Q3 2021 PowerSchool Holdings Inc Earnings Call

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Greetings, ladies and gentlemen, and welcome to the Tower School third quarter 2021 earnings Conference call. At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation should anyone require operator assistance. Please fresh stars zero and your telephone keypad. It is now my pleasure to introduce your host Allen.

Taylor. Thank you you may begin.

Thank you good evening, everyone and thank you for joining us for powerful financial results conference call for the third quarter ended September 30th 2021 on the call. Today, we are powerful C E O hurting galotti and CFO, Eric Sandor before we begin allow me to provide a disclaimer regarding forward looking statements this call, including the Q&A portion of the call.

<unk> may include forward looking statements related to the expected future results for our company and are therefore forward looking statements are 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. You are described in our earnings release and other a SEC filings.

Today's remarks will also include references to non-GAAP financial measures additional information, including definitions and reconciliation between non-GAAP financial information to the GAAP financial information is provided in the corresponding press release, which is posted on powers schools Investor Relations website at investors Dot power School Dot com.

In addition, this conference call will be available for replay via webcast through the same website party will begin with a review of powerful third quarter and year to date highlights. Eric will then take you through a review of the financial before you proceed Q&A would that I'll now turn the call over to Hardy.

Thank you gentlemen, good evening, everyone and thank you for joining us photo of third quarter earnings call or.

Or a call today I'll share some financial highlights for this quarter, Eric will be going a lot more into the details, but I'll also provide you an up date on a a good drivers driving the momentum of our business.

I'll finish with some commentary about what exciting announcement, we made today earlier late.

Related to the upcoming acquisition of Kickboard, which represents a strategic could just hidden fee and the behavior space that continues to expand of a unified platform and steps us towards that we're not sure of course slice Lenny.

Let me start with first the high level financial summary.

We continue to see strong growth driven by cross so with total revenue in the third quarter going 29% year over year $249 million and they are are reaching 528 million also up 29% year over year.

Adjusted EBITDA was 40 million, representing a margin of <unk> under 27 person.

Reflecting the message we have made in becoming a public charity company this year.

We are pleased with these results, which exceeded of our prior guidance and you will see it reflected in our increased guidance for the remainder of 2021.

Let me share a a key growth drivers third quarter is back to school time, and one of the busiest time for over districts, especially this year. It has been an exceptionally challenging amidst the delta variant <unk>.

And the desire for a safe in person schooling.

I'll bet technology plays a critical role and has been instrumental for our customers and ensuring all back office in front office systems running smoothly.

Managing any disruptions supporting the new initiatives and also moving education forward.

Each Q3 received the highest number of implementation of a new solutions and customer training to help educators and insult within sight to help drive effective instruction and student support programs.

Last year, we saw significant amount of for learning management system as well as other online tools like cover enrollment in professional development.

As districts around the country, we're trying to keep learning going virtually hybrid or in person.

While we still see demand for more for bust online technologies.

Additional prior to this year has been on identifying and closing loading gaps.

And providing multiplayer support doors every student.

With the pause and the disruption to standardized tests across the country in the last two years.

District needs more insights on how the students are doing academy Klee and emotionally.

Real time formative assessments and more holistic visibility to the student engagement has become a must have.

Pretty much in every district.

This need is driving higher demand and about assessment and Noah analytic solutions.

That drive school priorities resources instructional behavior anyone's social emotional sports.

Also supported by strong local and federal funding and support for such initiatives and programs.

The beauty of for a unified platform and the comprehensive portfolio solution is that we are able to support these customers, India critical priorities and the diverse needs to have lane.

Laying the foundation for a broader digital transmission.

Balanced performance of crossover product line create stability in over financial profile.

Two driving increased revenue predictability and stickiness of a solution and helps us provide mission critical solutions that a quarter districts, ensuring high quality education now and into the future.

Dot stability velocity and the robustness of our business is evident in a a Q3 results.

Revenue <unk>, both grew 29th person.

Ear.

We close over 300 costal transactions in Q3 with net retention of $105, 6%, which.

Which is in line with our expectations and school year seasonality.

We cross over 500 transactions.

Overall not of 10-K.

And we helped our customers launch for 1200 product go lives to help prepare them for the year ahead.

Allow me to share more about the momentum we are seeing within our customer base, starting with our multi product investments and other unified platform.

Today's pulses of customers across all Geography's sizes and school types benefit from using multiple products across of a sweet.

Public districts continue to represent the majority of our customers and Vin, but let me also given example, this time of a charter management organization concept schools.

Presenting 13000 students this call the cross Midwest or.

Well not only selected OSI S R suite information system and.

Along with enrollment.

And multiple unified talent products.

In addition to their already existing usage of Navios of a college career and life right and a solution.

We are seeing sweet blends in the private market as well such as challenges school a network of K two eight private schools, representing 10000 students across five states.

Who selected our student information system, along with enrollment and as well as all of the classroom products <unk> assessment.

<unk> also topic, but the unified insights.

We are especially critical if Torre district, when it comes to powering their operations during back to school season. In Q3, we saw over 150 cross sell and new product wins, ERP and talent product lines.

