EX-99.1 2 pwsc-ex991xq421earningsrel.htm EX-99.1 Document
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PowerSchool Announces Fourth Quarter and Full Year 2021 Financial Results
FOLSOM, CA – March 3, 2022: PowerSchool Holdings, Inc. (NYSE: PWSC) ("PowerSchool" or the “Company”), the leading provider of cloud-based software for K-12 education in North America, today announced financial results for its fourth quarter and full fiscal year ended December 31, 2021.
“We had a fantastic fourth quarter, exceeding the top ends of our guidance on both revenue and Adjusted EBITDA, and capping off a record year for PowerSchool in which ARR grew 26% to $538.6 million,” said PowerSchool CEO Hardeep Gulati. “The record results for 2021 were underpinned by strong demand for our products as school districts rely on PowerSchool as a trusted strategic partner to navigate the ongoing digital transformation in education.”
“Looking ahead to 2022, we believe we are still early in our growth trajectory and aim to capture upside through cross-sell, continued strategic M&A and a robust K-12 education funding environment. We are gratified by customer feedback indicating the power of our unified, end-to-end platform is resonating with students, teachers and parents and further validating our investments in innovation to build out our personalized learning vision,” Gulati added.
Fourth Quarter 2021 Financial Results
•Total revenue was $146.1 million for the three months ended December 31, 2021, up 25.8% year-over-year.
•Subscriptions and Support revenues were $128.2 million, up 28.8% year-over-year.
•Gross Profit was $80.3 million, or 54.9% of total revenue, and Adjusted Gross Profit* was $96.2 million, or 65.8% of total revenue.
•Net loss was $15.9 million, or negative 10.9% of total revenue, and Non-GAAP net income* was $28.1 million, or 19.2% of total revenue.
•Adjusted EBITDA* was $33.2 million, or 22.8% of total revenue.
•GAAP net loss per basic and diluted share was $0.08 on 158.0 million shares of Class A common stock outstanding. Non-GAAP net income per diluted share* was $0.14 on 199.1 million shares of Class A common stock outstanding.
•Net cash provided by operations was $20.2 million, and free cash flow* was $11.8 million.

Full Year 2021 Financial Results

•Total revenue was $558.6 million for the year ended December 31, 2021, up 28.4% year-over-year.
•Subscriptions and Support revenues were $477.3 million, up 28.7% year-over-year.
•Gross Profit was $317.7 million, or 56.9% of total revenue, and Adjusted Gross Profit* was $375.7 million, or 67.3% of total revenue.
•Net loss was $43.1 million, or negative 7.7% of total revenue, and Non-GAAP net income* was $124.6 million, or 22.3% of total revenue.
•Adjusted EBITDA* was $161.2 million, or 28.9% of total revenue.
•GAAP net loss per basic and diluted share was $0.21 on 157.6 million shares of Class A common stock outstanding. Non-GAAP net income per diluted share* was $0.63 on 198.6 million shares of Class A common stock outstanding.
•Net cash provided by operations was $143.1 million and free cash flow* was $103.2 million, up 60.0% and 78.3% year-over-year, respectively.
•Annual Recurring Revenue (ARR)* was $538.6 million, up 26% year-over-year, and Net Revenue Retention Rate* was 106.4%.

* Definitions of the key business metrics and the non-GAAP financial measures used in this press release and reconciliations of such measures to the most closely comparable GAAP measures are included below under the headings “Definitions of Certain Key Business Metrics” and “Use and Reconciliation of Non-GAAP Financial Measures.”
Recent Business Highlights
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•PowerSchool saw continued growth through its cross-sell strategy, closing the year with nearly 1,500 cross-sell transactions, including a major multi-district city Department of Education selecting our Special Programs solution in the fourth quarter.
•PowerSchool completed its acquisition of Kickboard, Inc. a leading provider of K-12 education behavior management solutions, in the fourth quarter.
•PowerSchool completed its acquisition of Kinvolved, expanding its K-12 platform with two-way communication, attendance, and engagement technology, in the first quarter of 2022.
•PowerSchool announced a new, streamlined Human Resources Management System to simplify and centralize human resources management for schools and districts.
•PowerSchool was named the “Pandemic Pivot” winner in the Sacramento Business Journal’s 2021 Sacramento Region Innovation Awards. PowerSchool was recognized for its response to supporting educators and students through the pandemic.
•The PowerSchool Education Fund, launched in July 2021, added seven new University partners to support classroom equity programs and help diverse new teachers enter the profession.

