacy of education outcomes. We have actually a few testimonials which have got good media coverage from Epic Charter as well as District 11, and we encourage you guys to check those news outlets as well, where teachers are really seeing having that ability to be able to provide help to a teacher and student, it has been a phenomenal game changer. Awesome. Thank you. The next question comes from Saket Kalia of Barclays. Please go ahead. Hey, great. Hey, guys. Thanks for taking my questions here. Thanks, Saket. Hardeep. Hey, Hardeep, maybe I'll, I'll start with you. You know, I appreciated in your prepared remarks, just, you know, kind of flushing out a little bit the impact that or the little impact that ESSER funding, I think, has kinda had on the business. Can you just maybe remind us what the timeline for ESSER funding is for your customers? And, you know, maybe related to that, I mean, are you seeing any change in pipeline as a result of it, kinda positive or negative? Yeah, when you look at the overall, ESSER fund, Saket, that, you know, depending upon states, again, there is this, federal portal on ESSER transparency, where people can check it out. You will see that almost 70%-80% of the ESSER funds have been spent, and I would say even more of that has been already allocated. We, as we're mentioning, right, that ESSER funds were largely towards one-time purchases, district staffing, supplemental content, tutoring to help learning loss. When they're buying software, they're buying it from their normal ongoing budgets, right? So we don't see a very direct impact to that. We did see some, benefit of that on the implementation dollars they might use it to roll out the systems. So we're not seeing that to be a material impact to our pipeline. In fact, our pipeline has grown year-over-year, and we even while we have put more validation and qualifications on our pipeline, and we're also seeing actually the second-half pipeline, especially as we have launched our new MyPowerSchool solution, our our AI PowerBuddy, as well as our bringing the integrations of Allovue and our international ramp-up. We are actually seeing a second-half pipeline, which is already showing a lot of further improvement to that as well. So we do see this, from a business perspective, our pipeline to be very healthy. And given these solutions are mission-critical, as you can imagine, our growth retention and overall order retention actually are showing, given you know, similar trends or if not, further positive trends on that. Got it. That's good to hear. Eric, maybe for my follow-up for you, can we just talk a little bit about how you think about free cash flow, either this year or just kinda more broadly? You know, the EBITDA guide is always helpful, and it's good to see that go up a little bit. But, you know, the cash flow here is just, it's just nice to see. I'd love to kinda hear how you think about that, just even anecdotally or just kinda broad brush. Yeah, sure. Saket, so, you know, just as, you know, as I mentioned in my prepared remarks, right? So we're expecting full year adjusted EBITDA, you know, to be around $268 million-$273 million. We took it up, on the top end, you know, which is, you know, well over 100 basis points of where we finished the year. As you think about and as I, you know, focus in on, free cash flow, last year, we were, you know, roughly 19% margin. While we don't guide on free cash flow, what I will tell you, you know, a couple of the key components to it, we will have about an incremental $20 million, in interest expense this year, you know, almost three percentage points. However, we are still targeting to be, you know, in the range of flat from last year, you know, while we're also absorbing those three percentage points of interest. And then certainly, you know, who knows what's gonna happen with interest rates in the back half of the year, so we could certainly get some benefits from there. But, you know, what I would just say is, we are very much focused on free cash flow, very much on track with what we said back in September out on our Investor Day. You know, we will be in the mid-20s by 2026, and we're, you know, we're marching towards that. And, you know, the company as well as I have a very keen focus on that. You know, hopefully that gives you some color around where we're thinking about the margin from an overall margin standpoint, with some of the ins and outs that go into that. Very helpful. Thanks, guys. Yep. Thanks, Saket. The next question comes from Brent Thill of Jefferies. Please go ahead. ... Thanks. On go-to-market this year, any big changes you're making in terms of quota-carrying reps or new distribution partners or any differences in strategy and changes that you're putting in to help the adoption of the broader platform? Yeah, Brent, we are always optimizing our sales team but also expanding it as well. We've actually increased our sales force coverage model by at least 10%-15% each year. As you will see from our investments, that that's, you know, an area where we continue to focus on. As our platform continues to grow, we are