Take an example, Elk Grove in California, representing over 60000 students as one of the fifth largest district in the state.

Selected unify talent to help manage the employee records for Covid tracking needs.

Also within the unified talent, South Carolina Department of Education, why highlighted in our last sending calls for expanding their assist footprint.

Added a a professional learning to sign.

To help manage professional development of roughly 50000 teachers within the state.

Unaware prior any call provided an update on over elements business momentum through the year.

Let me this time highlight the other components of a unified classrooms solution assessment and special program.

Previously mentioned assessment is a top focus area for a lot of our customers this year.

Year to date, we have reached nearly a million new students to new and cross sell off our assessment products.

Customers are seeing the value of rounding out the classroom solution, but the existing squillagee customer, adding alert performance matter assessment, becoming a common trend.

We also saw success of our special programs solution, especially within the larger count.

Toronto DSB, the largest school board in Canada, representing over 200000 students.

And a regional department of education in U S, representing roughly 100000 students selected over special Programmes solution this quarter.

Elements continues to see increase adoption, notably in Texas, where we now are reaching 2.6 million students fit squillagee.

As I shared earlier, we are continuing to see analytics as a top priority for our customers as they look to better manage that data and leverage insights to help improve instruction and drive decision making across their organization.

We have continued to expand our customer base afford new annuit unified insights product.

Now, reaching one find ministrant with cross send a new logo Vince year to date in.

In Q3, we were selected by a top 10 U S district by student enrollment.

Adding toward already impressive customer base, which includes 12 state and regional department of education.

We are seeing insights being included many of her platform in classroom opportunities and and encouraged by the growth.

<unk>.

<unk> an excellent addition to a unified street, helping to prepare students for the journey beyond High school.

When it Coning, Georgia, representing over 170000 students selected Navios in Q3, along side or any other new implementation or expansions forward Navios product line.

We are pleased with the business momentum that a a sweet strategy has helped us to achieve.

Our ability to support our customers, we added an changing needs through different or multiple products for more unified platform. It gives us a comfort in our ability to consistently execute against a on financial plans.

We are seeing photo need and demand for more integrated costume solutions across Fas learning assessment special education teacher professional development and a unified analytics and we are in a unique position to support of our customers across all these neat.

We will continue to expand over platform not only through cross sell but with the aim of achieving your vision of Personalised Looney.

In fact, we announced a small strategic technology investment today that helps us closer to that vision.

We are excited to bring kickboards behavior management solution into a sweet along the customers to not only centralize all behavior management and reporting including social emotional help.

Positive behavior intervention and support often refer that's P. B S.

Managing discipline incidents.

And as well as providing up comprehensive multi tiered system of support M. TSS.

It allows us to create full and clear visibility to the whole child, but combining the student behavior and developing data of its student performance in the Catholic data.

When we initially partnered with Kickboard, all just sort of a year ago, we believe that helping educators better understand and manage student behavior, especially their social emotional health.

And ordered for climate and culture would help improve student outcomes.

And combining this.

Seamlessly with our LMS OSI S or assessment analytics product.

Would help provide even people inside so the true whole child view.

Today, we believe the focus on behavior and social emotional health is more important than ever.

Even prior to pandemic in 2019.

70% of the principles identified the need for SCL focused support as a priority.

Up from 43% just two years prior.

And the pandemic only exasperated that need.

Focus on student emotional wellbeing.

Addressing this is critical not just for schools and district, but for our families and communities.

And as an industry leader named K 12 education.

Technology, we are committed to providing the best solutions to support them.

We anticipate to close the transaction prior to the end of the year.

Immediate revenue contributions will not be material and we expect to drive growth to further integrating the product into a unified classroom solution and driving cross across the street.

We will continue to expand over platform to reach a revision of course slight learning.

Our customers are striving for real time competency based first slight learning to meet every child's need and we are well positioned to support that.

Back from expansion, just skateboard help us achieve that vision and will continue to provide our customers with the tools and data to support them in there.

In closing we are happy with the performance in Q3.

And remain confident of our ability to continued growth moving forward.

We continue to hold over leadership position in K through 12 vertical software and I'm excited to continue to die.

Panic growth and strategically expand to emanate.

Thank you for your time and continued support.

Now turn the call over to Eric to discuss of our financial results for the quarter and provide the guidance for Q4.

Thank you hardly even good evening, everyone. Overall, we delivered strong topline and profitability performance in the third quarter we.

We generated $149 million in total revenue up 29% year over year and exceeding the top end of our guidance by $6 million.

This was driven by the continued momentum in our cross selling efforts coupled with the impact from our acquisition of Hopkins in February of this year.

Subscription support revenue totaled $124.3 million up 31% from the same period, a year ago, driven by renewals and the increased sales of our solutions to existing customers as well as the revenue from the hobson's acquisition or.

Our services business delivered revenue during the third quarter of $18.5 million, representing a 31% year over year increase which was fueled by the increased back to school implementations and training services related to our sales may to existing and new customers as well as the impact from the Hopkins acquisition.