Commenting on the Company’s financial results, Eric Shander, PowerSchool CFO, added, “I’m very pleased with the outstanding fourth quarter and full year 2021 results that highlight the durability and predictability of our business model. In addition, we significantly improved our balance sheet, paying down debt and setting the stage for another year of strong cash flow generation. Our 2022 guidance reflects a Rule of 40 business, and we believe we can continue to operate in that range well into the future."

Financial Outlook

The Company currently expects the following results:
Quarter ending March 31, 2022 (in millions)
Total revenue$145to$148
Adjusted EBITDA *$40to$42
Year ending December 31, 2022 (in millions)
Total revenue$620to$626
Adjusted EBITDA *$180to$184

* Adjusted EBITDA, a non-GAAP financial measure was not reconciled to net income (loss), the most closely comparable GAAP financial measure because net income (loss) is not accessible on a forward-looking basis. The Company is unable to reconcile Adjusted EBITDA to net loss without unreasonable efforts because the Company is currently unable to predict with a reasonable degree of certainty the type and extent of certain items that would be expected to impact net income (loss) for these periods but would not impact Adjusted EBITDA. Such items include stock-based compensation charges, depreciation and amortization of capitalized software costs and acquired intangible assets, severance, and other items. The unavailable information could have a significant impact on net income (loss). The foregoing financial outlook reflects the Company’s expectations as of today's date. Given the number of risk factors, uncertainties and assumptions discussed below, actual results may differ materially. The Company does not intend to update its financial outlook until its next quarterly results announcement.

Important disclosures in this earnings release about and reconciliations of historical non-GAAP financial measures to the most closely comparable GAAP measures are provided below under “Use and Reconciliation of Non-GAAP Financial Measures.”

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Conference Call and Webcast Information
PowerSchool will host a conference call to discuss the fourth quarter and full year 2021 financial results on March 3, 2022 at 2:00 p.m. Pacific Time. Those wishing to participate via webcast should access the call through PowerSchool’s Investor Relations website. An archived webcast will be made available shortly after the conference call ends.

Those wishing to participate via telephone may dial in at 1-877-407-0792 (USA) or 1-201-689-8263 (International) by referencing conference ID 13726651. The telephone replay will be available from 5:00 p.m. Pacific Time on March 3, 2022, through March 10, 2022, by dialing 1-844-512-2921 (USA) or 1-412-317-6671 (International) and referencing the replay passcode 13726651.

About PowerSchool
PowerSchool (NYSE: PWSC) is the leading provider of cloud-based software for K-12 education in North America. Its mission is to power the education ecosystem with unified technology that helps educators and students realize their full potential, in their way. PowerSchool connects students, teachers, administrators, and parents, with the shared goal of improving student outcomes. From the office to the classroom to the home, it helps schools and districts efficiently manage state reporting and related compliance, special education, finance, human resources, talent, registration, attendance, funding, learning, instruction, grading, assessments and analytics in one unified platform. PowerSchool supports over 45 million students globally and more than 14,000 customers, including over 90 of the top 100 districts by student enrollment in the United States, and sells solutions in over 90 countries.