actually reducing the territories for our sales team, so they are able to further engage on that platform with each of the personas and the districts at all levels and be able to continue to do that. So that is a constant motion for us each year. We have actually seen that to be actually create better results from our bringing new business, both on the cross-sell as well as net new. International, we started this, you know, investment last year, where we started creating the international. That has definitely ramped up. We are continuing to ramp that up this year as well, and both supported by partner channel, partner channel coverage from our side, but then also with boots on the ground in Middle East, India, as well as in Latin America, to kind of support both partner as well as some direct deals. So, you know, we—One of the exciting parts of PowerSchool is the coverage model, that we are in front of these 90,000 buying entities in North America, and we are in front of them in pretty much periodically to make sure that we are addressing their most strategic needs with one, one of the solutions which we offer. Okay. And when you think about just your overall pipeline, the visibility that you see, how would you characterize the pipeline versus in the past? You know, what are the differences, the nuances of what you're seeing? Anything to be concerned about, or do you feel you feel better about maybe where your pipeline sit even 6-9 months ago? Yes, as I mentioned, Brent, that we have seen definitely year-over-year increase in the pipeline. Even as, over the last, call it 12-18 months, we have put in a lot more controls on our pipeline and implemented Clari to give us better visibility as well as AI on our pipeline and close rates, so we have a better visibility on how things are gonna be. So we're actually very comfortable with that. I did mention some of the growth areas, for example, you know, just the Allovue piece, the PowerBuddy piece, these are the areas where we actually already seen some exciting pipeline. If you think about PowerBuddy, we've just launched it less than 2 months back, the PowerBuddy for learning and assessment. Not only we have closed, you know, a handful of deals almost with $400K of revenue, the fact that we are sitting on 100+ opportunities on PowerBuddy with our pipeline almost close to $10 million, just tells you that how much opportunity that exists. We do see that that's going to be definitely give us a pretty exciting growth area. You know, as you can imagine, you know, going back to the survey results I highlighted, districts still are dealing with a lot of old systems, which they are worried about data security, and they are looking at automation. Districts are still worried about integrations of their different siloed systems and not having the ability to have seamless integration, which is a big nightmare and time sink for them. Districts are worried about continued way for their budgets to be more efficient and more efficacy, so they're looking at data and insights, and they're also looking at help on managing their budgets, their help on continuing to empower teachers. When you look at the breadth and the depth of the solutions and everything, what we do, we are hitting on all these strategic priorities for districts. So whenever we are sitting with a customer, we are walking away with at least one, if not five, opportunities on the which they want to prioritize over the next months and year. So the more we are getting from our customers, the more pipeline we're seeing, and that's why we continue to invest in the coverage model. Thanks, Hardeep. Thank you. The next question comes from Steven Sheldon of William Blair. Please go ahead. Hi, you've got Pat McEleney on for Steven today. So my first question, you announced the Knights of Knowledge win this quarter, and I just wanted to ask for a win like that, is the implementation burden, is that any heavier than it would be for a customer domestically, or does that require any additional customization of your existing platform to go live with a customer like that? Yeah, Patrick, when you look at from the international, there are a couple of models. One is the, especially with the, that deal where BME, which is one of partners involved, they will be actually doing some of the implementation elements of it as well. So that's the reason why we have such strategic, these partnerships, where they're providing the local support and services, provided an oversight and with some of the support from our global as well as our India implementation teams. Second, in terms of the localization questions you have, we actually do already have translated our student systems, our Schoology, for the full Middle East Arabic, as well as left to right and right to left for the Middle East region, including localizations of calendars and other elements which are also in the product. We already now have local schools, not just international schools, but actually local schools, who are implementing our SIS as well as Schoology in the Middle East. So the localization element has already been the investment