Q1 2022 PowerSchool Holdings Inc Earnings Call
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Good afternoon, and evening, everyone and welcome to cover schools first quarter 2022 earnings Conference call. As a reminder, today's call is being recorded and your participation implies consent to such recording.
At this time all participants are in a listen only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance. During the conference. Please press star zero on your telephone keypad with that I would like to turn the call over to Ellen Taylor Investor Relations. Thank you. Please begin.
Thank you good evening, everyone and thank you for joining us for <unk> financial results Conference call for the first quarter ended March 31 2022.
On the call today, we have powerful CEO <unk> <unk> and CFO , Eric standard before we begin allow me to provide a disclaimer regarding forward looking statements.
This call, including the Q&A portion of the call May include forward looking statements related to the expected future results for our company and are therefore forward looking statements.
Our actual results may differ materially from our projections due to a number of risks and uncertainties. The risks and uncertainties that forward looking statements are subject to are described in our earnings release and other SEC filings.
Today's remarks will also include references to non-GAAP financial measures additional information, including definitions and reconciliations between non-GAAP financial information to the GAAP financial information is provided in the corresponding press release, which is posted on <unk> Investor Relations website at investors power School Dot com.
In addition, this conference call will be available for replay via webcast through the same website.
<unk> will begin with a review of our tools first quarter highlights Eric will then take you through a review of the financials before we proceed to Q&A.
With that I'll now turn the call over to Hardy.
Thanks, Alan and good evening everyone.
Welcome everyone and thank you for joining our first quarter earnings call.
We had a strong start to the year laying the foundation for continued growth and momentum in 2022.
We exceeded the top end of our guidance range for both revenue and adjusted EBITDA for the fourth consecutive quarter.
First quarter revenue totaled $149 6 million up 27% year over year, and adjusted EBITDA was $42 6 million, representing a 28, 5% margin.
We continue to see strong demand for our products, which are mission critical and core four districts to operate empower educators and achieve student's success.
We are excited about the momentum in our business and feel we are only scratching the surface of the long term opportunity ahead of us.
This continued strong execution showcases the predictability and consistency of our business model and the resiliency of enterprise capable end market.
This consistency has been the cornerstone of our success driven by first the power of our unified comprehensive platform, which enabled continued demand and growth to cross sell into existing customers.
Second our track record and opportunity to continue expanding the depth and breadth of our differentiated platform.
Our position and continued growth as a platform leader in the K through 12 SaaS market for not just in North America, but also with the net new logo wins and international.
Finally, and above all the impact of our compliance driven must have platform as the K through 12 education, which is one of the largest most predictability funded and least cyclical market.
I will share more details on these four key differentiated aspects of our platform as a highlight the results for this quarter.
Perfect.
Our unified comprehensive platform enabled strong cross sell demand of our 18 plus products into our 14000 customers for.
Providing an integrated system of intelligence builds on top of their system of record.
All district operations and compliance.
Integrated unified system of engagement for all key users and stakeholders students parents teachers and administrators.
Makes us unique and essential strategic partner to our customers for the next critical needs and priorities.
It is very exciting to see the demand and the conversations we are having with the state department of education.
Large and mid size district on the broader digital transformation across all elements of transforming education.
For example, unified insights to provide predictive intelligence.
<unk> to drive not just college, but clearly readiness and book corresponding.
Unified classroom to put the whole child view and student engagement.
<unk> unified talent to address one of the biggest challenges education is facing today of future retention and shortage.
We arent these strategic choice for our customers as no. Other single vendor can bring these pieces together and drive this transformation like us.
With that we are continuing to see balanced consistent performance across all solution areas with over 300 cross sell transactions in Q1.
Unified insights continues to be of highest cross sell growth area.
Adoption in many of our hospital customers like <unk>, but also in other non <unk> customers like Marion County, in Florida, and Tennessee, La County in California.
Our costume business is very healthy as customers see the value of our unified experience.
In Q1, we closed on the largest formative assessment deployment in North America with a top three school districts.
Briefly mentioned our selection as the vendor of choice in the last earnings.
And we continue to see strong growth in assessment to accelerate learning gains for students, which has been a challenge even prior to the pandemic for many district and state.
We are continuing to see growth and adoption of our Squillagee LMS.
Take the example, Guam, who selected quality for all its public schools.
Setup, the largest school district in Idaho selecting squillagee.
Washington County, 30000 students will district, Utah rounded updated tokbox from suite with the special programs in Q1.
