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Share Name | Share Symbol | Market | Type |
---|---|---|---|
PowerSchool Holdings Inc | NYSE:PWSC | NYSE | Common Stock |
Price Change | % Change | Share Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|
0.03 | 0.13% | 22.34 | 22.36 | 22.32 | 22.33 | 998,133 | 01:00:00 |
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 first quarter ended March 31, 2024.
“We opened 2024 with a strong first quarter in which we met our revenue guidance and exceeded the high end of our profitability guidance. We continue to see strong market demand for our suite of mission-critical products, which drove double-digit ARR and revenue growth, while our continued focus on operating leverage helped drive a 2-percentage point improvement in our adjusted EBITDA margin," said Hardeep Gulati, PowerSchool CEO. “Our platform of leading K-12 solutions continues to be the preferred choice for over 17,000 school districts and states who leverage our technology to enhance operations, empower teachers, and drive positive student outcomes."
First Quarter 2024 Financial Highlights
* 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
Commenting on the Company’s results, Eric Shander, PowerSchool President and CFO, added, “We demonstrated continued operational excellence and execution in line with our strategy during the first quarter. Our leading platform is resonating with customers worldwide and helping drive sustainable double-digit top line growth. We believe our focus on innovative new products that solve the K-12 ecosystem's most pressing challenges will provide meaningful differentiation that will drive long-term value for students, educators, employees, and shareholders."
Financial Outlook
The Company currently expects the following results:
Quarter ending June 30, 2024 (in millions)
Total revenue
$192
to
$197
Adjusted EBITDA*
$67
to
$69
Year ending December 31, 2024 (in millions)
Total revenue
$786
to
$792
Adjusted EBITDA*
$268
to
$273
* 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.”
Conference Call Details
PowerSchool will host a conference call to discuss the first quarter 2024 financial results on May 7, 2024, at 2:00 p.m. Pacific Time (5:00 p.m. Eastern 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 1-844-826-3035 (USA) or 1-412-317-5195 (International) by referencing conference ID 10187624. The telephone replay will be available from 5:00 p.m. Pacific Time (8:00 p.m. Eastern Time) on May 7, 2024, through May 21, 2024, by dialing 1-844-512-2921 (USA) or 1-412-317-6671 (International) and referencing the replay passcode 10187624.
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 55 million students globally and more than 17,000 customers, including over 90 of the 100 largest districts by student enrollment in the United States, and sells solutions in over 90 countries globally. Visit www.powerschool.com to learn more.
Forward-Looking Statements
This press release contains “forward-looking statements” within the meaning of the safe harder provisions of the U.S. Private Securities Litigation Reform Act of 1995. 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 are not assurances of future performance and may 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: 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; and the other factors described under the heading “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 (the "Annual Report"), filed with the Securities Exchange Commission (“SEC”). Copies of the Annual Report may be obtained from the Company or the SEC.
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 publicly update forward-looking statements, whether written or oral, to reflect future events, future developments or circumstances, or new information.
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. We record ARR at the time a customer purchases a new product or renews an existing product, and at a value that represents the contracted annual recurring revenue value excluding any granted one-time discounts. 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. Typically, our customer agreements are sold on a three-year basis with one-year rolling renewals and annual price escalators. These annual renewal processes provide us an additional opportunity to upsell and cross sell additional products. We assess our performance in this area using a metric we refer to as Net Revenue Retention Rate (“NRR”). For the purposes of calculating NRR, we exclude from our calculation of NRR any changes in ARR attributable to Intersect customers, as this product is sold through our channel partnership with EAB Global, Inc. 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:
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 analytical and supplemental informational purposes only, and should not be considered in isolation or as 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 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 (Loss), Non-GAAP Cost of Revenue and Operating Expenses, and Adjusted EBITDA: Non-GAAP Net Income (Loss), 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 net income (loss), GAAP cost of revenue, and GAAP operating expenses, as applicable. We define Non-GAAP Net Income (Loss) as net income (loss) adjusted for depreciation and amortization, share-based compensation expense and the related employer payroll tax, management fees, restructuring expense, 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, nonrecurring litigation 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.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(unaudited)
(in thousands except per share data)
Three Months Ended March 31,
2024
2023
Revenue:
Subscriptions and support
$
166,927
$
141,073
Service
16,686
16,233
License and other
1,354
2,148
Total revenue
184,967
159,454
Cost of revenue:
Subscriptions and support
46,327
38,194
Service
13,383
14,323
License and other
1,071
951
Depreciation and amortization
19,080
16,021
Total cost of revenue
79,861
69,489
Gross profit
105,106
89,965
Operating expenses:
Research and development
31,651
25,421
Selling, general, and administrative
52,432
49,558
Acquisition costs
753
—
Depreciation and amortization
17,349
15,771
Total operating expenses
102,185
90,750
Income (loss) from operations
2,921
(785
)
Interest expense—net
20,996
14,029
Other expenses (income) —net
(99
)
44
Loss before income taxes
(17,976
)
(14,858
)
Income tax expense (benefit)
4,872
(45
)
Net loss
$
(22,848
)
$
(14,813
)
Less: Net loss attributable to non-controlling interest
(3,290
)
(2,960
)
Net loss attributable to PowerSchool Holdings, Inc.