which we have done over the last two years, but the actual implementation of that would be supported through partner, and we do have extensive partner network in the region, including the BME, who are carrying the majority of the load. Okay, understood. And so then just as a follow-up to that, you know, that partner model and with some of those- ... additional customizations, we'll call them. You know, I know it's early, but just generally, as you scale outside of the U.S., are there any considerations we should be thinking about with the price point of your solutions there, or, you know, the margin profile of selling them internationally? Yeah. So Patrick, two things. One is that one of the big differentiator for our student information system is that the level of extensibility, both from actually how you view the application, configure the application, put different rules, different attributes, as well as integrations to other systems and local elements. That's why we have been so pervasive in North America across all states, in Canada, across all the provinces, and even also having SIS deployments in almost, you know, 80-90 countries. So that inherent level of configurability is actually very easy and built into the product. That is our big differentiator. In terms of the margins, we expect actually Middle East to be very close to the price point we are seeing is very close to wherever North America point is, but, you know, there's some adjustment of GDP pricing we do. We do see the Latin America and India regions to be a little bit more lower price point, so we have built our support, service, and hosting models based on the local pricing. So our margins are not dilutive even as we are expanding to international. Okay, great. That's all really helpful. Thank you, Hardeep. Yeah. Thanks, Patrick. Our next question comes from Gabriela Borges of Goldman Sachs. Please go ahead. Hi, this is Maura on for Gabriela. Thanks for taking the question. On the PowerBuddy products, they seem like a really exciting pipeline, and there's a lot of interest for them. Can you talk a little bit about the build-out for PowerBuddy capabilities for the 2024 and 2025 school year, and if there's any focus specifically given customer demand? Yeah, no, this is really exciting because you can imagine the opportunity here for PowerBuddy for us is to transform the entire experiences. We are at such a unique position because we have such a huge installed base, we understand everything about the student, what's happening in the classroom. We are able to personalize and contextualize and the experiences, and leveraging generative AI, make them conversational, but then also embed them into our solution so they are easy for districts to adopt. So there will be pretty much a PowerBuddy element to every one of our solutions. We've launched it in Schoology and Performance Matters. There'll be a PowerBuddy for Talk to Your Data and your Unified Insights. There's a PowerBuddy for Custom AI with our Connected Intelligence, so we can bring even district rest of the data and allow them to be able to easily search and be able to have conversational elements to those. There's PowerBuddy within Naviance, which will help them with college and career planning, with talent to help them with coaching and mentoring, as well as with MyPowerSchool, so parents and students can engage and ask any questions. So we pretty much PowerBuddy is gonna be pervasive part of our all our platforms, supported by one PowerBuddy, which is also a big differentiator because you're not gonna have any, You know, the all other niche providers are not gonna have the broader bread-depth of understanding and personalizing, but also having being able to embed it into these different applications. Not only is this creating us a huge amount of additional TAM and growth for PowerBuddy with the AI components, it's actually making our core platform even more differentiators. We're actually seeing more sales of our talent and Schoology and assessment platform, thanks to PowerBuddy, because it is helping us differentiate from some of the niche solutions who don't have a built-in AI or haven't invested strongly in having a more comprehensive AI platform. So we do think this allows us to really address a lot of the value for districts in supporting all these different elements, whether they are trying to provide interventions or help, but also improve our solution and experiences and making them even more differentiator. So it is gonna help us even improve our cross-sell growth of our existing platform. That's helpful, color. Thanks. And sticking with the PowerBuddy products, can you talk a little bit about the pricing models and how you're thinking about pricing for teachers versus students versus parents and admins? Absolutely. We shared this in our Investor Day, that we are looking at PowerBuddies to be about, you know, when you think of from the value, to make such that these are bite-sized, so districts can start adopting them more quickly. So we have a PowerBuddy for, you know, as I said, for each of these solutions, which would be