Behavior. It is also becoming a key piece of our classroom solution.
<unk>, a leading charter management organization added kickboard behavior to their existing suite deployment.
Our unified talent products continued to prove their value during what has been a difficult year for hiring and retaining educators.
Cleveland for example added over teacher evaluation solution to their implementation.
<unk> them up to a parcel products.
Right across the district.
I'm thrilled to see the longtime customers continue to expand on our platform. It validates our ability to provide better student outcomes and transform K 12 education with unified platform.
No other vendor has this cross sell opportunity given the market share.
We have only touched a fraction of the billions of dollars of cross sell opportunity within our base.
Second we have proven ability to innovate and create new avenues for growth for platform expansion.
The integration of our recent acquisitions are progressing well.
Rounding our best in class SaaS platform that we believe is unmatched in breadth scale and presence with a north American tier swap.
Last quarter, we added our communication and attendance product within unified volt.
Already we have successfully sold the product to a regional department of education to presenting 90 positive sooner.
That was already using over a science and special education products.
Helping them with territory wide communication and attendants intervention.
We are also excited to announce that we are bringing an integrated critical and lesson planning solution into a classroom fleet through the acquisition of chalk.
A small technology tuck in acquisition that we closed this Monday.
Having a best in class curriculum management further differentiates our <unk> solution and for those the value of deploying an enterprise LMS to support consistent high quality education in every classroom.
The chalk acquisition is consistent with our long term strategy and push us one step further towards creating or slight learning pathway and expand the size of our total addressable market.
There is no shortage of opportunity to continue expanding our platform.
There are hundreds of options and partners, but technology tuck in to broaden our solution.
With that Jesse around every solution area in our portfolio.
We will continue to expand our platform through the highest investment in innovation in our industry and differentiated unified experiences and unified flows.
Take example of recent innovation relief of novel Tcl, a quality Korean likelihood solution with apology to effectively duals corresponding for students.
Third we continue to grow our platform leadership position not only North America, but increasingly as a global leader in K 12.
About 45 million students reach in over 90 countries.
I'm excited to announce the recent traction in United Arab Emirate, where we secured two net new full suite platform deals, which includes our student information system or learning management cross from products and of our entire unified talent suite.
In private school groups I will hit the odds and leave education, representing over 10000 students.
We recently brought on board and international head of field based in Middle East as we see additional pipeline demand in.
In middle East and more broadly across the globe and will help us increase our focus on this massive international opportunity.
We look forward to sharing more about our plans.
To tap into this growth vector in the future.
Finally, the growth in the commission with fee is robust, but most exciting is the impact and the level of product adoption and usage, we are seeing with our customers.
In Q1 alone our customer delivered 410 million assessments to a classroom products.
Showing the value of thoughts some solution for all learning modalities.
We have been critical in helping district saw one of the biggest issues the teacher retention and recruiting.
With $2 8 million dropped posted $1 7 million substituted positions filled.
And $1 4 million professional development courses taken within our talent products in Q1 alone.
These statistics underscore just how critical of our solutions at the supporting of educators and administrators day to day and have a stickiness and of our ability to meet customer needs as they evolve.
These are just a few of the proof points that highlight the breadth and the scale of our platform, which we believe is unmatched by any other vendor in K through 12 space.
This will continue to grow we had over 500 product go lives in Q1.
And currently have more than 7100 active implementation projects.
We are the market leader and the only provider of unified comprehensive end to end software platform, serving the <unk> ecosystem.
We are the strategic choice for our customer as no. Other single vendor can bring these pieces together and drive the broader digital transformation like up.
And reaffirm that we have the pipeline to grow within our existing customer base for years to come.
I'm very proud of the business we have built.
Sustainable and profitable business model allows us to generate consistent results, but more importantly, it allows us to have positive impact on education outcome.
<unk> equity in education, and make investments toward our vision of spotlight learning.
We are pleased with our fourth quarter result, and have a healthy pipeline for Q2 and beyond.
Looking forward, we are very confident in our ability to deliver consistently strong results both in 2022 and beyond.
I'll now hand, it over to Eric to discuss our first quarter financial results in more detail and provide guidance for Q2 and rest of the year.
Eric.
Thank you Heidi and good evening, everyone. We had a strong start to the year, reflecting the business momentum.
One which continues to play out to 2022.
Topline performance in the first quarter was ahead of expectations driven by cross sell and balanced growth across the product portfolio as districts continue to recognize the value of a multi product unified suite.