(19,558
)
(11,853
)
Net loss attributable to PowerSchool Holdings, Inc. Class A common stock:
Basic
(19,558
)
(11,853
)
Diluted
(24,131
)
(11,853
)
Net loss attributable to PowerSchool Holdings, Inc. per share of Class A common stock, basic and diluted
$
(0.12
)
$
(0.07
)
Weighted average shares of Class A common stock:
Basic
165,037,089
160,506,571
Diluted
202,691,148
160,506,571
Other comprehensive income (loss), net of taxes:
Foreign currency translation
(734
)
86
Change in unrealized loss on investments
—
3
Total other comprehensive income (loss)
(734
)
89
Less: Other comprehensive income (loss) attributable to non-controlling interest
$
(136
)
$
17
Comprehensive loss attributable to PowerSchool Holdings, Inc.
$
(20,156
)
$
(11,781
)
CONSOLIDATED BALANCE SHEETS
(unaudited)
(in thousands)
March 31, 2024
December 31, 2023
Assets
Current Assets:
Cash and cash equivalents
$
17,425
$
39,054
Accounts receivable—net of allowance of $6,543 and $7,930 respectively
61,121
76,618
Prepaid expenses and other current assets
51,609
40,449
Total current assets
130,155
156,121
Property and equipment - net
8,181
5,003
Operating lease right-of-use assets
15,900
15,998
Capitalized product development costs - net
112,810
112,089
Goodwill
2,770,971
2,740,725
Intangible assets - net
692,953
710,635
Other assets
35,897
36,311
Total assets
$
3,766,867
$
3,776,882
Liabilities and Stockholders’ Equity
Current Liabilities:
Accounts payable
$
12,686
$
13,629
Accrued expenses
110,858
116,271
Operating lease liabilities, current
3,837
4,958
Deferred revenue, current
275,461
373,672
Revolving credit facility
125,000
—
Current portion of long-term debt
8,379
8,379
Total current liabilities
536,221
516,909
Noncurrent Liabilities:
Other liabilities
1,902
2,178
Operating lease liabilities—net of current
13,461
13,359
Deferred taxes
276,629
275,316
Tax Receivable Agreement liability
375,647
396,397
Deferred revenue—net of current
8,196
6,111
Long-term debt, net
810,497
811,325
Total liabilities
2,022,553
2,021,595
Stockholders' Equity:
Class A common stock, $0.0001 par value per share, 500,000,000 shares authorized, 165,726,673 and 164,796,626 shares issued and outstanding as of March 31, 2024 and December 31, 2023, respectively.
16
16
Class B common stock, $0.0001 par value per share, 300,000,000 shares authorized, 37,654,059 and 37,654,059 shares issued and outstanding as of March 31, 2024 and December 31, 2023, respectively.
4
4
Additional paid-in capital
1,532,371
1,520,288
Accumulated other comprehensive loss
(2,828
)
(2,094
)
Accumulated deficit
(237,945
)
(218,387
)
Total stockholders' equity attributable to PowerSchool Holdings, Inc.
