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Earnings call: PowerSchool sees 16% YoY revenue growth in Q1 2024

EditorEmilio Ghigini
Published 09/05/2024, 09:24
© Reuters.
PWSC
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PowerSchool (NYSE: PWSC), a leading provider of K-12 education technology solutions, has reported robust financial results for the first quarter of 2024.

The company announced a 16% year-over-year increase in revenue, reaching $185 million. Subscription and support revenue, a significant part of the business, grew by 18% to $167 million. Adjusted EBITDA also saw a notable rise of 24% compared to the previous year, amounting to $61 million and representing a 33% margin.

PowerSchool's CEO, Hardeep Gulati, underscored the company's growth strategies, including cross-selling in North America, international market expansion, strategic mergers and acquisitions, and the introduction of new products like PowerBuddy, an AI assistant for education.

The company also emphasized its commitment to data security and compliance with student privacy regulations.

Key Takeaways

  • PowerSchool's Q1 2024 revenue increased by 16% YoY, with a total of $185 million.
  • Subscription and support revenue grew to $167 million, an 18% increase.
  • Adjusted EBITDA improved by 24% YoY, reaching $61 million, reflecting a 33% margin.
  • The company launched PowerBuddy, a suite of AI-driven products, and aims to reach $1 billion in revenue within three years.
  • PowerSchool highlighted a 107% net revenue retention rate and a significant international growth, expecting a 50% increase in international revenue.
  • The company is investing in product innovation, efficiency, and international expansion.
  • PowerSchool reported the acquisition of 11 companies and is focusing on expanding partner coverage in Southeast Asia, Western Europe, and Africa.
  • The enterprise segment showed strong retention rates and bookings, particularly among customers with 3,000 to 50,000 students.

Company Outlook

  • PowerSchool expects continued growth in revenue and adjusted EBITDA for the second quarter and full year.
  • The company provided an adjusted EBITDA forecast for the year between $268 million to $273 million.
  • PowerSchool is focused on improving free cash flow and optimizing sales team efficiency.

Bearish Highlights

  • Challenges include maintaining momentum in a competitive international market with no clear leader.
  • The company is working to improve partner channel pipeline and close rates.

Bullish Highlights

  • PowerSchool has nearly doubled its pipeline, with almost 200% growth.
  • The company's cross-selling strategy led to the largest opportunity in its history with the Indiana Department of Education.
  • PowerSchool enjoys a leading market share in the Student Information System (SIS) space, double that of its nearest competitor.

Misses

  • There were no major updates on multiproduct adoption trends since the Analyst Day.

Q&A Highlights

  • AI is becoming a significant focus area, with revenue from AI-related products expected to reach millions of dollars this year.
  • PowerBuddy is priced to be gross margin neutral and could become accretive in the future.
  • The company continues to focus on innovation in data and AI, strategic acquisitions, and international market expansion.

In conclusion, PowerSchool's first quarter of 2024 has been marked by strong financial performance and strategic growth initiatives, particularly in the area of AI with their PowerBuddy product line.

The company's focus on cross-selling, international expansion, and product innovation, along with its commitment to data security, positions it well for continued success in the K-12 education technology market.

InvestingPro Insights

PowerSchool's (NYSE: PWSC) first quarter of 2024 has shown promising growth, but it's essential to delve deeper into the financial health and market sentiment surrounding the company. Here's what InvestingPro data and tips reveal:

InvestingPro Tips:

  • Analysts are optimistic about PowerSchool's profitability, predicting that the company will be profitable this year. This aligns with the company's own growth strategies and recent financial results.
  • The stock is currently trading near its 52-week low, which might indicate a potential buying opportunity for investors who are bullish on the company's long-term prospects.

InvestingPro Data:

  • Market Cap (Adjusted): PowerSchool's market cap stands at $3.38B, reflecting the company's size and investor valuation in the market.
  • Revenue Growth (Quarterly) Q1 2023: The company has experienced a 13.08% quarterly revenue growth, complementing the reported 16% YoY increase in revenue.
  • P/E Ratio (Adjusted) Last Twelve Months as of Q4 2023: The P/E ratio of -99.55 suggests that investors are expecting high future earnings growth despite the company currently not being profitable.

For investors seeking a more detailed analysis, there are additional InvestingPro Tips available at https://www.investing.com/pro/PWSC. Use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription. There are 11 more tips on InvestingPro that can provide further insights into PowerSchool's financial health and market performance.