Lastly, our license and other revenue came in at $6 $2 million, representing a slight decrease of 2% from the same period a year earlier.

This revenue component is the smallest contributor to the total revenue and primarily consists of one time perpetual license and partner royalty fees.

As such this revenue tends to be less predictable and will vary from quarter to quarter.

We ended the quarter with an annual recurring revenue or IRR balance of 527 $8 million, representing an increase of 29% year over year.

Our net revenue retention ended the quarter at 105, 6% compared with an N R. R of 108.1% in the prior year period.

Primary driver of the decline in N R. R.

Which is an LTM metric is the third quarter of 2020 experienced exceptionally strong sales to our existing customers. During the COVID-19 pandemic to prepare them for distance learning.

Which was outside of your usual seasonality this change in in our our came in line with our expectations now, let's turn to the rest of the piano. Please note that unless otherwise stated all references are in a gap basis of non-GAAP financial measures are detailed and reconciled to our GAAP results and the earnings press release that was issued this evening.

Overall gross profit for the third quarter was $85 $6 million, representing a 57, 5% gross margin.

This compares with gross profit of $67.5 million and a 58, 4% gross margin in the same period last year.

Year over year increase in gross profit was driven by higher sales and the addition of the Hobson's acquisition.

From a gross margin perspective, the slight decline of 92 basis points largely reflects the increases in third party royalties related to the acquisition of options and the post ipo's stock based compensation expense.

On a non-GAAP basis, adjusted gross profit for the quarter came in at $101.2 million.

Or 67.9%.

Paired with an adjusted gross profit of $78 million or 67.5% for the same period last year.

From a subscription and support standpoint gross margin came in at 71.7% as compared to 71.2% for the same period last year with.

With the favorable variance being driven by the continued hosting and operational efficiencies driven in 2021.

Our services business gross margin during the third quarter came in at 21.7% down from 26% in the year earlier.

Which largely reflects the increased and post IPO stock based compensation expense.

Increased travel and the expenses related to the increased activity to migrate customers to higher retention products relative to the third quarter of last year.

Total operating expenses in the third quarter.

Where $88 $1 million up $38 million as compared to the same period last year.

The higher operating expenses were mainly driven by the acquisition of options.

The addition of public company related costs.

In the post Ipo's stock based compensation expense.

As an innovation leader and the <unk> education technology space.

R&D investments continue to be a top priority for us for the third quarter R&D expense totaled $24.4 million for $16, 4% of total revenue representing over a three point increase year over year coming in line with our expectations and a reflection of the continued investments.

We are making.

Our SG&A expense totaled $47.3 million.

Or 31.7% of total revenue for the third quarter, representing an increase of approximately 13 points year over year.

Primarily driven by the addition of Hobson's public company related costs and the post Ipo's stock based compensation expense.

Our non-GAAP adjusted EBITDA for the quarter was $41 million or 26.9% margin, which exceeded the top end of the $36 million to $39 million guidance, we provided last quarter by $1 million.

Or a gap net loss for the third quarter was $25 $1 million compared to the net income of $4 million in the same period last year.

This year includes a $12.9 million loss related to the early repayment of our debt facilities.

And higher operating expenses, primarily driven by the post ipo's stock compensation expense and public company costs as part of our new corporate structure and operating requirements.

Now, let's turn to liquidity in cash flow.

We ended the third quarter with $91 million in cash and cash equivalents and approximately $742.4 million of total current and long term debt.

Down $426.3 million from the year end of 2020.

Delevering remains an important priority for us as such we use the net proceeds from the July IPO, along with the operating cash flows to repay the full outstanding principal balances of our bridge loan in the amount of $320 million or second lien term loan in the amount of $365 million and an incremental.

Ability and the amount is $69 $1 million.

We also repaid $95 million a revolving credit facility and it was no outstanding balance on this facility as of the end of the quarter.

Since this is our second earnings call as a public company and some of you are getting familiar with our business cycle I wanted to highlight that a significant amount of Ah renewals take place in July which is when the fiscal year budget starts for many of our customers. Therefore, our business is seasonal and that collections and cash flow generation peak in the second half.

Of the year.

Or in the third quarter of 2021, we had $163.6 million in free cash flow compared with $102 $2 million in free cash flow generated during the same period last year, representing a year over year increase of $61.4 million.

This increase was primarily driven by a strong cash collections performance and lower interest expense as a result of reducing the level of outstanding debt.

Unlevered free cash flow in the third quarter of 2021 totaled 176 $8 million compared to $117 $2 million in the same period last year, representing a year over year increase of $59.6 million.

Now turning to guidance.

For the fourth quarter of 2021, we are currently expecting to deliver total revenue in the range of $139 million to $142 million, reflecting growth of 19, 7% to 22.3% from the same time in the prior year.

I also wanted to note that we expect our subscription of support revenue to grow sequentially quarter to quarter with a quarter to quarter decline in total revenue attributed to the seasonal nature of our services business in the fourth quarter.

As a reminder, Q3 is seasonally heightened services revenue due to heavy implementation volume prior to the back to school in August and September.