1,291,618
1,299,827
Non-controlling interest
452,696
455,460
Total stockholders' equity
1,744,314
1,755,287
Total liabilities and stockholders' equity
$
3,766,867
$
3,776,882
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
Three Months Ended March 31,
(in thousands)
2024
2023
Cash flows from operating activities:
Net loss
$
(22,848
)
$
(14,813
)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization
36,429
31,792
Share-based compensation
14,155
14,549
Amortization of operating lease right-of-use assets
851
788
Change in fair value of contingent consideration
20
(450
)
Amortization of debt issuance costs
1,487
876
(Benefit from) provision for allowance for doubtful accounts
(1,272
)
369
Loss (gain) on lease modification
(37
)
52
Loss (gain) on sale/disposal of property and equipment
(816
)
48
Changes in operating assets and liabilities — net of effects of acquisitions:
Accounts receivables
17,748
8,360
Prepaid expenses and other current assets
(9,922
)
(7,135
)
Other assets
191
(2,283
)
Accounts payable
(646
)
250
Accrued expenses
(25,371
)
(16,512
)
Other liabilities
(1,654
)
(1,753
)
Deferred taxes
4,533
(494
)
Tax Receivable Agreement liability
323
16
Deferred revenue
(102,856
)
(73,687
)
Net cash used in operating activities
(89,685
)
(60,027
)
Cash flows from investing activities:
Purchases of property and equipment
(3,887
)
(356
)
Investment in capitalized product development costs
(8,956
)
(9,676
)
Acquisitions—net of cash acquired
(36,062
)
—
Payment of acquisition-related deferred consideration
(5,800
)
—
Net cash used in investing activities
(54,705
)
(10,032
)
Cash flows from financing activities:
Taxes paid related to the net share settlement of equity awards
(65
)
(1,284
)
Proceeds from Revolving Credit Agreement
140,000
—
Repayment of Revolving Credit Agreement
(15,000
)
—
Repayment of First Lien Debt
(2,095
)
(1,938
)
Payment of contingent consideration
(245
)
—
Net cash (used in) provided by financing activities
122,595
(3,222
)
Effect of foreign exchange rate changes on cash
$
166
$
73
Net increase in cash, cash equivalents, and restricted cash
(21,629
)
(73,208
)
Cash, cash equivalents, and restricted cash—Beginning of period
39,554
137,981
Cash, cash equivalents, and restricted cash—End of period
$
17,925
$
64,773
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
(unaudited)
Reconciliation of gross profit to Adjusted Gross Profit
Three Months Ended March 31,
(in thousands except percentages)
2024
2023
Gross profit
$
105,106
$
89,965
Depreciation
151
252
Share-based compensation (1)
2,273
2,458
Restructuring (2)
1,279
13
Acquisition-related expense (3)
173
87
Amortization
18,929
15,769
Adjusted Gross Profit
$
127,911
$
108,544
Gross Profit Margin (4)
56.8
%
56.4
%
Adjusted Gross Profit Margin (5)
69.2
%
68.1
%
______________(1)
Refers to expenses in cost of revenue associated with share-based compensation.
(2)
Refers to expenses in cost of revenue related to migration of customers from legacy to core products, and severance expense related to offshoring activities and executive departures.
(3)
Refers to expenses in cost of revenue 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 March 31,
(in thousands except percentages)
2024
2023
Net loss
$
(22,848
)
$
(14,813
)
Add:
Amortization
35,492
30,873
Depreciation
937
918
Interest expense - net (1)
20,996
14,029
Income tax expense (benefit)
4,872
(45
)
Share-based compensation
14,685
15,481
Management fees (2)
80
63
Restructuring (3)
3,858
1,366
Acquisition-related expense (4)
3,202
1,534
Adjusted EBITDA
$
61,274
$
49,406
Net loss margin
(12.4
)%
(9.3
)%
Adjusted EBITDA Margin (5)
33.1
%
31.0
%
______________(1)
Interest expense, net of interest income.
(2)
Refers to expense associated with collaboration with our principal stockholders and their internal consulting groups.
(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, loss on modification of debt, nonrecurring litigation expense, and executive departures.