Forward Looking Statements
Any statements made in this press release that are not statements of historical fact, including statements about our beliefs and expectations, are forward-looking statements and should be evaluated as such. Forward-looking statements include information concerning possible or assumed future results of operations, including our financial outlook and descriptions of our business plan and strategies. Forward-looking statements are based on PowerSchool management’s beliefs, as well as assumptions made by, and information currently available to, them. You can identify forward-looking statements by the fact that they do not relate strictly to historical or current facts. These statements may include words such as “anticipate,” “estimate,” “expect,” “project,” “plan,” “intend,” “believe,” “may,” “will,” “should,” “can have,” “likely” and other words and terms of similar meaning in connection with any discussion of the timing or nature of future operating or financial performance or other events. Because such statements are based on expectations as to future financial and operating results and are not statements of fact, actual results may differ materially from those projected. Factors which may cause actual results to differ materially from current expectations include, but are not limited to: potential effects on our business of the COVID-19 pandemic; our history of cumulative losses; competition; our ability to attract new customers on a cost-effective basis and the extent to which existing customers renew and upgrade their subscriptions; our ability to sustain and expand revenues, maintain profitability, and to effectively manage our anticipated growth; our ability to retain, hire and integrate skilled personnel including our senior management team; our ability to identify acquisition targets and to successfully integrate and operate acquired businesses; our ability to maintain and expand our strategic relationships with third parties, including with state and local government entities; the seasonality of our sales and customer growth; our reliance on third-party software and intellectual property licenses; our ability to obtain, maintain, protect and enforce intellectual property protection for our current and future solutions; the impact of potential information technology or data security breaches or other cyber-attacks or other disruptions. Additional information concerning these and other risk factors can be found in our filings with the Securities and Exchange Commission.

We caution you that the factors referenced above may not contain all of the factors that are important to you. In addition, we cannot assure you that we will realize the results or developments we expect or anticipate or, even if substantially realized, that they will result in the consequences or affect us or our operations in the way we expect. All forward-looking statements reflect our beliefs and assumptions only as of the date of this press release. We undertake no obligation to update forward-looking statements to reflect future events or circumstances.
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Definitions of Certain Key Business Metrics

Annualized Recurring Revenue (“ARR”)

ARR represents the annualized value of all recurring contracts as of the end of the period. ARR mitigates fluctuations due to seasonality, contract term, one-time discounts given to help customers meet their budgetary and cash flow needs and the sales mix for recurring and non-recurring revenue. ARR does not have any standardized meaning and is therefore unlikely to be comparable to similarly titled measures presented by other companies. ARR should be viewed independently of revenue and deferred revenue and is not intended to be combined with or to replace either of those items. ARR is not a forecast, and the active contracts at the end of a reporting period used in calculating ARR may or may not be extended or renewed by our customers.

Net Revenue Retention Rate (“NRR”)

We believe that our ability to retain and grow recurring revenues from our existing customers over time strengthens the stability and predictability of our revenue base and is reflective of the value we deliver to them through upselling and cross selling our solution portfolio. We assess our performance in this area using a metric we refer to as Net Revenue Retention Rate. For the purposes of calculating NRR, we exclude from our calculation any changes in ARR attributable to Intersect customers, as this product is sold through our channel partnership with EAB and is pursuant to annual revenue minimums, therefore the business will not be managed based on NRR. We calculate our dollar-based NRR as of the end of a reporting period as follows:

•Denominator. We measure ARR as of the last day of the prior year comparative reporting period.

•Numerator. We measure ARR from renewed and new sale opportunities booked as of the last day of the current reporting period from customers with associated ARR as of the last day of the prior year comparative reporting period.

The quotient obtained from this calculation is our dollar-based net revenue retention rate. Our NRR provides insight into the impact on current year recurring revenues of expanding adoption of our solutions by our existing customers during the current period. Our NRR is subject to adjustments for acquisitions, consolidations, spin-offs and other market activity.