For adjusted EBITDA, we expect to deliver in the range of $28 million to $31 million for the fourth quarter.

For the full year 2021, we expect to deliver the following results.

Little revenue in the range of $552 million to $555 million, reflecting annual growth of 26, 827.5% and adjusted EBITDA in the range of 156 to one on $159 million.

For free Cashflow modeling I would use an assumed estimated annual capex spending of approximately $4 million.

Overall, we're very pleased with the strong financial performance, we delivered during the quarter continuing the momentum that we built in the first half of the year as well as the progress we have made on our strategic initiatives delivering double digit revenue growth with an attractive gross profit profile as we expanded our operating footprint and continued R.

Cross selling momentum with over 300 cross sell transactions in the third quarter.

We believe we ideally positioned to continue our growth trajectory as the leading technology provider serving the needs of the K through 12 ecosystem as the industry continues to embrace and accelerate its digital transformation.

The stability of our business is supported by a strong purchasing environment and the mission critical nature of our solutions. We remain confident in the investments we have made and continue to make to deliver the value innovation that our customers expect from power school.

With that we're now happy to open the call for questions. Operator, we please open up the line for Q&A.

Thank you, ladies and gentlemen will that'd be conduct a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad and confirmation total and he wanted the question queue. You May press star two if you'd like to remove your questions to make him.

So can I get for choosing speaker Clinton it may be necessary to pick up the handset before pressing his cherokees one moment. Please help me pull for questions.

Our first question comes from the line of Alex Scar with Raymond James. Please proceed with your question.

Oh, great. Thank you Uhm Hardy I just wanted to maybe start with if you could provide an update around the state of stimulus distributions I know these districts have a few years to kind of get them out there, but are you starting to see any signs of this money flowing into the districts for <unk> for power school related spend.

Thanks for the question when.

When you look at the stimulus there are multiple elements of back which are being able to district through different programs.

Areas like areas around court protection as well as being able to look at better environments, where replay come into picture a lot more as in terms of how to understand the London glass and how do you proactively put support programs, which directly provide assistance to the students as well as teachers and the supporting those initiatives.

I think as I mentioned in the prepared remarks, we are definitely seeing some increase demanded over assessment, but also you have a broader insights solution, where a lot of those funds can be leveraged by districts to help them put systems like those in place to understand that learning loss and also provide the right intervention and insights and programs and also see.

How those programs are being effective to actually addressing those needs. So definitely there is a trickle through of that funds, which is benefited to the possible largely the districts do have the next couple of years to spend these funds and we are having active dialogues with districts and on the broader digital transformation of their platform.

And that's something again, we will keep you guys posted on how we see that you'll be trickling through into different bys.

Hope that helps.

Yeah, that's a great color. Thank you and then just a follow up Eric can you help parse out the the net revenue retention results I got the lapping of the remote learning Tailwinds that was certainly a big driver last year, but it seemed like she did cross cell activity from the prepared remarks I'm just curious what what's the right range to think about that metric going forward.

Yeah, So as as I had said in my prepared remarks uhm. So the net revenue retention actually did come in ahead of our expectations.

I think as you all can appreciate Q3 has the highest level of churn. So yeah, that's obviously going to impact. The overall net revenue retention. So Q3, it will dip down and then continued to kind of build up beat beyond that so.

I think you know everything that we saw was much pretty much in line with our expectations will go ahead and.

And you know no no terrible surprise in Q3, I think just for those of you who aren't necessarily as familiar Q3.

Is our largest renewal period. So we've got over 60% of a renewal. So you are going to see if you are going to see any level of churn. It is going to be in Q3. So you know certainly.

Impact in the net revenue retention, but again I think just you know I've just emphasizes I had in my prepared remarks that it did come in ahead of our expectations and we're really really pleased with the the momentum we saw Q3 and then certainly as we go into two four.

Alright, great. Thank you.

Thank you. Our next question comes from the line of Matt Hedberg with RBC capital market. Please proceed with your questions.

Okay Sandburg surfer Mad hedberg, thanks for taking our questions that Kickboard sounds interesting, maybe a little more than what treated the opportunity how do you see that fitting in the platform.

And then you know you you had it under a partnership what made you want to bring it in house and then I guess.

Are there other areas like this sort of around the core burning function that probably aren't top of mind for us, but you know are in demand from customers or may present themselves as future M&A opportunities.

Great cushions.

You mentioned it is definitely a very exciting acquisition spell.

Especially the fact that what we're seeing things even after they've been getting a restart seeing the dialogue happened even almost the last year, that's what we <unk>, we actually did.

Did a strategic partnership with them.

When you look at the entire behavior space, there was a lack of systems and ability to noxious track the behavior create better positive hitter engagement help understand the old social emotional wellbeing that goes into the full hold child view based on how you doing on achievement as well as how ya doing socially emotionally and then being able to create.

Multi tiered support programs based on how you are in each of the student so that differentiate it kept bulky and take <unk> is actually one of the only market leading products, which has evidence base level two certification with S. Do only provide that that was exciting for us to bring that integrates with restaurant for a student systems, where.