Third is our compelling profitability profile, which allows us to invest in growth initiatives and strategic M&A opportunities.
We have maintained strong margins, while investing significantly in our public company infrastructure.
<unk> growth initiatives and tuck in acquisitions.
Now turning to the quarterly results total company revenue in the first quarter was $149 6 million, an increase of 27% year over year and $1 $6 million better than the top end of our guidance.
The beat was driven by an acceleration of services revenue subscription.
Subscription and support revenue totaled $129 $8 million up 26% year over year, driven by balanced growth across our product portfolio and strong customer retention.
Services revenue was $16 $1 million up 24% year over year, driven by increased product deployments and strong demand for our onsite services and power School University, our onsite training events.
For comparative purposes Q1 of last year included one month of results from the Hopkins acquisition, which closed on March three 2021.
We ended the quarter with an annual recurring revenue balance of $556 $7 million and net revenue retention of $106 seven up 30 basis points from Q4, highlighting the continued success of our cross sell strategy and the stickiness of our products.
Gross profit for the first quarter was $81 $6 million up 23% year over year, and representing a 54, 6% margin while non-GAAP adjusted gross profit was $98 9 million up 26% year over year, representing a 66, 1% margin.
We maintained strong margins benefiting from continued leveraging of our India Center of excellence, which helped partially offset higher post COVID-19 corporate travel and in person customer event in expenses as we continue to invest in the areas driving our topline growth.
Now turning to operating expenses R&D in the first quarter totaled $26 $6 million or 17, 8% of total revenue.
Paired with 15, 7% a year earlier.
Reflecting our ability to maintain operational scale, while continuing to invest in areas of innovation and our information security infrastructure.
Excluding stock based compensation R&D expense as a percentage of total revenue was relatively flat on a year over year basis.
SG&A expense in the first quarter was $40 1 million or 26, 8% of total revenue versus 21, 4% from a year earlier, primarily driven by an increase in public company related costs higher post IPO stock based compensation expense.
And head count to accelerate our go to market strategy.
This week, we acquired chalk our latest tuck in acquisition, which complements our suite by adding a leading K through 12 curriculum and lesson planning solution.
For modeling purposes, chalk has minimal revenue and costs associated with it for 2022.
Adjusted EBITDA in the first quarter totaled $42 $6 million or 28, 5% margin, beating the top end of our guidance range. We remain focused on maintaining a healthy margin profile, while continuing to invest in growth opportunities, including innovation focused on platform expansion.
And strategic M&A.
Now turning to the balance sheet liquidity and leverage we ended the first quarter with $23 $6 million in cash and equivalents driven by strong cash collections and a $30 million draw on our revolving credit facility offset by a negative $94 $4 million change in working capital.
Our working capital requirements peak in the first half of the year and then become a major source of cash in Q3 and Q4.
As a reminder, we generated $103 2 million and free cash flow in 2021, and we expect that number to grow this year.
We ended the quarter with a net leverage ratio of four five times, which ticked up from four one times at year end 2021, due to the $30 million revolver draw in Q1, and a lower cash balance compared with year end.
Because of the cyclical nature of our cash flows we expect our net leverage ratio to peak in Q2 before normalizing in Q3 and Q4.
This seasonality is common in businesses, serving the K through 12 ecosystem as we aligned annual renewals to their budgeting cycle, resulting in a majority of annual payments coming in Q3 and Q4.
We continue to be ahead of our original Delevering plan.
Which is tremendous progress considering we have closed three acquisitions since our IPO.
In the current rising interest rate environment. Our first lien term loan has exposure to euro dollar based interest rates, specifically short term labor at.
A 25 basis point increase in the market interest rates would result in an increase in annual interest expense of less than $2 million.
Given the current macroeconomic environment I'd like to discuss the durability of our business model in more depth, especially with the fed signaling it will tightened monetary policy more aggressively to come back inflation.
We believe our business is relatively well insulated against an economic downturn given the non cyclical nature of our K through 12 and market and the mission criticality of our solutions.
In 2002 to 2019 inflation adjusted K through 12 revenues grew by 24% nationally with all but two states increasing revenues in 23 states increasing revenues by more than 20%.
Moreover, the federal government has shown a willingness to provide financial relief to schools, such as aster stimulus funds offsetting any negative impacts on state and local budgets.
And perhaps most importantly.
Mission critical solutions, such as the student information system had become foundational in indispensable to public school operation.
Now turning to our second quarter and full year 2022 financial outlook and guidance.