Full transcript - Powerschool Holdings (PWSC) Q1 2024:

Operator: Good day, and welcome to the PowerSchool First Quarter 2024 Earnings Conference Call. All participants will be in a listen-only mode. [Operator Instructions] Please note this event is being recorded. I would like now to turn the conference over to Shane Harrison, Senior Vice President of Investor Relations. Please go ahead.

Shane Harrison: Welcome, everyone, to PowerSchool's earnings conference call for the first quarter ended March 31, 2024. I wanted to first let you know that we posted a slide deck to the Investor Relations section of our website that accompanies our remarks here. On the call today, we have Power Schools CEO, Hardeep Gulati; and President and CFO, Eric Shander. Before getting started, I'd like to emphasize that this call, including the Q&A portion, will include statements related to the expected future results for our company which are, therefore, forward-looking statements. Our actual results may differ materially from our projections due to a number of risks and uncertainties. The risks and uncertainties that forward-looking statements are subject to are described in our earnings release and other SEC filings. Today's remarks will also include references to non-GAAP financial measures. Additional information, including definitions and reconciliations between non-GAAP financial information to the GAAP financial information is provided in the corresponding press release and results presentation, which are both posted on PowerSchool's Investor Relations website at investors.powerschool.com. A replay of this call will also be posted to the same website. With that, let me now turn the call over to Hardeep.