(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. Also, refers to the fair value adjustments recorded to the contingent consideration liability related to the acquisitions of Kinvolved, Inc. ("Kinvolved") and Chalk.com Education ULC ("Chalk"). 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 March 31,
(in thousands, except per share data)
2024
2023
Net loss
$
(22,848
)
$
(14,813
)
Add:
Amortization
35,492
30,873
Depreciation
937
918
Share-based compensation
14,685
15,481
Management fees (1)
80
63
Restructuring (2)
3,858
1,366
Acquisition-related expense (3)
3,202
1,534
Non-GAAP Net Income
$
35,407
$
35,422
Weighted-average Class A common stock used in computing GAAP net loss per share, basic
165,037,089
160,506,571
Weighted-average Class A common stock used in computing GAAP net loss per share, diluted
202,691,148
160,506,571
Weighted-average shares Class A common stock used in computing Non-GAAP net income, basic
165,037,089
160,506,571
Dilutive impact of LLC Units
37,654,059
37,654,059
Dilutive impact of Restricted Shares and RSUs
926,215
1,262,790
Dilutive impact of Market-share units
510,314
26,027
Weighted-average shares Class A common stock used in computing Non-GAAP net income per share, diluted
204,127,677
199,449,447
GAAP net loss attributable to the PowerSchool Holdings, Inc. per share of Class A common stock, basic
$
(0.12
)
$
(0.07
)
Non-GAAP net income attributable to the PowerSchool Holdings, Inc. per share of Class A common stock, basic
$
0.21
$
0.22
GAAP net loss attributable to the PowerSchool Holdings, Inc. per share of Class A common stock, diluted
$
(0.12
)
$
(0.07
)
Non-GAAP net income attributable to the PowerSchool Holdings, Inc. per share of Class A common stock, diluted
$
0.17
$
0.18
______________
(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, executive departures, loss on modification of debt, and nonrecurring litigation expense.
(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. Also, refers to the fair value adjustments recorded to the contingent consideration liability related to the acquisitions of Kinvolved and Chalk. These incremental costs are embedded in our research and development, selling, general and administrative, and cost of revenue line items.
Reconciliation of GAAP to Non-GAAP Cost of Revenue and Operating Expenses
Three Months Ended March 31,
(in thousands)
2024
2023
GAAP Cost of Revenue - Subscriptions and Support
$
46,327
$
38,194
Less:
Share-based compensation
1,549
1,556
Restructuring
1,021
—
Acquisition-related expense
136
22
Non-GAAP Cost of Revenue - Subscription and Support
$
43,621
$
36,616
GAAP Cost of Revenue - Service
$
13,383
$
14,323
Less:
Share-based compensation
723
902
Restructuring
257
13
Acquisition-related expense
40
65
Non-GAAP Cost of Revenue - Service
$
12,363
$
13,343
GAAP Research & Development
$
31,651
$
25,421
Less:
Share-based compensation
3,636
4,072
Restructuring
2,396
105
Acquisition-related expense
493
1,376
Non-GAAP Research & Development
$
25,126
$
19,868
GAAP Selling, General and Administrative
$
52,432
$
49,558
Less:
Share-based compensation
8,777
8,951
Management fees
80
63
Restructuring
145
1,248
Acquisition-related expense
1,780
70
Non-GAAP Selling, General and Administrative
$
41,650
$
39,226
Reconciliation of Net Cash Used in Operating Activities to Free Cash Flow and Unlevered Free Cash Flow
Three Months Ended March 31,
(in thousands)
2024
2023
Net cash used in operating activities
$
(89,685
)
$
(60,027
)
Purchases of property and equipment
(3,887
)
(356
)
Capitalized product development costs
(8,956
)
(9,676
)
Free Cash Flow
$
(102,527
)
$
(70,059
)
Add:
Cash paid for interest on outstanding debt
19,129
13,695
Unlevered Free Cash Flow
$
(83,398
)
$
(56,364
)
© PowerSchool. PowerSchool and other PowerSchool marks are trademarks of PowerSchool Holdings, Inc., or its subsidiaries. Other names and brands may be claimed as the property of others.
PWSC-F
View source version on businesswire.com: https://www.businesswire.com/news/home/20240507890237/en/
Investor Contact: Shane Harrison investor.relations@PowerSchool.com 855-707-5100
Media Contact: Beth Keebler public.relations@powerschool.com 503-702-4230
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