In the second quarter, we expect to deliver total revenue of $154 million to $156 million and adjusted EBITDA of 43 million to $45 million, representing a 28, 4% margin at the mid point. Please note that when we announced fourth quarter and full year 2021 results.
On March 3rd we had good visibility into first quarter revenue trends.
The outperformance in Q1 was driven by services revenue, while subscriptions and support revenue was in line with our expectations.
For the full year 2022, we are raising the top and bottom end guidance ranges for revenue and adjusted EBITDA, reflecting the continued momentum we see in the business. We now expect total revenue in the range of 623 million to $627 million with the midpoint coming in at $625 million.
Representing an 11, 9% year over year growth rate and adjusted EBITDA of $182 million to $186 million, representing a 29, 4% adjusted EBITDA margin at the midpoint.
This guidance includes additional costs from our recent tuck in acquisitions of chalk, Ken Volk, and Kickboard, which are not expected to materially contribute to revenue or profitability in 2022.
For modeling purposes, we expect capital expenditures, excluding capitalized software of approximately $7 million and share based compensation expense of approximately $60 million to $65 million for the full year.
Fully diluted shares for the year are expected to be in the range of 200 to 205 million shares.
Overall, we delivered a strong first quarter and start to 2020 to demand for our solutions remains healthy and our unified platform approach and market leading position provides significant cross sell opportunities.
The ROI and value, we provide to school districts and supporting mission critical operations and improving student outcomes remains a key differentiator and competitive advantage.
With that we're now happy to open the call for questions. Operator will you. Please open up the line for Q&A.
Thank you to register a question. Please press the one followed by the four on your telephone keypad, you will hear a three town perhaps to acknowledge your request.
If your question has been answered and you would like to withdraw your registration you can pass the one followed by the three.
And our first question is from the line of Brent Thill with Jefferies. Please go ahead.
Thanks Sam.
But I'm curious if you could comment as it relates to the international opportunity.
How do you see that unveiling over the next over the next three years and.
Just a quick follow up on the interest rate component I think every everyone's.
Hello, and concerned about what's going on in the macro side. If you could just spend a little more time just drilling them.
What is giving you the confidence in the resiliency of <unk>.
The core business.
Time environment on the macro side. Thank you.
Thanks Brent.
I appreciate the question. So when you look at the International let me talk with plus highlighting that there is no other international player.
Got the depth breadth and the scale, we have with those solutions. So we continuously get a lot of inbound opportunities across the globe.
Is it whether it's a private school live and local schools, who want to kind of transform the education, they're very interested in the parcel suite, because we have the breadth and depth and proof points pretty much globally in every country.
One of the benefits as I mentioned international Middle East for example, and pick. The example, Gary we've got a lot of proof points almost already 100000, plus students and multiple private schools in international schools. There. So we absolutely the recognition helps us even secure even more of these two wins of.
What's exciting about them as the game the value is not just know student information system. If they also valuable classroom product was coluccio of entire assessment of our as well as our talent products, which are critical so we do see the traction we are seeing in the demand. We are seeing it is go to transport as much.
As we mentioned in the road show. This is still very early innings for us in international So one of the things we are putting an emphasis with bringing in our head of international sales. Similarly have more investment in our partner network and potentially even acquisitions.
Look at a more aggressive as well as more accelerated a portion of international so over the next two to three years, you will see that and we are happy to kind of share those more detailed plans.
In the next few quarters.
Now to your other question Brent about the market.
One of the things that I highlighted in my last earnings report as well when you look at the case for trial and Eric just mentioned this in his prepared remarks.
The K 12 funding is largely protected.
The inflationary as well as recessionary pressures. So when you look at the trend over the last 20 years, even during the great recession, you have been doing any inflation in the period. The <unk> investment is largely robust and you also are coming off a moment, where there is additional investing through their money that is providing even more cushion to the school districts to kind of right.
Any disruptions, even if they see that through their state budgets and all so we feel very healthy stable funding environment for K through 12, and that's what's giving more strength into our projections into our results as you see as well as into our guidance.
We are definitely seeing a very exciting opportunities around the whole broader digital transformation, especially coming out of the call. It the districts or even further breaking up and looking at those transfer whether its on the data side or operation side of the classroom side or on the talent side, we are really benefiting from that all broader dialogue.
That helps.
Absolutely. Thank you.
And our next question is from the line of Matt <unk>.
Hedberg with RBC capital markets. Please go ahead with your question.