Hardeep Gulati: Thank you, Shane, and thank you, everyone, for joining us today. We are starting 2024 with continued strong momentum, beating the midpoint of our revenue outlook and exceeding the high end of our outlook for adjusted EBITDA. ARR grew 18% year-over-year, while NRR improved 30 basis points sequentially to 107%. First quarter revenue totaled $185 million, up 16% year-over-year, and subscription and support revenue growing 18% to $167 million. Adjusted EBITDA improved 24% year-over-year to $61 million, representing a 33% margin, an expansion of over 2 percentage points year-over-year. These first quarter results showcase the robustness of software spend in K2 market and the continued demand and stickiness of our market-leading mission-critical solutions that drive better education outcomes in power educators and help districts run more efficiently. These results are driven by the strength of our multiple growth vectors, which create the diversity and sustainability of our business model and enabled us to deliver consistent results quarter after quarter. Now 11 consecutive quarters since our IPO of meeting or beating guidance. I will highlight the updates in the quarter based on each of the four key growth vectors we have shared in the past. First, significant cross-sell and net new opportunity across North America for our comprehensive and broad 20-plus products meeting a variety of district and strategic initiatives. Second, our expansion and successes in the untapped large international market; third, continued strategic M&A that expands over TAM and add solutions that address the most important growth areas such as our recent Allovue budgeting and planning acquisition; fourth, launching new disruptive high-growth innovations like PowerBuddy, a K-12 industry first AI assistant for everyone. Let's start with our first growth vectors and share with you some of the highlights of customer momentum in cross-sell and new logos with our key wins in Q1. As we briefly previewed in our last earning calls, we are thrilled and honored to have signed in Q1, one of our largest deals in recent history to serve the Indiana Department of Education to provide special program solution to the state and all its districts to modernize systems, processes and improved special education program needs for every student at every school in Indiana. Our solution replaced their existing vendor as we provide a more modern interoperable platform with enhanced compliance for federal and state reporting requirements. We also saw several other notable cross-sell wins during the lead of public schools who selected our SIS and ERP solutions, Visalia Unified School District who chose our communication and our new My PowerSchool product, then Bernardino Study Unified School District who selected our analytics and talent modules. LEAP Social Enterprise in Puerto Rico who brought their presence with us on multiple products, including SIS, Schoology, Enrollment & Naviance. The volume and the types of deals across these broad solutions show our ability to meet the varying needs and priorities or districts of different sizes and across regions. During the quarter, we also added great new logos, including Manitoba First Nations Education Resource Center, who purchased our student information system to power their district operations and reporting. In fact, one of the reasons for our ongoing cross-sell and new logo successes is our key differentiator of strong unparalleled leadership of our student information system, or SIS, along with many of our other solutions. The SIS is the hard beat, the source of its stores and manages all student data within a school district or charter school system. School use SIS for compliance reporting to Department of Education and to provide reports to key stakeholders to inform decision-making to help students succeed. PowerSchool SIS is a premium solution and a clear market leader with gross retention rates in the high 90s and strong customer satisfaction scores. We continue to win new accounts in SIS and have brought in over 1 million new students over the past two years. We're now reaching over 20 million K-12 students globally and roughly 1/3 of North American students. The SIS is one of the keys to cross-selling additional products and we have much stronger win rates with customers who already use our SIS. During the first quarter, we made great progress in our second growth vector of international expansion, particularly in the high-growth target markets in the Middle East, Latin America and India. In the Middle East, through our Board Middle East, BME partnership, we signed a new logo Knights of Knowledge International Schools in Saudi Arabia who purchased SIS, Schoology, and other modules to benefit all their students and teachers. We also continue to cross-sell into our international customer base with customers like Arabian Education Development, who expanded their deployment from student cloud to personalized learning cloud, talent cloud and now our analytics cloud. Another example of international cross-sell is in Latin America, where we broadened our presence with the International School of Tegucigalpa in Honduras in an existing Schoology customer who expanded to a broader platform, including SIS, Enrollment, Ecollect and other modules. In India, we won new business with Kalgidhar Education and EDUFICE, among many others. We are very excited about the international prospects this year as our full year international pipeline has grown over 200% year-over-year. This includes large deals and pipeline to our partner channels. Before we move to our third growth driver, I want to touch on funding and the key priorities in front of our customers. As you know, K-12 is one of the largest spend categories globally with over $700 billion in U.S. alone and over $5 trillion globally. The core budgets are resilient and are relatively insulated from inflationary and other macroeconomic events. Budgets are funded through multiple sources, federal, state and local and education is a bipartisan priority. ESSER injected an additional 5% to 10% per year to the overall budget targeted towards onetime purchases and managing additional staffing, supplemental content and services needs during the past few years. While in some cases, District use ESSER to fund their initial implementation and rollout of K-12 technologies, districts are largely required to allocate their ongoing software contract spend from their regular core ongoing budgets. The broader tailwinds driving the software growth in K-12 has been the need for digital transformation to support more automation of their back office, eliminate costly manual task, reduced teacher at this rate of time, modernize the classroom to drive more engagement with students and also get better insight that districts can optimize their investments to create better student outcomes. That is why education software spending is forecasted to remain one of the highest growth areas in K-12 education. In March, we conducted a survey of our annual education focus report, where we received nearly 2,000 educated responses from across the U.S. from every state and U.S. Territory on a wide range of questions, including top K-12 technology priorities, budgets and much more. I'd like to share some of the preliminary results from our market research which will be formally released in July. The top five technology priorities districts identified are integrating technology solutions, connecting data across systems, implementing attendance solutions to address chronic absenteeism, providing AI guidance in infrastructure, cybersecurity and protecting student data. Conversely, the top areas of budget management that district identified were limiting additional staffing budget hardware spend and reducing tutoring spend. These survey results directly aligned with our solutions and platform strategy to provide secure, modern, integrated systems and data with mission-critical needs like MTSS, attendance intervention and data insights to provide the right health efficiently and surgically, based on individual student needs and drive better attendance and engagement to help keep students and school. In fact, helping districts with budgeting and spending efficiency and efficacy was a key rationale behind our recent strategic acquisition of Allovue. As we discussed during our last earnings call, we acquired Allovue in January of this year, and we are already seeing very strong demands for its capabilities. Results from the second annual Allovue Education financial survey found that roughly half of the educator surveys said that their budget tools are out of date and our need of modernization. By adding Allovue, PowerSchool can now provide schools, districts and state education leaders with most comprehensive suite of K-12 data and analytics tools available to accurately planned budgets and provide clear visibility for their communities into district lending and the impact on student outcomes. This showcases how we are leveraging our third growth vector of strategic M&A expansion to drive additional growth on current district priorities. Now turning to our fourth growth factor of differentiated innovation. In January, we announced our generic AI platform, PowerSchool PowerBuddy a K-12 industry-first AI-powered assistant for everyone. PowerBuddy is designed to deliver conversational, personalized, contextual and embedded experiences for educators, students, administrators and parents. We recently announced general availability of two new AI-powered solutions. PowerBuddy for Learning and PowerBuddy for Assessment. These two solutions are targeted for teachers to save them countless hours spent generating student assignments, lesson plans and assessments, personalized to different reading levels, subjects, languages and state standards. They seamlessly integrate within Schoology and performance matters and are built on Microsoft (NASDAQ:MSFT) Azure Open AI, but designed and fine-tuned by power school specifically for K-12 with controls for responsible AI principles and compliant with district and state standards and content. Demand for property has been very strong, and we already have signed dozens of customers, including Epic Charter Schools and Duval County Public Schools. We have several other PowerBuddy solutions under beta with districts representing approximately 2 million students and have built roughly 10 million of opportunity pipeline for these solutions. Additionally, we have received impactful testimonials from teachers saying they have reduced the amount of time needed to create a standard aligned assessment item by more than 2/3. We are excited to launch additional PowerBuddy products, including PowerBuddy four data analysis, custom AI, college and career engagement and coaching inventory, which will be available for 2024 and 2025 school year. Given our leadership in reach, scale, breadth and impact, we are uniquely positioned to provide generative AI solutions that personalize experiences leveraging whole child information and are embedded into existing solutions that students, parents, teachers and administrators use every day and provide a contextualized health and assist us for all their needs. We are also helping districts formalize their data platform for AI with our differentiated connected intelligence data lake solution that enables district to ensure their data severity and empower their educators and students to leverage GenAI by bringing AI to their data. When it comes to data, PowerSchool leads the K-12 industry in student data privacy and data security. A responsibility we take very seriously. To that end, we are certified by industry leaders such as TrustArc and PRIVO, and we probably had her to all applicable federal and state loss pertaining to student data. including federal laws, such as Family Education Rights and Privacy Act, FERPA; and the Child Online Privacy Protection ACT, COPPA as well as state regulations including California’s Student Online Personal Information Protection Act, SOPIPA and its variants in many other states. We are also proud signatories of the Student Privacy Pledge and the White House’s Secure by Design initiative of voluntary pledge developed by the Cybersecurity and Infrastructure Security Agency CISA and the U.S. Department of Education. We also pledged our commitment to further secure the education technology ecosystem by offering free and subsidized security resources to all U.S. schools and districts. For more information on our student privacy compliance, security investments and our responsible AI guidelines, please refer to the accompanying earnings presentation for links to our data security policies, and our chief compliance officer privacy blog. PowerSchool today is the vastly larger and fundamentally different company than it was just five years ago. Since 2019 and based on the midpoint of our 2024 outlook, we will have more than doubled our revenue and nearly tripled our adjusted EBITDA while expanding our adjusted EBITDA margin by nearly 10 percentage points. Over the same period, we have acquired 11 companies and nearly doubled the number of our products in our portfolio. We have started to put boots on the ground in international markets and build out a channel partner network of 14 partners across all of our targeted international markets, delivering this kind of growth requires exemplary executive talent and high-performance culture. I'm proud to have been able to attract and retain the world class executive leaders and team needed for PowerSchool of today, many of them drawn to the Company's powerful mission. Highlighted by these strong first quarter results, we remain focused and confident about our continued success and ability to execute in line with the strategy and targets we shared at our Investor Day last year to reach $1 billion plus in revenue in the next three years. Now, I will turn over to Eric to discuss the financial results and outlook. Eric?