about $3-$5 per student. But somebody wants a full platform, that would be in the range of almost, you know, 30, 40-50, per student. We are seeing that price points to be pretty attractive, given the, you know, the overall where we are seeing the market, and we do think the value they're creating. We're actually getting a pretty good response on those. Great. Thanks. Thank you. Our next question comes from Koji Ikeda of Bank of America Securities. Please go ahead. Hi, this is George McCree on for Koji. Thanks for taking my question. You know, I just kind of wanted to ask, in terms of the international markets that you guys are in, kind of on the competitive front, you know, how would you say the competitive dynamics in your international markets are kind of different from what you see domestically? Yeah, George, when we look at the market, especially where we are focused on, like the Middle East, the Latin America, and in India, we don't see a clear leader which has established. These are untapped markets. They are high growth, population growth areas. There's a lot of investment going on in creating new private schools. Even some of the government schools are putting better infrastructure. And one of the reasons we have prioritized these regions is that there is no clear leader, and no, even when you do see some of the niche solutions, they don't have the full platform. And as you can see from these deals, when these districts or private schools or even national schools are looking at it, they want the platform. They want a student system, they want an LMS, they want ability to do enrollments, they want analytics, they even want college and career planning. And we have we, you know, we are the unique company, even globally, which has this full depth and breadth of the platform with best-in-class, and that's why we are seeing a lot of great opportunity. One of the big thing, I think also we see in the pipeline, we have literally country-level opportunities. So we definitely see that to be a big differentiators. I think some of the more mature markets like Western Europe, especially U.K. and all, they are established players, but those are also the markets where, you know, we don't see a very high level of growth either. That's why we are investing in these high growth areas where there is not much strong competition. Thank you. Our next question comes from Rich Hilliker of UBS. Please go ahead. Hi, thanks for taking my question. The first one's for, for Eric. In the past, we've talked about the 3,000-50,000 student segment, and, and how that's an important driver for organic growth moving forward. I'm wondering if we could talk a little bit, or if you could give us a little bit of color on how that segment performed in the quarter. Any color or any metrics would be really helpful. Thanks. Yeah. Yep, thanks, Rich. Just for everybody's benefit, you know, what Rich is referring to is our enterprise customers, right? These are the 3,000-50,000 students, and then obviously, the larger ones in that are the strategic. That actually has performed quite well. And, you know, I can talk both from a retention standpoint as well as a bookings momentum standpoint. You know, as you all can appreciate, our first quarter from a renewal standpoint is a low point for just renewals volume. Our renewals volume really happens in Q3. But what we are seeing is, you know, good retention rates with the enterprise segment. You know, as our teams are working on the upcoming renewals, they are partnering with the sales teams. From that, as Hardeep mentioned, you know, there's a lot of good opportunities within that segment, and, you know, we've made some sales changes with some of the leadership team over the past year on that. You know, what we're seeing both in terms of bookings as well as pipeline, that is a very good segment for us and will continue to be a nice contributor as we kind of look, you know, as we go through the rest of the year. Okay, great. Thanks for that helpful color. Maybe my next question here, you've given us a lot of helpful details around what customers are interested in and adopting and how you're broadening your portfolio. One remark was that you have the strongest cross-sell ever in a Q1. I'm wondering if we could more pointedly talk about which specific products drove that, or if there's any sort of commonality or trends that you could just re-highlight for us. Thanks so much. Yeah, I mean, so I'll, I'll start, Rich, on that. So, you know, as we announced our Indiana Department of Education, you know, it's actually our largest special programs opportunity that we've ever had in the company's history. But that is an existing customer. It is, you know, a large cross-sell opportunity for us, you know, from an ARR perspective, well over $5 million on that. It you know this is the largest cross-sell we've seen, obviously, Indiana being a big contributor to that. But even back to you know some of the prior comments I made, you know, we did see nice momentum, you know, across our enterprise segment as well. And I don't know, Hardeep, if there's anything else you'd