Hey, this is a nice Jeff and Matt Hedberg, Thanks for taking my questions.
You're calling for EBITDA margin improvement year over year in an environment, where others are guiding their margins down could you talk about the leverage Dan and what gives you the confidence to continue improving the margin, particularly in the inflationary environment win.
Sure. This is Eric Great question.
First off as you look at our margin profile I mean, we're extremely proud of not only growing top line, but also continuing to do that.
In an environment, where we're expanding our margins as we look at the back half of the year, we've got a lot of operational leverage within the model.
Got a good clarity in terms of operational expenses, we've got over 1000 folks in our India Center of excellence, which has continued to be a really highlight for us.
And as.
As I've said before we've got the opportunity to continue to grow the margin.
At the same time too we want to spend some of that investment into growing the areas are going to help the top line as well so.
We've got good visibility into the expenses, we have in the second half.
And we are very very bullish on not just the top line, but then certainly as we showed in our guide we increased 10 bps on that.
On the top end of our adjusted EBITDA. So I would just say go back to the predictability of our cost model.
How we're servicing our customers.
Investments that we've made we're really seeing the value there.
We've continued over the last few years to really scale a lot of our operations, we're seeing that play through as well so extremely extremely strong margin profile and we're going to continue to drive the necessary items there but.
Again, we just wanted to really signal of the strength and bullishness, we have around overall margin profile as we see.
The second half playing out.
Great. Thank you.
And our next question comes from the line of Stephen Sheldon with William Blair. Please go ahead.
Yeah.
Our deep and Eric Thanks for taking my questions.
First just kind of curious what trends you've seen in bookings and RFP activity throughout the first quarter and I guess into <unk>.
April 2nd.
Second quarter, you are now entering the heaviest bookings quarter. So have you seen any notable upticks in activity.
Generally curious how conversations are going there, especially with the increased stimulus funding, maybe starting to flow through a little bit more.
Sure.
Thanks again for the question, you're absolutely right, we're definitely seeing an uptick in the activity and as you know Q2 is seasonally one of the most important quarters has a lot of districts prepare.
<unk> themselves for the next back to school and do those transformation projects. We are already seeing that into Q1, which is shown by the results and we are definitely sitting on a pretty exciting pipeline for not just Q2, but even the rest of the year as well with especially what I would call out is that some of the pipeline as I mentioned little bit in my prepared remark like take example of analytics.
It's definitely an area, where we're seeing tremendous interest and increase.
Not just at the district level from small and large but given at the state level.
Understanding of power they could use the longitudinal view about the student the whole child view. So they can have the right support and policies as you mentioned, it's our money in fact with a lot of that is still vast majority are still not spend is one of the easy areas for them to really use that to leverage that to further fund and look at not just how the kit.
And for our intervention and different support has been provided post COVID-19, but even longer term view of that as well. The second area. I mentioned briefly is that the kind of conversation. We're having is not just on the core operational but evenly throughout the full longitudinal view into K through 'twenty. The long term workforce, so <unk> connection with that of a clock.
From connections with <unk> all of these are becoming very important and relevant for our customers. So we've seen a pretty healthy pipeline across the insights and classroom as well as our talent products, but we're also actually we're exciting to see now is that coming out of the post pandemic.
Pandemic district, but actually looking at transformation of their back office and operations, even more aggressively. So we are even seeing state level as well as regional interests are one.
Which is also speaks to the broader <unk>.
Adding time, especially in K 12 as to how much transformation, we can help drive for these districts.
Got it thats great to hear.
And it gets.
With that background, how are you thinking about the trend NRI. This year. It ticked up once again this quarter and you talked about at least one percentage point improvement for the year last quarter, given what youre seeing now how confident are you in that and do you think there could be any potential upside to that yes.
Thanks, Stephen Great Great question.
We executed as we said we were going to we saw a 30 bps increase from Q4 into the first quarter.
As I previously mentioned the way that youre going to see the NRI continued to trend youre going to see these types of movements sequentially quarter to quarter to quarter I did say last quarter, we saw at least eight point of improvement.
Certainly based off Q1 performance and kind of where we see Q2 shaping up in the rest of the year, even more confidence in that and do we see some upside to the one percentage point that we had called.
At this point, it's still early but I would say that we're very optimistic about that for sure.
Thanks, Congrats on the results.
Thank you Sir.
Okay.
And our next question is from the line of Joe <unk> from Baird. Please go ahead.
Great Hi, everyone I wanted to start with the cross sell activity in the quarter 300 transactions you spoke about earlier.