Use and Reconciliation of Non-GAAP Financial Measures

In addition to our results determined in accordance with GAAP, we believe the following non-GAAP measures are useful in evaluating our operating performance. We believe that non-GAAP financial information, when taken collectively, may be helpful to investors because it provides consistency and comparability with past financial performance and assists in comparisons with other companies, some of which use similar non-GAAP financial information to supplement their GAAP results. The non-GAAP financial information is presented for supplemental informational purposes only, and should not be considered a substitute for financial information presented in accordance with GAAP, and may be different from similarly-titled non-GAAP measures used by other companies. A reconciliation is provided below for each non-GAAP financial measure to the most directly comparable financial measure stated in accordance with GAAP. Investors are encouraged to review the related GAAP financial measures and the reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measures.
Adjusted Gross Profit: Adjusted Gross Profit is a supplemental measure of operating performance that is not made under GAAP and that does not represent, and should not be considered as, an alternative to gross profit, as determined in accordance with GAAP. We define Adjusted Gross Profit as gross profit, adjusted for depreciation, share-based compensation expense and the related employer payroll tax, restructuring and acquisition-related expenses and amortization of acquired intangible assets and capitalized product development costs. We use Adjusted Gross Profit to understand and evaluate our core operating performance and trends, to prepare and approve our annual budget, and to develop short-term and long-term operating plans. We believe that Adjusted Gross Profit is a useful measure to us and to
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our investors because it provides consistency and comparability with our past financial performance and between fiscal periods, as the metric generally eliminates the effects of the variability of depreciation, share-based compensation, restructuring expense, acquisition-related expenses, and amortization of acquired intangibles and capitalized product development costs from period to period, which may fluctuate for reasons unrelated to overall operating performance. We believe that the use of this measure enables us to more effectively evaluate our performance period-over-period and relative to our competitors.
Non-GAAP Net Income, Non-GAAP Cost of Revenue and Operating Expenses and Adjusted EBITDA: Non-GAAP Net Income, Non-GAAP Cost of Revenue, Non-GAAP Operating Expenses and Adjusted EBITDA are supplemental measures of operating performance that are not made under GAAP and that do not represent, and should not be considered as, an alternative to to net income (loss), GAAP cost of revenue and GAAP operating expenses, as applicable. We define Non-GAAP Net Income as net income (loss) adjusted for depreciation and amortization, share-based compensation expense and the related employer payroll tax, management fees, restructuring and acquisition-related expenses. We define Non-GAAP Cost of Revenue and Operating Expenses as their respective GAAP measures adjusted for share-based compensation expense and the related employer payroll tax, management fees, restructuring expense, and acquisition-related expense. We define Adjusted EBITDA as net income (loss) adjusted for all of the above items, net interest expense and provision for (benefit from) income tax. We use Non-GAAP Net Income, Non-GAAP Cost of Revenue, Non-GAAP Operating Expenses and Adjusted EBITDA to understand and evaluate our core operating performance and trends and to develop short-term and long-term operating plans. We believe that Non-GAAP Net Income and Adjusted EBITDA facilitate comparison of our operating performance on a consistent basis between periods and, when viewed in combination with our results prepared in accordance with GAAP, help provide a broader picture of factors and trends affecting our results of operations.

Free Cash Flow and Unlevered Free Cash Flow: Free Cash Flow and Unlevered Free Cash Flow are supplemental measures of liquidity that are not made under GAAP and that do not represent, and should not be considered as, an alternative to cash flow from operations, as determined by GAAP. We define Free Cash Flow as net cash provided by operating activities less, cash used for purchases of property and equipment and capitalized product development costs. We define Unlevered Free Cash Flow as Free Cash Flow plus cash paid for interest on outstanding debt. We believe that Free Cash Flow and Unlevered Free Cash Flow are useful indicators of liquidity that provide information to management and investors about the amount of cash generated by our operations inclusive of that used for investments in property and equipment and capitalized product development costs as well as cash paid for interest on outstanding debt.
These non-GAAP financial measures have their limitations as an analytical tool, and you should not consider them in isolation, or as a substitute for analysis of our results as reported under GAAP. Because of these limitations, these non-GAAP financial measures should not be considered as a replacement for their respective comparable financial measures, as determined by GAAP, or as a measure of our profitability or liquidity. We compensate for these limitations by relying primarily on our GAAP results and using non-GAAP measures only for supplemental purposes.
For a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measure, please see "Reconciliation of GAAP to Non-GAAP Financial Measures" below.