Discipline and all the information that we manage into our LMS fair you can actually create better engagement to posture Beaver, especially for all the education as well as into assessment athletics. So it has to touch points into all of our products, we actually through the partnership already took it a couple of customers can walk customer in West Virginia is a Great example, 28000 student district youth.

Going over Squillagee and integrating back for the Kickboard burning them in Alabama, a 2000 School district. So we're in school district, using <unk> and using Kickboard. So we saw the potential we were able to bring those integrations over the last year and now being able to bring that and make it available to all of our customers what's exciting this.

Is very relevant for the what we're seeing in the demand right now now.

Now to your point.

They are definitely a lot of other just synthes, which helped us kind of create more comprehensive view about the student and teacher. If you look at it we can talk strategy a follow a strategic acquisitions, we've kind of look that has all the different elements, which go into improving store outcomes and this is behavior is one component similarly, the auto or just since he's which we continue to walk through.

Partnership as well as at the right time, and the right technology bring them into our platform. So that way we can have all the customers benefit for the ultimate goal to provide that personalized learning. So a lot of exciting opportunity with this product, but also in other just since he's which would be relevant for us.

Thanks, So it was very helpful and then for Eric the.

The magnitude of deferred revenue increase was really impressive no I know, it's a big renewal quarter, we just talked about that as the increase as simple as that or is there any additional color on what drove the strong number there.

Yeah. It is a good question. It is yeah. It is really based on the not only just the renewal period, but then certainly the the net new business that we saw in the quarter. So we ended both short term long term at around 350 million uhm deferred revenue on the balance sheet and yeah, I mean, it's principally really related to.

The heavy renewal sequencing.

The only other thing I would say too is if you are doing and I'm sorry. If you are doing any kind of year over year analytics right. I mean, I think you can appreciate the fact that hobson's is in our in the results as well so that certainly would would have an impact there too so.

Great. Thank you.

You're welcome.

Thank you. Our next question comes from the line of Stephen Sheldon with William Blair. Please proceed with your question.

Hi, Thanks for taking my questions first.

First of all I wanted to ask you about your <unk> your success cross selling products, and especially cross categories, such as a classroom customer, adding admin tools or your student information system.

If we if you think about the last couple of quarters since most of the cross selling you've seen been within the same category or have you starting to see increased traction cross selling across categories.

Thanksgiving and then.

Great question again, Uhm from my perspective, and you look at it there are definitely natural or just since he's of cross selling quite we sell a lot of components within a student information system on enrollment we talked about our whole state level dealer lots of things. We similarly continue to see almost a.

130 crosses as I mentioned across the operations not just from S. I S. Two enrollment, but also into ERP and talent as well. So there's a natural integration touch points between S. I S. N E. R P as well as into a talent and we see continue to see good traction around that we had it gets really strategic and <unk>.

Writing is the traction also between S. I S and classroom products. When you look at the the need for having a one understanding on competency based how the students are doing not just from a based on a letter grade, but actually looking at holistically on their mastery at different levels being able to understand the full whole child view and then be able to not just have.

That in your learning management or your assessment or your special Ed, but bringing that all into your report card in your interactions within your planning although into college Covid liked very nice that's the exciting integration, which we all know unique position to provide and that's where we're seeing a lot of demand. Some majority of <unk> customers have been up taking a lot of school.

G. We shared that little bit in the last quarter, we'd also seeing that similar into the assessment platform aswell as going into the the entire analytics platform, what we're seeing a lot.

As we mentioned we're prepared remark of almost 1.5 million now to your point there is the other way around as well we do have school did your customers like who have bought a R. S. S platform crossing is a great example of that they were actually doing school G and as they looked at putting go is R. S. I F. They adopted a wooden platform.

Platform on through that size, so you'll definitely see other customers who are starting from different point in buying at Miami Dade I think one of the Great example, on our assessment platform and expanding into a one of the top for deployments Overloading management, So South Carolina is a great <unk>.

Sample as well, where we have seen cross sell across multiple modules. So we do see traction but to your point, we do see some natural affinity Strom says sent to other areas. But then we also starting seeing the other pull through effect as well.

<unk> is another exciting part, which we are seeing that pretty much scratching with all of our products.

Got it that's what's really helpful.

And then on the net retention rate coming in slightly above your expectations anything more you can share on the movie pieces there between <unk>.

<unk> up selling and the and the impact of pricing and curious if you saw any notable changes on insurance I'd heard that held steady relative to what what you would have expected.

Yeah. So I just think Stephen I think it's important and I think you guys notice that the N. R. R is in L. T. M metric right. So you know there's really going to be two key contributors that are gonna certainly impacted if you look at on a year over year basis certainly.

Last year, we had an exceptionally strong.

Q3, with the pandemic and and a lot of the demands on distance learning and then this year, we saw some slight impact.

As it relates to our Hobson's acquisition, you know as we integrate them into a into the to the power School family.

So you know those two events and there were really kind of what's you know if you look at your year over year decline.