add. Yeah. What, you know, typically, what we see, Rich, is that every one of our products would actually have deals in any of the quarter, you know? So when you look at across our entire 20-plus products, there'll be always some deal happening on every one of the products, right? So whether it's Unified Insights, Connected Intelligence, Naviance, each of the talent products, each of the areas of CCR, there's always multiple cross-sells happening for us, and that's exciting part of it, is the just the breadth and the depth of the volume of the cross-sell we do in any quarter. Our next question comes from Joe Vruwink of Baird. Please go ahead. Great. Thanks for taking my questions. I wanted to go back a little bit to the conversation around pipeline, as it seems like you've gone through kind of a more robust grading and validation process around pipeline. When, you know, on the outside looking in, we look at your guidance for not just this year, but also the midterm framework, does that embed a certain conservatism, maybe conversion rates below prevailing trends, just on the potential that schools become distracted when trying to finalize budget decisions into the next school year? And then, similarly, what about the forward gross retention assumptions that you've baked into the midterm forecast? Yeah. Joe, it's Eric. Let me start, and then Hardeep can add in. In terms of the guidance, you know, as you all can appreciate and have seen over the last several quarters, you know, large deals will drive, you know, quarterly variability, but yet, you know, as we look at the full year achievement, right, we're certainly very firm on where we believe, you know, we're gonna end from a full year. So what you're really kind of seeing is, you know, just us kind of recalibrating a little bit, just in terms of some potential larger deal variability, but yet, you know, reaffirming the full year. So, that's all you're seeing in the guidance that we provided. And then just from a, you know, gross retention standpoint, you know, we continue and, you know, like I said, you know, ... Q1 is our lowest period from a renewal standpoint, but yeah, Q1 was very successful. We're obviously ramping up through Q2 for our Q3 period, and the early signs are extremely positive there as well. So I would just say that there isn't anything that we've seen to date that has us concerned that we're, you know, gonna see something unexpected. And Joe, I guess the other part of your question on just the, the, different trends, what we see, right? I think this is the beauty of our business. When you look at compared to a niche solutions, right, they might have suddenly a growth, and suddenly that particular area, demand has reimpacted for whatever reason. They might slow down and then come back up, right? But what happens in our solution is because we are pretty much selling to all the different mission-critical elements, all the critical software elements, as well as with our data products pretty much impacting the entire decision making for these districts, we see a lot more consistent results. Now, certain products might have up and down, depending upon the area. We've mentioned, like, classroom was a bigger growth area for us in, back in the 2021 area. Data, you know, and then data's picked up all the demand, and we saw a lot more growth out of the data product. So we do see some variations. I think this is what we are highlighting, is when we look at this year, right, some of the big areas of focus, as you mentioned, like budgeting is a big area, and that's why you still see the demand for our data products, demand for our overview products, is top of the mind. As they continue to look at how do they improve attendance so they can improve their funding, we see a lot of demand for our attendance intervention, our MTSS, to help provide the intervention support, as well as our communication, so they can actually engage. So these are the kind of things. This is what... We are able to have the front-row seats with these districts on their strategic priorities and the broader needs. That allows us to both invest our innovations as well as our acquisitions to what are the top priorities we see in the trend. Having that full view across the nations with 80% of the school districts and sitting in front of superintendents, CIOs, academic advisors, we are able to get that view, which allows us to make sure our sales motions, our sales plays, our marketing plays, and our innovation is all aligned to where we see the priorities. That gives us that robustness of demand, what you don't see in other K-12 players, because they don't have the mission capability solutions, and they don't have the breadth and depth of the view and the coverage model. Okay, that's great. And then I wanted to actually ask about Allovue. It has a good brand, and it's come up a couple of times on this call. What sort of financial impact might that have had in the quarter and maybe the full year? And then is that all gonna be in software, or is there actually kind of a consulting or services component to that business as well? Yeah, we've