And some of your stronger seasonally strong quarters of last year, you were doing 300 or 400 cross sell transactions. So.
Is the right way to think about a one in Q number being at 300 can we take that as an unusually seasonally strong kind of cross sell period.
Is there any anything more in terms of maybe where incremental demand or what's behind that strength.
Thanks, Joe.
So let me kind of when we could looking at the number of transactions. We are really telling you about the velocity and as you said, we do do a pretty.
The velocity within each quarter, it seems to be very exciting, but when you look at from traveling as a result, sometimes that depends on the size of the customer. So you might have a large deals and you might have a small team. So I would not translate that directly into that but I think you could use that as a good better measure of the velocity of the number of transactions and the customers. We've talked about so absolutely you can.
But I will not directly multiply that into kind of like from a growth because of the size of the customer does matter.
Okay. Okay.
Helpful.
And then I know.
Kind of talk about your product suites.
And what levels of growth on a quarter by quarter basis, but just going off the disclosures in your annual report it seems like organically. It was still a unified classroom and insights that was the strongest growth area of our school overall.
Is that kind of the right expectation to have going forward again, you spent a lot of time on analytics and the ability.
To offer.
Yes closer almost personalized tutoring experience should that be a conduit for faster growth there relative to.
I ask Talon administration some of the other areas.
Yes.
Right well points. So I think as you factored in right definitely when you look at the insights from the classroom products. We are definitely very high growth area is no surprise given.
As we have seen in the pandemic both from transforming the classroom. So you can manage the different hybrid and different modalities, but then also insights to help them understand where the learning gap SAR and actually driving further improvements on it and we were seeing some of these high growth by the way in the classroom and insight even prior to pandemic. So they're just building even further.
From the pandemic, but it's equally important that when you look at the course.
And to have a talent products. They are also actually growing very healthy because their mission critical one of the beauty of our products is that these are things, which are required for any organization for any K 12 organizations to actually get them funded remain in compliance and then be able to continue running their operations. So.
These are very high sticky mission critical applications.
And absolutely. We are also seeing strong upsell as well as the new logo growth on those areas as well. So we do expect those areas to be also continue to do well, but definitely the insight in classroom as you would say would be the highest growth areas.
Great. Thank you very much.
Okay.
As a reminder, if you do have a question you can pass the one followed by the four on your telephone keypad.
And our next question is from the line of Gabriella <unk> with Goldman Sachs. Please go ahead.
Hi, Good afternoon. Thanks for taking my question and I appreciate the additional commentary on the resiliency of the end market.
I'd Love to ask you about what youre seeing in the LMS market today and more specifically could you walk us through some of the catalysts that are happening in the market that Kansas.
Transitioning our clothing Scotia transaction from unpaid paid.
So Gabriel ticket pleasure talking to you.
As you said one of the beauty of our market is that it's a very stable end market, it's kind of everything else going into the condition market Commission is kind of very resilient and.
<unk> from that our solutions are very mission critical elements is definitely one of our key areas of growth along with the benefit of the broader classroom, what we do see it.
We do see adoption of lot of LMS and overpower school install base customers, who are leveraging of our student information system or theyre leveraging of our performance matters assessment solution. They are definitely.
Looking at adopting elements, we saw a very high growth over the 2020, even during the height of the pandemic, where we're almost at a four to 5 million students during that 18 month, but typically in any year, we will see about 1 million to 2 million students additional adopt MMF and we're still seeing that even post pandemic to be very healthy I mentioned, Guam I had.
Mentioned the rest of the day in my prepared remarks, we similarly, seeing a lot of other customers.
As well as over.
For our customers, we're kind of using that as an opportunity to kind of really have an integrated classroom and.
The back office system, I think you probably would appreciate that thinks about a student not having to go check our homework and assignment in one place and having to check their grade them their attendance and their behavior on a report card in another place, bringing it all together we are the only solution, which offer in <unk> and LMS and assessment integrate.
And that is a big differentiation, where we continue see it half of the market to your point, it's still unpaid so we which are using very lightweight.
Collaboration systems, I would call them I wouldn't call them, an LMS and we do see continuing traction of the market.
One to 2 million students. Additionally, we continue to see at capturing that into the foreseeable future.
That's very helpful. Thank you and as a follow up if I may I know you've talked in the past about the analytics piece of the portfolio growing sustainably in the 30% kind of range, either first half or for Eric remind us how to think about how deal sizes change.
Student basis on a pricing basis as Marcia customer analytics.