Eric Shander: Thank you, Hardeep. We kicked off 2024 with a strong first quarter that demonstrated continued execution in line with our strategy. We delivered double-digit top line growth, expanded our adjusted EBITDA margin by more than 2 points over the prior year and continue to invest in product innovation and international initiatives that will drive long-term value to our customers and to the Company. First quarter total revenue came in at $185 million representing 16% year-over-year increase, in line with the guidance range we provided on our last earnings call. Subscription and support revenue came in at 18% year-over-year to $167 million and accounted for 90% of total revenue in the quarter. As Hardeep mentioned, we are thrilled and honored by the opportunity to serve the Indiana Department of Education with our special program solution reaching the entire special education population of the state. This large deal represents approximately $5 million in subscription and support revenue and approximately $9 million in services revenue that will span into 2025 given the significant scope of this opportunity. Revenue from our Services business totaled $17 million in the quarter, representing a slight increase over the prior year. We continue to see more efficient deployment cycles from our implementations, which drives quicker time to value for our customers using our platform. Revenue from license and other, which relates mainly to our third-party revenue and is the smallest revenue stream totaled $1 million for the quarter. This came in slightly below our expectations based on the mix of third-party partner activity in the quarter. We ended the quarter with an annualized recurring revenue balance of $720 million, representing an 18% increase over the same time period last year. This strong performance was driven largely by the strongest cross-sell activity we have ever seen in the first quarter as well as the addition of our recent acquisitions. Our net revenue retention rate came in at 107% up 30 basis points on a sequential quarterly basis. Adjusted gross profit for the quarter came in at $128 million with a 69.2% margin, representing a 110-basis point year-over-year improvement driven by our continued focus on cost management and operational scale. Moving to the first for operating expenses. Non-GAAP research and development expense came in at $25 million representing a 13.6% of revenue compared with 12.5% in the same time period last year. This 110-basis point increase in adjusted R&D expense as a percentage of revenue reflects our continued focus on investing in the data and AI products that will shape the future of education. Including capitalized R&D expenditures, our total investment in R&D was 18.4% of revenue compared with 18.5% in the prior year. Non-GAAP SG&A expense totaled $42 million in the first quarter, representing 22.5% of revenue compared with $39 million or 24.6% of revenue in the same time period last year. This 210-basis point improvement was largely due to lower G&A expense driven by our operational scale, which was partially offset by the investments we are making in sales and marketing focused on go-to-market activities and our continued international build-out. First quarter adjusted EBITDA was $61 million, representing a 33.1% margin, exceeding the high end of our guidance range and reflecting our continued commitment to margin expansion. Non-GAAP net income in the first quarter was $0.17 per fully diluted share, down $0.01 from the $0.18 per fully diluted share we reported in the same time period last year. Higher interest expense was a headwind of approximately $0.03 to our non-GAAP earnings per share and we had a non-cash tax expense related to the acquisition of Allovue, which had an impact of approximately $0.04. First quarter free cash flow, which typically reaches a seasonal low point in Q1 due to the timing of renewals and bonus payouts was a negative $103 million compared with negative $70 million in the same time period last year. This reduction is driven by the increase in interest expense, acquisition-related costs and the changes in working capital, which we believe to be timing related. Moving to the balance sheet. We ended the quarter with $17 million in cash and equivalents, a decrease of 73% over the same time period last year. This was due largely to the seasonality of Q1 cash flow and cash payments related to the SchoolMessenger and Allovue acquisitions, partially offset by a $125 million draw on our revolving credit facility. Net debt leverage as of the end of the quarter was 3.8x compared with 3.3x a year earlier. As a reminder, our net leverage decreases in the second half of the year given the collection seasonality. Now turning to our 2024 2nd quarter and full year financial outlook. For the second quarter, we expect to deliver total revenue in the range of $192 million to $197 million and adjusted EBITDA in the range of $67 million to $69 million, representing a 35% margin at the midpoint. For the full year 2024, we are reiterating our guidance with total revenue expected to be in the range of $786 million to $792 million, with the midpoint representing a 13% year-over-year growth rate. We are raising our full year adjusted EBITDA guide to a range of $68 million to $73 million, representing a 34.3% adjusted EBITDA margin at the midpoint. For modeling purposes, we expect full year capital expenditures, including capitalized software of approximately $48 million to $52 million and share-based compensation expense of approximately $80 million to $84 million. Fully diluted shares by the end of the year are expected to be in the range of $203 million to $207 million. Overall, we're very pleased with the progress in the first quarter. We demonstrated continued execution against our strategy by delivering double-digit top line growth and margin expansion. We are intensely focused on delivering market-leading innovation and value to our customers through a comprehensive and differentiated platform. This concludes our prepared remarks. Alan, will you please open the call for Q&A.