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CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(unaudited)
(in thousands except per share data)
Three Months Ended December 31, 2021Twelve Months Ended December 31, 2021
2021202020212020
(unaudited)(unaudited)
Revenue:
Subscriptions and support
128,170 99,481 $477,296 $370,853 
Service
14,442 12,912 61,976 49,471 
License and other
3,483 3,701 19,326 14,564 
Total revenue
146,095 116,094 558,598 434,888 
Cost of revenue:
Subscriptions and support
38,160 28,847 135,963 108,158 
Service
13,832 11,813 51,803 41,324 
License and other
836 369 2,384 1,320 
Depreciation and amortization
13,014 12,217 50,708 41,000 
Total cost of revenue
65,842 53,246 240,858 191,802 
Gross profit80,253 62,848 317,740 243,086 
Operating expenses:
Research and development
27,866 22,549 92,740 70,673 
Selling, general, and administrative
45,907 25,279 149,167 92,711 
Acquisition costs
1,225 2,472 7,299 2,495 
Depreciation and amortization
16,002 13,388 62,818 54,744 
Total operating expenses
91,000 63,688 312,024 220,623 
Income (loss) from operations
(10,747)(840)5,716 22,463 
Interest expense - Net    
7,519 15,962 58,935 68,714 
Loss on extinguishment of debt
— — 12,905 — 
Other expense (income) - Net
(10)1,027 (644)358 
Income (Loss) before income taxes
(18,256)(17,829)(65,480)(46,609)
Income tax expense (benefit)
(2,380)(25)(22,415)39 
Net income (loss)
$(15,876)$(17,804)$(43,065)$(46,648)
Less: Net loss attributable to non-controlling interest(3,544)— (9,296)— 
Net income (loss) attributable to PowerSchool Holdings, Inc.(12,332)(17,804)(33,769)(46,648)
Net loss attributable to the PowerSchool Holdings, Inc. per share of Class A common stock - basic and diluted$(0.08)$— $(0.21)$— 
Weighted average shares of Class A common stock outstanding - basic and diluted157,996,637 — 157,576,056 — 
Other comprehensive income (loss) - Foreign currency translation
114 491 (554)353 
Total other comprehensive income (loss)
114 491 (554)353 
Less: comprehensive loss attributable to non-controlling interest$80 $— $(55)$— 
Comprehensive income (loss) attributable to PowerSchool Holdings, Inc.$(12,298)$(17,313)$(34,268)$(46,295)


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CONSOLIDATED BALANCE SHEETS
(unaudited)