<unk> in terms of churn you know I I think we actually perform exceptionally well there there wasn't any unexpected items in that category and hence the reason that when you're kind of you'll look at dropping off Q3 of last year factor in a little bit of some of what we would expect to see two quarters in with the Hopkins acquisition.

We're we're ahead of our expectations by a point yourself from our in our our perspective, So I think you know.

The actual churn was a bit less than what we had anticipated.

Good to hear how congrats on the results.

Hi, Thanks for them Thanks statement.

Thank you. Our next question comes from the line of the Cat Kelly with Barclays Capital. Please proceed with your question.

Awesome, Hey, guys. Thanks for taking my questions here.

Maybe maybe for you you know a lot of talk about unified analytics, and who knew what I was wondering if you could just dig into that just one layer deeper how broadly is that two used and what type of cross-sell opportunity can that be into your your existing base.

Okay. Thanks.

Thanks, I kept in touch.

You're going to one of the very strategic part of her portfolio.

So we've talked about right we have market leadership it though that's fast on the system of record right and we also have best in class products on system of engagement, there with a learning management assessment talent in other areas.

<unk> the hood with peace the unified inside features that system. If intelligence, how we can gather data from all the different Ah system's chilled that you can actually provide realtime insights to districts. So that directly can not only help them improve store and outcomes, but also look through the auto why of that investment of how that benefits the students.

This is a very differentiated kept <unk>, it's a unique solution.

Solution on the market because it's comprehensive and not only does the assessment I'll lytic spot, but actually brings in the data from S. I S from ERP from talent and Multicomputer for the system.

As I mentioned, we almost have <unk>, a state and regional level contracts. A great example of that is Louisiana Department of Education. We also have a lot of companies like Con County, Santa Clara County, Senator Coney actually has a documented case of the talk about how they were able to leverage some of the insights an actress.

For graduation rates in the county by 5% so lot of exciting opportunity of how you can leverage we are seeing as as we mentioned in oak repaired remarks, a lot of.

Interest in most of our our school S. I S customers, even though a squillagee customers like Virginia Beach adopted over stuff.

One of the top 10 districts I mentioned in my prepared remarks.

They don't even use it with a sigh synonymous but they see the value of this to be a best in class kabuki analytics and adopted that so we do see this to be not just across salt, but also it's actually a very strong nephew product as well and itself has a huge market opportunity in time that we entered a unique position.

<unk> to benefit.

We're taking this is even more exciting one of the things we actually have done this quarter is actually signed a contract with snowflake and partly with them on how we can build that entire data leak technology, a best in class date, I take technology input the product and provide this to a kid through 12 district, something only very large districts were able to afford.

Now, we can actually make that available to a masters in really for white the value and allowed these insights asthma as well as different theater sciences on it that districts can uniquely benefits. So we're really excited about this park area and you know stay tune as we will share more about that.

And next year, but definitely one of the exciting and especially very relevant at the current time, given where the students Arden how providing those insights for those districts.

Got it got it that's very helpful. Eric maybe for you just as a follow up a lot of questions on on the N. R. R. I was wondering if you could just talk about the seasonality of net new a R. R.

I I think we've talked about it a bunch just in terms of this being the largest volume of renewables and so the net new era being down sequentially makes a little bit of sense, but can you touch on on sort of how you think about sort of the ebb and flow of net new a roaster the year, specifically touching on the pipeline here for Q4.

Sure. Thanks, <unk> good to here for Ya from you. So yeah. So typically what we would expect is the air are to be essentially flat from Q3 from Sir from Q2 Q3, and the reason for that <unk>. We are gonna have our highest level renewals. It happened in Q3, so to the extent that.

There is gonna be churn uhm your higher levels of churn are gonna happen in Q3, so typically.

We would expect it to be flat and you know this quarter, we actually solid expand by a couple of million dollars. You know and then hence you look at just the favorability of the pipeline for not only queue for US we kind of look into you know the first half of next year I mean, certainly.

So we're bullish on queue for is reflected in the increased revenue guidance that I provided so you know I think the best way to think about Q2 Q3 is essentially flat are are we actually expanded by a couple of million dollars Uhm again, which was a reflection of the strong cross sell momentum that the sales team had this quarter and.

You know again I think it's a really another reflection of just in the end of the stress we're seeing in Q4, and then as we start to.

Work on the plans for 2022, some of our expectations for for the first half of next year as well.

Alright, and if I could just squeeze in a housekeeping item did we disclose how big Kickboard was in terms of purchase price and other revenue contribution here near term isn't material, but any sort of any sort of color you could give us on on on purchase price.

Yeah, we did we basically the purchase price was $15 million and as hard deep had mentioned the.

It's got a very immaterial impact on revenue you know I think I would I would just emphasize though is this was a very strategic technical acquisition for us So really falls in nicely with our personalized learning strategy and mission. So that that was really the intent of it and we're extremely <unk>.

Confident as we fold it into the power school family with the momentum we're going to be a drive next year.

Very helpful. Thanks, guys.

Okay. Thank you.

As a reminder, if you'd like to ask a question. Please press star one on your telephone keypad. Our next question comes from the line of Fred have admire with Macquarie. Please proceed with your question.