Operator: [Operator Instructions] Our first question comes from Matt Hedberg of RBC Capital Markets. Please go ahead.

Dan Bergstrom: It's Dan Bergstrom for Matt Hedberg. So, Eric, you called out more efficient implementations in the prepared remarks. I think that's something you've been working on. Are there any incremental undertakings maybe this year with the services team to accelerate implementations and time to value, anything new or maybe incremental you want to point out there?

Eric Shander: Yes. No, look, it's a good question. I appreciate that. And as you all have seen, last year, we have seen a lot of success. When we did Puerto Rico, which a large student information system implementation, the team is super proud of what they did, did it in seven months. Years ago, that never would have been possible. But look, this team -- and we're always focused on continuous improvement. So, we are continually looking at how we're packaging up the work where the work is being placed. So, I would tell you, while I'm certainly pleased with the progress, we're not done. So, I would tell you we're going to continue to focus on efficiency levels. And then certainly, the other areas will continue to build out our factory approach in India. So, I guess I would say stay tuned because we'll continue to see efficiencies there. But I'm super proud of the progress the team made last year, which was significant, and we're not going to stop with that.

Dan Bergstrom: That's great. And then you mentioned Puerto Rico there. Internationally, you highlighted that as a key growth factor. It sounds like the pipeline is building nicely there. I think you had a lot of success last year adding new international partners. I guess looking at this year, are you targeting maybe adding a similar level of partners or more focusing on the ramp of what you signed up so far?