(in thousands)
December 31, 2021December 31, 2020
Assets
Current Assets:
Cash and cash equivalents
$86,479 $52,734 
Accounts receivable—net of allowance of $4,964 and $7,869 respectively48,403 47,977 
Prepaid expenses and other current assets
38,423 22,799 
Total current assets
173,305 123,510 
Property and equipment - net15,676 17,069 
Capitalized product development costs - net80,611 58,894 
Goodwill2,454,692 2,213,367 
Intangible assets - net804,909 763,459 
Other assets27,489 24,401 
Total assets
$3,556,682 $3,200,700 
Liabilities and Members’ Equity
Current Liabilities:
Accounts payable
$12,449 $11,145 
Accrued expenses
71,167 53,698 
Deferred revenue, current
294,276 229,622 
Revolving credit facility
— 40,000 
Current portion of long-term debt
7,750 8,450 
Total current liabilities
385,642 342,915 
Noncurrent Liabilities:
Other liabilities
7,423 7,535 
Deferred taxes
295,959 6,483 
Tax receivable agreement liability
404,394 — 
Deferred revenue -net of current
6,881 5,568 
Long-term debt, net
733,425 1,160,326 
Total liabilities
1,833,724 1,522,827 
Stockholders'/Members’ Equity:
Members’ investment
— 1,855,730 
Class A common stock, $0.0001 par value per share, 500,000,000 shares authorized, 158,034,497 shares issued and outstanding as of December 31, 2021. No shares issued and outstanding as of December 31, 2020.16 — 
Class B common stock, $0.0001 par value per share, 300,000,000 shares authorized, 39,928,472 shares issued and outstanding as of December 31, 2021. No shares issued and outstanding as of December 31, 2020.4 — 
Additional paid-in capital1,399,967 — 
Accumulated other comprehensive income
(216)441 
Accumulated deficit
(165,026)(178,298)
Total stockholders'/members’ equity attributable to PowerSchool Holdings, Inc.1,234,745 1,677,873 
Non-controlling interest488,213 — 
Total stockholders'/members’ equity1,722,958 1,677,873 
Total liabilities and stockholders'/members' equity
$3,556,682 $3,200,700 
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CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)

Three Months Ended
December 31,		Twelve Months Ended
December 31,
(in thousands)
2021202020212020
(unaudited)
(unaudited)
Cash flows from operating activities:
Net loss$(15,876)$(17,804)$(43,065)$(46,648)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Loss on extinguishment of debt— — 12,905 — 
Depreciation of property and equipment1,531 1,632 6,485 7,344 
Amortization of intangible assets23,153 19,894 91,350 78,663 
Amortization of capitalized product development costs4,298 4,067 15,644 9,737 
Loss on disposal/retirement of property and equipment70 400 97 500 
Provision for allowance for doubtful accounts993 53 1,119 170 
Equity-based compensation11,682 1,373 25,137 5,592 
Amortization of debt issuance costs and discount895 1,383 9,097 5,500 
Changes in operating assets and liabilities — net of effects of acquisitions:
Accounts receivables
36,281 41,836 7,299 11,566 
Prepaid expenses and other current assets
3,233 1,072 (1,099)(2,387)
Other assets
93 (2,393)(1,576)(6,351)
Accounts payable
4,259 2,166 2,265 (2,165)
Accrued expenses
2,135 4,032 3,381 (996)
Other liabilities
(78)(95)(271)(273)
Deferred taxes
(3,458)(885)(24,864)(1,925)
Deferred revenue
(48,995)(33,562)39,199 31,127 
Net cash provided by operating activities20,216 23,169 143,103 89,454 
Cash flows from investing activities:
Purchases of property and equipment(766)248 (3,988)(2,771)
Proceeds from sale of property and equipment— 66 — 69 
Investment in capitalized product development costs(7,641)(3,332)(35,920)(28,822)
Acquisitions—net of cash acquired(14,362)(75,874)(333,593)(75,753)
Net cash used in investing activities
(22,769)(78,892)(373,501)(107,277)
Cash flows from financing activities:
Proceeds from Revolving Credit Agreement— 40,000 55,000 101,000 
Proceeds from Bridge Loan— — 315,200 — 
Repayment of Bridge Loan— — (320,000)— 
Repayment of Revolving Credit Agreement— — (95,000)(61,000)
Repayment of First Lien Debt(1,938)(1,937)(7,750)(7,750)
Repayment of Second Lien Debt— — (365,000)— 
Repayment of Incremental Facility— (175)(68,775)(525)
Payments for repurchase of management incentive units— — (448)(989)
Payments of deferred offering costs— — (11,753)— 
Payment of debt issuance costs— — (2,823)— 
Repayment of capital leases— 2 (27)(34)
Proceeds from Initial Public Offering— — 766,075 — 
Net cash provided by (used in) financing activities
(1,938)37,890 264,699 30,702 
Effect of foreign exchange rate changes on cash$(42)$1,577 $(556)$876 
Net increase (decrease) in cash, cash equivalents, and restricted cash(4,533)(16,256)33,745 13,755 
Cash, cash equivalents, and restricted cash—Beginning of period91,525 69,502 53,246 39,491 
Cash, cash equivalents, and restricted cash—End of period$86,992 $53,246 $86,991 $53,246 
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RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
(unaudited)
Reconciliation of Gross profit to Adjusted gross profit