Hey, Thank you <unk>, it's encouraging to hear that you're seeing traction with your special programs solutions. So as we understand it. This is pretty specialized so very specialized software, that's especially helping a more vulnerable group of students that can better benefit from better education technology.

So I'd like to ask you know could you help us understand how far along schools generally are in adopting software for special programs and also generally what your special program software is helping schools to accomplish.

Sure Fred I think.

Remember this is an area, which we've talked about being something which often has ignored a lot of time districts do have some level of technology or processes to to be able to track. So that's because they need to be for title one as well as federal compliance as well as for idea of regulation.

There to meet the what gets exciting is.

In terms of the opportunity, we can provide and how we can.

For white that not just as a special lift capability to track. The the case management back should be able to personalize education and if you go talk to.

Educator, or especially instructor. They will also talk about that there is a lot broader population of students that could be English language learner higher for that could be gifted who could also benefit from very clear planning an understanding of how you can actually provide a more personalized learning pop. So we we use a special.

Asian.

Not just a great business for us and being able to be best in cost and we have some of the largest school district in North America. In fact, two <unk> two of the top four are using over special Ed as I mentioned, the Toronto as well as a new state we already have a couple of other state deployments with that we think as we continue to.

Tie this up into a loading management system into a student information system and now with the behavior and having the analytics on top of it you could actually completely change the way districts are managing special at times and constantly we can bring all that information relevant to normal class teacher.

So you can do more inclusive for white, the right support and accommodation for every specialty shot, but also wice versa power the special Ed and the confidence of the districts to not be able to provide that kind of help to a more broader student population.

A lot of educators are very excited about the integrations, we have built between over special Ed M. S. I S. We see it tons of cross sell off that specialize in Nevada S. I S. But now as we are tying that into a school of G. As what I was trying to get it into our analytics, we're seeing a whole lot of entrust and this behaviour piece of again goes so you can actually go and catch some.

The needs even earlier, so that way you can predictably understand where they might be need so all.

All this is a continuum of kind of really understanding everything about the child and wide. These pieces really fit into a strategy.

Okay. Thank you for that and then I wanted to also ask about another product offering that I saw you announced and a quarter. It's uhm at H and H R product, specifically geared towards the K 12 market. So like to ask you know what what do you see that schools are struggling with that you're aiming to solve with a <unk> a specialized HR product for the K 12, Mark.

And then generally can you walk us through your Bill for spy philosophy, when you're assessing new product categories. Because this one it looks like it's an organic product development. Thank you yeah.

Yeah. That's a great question, one of the things that especially what we have seen.

If you look at the last couple of years and it has been an ongoing teacher shortage and we would also seeing the broader issue about retention four districts in T shirt and the Covid definitely did not help infected xrayed or some of that shift what districts are are really not top of their mind is how to make.

Sure that you'll get providing the best environment for every teacher, just like we talk a lot about empowering students in having the whole view of the Sudan. They also want a whole view about the teacher, where you can understand all the different aspects of the teacher weather's teacher professional development, there how they're doing off their vacations in there if they're <unk>.

Extra teachers your.

Supporting through them.

And as well as <unk> they are from our understanding of their career path their well being to be able to have that information. Unfortunately today again in the market. We do have a lot of best in class tools, we have some of the best in class towards on Recoupment professional development managing substitute teachers as well as pedals in the broad.

<unk> chop platform part.

Part of the strategy was we wanted to bring more comprehensive I chop portal, which gives that holistic view across all the dimensions of the teacher and one view so from a self service perspective, the teacher's feels better engage with the districts. So they can kind of have a more.

Better engagement that the district leaders as well as the district leaders, having a more holistic view across that this is again, an exciting product there's not a whole lot of product when we look at organic forces by we all this look at all the good market leading products out there with great technologies that can fit into your portfolio and provide that value or districts I'm looking for.

And we did not really find any and we kind of look at that as an organic option to kind of really build something that is game training into appreciate her and that's why you see investment, which we have been doing over the last two years in this area and really excited to bring to market. We're already seeing some good traction on that as well as we speak and we'll keep you posted as we.

You kind of get that info up more and more for customers.

Okay. Thank you and congratulations on the quarter.

Oh, thank you.

Thank you. Our next question comes from the line of bread.

Salad with Jeffries. Please proceed with your question.

Thank you just a quick update on our mess just curious what you're seeing I know you mentioned you still got room to come back relative to where you were in the past, but any thoughts in terms of what you're seeing there.

Brent. Thank you I think it's we've shared right. This is when you look at some of the elements perspective.

We have been going very steadily over the last few years with an exception last year, which was game changing we almost added four to 5 million students on a less back from last year alone.

I think is no surprise there are a lot of districts, who did not have a strong to definitely.

Or did not have appeared on enterprise LMS really felt the need to be able to manage the entire virtual and hybrid money now what we are seeing going to this year. We saw the demand definitely not at the same level as last year, but we still seem fairly healthy healthy demand as we mentioned about the.