Hardeep Gulati: Sure, Dan. This is Hardeep. I'll jump in on that. And overall, we are very excited about the international. I think as we look at a mentioned in the pipeline, we are almost seeing 200% growth in the pipeline. With some -- especially good-sized large deals helped by the partners, the 14-plus partner channels we have built across the entire globe. What's also exciting is that we're still expecting almost 50% growth on international this year as well. So, we are -- definitely have built a pretty strong engine through the partner as well as our own management team, especially we have brought in a new GM of International, and we have seen a lot of success both in terms of improving our partner channel pipeline as our own execution about bringing these deals in. We do expect to sign more partners, but we also have a pretty good coverage of these partner in the most focused agents. As we expanded to Southeast Asia, some of the Western Europe, you're going to see a little bit more coverage on the partners in Africa as well, and we will continue to develop that. But the big focus is actually the partners we do have kind of enabling and bringing their pipeline and actually executing and closing those.

Operator: The next question comes from Brian Peterson of Raymond James. Please go ahead.

Jessica Wang: This is Jessica for Brian. Start off with in 2024, are there any particular product sets that you're prioritizing for cross-sell? And like what has been motes success selling back into the customer base?

Hardeep Gulati: Jessica that's a great question. So, one of the exciting part of our breadth of the platform is that we have really all these different solutions addressing all the variety of needs. So, when we are going to the -- when we're looking at the demand we see on the cross-sell and where we are focusing on what we call as an expert. We will work with the customer, defy each of these customers' key pinpoints where it will need and with -- as you can imagine, with the 20-plus solutions and the different elements, whether it's in their back office, whether it's their talent management needs, whether it's in the classroom, whether it's in terms of improving graduation rates or overall funding we really help drive the right solution to the key priorities, these districts space and be able to bring a solution to them. So, our cross-sell motions actually are across the globe. We have the largest K-12 software sales channel in the whole country. We are engaging with these districts on all levels, all the way from CIOs to their Chief Technic Officer as print and as well as the CFOs in HR and building that core transformation plan from them based on what are the key strategic plans. Now, we do see further levels of areas which are really at the high demand of this -- for this year as well. One, in continuation of what we have seen in the last year, data and analytics products are a big focus. Especially as these districts deal with how do they manage more limited investment on supplemental learning but reaching out to every specific kid we are able to help them with the data to identify which kid needs what help and how they can optimize their funding and spend so they can reach every child based on their need. We also, as I mentioned in the prepared remarks, all of you is a big growth area for us this year. We're seeing a lot of exciting demand of that with a pipeline of about $10 million, where we are seeing the need for budgeting solutions that they can actually help manage all the different elements. Parent engagement and communication remains one of the top priorities. That's why the SchoolMessenger along with our My PowerSchool is one of our big growth areas as well. And then as I mentioned, we are actually very excited about the demand we are seeing in the AI. We have been doing about 40-plus luncheon and series with our customers across the nation. And we are really excited about the pipeline that we are seeing for districts. We're pretty much universally seeing almost 20% of the districts have shown in trust or they've already started looking at how AI can be brought into their districts. So, we are expecting that to be a phenomenal growth area as well.

Jessica Wang: That's really cool. And just like digging further into what you're saying this now about your AI with the rollout of the power bodies, GenAI capabilities, what is some of the early user feedback so far? Like how do you view PowerBuddy's potential for further increasing the product stickiness with schools?

Hardeep Gulati: Yes. As I was mentioning that there is already -- the feedback we're getting quantitatively that this is a significant time setting for districts, especially for teachers to create less than planned and items. The beta of some of the elements which we are launching around data insights as well as custom AI allows them to actually create better efficiency and understanding of their data and how they can get in front of all the principals and teachers and their boards in real time. There's also value of the My PowerSchool and college career as less coaching, where the PowerBuddy helps you drive efficiency in across. So, the feedback across all these different properties, which we have general built as well as the ones in the beta, has been pretty instrumental. In fact, we do see that districts are seeing this to be one of the big areas of how they can actually help navigate on their improved efficacy of education outcomes. And we have actually a few testimonies which have got good media coverage from Epic Charter as well as district level, and we encourage you guys to check those news outlets as well, where teachers are surely seeing having the ability to be able to provide help to a teacher and student. It has been a phenomenal game changer.

Operator: The next question comes from Saket Kalia of Barclays (LON:BARC). Please go ahead.

Saket Kalia: Maybe I'll start with you. I appreciate it in your prepared remarks, just kind of flushing out a little bit the impact that -- or the little impact that ESSER funding, I think it's kind of had on the business. Can you just maybe remind us what the time line for ESSER funding is for your customers? And maybe related to that, I mean, are you seeing any change in pipeline as a result of it, kind of positive or negative?