 Three Months Ended December 31,Year Ended December 31,
 (in thousands)2021202020212020
 
Gross profit$80,253 $62,848 $317,740 $243,086 
Depreciation4493941,7711,566
Share-based compensation(1)
2,0701173,556359
Restructuring(2)
7127433,0971,594
Acquisition-related expense(3)
107135591465
Amortization12,56511,81848,93939,434
Adjusted Gross Profit$96,156 $76,055 $375,694 $286,504 
Gross Profit Margin(4)
54.9 %54.1 %56.9 %55.9 %
Adjusted Gross Profit Margin(5)
65.8 %65.5 %67.3 %65.9 %
 
(1) Refers to expenses flowing through gross profit associated with unit-based compensation.
(2)    Refers to expenses flowing through gross profit related to migration of customers from legacy to core products, and severance expense related to offshoring activities, facility closures and executive departures.
(3)    Refers to expenses flowing through gross profit incurred to execute and integrate acquisitions, including retention awards and severance for acquired employees.
(4)    Represents gross profit as a percentage of revenue.
(5)    Represents Adjusted Gross Profit as a percentage of revenue.

Reconciliation of Net loss to Adjusted EBITDA
 
 Three Months Ended December 31,Year Ended December 31,
 (in thousands)2021202020212020
 
Net loss$(15,876)$(17,804)$(43,065)$(46,648)
Add:
Amortization27,45123,966107,01388,400
Depreciation1,5641,6326,5147,344
Net interest expense (1)
7,51915,95658,92868,611
Income tax benefit(2,380)(25)(22,415)39
Share-based compensation    
11,6701,37225,1255,592
Management fees(2)
3936654839
Restructuring(3)
1,2713,3574,8475,027
Acquisition-related expense(4)
1,9883,54810,6506,438
Loss on extinguishment of debt——12,905—
 
Adjusted EBITDA$33,246 $32,038 $161,156 $135,642 
Adjusted EBITDA Margin(5)
22.8 %27.6 %28.9 %31.2 %
(1)    Interest expense, net of interest income.
(2)    Refers to expense associated with collaboration with our principal stockholders and their internal consulting groups.
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(3)    Refers to costs incurred related to migration of customers from legacy to core products, remaining lease obligations for abandoned facilities, severance expense related to offshoring activities, facility closures, and executive departures, and event cancellation fees related to the COVID-19 pandemic.
(4)    Refers to direct transaction and debt-related fees reflected in our acquisition costs line item of our income statement and incremental acquisition-related costs that are incurred to perform diligence, execute and integrate acquisitions, including retention awards and severance for acquired employees, and other transaction and integration expenses. These incremental costs are embedded in our research and development, selling, general and administrative and cost of revenue line items.
(5)    Represents Adjusted EBITDA as a percentage of revenue.