What I can tell you <unk>, Eric feel free to jump on this.
When you look at when you look at our suite right. If somebody buys all of our 19 plus modules right you're talking about somewhere between <unk> 72 to $100 per student.
Who might have eight to nine products youre looking at 30% to $50, depending upon the size of the customers.
To see that so analytics think about analytics is another module right, which allows us to come to capture one of the beauty of the analyst analytics, which is what I would say is that while one of the key things that we continue to see the demand is on the student of social analytics, which is understanding student in the whole child view, how the student is doing from the <unk>.
<unk> engagement, we do have multiple analyst analytic solutions like the entire finance and HR analytics, we have enrollment analytics. We also have analytics of understanding at tricks and predictive models and we are adding introducing one of the new areas. We are launching as soon as education prefer.
<unk> learning effectiveness analytics. So these will present the additional dollars per student we can capture from a school district. So I view analytics by itself is going to be a 10% to $20 per student.
<unk> formed the districts because it will provide them a huge value because it helps them optimize the rest of the 10% to $14000 pursuant spend.
Spending was areas by driving better data intelligence. So hope that helps you understand kind of from a pricing how would you think about the analytics.
Thank you very much.
Alright, Thanks Robert.
Okay.
And our next question is from the line of Fred <unk> with Macquarie. Please go ahead.
Hi, Thank you.
Reflecting earlier today about past couple of years and how many of the students that have been in school systems haven't really had a normal school year now since March 2020, but many of them are beginning to take what they thought initially just wanted to get like two two week break school.
It got me thinking.
The past couple of years you had.
Especially during the Covid pandemic substantial.
Substantial LMS adoption as schools are grappling with problem loans.
Distance learning.
Now as your portfolio is kind of normalizing or demand is normalizing across your portfolio do you see any opportunities here for schools to begin purchasing say more assessments or anything that would drive personalized learning opportunities that could really help students get back on track.
And really address those issues with learning loss would've been accruing as students just haven't had proper scooters.
Yes.
Youre touching on a key point in fact.
The one of the case studies I mentioned in my prepared remark. This is the.
Call. It top three school district, right, which has been using our learning management for 600000 students almost even prior to pandemic. They have been having almost 500000 students who are using it daily in and out on a system managing assignments mentioned homework the communication.
And Youre, absolutely right one of the opportunities they saw coming of the pandemic the how.
They were usage was only increase post pandemic the one of us to make that as a foundation. So they can do more personalized learning as well as to better support for kids. So they have adopted over performance by the assessment integrated into the oncology.
Because that allows them to now provide an better understanding of that across all through them.
We have also given the example of <unk> did in the previous calls where they also started with our assessment of an update LMS last year. So we feel a lot of the.
Venturing launches like we see the pretty common and hundreds of other school districts, who have actually taken the benefit of having an integrated learning and assessment environment to be one of the game changes for them not just for dealing with some of the pandemic and the learning loss, even before that as to how this really helps them better for.
Wide and engagement with the students. So they can support every child better so with most of this is.
This thing is trends are actually had been prior to the pandemic and they have only got X rayed post pandemic.
Thank you and then.
No. The we touched on a couple of different aspects of the macro environment, but I really wanted to also touch on or rather asked about just.
Generally your pricing philosophy is it pricing leverage in this market considering inflationary backdrop.
So.
Could you just again walk us through how powerful thinks about pricing.
Generally how it approaches multiyear contracts most pricing escalators. Thank you.
So Fred it's Eric So I will take this as we look at it first and we've said this a few times, we really look at it driving the overall value to our customers and the impact and really getting our customers adopting more and more of our modules, which then really becomes the overall value of the platform to the <unk>.
Customer so.
Our contracts do allow for price increases.
Those do.
We negotiate those at the beginning of the contract terms.
I would tell you they are in the low low percentage range think of 3% to 4% we have not done a substantial amount of increasing at this point in time to those price increases now there are some renewal opportunities, where we have certain situations not across the board that we have provided some increases.
And those prices very very small in nature.
But we continue to and this is back to that one of the earlier questions. I addressed is we've got a fair amount of operational leverage within our business model and we're really driving those actions to try and.
Keep the pricing as consistent as possible to our customers.
<unk>.
We feel like again, the value is really driving more modules adoption into the customer seeing the value of the platform.
So driving revenue through increasing of our price escalators.
Thank you.
Thank you.
Yeah.
And our next question is from the line of Diane Peterson from Raymond James. Please go ahead.