Hardeep Gulati: Yes. When you look at the overall ESSER funds, Saket, that depending upon states, again, there is a federal portal on necessary transparency where people can check it out. You will see that almost 70% to 80% of the ESSER funds have been spent. And I would say even more of that has been already allocated. We, as we're mentioning, right, the ESSER funds were largely towards onetime purchases, district staffing, supplemental content, tutoring to help learning loss when they're buying software, they're buying it from their normal ongoing budgets, right? So, we don't see a very direct impact to that. We did see some benefit of that on the implementation dollars they might use it to roll out the systems. So, we're not seeing that to be a material impact to our pipeline. In fact, our pipeline has grown year-over-year. And we -- even while we have put more validation and qualifications on our pipeline. And we're also seeing actually the second half pipeline, especially as we have launched our new My PowerSchool solution our AI PowerBuddy as well as bringing the integrations of all of you and our international ramp-up, we are actually seeing a second half pipeline, which is already showing a lot of a further improvement to that as well. So, we do see that from our business perspective, our pipeline to be very healthy. And given these solutions are mission critical, as you can imagine, our gross retention and overall or retention actually are showing given similar trends or if not further positive trends on that.

Saket Kalia: Good to hear. Eric, maybe for my follow-up for you. Can we just talk a little bit about how you think about free cash flow either this year or just kind of more broadly, the EBITDA guide is always helpful, and it's good to see that go up a little bit. But the cash flow here is it's just nice to see -- I'd love to kind of hear how you think about that just even anecdotally or just kind of broad brush?

Eric Shander: Yes, sure, Saket. So just as I mentioned in my prepared remarks, right, so we're expecting full year adjusted EBITDA to be around $268 million to $273 million. We took it up on the top end, which is well over 100 basis points of where we finished the year. As you think about and as I focus on free cash flow, last year, we were roughly 19% margin. While we don't guide on free cash flow, what I will tell you a couple of the key components to it. We will have about an incremental $20 million in interest expense this year, almost 3 percentage points however, we are still targeting to be in the range of flat from last year, while we're also absorbing those 3 percentage points of interest. And then certainly, who knows what's going to happen with interest rates in the back half of the year, so we could certainly get some benefits from there. But what I would just say is -- we are very much focused on free cash flow, very much on track with what we said back in September on our Investor Day. We will be in the mid-20s by 2026, and we're marching towards that and the Company as well as I have a very keen focus on that. So hopefully, that gives you some color around where we're thinking about the -- from an overall margin standpoint, with some of the ins and outs that go into that.

Operator: The next question comes from Brent Thill of Jefferies. Please go ahead.

Brent Thill: On go-to-market this year, any big changes you're making in terms of quota-carrying reps or new distribution partners or any differences in strategy and changes that you're putting in to help the adoption of the broader platform?

Hardeep Gulati: Yes, Brent, we are always optimizing our sales team, but also expanding it as well. We've actually increased our sales force coverage model by at least 10% to 15% each year. As you will see from our investments that that's an area where we continue to focus on. As our platform continues to grow, we are actually reducing the territories for our sales team. So, they are able to further engage on that platform with each of the personas in the district at to all levels and be able to continue to do that. So that is a constant motion for us each year. We have actually seen that to be actually create better results from our bringing new business, both on the cross-sell as well as net new International, we started this investment last year where we started creating the international. That has definitely ramped up. We are continuing to ramp that up this year as well and both supported by partner channel, partner channel coverage from our site, but then also boots on the ground in Middle East, India as well as in Latin America to kind of support both partners as well as some direct deals. So, we -- one of the exciting parts of PowerSchool is the coverage model that we are in front of these 19,000 we call it buying entities in North America, and we are in front of them pretty much periodically to make sure that we are addressing the most strategic needs with one of the solutions which we honor.

Brent Thill: Okay. And when you think about just your overall pipeline, the visibility that you see, how would you characterize the pipeline versus in the past? What are the differences, the nuances of what you're seeing? Any anything to be concerned about? Or do you feel better about maybe where your pipeline said even six to nine months ago?