already closed a couple of deals like Chesterfield and Columbus, but largely this is, you know, we have built into our models, which you guys have shared with the guidance. When we gave the full year guidance, we already had that visibility. Most of this is gonna be ARR. What I would tell you, there are some, you know, one or two large, big services deal in the pipeline as well. If there are those things, we'll let you guys know. But largely, this is, again, a most of it ARR-based, business. Okay, great. Thank you. The next question comes from Fred Havemeyer of Macquarie. Please go ahead. Hey, thank you very much for fitting me in here. I wanted to begin on competition. I've, there's been a couple of points out there about Infinite Campus and others in the core SIS space. So I wanna just drill into SIS in particular and ask, you know, from our vantage point as the largest market share holder and market share leader in North American SIS and K-12, what are you seeing, and are there any major changes in the competitive landscape? Fred, as I mentioned, right, we are still the clear market leader. We're more than double the market share of our nearest competitor. We are best in class. If you look at the deals like Stride, which is a public company which decided their SIS solutions, Puerto Rico, if you look at from a perspective of Toronto Public School, these are major districts which looked through all the different competitions and selected us as an SIS. Our gross retentions but, you know, are top class. So, you know, there would be deals where we might lose one or two deals, but when you look at from the our win rates, we win more than we lose, and you know, we are definitely, in terms of capabilities, the most modern solution, and the rest of our platform gives us even more differentiator into SIS because we allow them to integrate with all these other pieces. Thank you, Hardeep. I wanted to then also ask about multi-product adoption as well. That's something you gave quite a bit of good detail about actually back at the Investor Day this past fall. And, as I recall, I think 4 and 6-plus product customers were among your fastest growing groups of customers. So I wanted to ask, I guess, two-parter here. Firstly, what are you seeing in terms of multi-product adoption and how that's trended since the Analyst Day? And secondly, as we're going into the primary months of the K-12 buying cycle, are there any major products or pain points in particular this year that you think are of particular importance going into that June purchasing timeframe? Yeah, Fred, the when we ran the analysis, we pretty much seen the similar trends to what we shared with. So there's not a major update. The trends on the growth on cross-sell and multi-products are pretty similar to what we shared. We're happy to share that in maybe the next earnings calls or later this year about a little bit more update on that, so you guys can get a little bit more full year-over-year view on, on that as well. The trends, what we are seeing is the, we know we are seeing more Student Cloud, like all the different pieces. Similarly, we are seeing a lot more in interest on the full Talent Cloud, as well as the data product integrated with that. So we, those are definitely the areas of the cloud we are seeing the highest growth. Great, Hardeep. Thank you very much. ... The next question comes from Ryan McDonald of Needham and Company. Please go ahead. Hi, thanks for taking my questions. You know, fully realizing that obviously, as you said very clearly, that ESSER is not really a beneficiary for your business and its core spend, wanted to get a little bit creative on maybe potential impacts here, and it relates to PowerBuddy. It's great to see, obviously, you're starting to see all that success in the automation, but one thing we keep picking up from districts and schools that we talk to is that a lot of this spending was additional funding was spent on staffing. And in 2025, you know, that's that staffing is gonna be challenged, you know, from those budgets because of that one-time spend. Is that acting as a driver of maybe schools and districts looking for more automation around PowerBuddy to make, you know, the fewer staff that they have more effective, more streamlined? Just anything around that. Thanks. Absolutely. I think you touched on a key point here is that when you look at from a perspective and whether they're putting supplemental content, they're tutoring, they're putting help and interventions, it's very hard to reach every student based on the need. In fact, one of the large school districts gave us a data point is that they spend $10s of millions on tutoring, and the 10% of the kids who actually used it, they need it, and the 40% of the kids who need it had never even touched it, and they would never able to they were able to engage with them. This allows them to provide the just-in-time contextual help and tutoring, as well as overall support and assistance to every student so they can now optimize their overall spend. They're putting on supplemental content, services, and everything. This allows