Hi, This is Jeff.
On the Brian .
I have a follow up from earlier question.
Now back in school years wrapping up what early insights are having on customer.
Customer feedback on probably be using to help them return back to normal post pandemic.
Where are they interested in for renewal to upgrade next year. Thanks.
Sure.
Mixture I guess in one of the things that I think as I mentioned, the beauty of our business is that what.
What we sell is a must have right visa solutions like of a suite of information system or special education, our talent recruitment or substitute teacher management, Norbert feature professional learning or even our assessments, which is tied to the state accountability centers.
Learning management, so they can actually manage the compliance and also make sure that every child is getting any equity designation. These are critical to having these school districts getting funded remain in compliance and drive better attendance and education outcome, which actually helps them drive more funding as well.
So the <unk> solution and the stickiness of that is not based on like I need the solution today or not.
<unk> they have been using for many years and they get the benefit of it in any situation doesn't matter, whether the student is fully remote or hybrid or in person. Each of these solutions have the value of actually in all those scenarios of engagement and better student outcomes. So our renewal rates accurate.
<unk> to be very healthy in fact, when you look at our core products the renewal.
Our gross retention during the high Ninety's. So we really build on that the fact that these.
<unk> solutions.
Pandemic only as has been the next Richter and helping them look at additional transformations to be faster, but it's definitely not a signed where the renewals or anything is really a factor because it would all these solutions are applicable to them on an ongoing basis and they don't really move up and down based on the situation in one quarter or so it actually dipped.
Right across the entire industry.
Thanks.
Okay. Thank you.
And our next question is from the line of Koji I Kita from Bank of America. Please go ahead.
Hi, This is <unk> on for Gucci. Thanks for taking my question and its great to see our growth internationally.
Have you signed up two private schools should that go any higher.
<unk> motion public International schools.
So what do you see if David is the near term crude connector internationally more so than public.
Is there anything to highlight with respect any difference in demand or different lines of international customers, mostly domestic customers.
Yeah.
Thank you absolutely fair question. So we don't differentiate our pricing based on a private charter Republic or pricing is actually more based on the size of the district.
You can imagine if you're a big district deployment or USA deployment, you have a pricing advantage because of the volume.
And if you're a small private school than you have on the on the higher side of it so stock pricing is not dependent on one of our pricing is fairly robust across not just in North America, but international I think to a follow up question about in areas of fear, where do we see international to be any different behavior than U S. I think one of the.
Key emphasis I was trying to make with these two deals was the fact that how much that our entire suite is relevant even internationally for the demand. We are seeing is not just for <unk> all of our student information system. We are even seeing it for talent management internationally, we are seeing it for better assessment for better behavior management.
For communication enrollment. So all these solutions are very relevant even internationally, whether you're a private school or whether you are.
Our public school International when you look at the whole an IQ report it talks about education being a 10 trillion industry with <unk> almost six trillion plus funding globally. This is a very big huge market and as I mentioned, we are in a very unique position that there is no other international care, which has these best in class suite.
Solution for Capes withdrawal and Thats. The reason we are seeing a lot of interest in bone from park leaders across international and we already have proof points like contributor Uruguay, which has almost 600000 students of oncology or in Philippines, where we have more than 300 reported deposit students. We have set deployments across 90 countries. So we definitely have a lot of pull points.
As I mentioned, we this largely has been opportunistic and inbound we are definitely now turning and accelerating our international strategy of investment, which will help us start capturing these different markets, especially the emerging markets, where we have a big focus on.
That's great. Thank you.
Thank you.
And we have no further questions on the phone line at this time I will now turn the conference back to <unk> for closing remarks.
Well. Thank you again for your continued support and possible Andover mission.
<unk> been very pleased with our results from the first quarter and as you can see from our guidance. We're very confident in Gen will continue to have consistent success in 2022 and beyond.
As I mentioned, we are in a very.
Exciting timeframe, but also had a very stable market, which allows us to continue to leverage our market conditions, but also the differentiation we have out of our platform to continue to grow and also distance us from our competitors as we continue to invest not just in having a unified platform, but even the personalized learning, which is a game changer and we are proud to serve.
The 14th <unk> customers today, and continue that growth as well. So thanks again and I appreciate it and have a wonderful evening.
That does conclude your conference call for today, we thank you for your participation and ask that you. Please disconnect your lines.
Goodbye.
Yes.
Yes.
Thanks.
Sure.
Okay.
Yes.
Okay.