Our last one the report we're seeing more than a million plus two around who have adopted or LMS, including one of the top four districts in North America are adopting are loading management backbone. We saw similarly, a lot of horse possible S. I S districts or what assessment customers adopting or school legit this quarter as well so we see that as a constant trend where.

We are getting excited about is also the opportunity to sell that as a broader platform like the two examples I gave a R.

Charter School is Ah.

As well as in the private school, we do seem that modem or districts when they're buying now technology and S. I S. They would typically add in <unk> to that by because they want to kind of deploy that holistically. So that's very encouraging for us is that pretty much elements is becoming a standard add on to every one of four new S highest place.

As well so we definitely see the demand to remain healthy I think there is enough.

Market out there for you.

You know a need for an enterprise elements almost 40, 50% market still doesn't have a paid LMS and we see that while the districts.

Not buying a the same level as last year.

They are definitely having to write dialogue around ongoing change to a board online technology in the classroom and the more Google Zoom in other technology has been adopted it actually creates a natural progression for them to move to a more enterprise elements in the future. So we are definitely working with districts to kind of continued at my grocery shop.

Thanks Hardy.

Thank you.

Our next question comes from the line, Joe very Wank with that Bird. Please proceed with your question.

Oh, great how everyone. I was curious is there any area of the business U C. L. A has not quite yet achieved its full potential and maybe this is a function of just how customers have ended up contemplating near term priority is so yeah <unk>.

Just spoke to would be perhaps a good example of that versus when you think about mid term priority is you look at certain areas of your platform and say well this could actually be an area that ends up benefiting later on so potential acceleration stoli calm.

Yeah, Joe as absolute favorite question I think as we were mentioning that.

There was a lot of demand for more online technology, not just vanilla mask and enrollment in online professional development for teachers. Similarly.

Similarly, we are seeing that demand, but as we added more aspects on assessment analytics to better understand where the students are understanding how the impacts and support programs are seeing better results. So would that said, we do see a balanced performance across most of our products.

To a point that is still in it hadn't me when you look at the amount of legacy infrastructure that exists in a number of S. I S. Vendors is a big tale of a legacy S. I S M. Michelle.

Similarly back tail is even more deep than any ERP that may not be a top priority for districts right now because they are still trying to come out of the COVID-19 and deal with that but has definitely left them with the Ah during the pandemic as well as with the disruption the need and desire to modernize that back office infrastructure.

Especially as it's catching up with the they are more modernization in the classroom. So we aren't having more longer come discussions with some of the districts around the broader district transformation plan powerful education impact consultants and what industry experts actually have been really working on kind of the broader transformation. So we do.

C a healthy pipeline as well as demand in that area.

To your point there are some inherent areas for those that we will see more demand.

The one area I would definitely say Olympic to the socket question about insight, we do see we have not even scratch the surface of analytics. When you look at the breadth of athletics, we provide and where the district and benefits that whole area is going to continue to expand it with a lot further.

Okay, that's great and then.

Just staying on insights, but but maybe expanding it more broadly focus on personalised learning.

Is there a way you can characterize what portion of your customer base.

Is really approaching the opportunity holistically and embracing the idea of pursuing a fully integrated suites. So there would be an interest in behavior classroom analytics.

What what poor sent customers are there as opposed to maybe it's still putting individual pieces together and arriving at that I would come later on.

It's it's a great question Joh N B one of the numbers we have <unk> in the past is up I think in during the voucher was that when you look at the number of districts, who have more than three three modules <unk>. We're talking about a couple of more thousands of customers and then you start going into customers, who are almost using <unk> module strike, we're talking about some.

To 500000 range as well that.

The the the the to your point, our customer base was more already kind of at that point I would say that the discussions we are having a customized running a broadly at on competency based learning is actually <unk> with the district's which may not be using us and all the different pieces, but they know that the insights and the.

Gracious, we have we entered a unique position to kind of give them that whole <unk>, which they can plug into their definition solutions. So we don't literally limit a request size letting out of a broader insights to adjust the <unk> multi module districts, we actually working with a much broader base because it kept <unk> actually I pick.

It doesn't matter, what new solutions you might have.

Okay, great. Thank you very much alright.

Alright, thanks, So [noise].

Thank you, ladies and gentlemen, I would now like to tell us for over two hearty pilates or closing remarks.

Great well. Thank you all for your continued support for a possible none of our mission is we sure do we have some brought up exciting updates and momentum the business, especially the impact the I'm, making across the board with districts of all shapes and sizes across North America, what's exciting to US is not just the the <unk>.

<unk>, what we provide today, but how we are really making that and back to in Florida, I do want to attack each and every one of her possible employees, which is approaching 3000, and who have helped us make this happen, especially of a customers who who's the trust is a lot and pink ongoing relationship with us to ask we hadn't expand their deployment to in further so we're truly committed to helping.

Nobody educators and students the license for potential in the vision, we have on the with a platform is unique and we're very well positioned to achieve that and also drive sustainable growth in a business. So I really thank you all for a great questions and as well as having a wonderful evening.

Thank you ladies and gentlemen. This concludes today's teleconference. You may disconnect. Your lines at this time. Thank you for your participation.

Goodbye.