us to tap into almost $1,000 per student in help they're providing today, and we'll be able to have more surgical and more effective way to do that. This is why it's expanding over time. It's also allowing us to even differentiate and help but disrupt the broader K-12 market. That's really great to hear. I appreciate the color on that, Hardy. But maybe just as a quick follow-up for Eric, as PowerBuddy you continue to have more success with that. We already, you talked about the pricing, but is it priced at a point where we should expect it to be gross margin neutral, if not accretive? Yeah. So, what I would say, Ryan, is you should assume that it will not be dilutive. We have designed it, you know, there are certain elements that we've kinda put in the pricing such that, you know, some of the calls into the AI algorithms, they kinda get capped so that we don't get into a situation where there's a, you know, high volume of calls in there that, you know, are causing our cost to get out of whack. So the way that we've set it up now is that it'll be very similar to the current margin profile that we have. And, you know, look, this technology is expanding quite rapidly and whatnot. So as we continue to kinda look at all of the different AI algorithms and the, you know, the open, you know, some of the open source possibilities, we do expect these costs to come down. So at some point, I would say, yes, it can be accretive, but, you know, what I would say in the short term here, short to medium term, just assume that it's gonna be in line with what our current margins are. Our biggest focus, candidly, was to make sure that it was not gonna be dilutive to the margins. Excellent. Appreciate the color. Thanks. Yep. Thanks, Ryan. Thank you. The next question comes from Brett Knoblauch of Cantor Fitzgerald. Please go ahead. Hi, guys. Thanks for taking my question. Maybe just on AI. As you guys are talking to customers, I guess, how big of a focal point is that in every conversation? Is that a driving factor in winning deals? I guess, what's the add-on rate that you have seen? Is it as good or better than expected? And maybe just some commentary on what you think that the revenue opportunity for the AI-related products is, maybe not this year, given, you know, a lot of it just went GA, but as we look to next year and 2026. Thank you. Yeah. Yes, Brett. So I think you'll be surprised how many of the conversations are actually front and center. As I mentioned, we are doing a luncheon series, almost 40-plus across the nation. We started in Q1 and going into Q2. And pretty much universally, what we are running a campaign called Get Ready for AI, and what we are seeing is that the participation and the number of districts, almost 70%-80% of these audience, have already formed AI committees. The teachers have already using some, you know, open source versions or which they are worried about their data privacy and security because what is being loaded there and every district data is at risk. So with our strategy, with Connected Intelligence, they're able to get ready for AI by giving better data so they can bring AI to the data rather than taking their data to the AI. But then also they're using these different elements to start improving the efficacy we were talking about just in the last question. So we are seeing this to be front and center for a lot of the leaders, and that's why you see a, you know, such an exciting pipeline and the growth opportunity there. We are expecting the revenue. I shared this a little bit in the earnings release, is that we do expect this to be a few million dollars of revenue for us this year already, but really doubling up from there into the next year. We do expect this to almost become a mature business for us in the next few years. Thank you so much. I appreciate it. Thank you. This concludes our question and answer session. I would like to turn the conference back over to Mr. Gulati for any closing remarks. Yeah, thank you, operator. Thank you again, everyone, for joining us today. Our team delivered a strong start to 2024 and a continued double-digit growth, margin expansion, and excellent innovation momentum with the launch of our AI products. As you can see, our business fundamentals remain strong and robust. We provide sticky, mission-critical software products to a stable and durable K-12 end market. Our cross-sell engine continues to drive repeatable, sustainable growth, and we continue to win new logos. Innovation in the areas of data, AI, is a top strategic focus, and I'm thrilled about the success with PowerBuddy as well as the opportunity ahead of us. We also continue to execute thoughtful and timely M&A, such as our latest acquisition of Allovue, whose financial planning and budgeting software is a top-of-mind concern for districts, and we continue to build out proof points in key international markets that will support our long-term growth. I look forward to updating you on these key strategic growth drivers in the next quarter. Thank you again, everyone, for joining today. The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.