Reconciliation of Net loss to Non-GAAP Net Income
 
 Three Months Ended December 31,Year Ended December 31,
 (in thousands, except per share data)2021202020212020
 
Net loss$(15,876)$(17,804)$(43,065)$(46,648)
Add:
Amortization27,45123,966107,01388,400
Depreciation1,5641,6326,5147,344
Share-based compensation    
11,670 1,37225,1255,592
Management fees(1)
3936654839
Restructuring(2)
1,2713,3574,8475,027
Acquisition-related expense(3)
1,9883,54810,6506,438
Loss on extinguishment of debt——12,905—
Non-GAAP Net Income28,10716,107124,64366,992
Weighted-average Class A common stock outstanding used in computing GAAP net loss per share, basic and diluted157,996,637157,576,056
Weighted-average shares Class A common stock outstanding used in computing Non-GAAP net income, basic157,996,637157,576,056
Weighted-average shares Class A common stock outstanding used in computing Non-GAAP net income, diluted199,090,415198,602,714
GAAP net loss attributable to the PowerSchool Holdings, Inc. per share of Class A common stock - basic and diluted$(0.08)$(0.21)
Non-GAAP net income attributable to the PowerSchool Holdings, Inc. per share of Class A common stock - basic$0.18$0.79
Non-GAAP net income attributable to the PowerSchool Holdings, Inc. per share of Class A common stock - diluted$0.14$0.63
(1)    Refers to expense associated with collaboration with our principal stockholders and their internal consulting groups.
(2)    Refers to costs incurred related to migration of customers from legacy to core products, remaining lease obligations for abandoned facilities, severance expense related to offshoring activities, facility closures, and executive departures, and event cancellation fees related to the COVID-19 pandemic.
(3)    Refers to direct transaction and debt-related fees reflected in our acquisition costs line item of our income statement and incremental acquisition-related costs that are incurred to perform diligence, execute and integrate acquisitions, including retention awards and severance for acquired employees, and other transaction and integration expenses. These incremental costs are embedded in our research and development, selling, general and administrative and cost of revenue line items.

 

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Reconciliation of GAAP to Non-GAAP Cost of Revenue and Operating Expenses

 Three Months Ended December 31,Year Ended December 31,
 (in thousands)2021202020212020
 
GAAP Cost of Revenue - Subscription and Support$38,160 $28,847 $135,963 $108,158 
Less:
Share-based compensation1,061161,63466
Restructuring 1213113578
Acquisition-related expense55115414365
Non-GAAP Cost of Revenue - Subscription and Support37,04328,503133,802107,149
GAAP Cost of Revenue - Services$13,832 $11,813 $51,803 $41,324 
Less:
Share-based compensation1,0111001,922293
Restructuring7125302,9841,016
Acquisition-related expense5220177100
Non-GAAP Cost of Revenue - Services12,05711,16346,72039,915
GAAP Research & Development$27,866 $22,549 $92,740 $70,673 
Less:
Share-based compensation2,8282425,198969
Restructuring1612685852
Acquisition-related expense3232651,004737
Non-GAAP Research & Development24,71421,43085,85368,115
GAAP Selling, General and Administrative$45,907 $25,279 $149,167 $92,711 
Less:
Share-based compensation6,7691,01416,3714,264
Management fees3936653839
Restructuring5572,0031,0652,582
Acquisition-related expense3346761,7562,742
Non-GAAP Selling, General and Administrative38,20821,550129,32282,284
Reconciliation of Net Cash Provided by Operating Activities to Free Cash Flow and Unlevered Free Cash Flow
 
Three Months Ended December 31,Year Ended December 31,
 (in thousands)2021202020212020
Net cash provided by operating activities$20,216 $23,169 $143,103 $89,454 
Less:
Purchases of property and equipment(766)248 (3,988)(2,771)
Capitalized product development costs(7,642)(3,332)(35,920)(28,822)
 
Free Cash Flow$11,808$20,085$103,195$57,861
Add:
Cash paid for interest on outstanding debt6,66414,82851,43872,102
Unlevered Free Cash Flow$18,472$34,913$154,633$129,963

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Category: PWSC-F

Source: PowerSchool Holdings, Inc.

Investor Contact:
Alan Taylor
investor.relations@PowerSchool.com
855-707-5100

Media Contact:
Kari Sherrodd
public.relations@powerschool.com
206-295-2826










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