Hardeep Gulati: Yes. As mentioning, Ben, that we have seen definitely a year-over-year increase in the pipeline. Even as over the last, call it, 12 to 18 months, we have put in a lot more controls on our pipeline and implemented clarity to give us better visibility as well as the eye on our pipeline and close rates. So, we have a better visibility on how things go by. So, we're actually very comfortable with that. I did mention some of the growth areas, for example, just Allovue piece, the PowerBuddy piece, these are the areas where we've actually already seen some exciting pipeline if you think about PowerBuddy, we've just launched it less than two months back, the PowerBuddy for Learning and assessment. And not only we have closed a handful of deals almost with $400,000 revenue the fact that we're sitting on 100-plus opportunities on PowerBuddy with our pipeline almost close to $10 million, just tells you that how much opportunity that exists. And we do see that, that's going to be -- definitely give us a pretty exciting growth area. So, as you can imagine, going back to the survey results I highlighted, districts still are dealing with a lot of old systems, which they are worried about data security, and they are looking at automation. Districts are still worried about integrations of their different siloed systems and not having the ability to have seamless integration, which is a big nightmare and time sync for them. Districts are worried about continued way for their budgets to be more efficient and more efficacy. So, they're looking at data and insights, and they're also looking at help on managing their budgets, their help on continuing empower teachers when you look at the breadth and the depth of the solutions and everything what we do, we are hitting on all these strategic priorities for districts. So, whenever we are sitting with the customer, we are walking away with at least one, if not five opportunities on which they want to reprioritize over the next months and year. So, the more we are getting from the customers, the more pipeline we are seeing, and that's why we continue to invest in the coverage model.

Operator: The next question comes from Stephen Sheldon of William Blair. Please go ahead.

Pat McIlwee: You've got Pat McIlwee on for Stephen today. So, my first question, you announced Knights of Knowledge win this quarter. And I just wanted to ask for a win like that -- is the implementation burden, is that any heavier than it would be for a customer domestically? Or does that require any additional customization of your existing platform to go live with a customer like that?

Hardeep Gulati: Yes, Patrick, when you look at from the international, there are a couple of models. One is the -- especially with that deal, where BME, which is on our partners involved, they would be actually doing some of the implementation elements of it as well. So, that's the reason why we have such strategic these partnerships where they're providing the local support and services. Provided an oversight and with some of the support from our global as well as our India implementation teams. Second, in terms of the localization cautions you have, we actually do already have translated our student systems or Schoology for the full Middle East, Arabic as well as lecture and right to left for the Middle East region, including localizations of calendars and other elements, which are also in the product. We already now have local schools, not just international schools, but actually local tools who are implementing our SIS as well as Schoology in the Middle East. So, the localization element has already been the investment, which we have done over the last two years, but the actual implementation of that will be supported through partner and we do have extensive partner network in the region, including the BME who all carrying the majority below.

Pat McIlwee: Okay. Understood. And so then just as a follow-up to that, under that partner model and with some of those additional customizations, we'll call them. I know it's early, but generally, as you scale outside of the U.S., are there any considerations we should be thinking about with the price point of your solutions there or the margin profile selling them internationally.

Hardeep Gulati: So, Patrick, two things. One is that one of the big differentiators of our student information system is that the level of extensibility both from actually how you view the application, configure the application, they put different rules, different attributes as well as integrations to other systems and local elements. That's why we have been so progressive in North America across all states. In Canada across all the provinces and even also having SIS deployments is almost 80 to 90 countries. So that inherent level of configurability is actually very easy and built into the product. That is a big differentiator. In terms of the margins, we expect actually Middle East to be very close to the price points we are seeing is very close to wherever North America point is, but there's some adjustment of GDP pricing we do. We do see the Latin America and India regions to be a little bit more lower price points. So, we have built our support service and hosting models based on the local pricing. So, our margins are not dilutive, even as we are expanding to international.

Pat McIlwee: Okay. Great. That's all really helpful.

Operator: Our next question comes from Gabriela Borges of Goldman Sachs (NYSE:GS). Please go ahead.

Unidentified Analyst: This is Laura on for Gabriela. On the PowerBuddy products, they seem like a really exciting pipeline, and there's a lot of interest for them. Can you talk a little bit about the build-out for PowerBuddy capabilities for the 2024 and 2025 school year? And if there's any focus specifically given customer demand?

Hardeep Gulati: Yes. No, this is really exciting because you can imagine the opportunity here for PowerBuddy for us is to transform the entire experiences. And we are such a unique position because we have such a huge installed base. We have understood everything about the student, what's happening in the classroom. We are able to personalize and contextualize experiences and leveraging generative AI make them conversational, but then also embed them into our solutions, so they are easy for districts to adopt. So, they will be pretty much a PowerBuddy element to every one of our solutions. We've launched Schoology and Performance matters. There will be a PowerBuddy for talk data and our unified insights. There's a PowerBuddy for custom AI with our connected intelligence, so we can bring even district rest of the data and allow them to be able to easily search and be able to have conversational elements to those. There's PowerBuddy within Naviance, which will help them with college and career planning with talent to help them with coaching and mentoring as well as with My PowerSchools so parents and students can engage and ask any questions. So, we pretty much PowerBuddy going to be pervasive part of all platforms, supported by one PowerBuddy, which is also a big differentiator because you're not to have any -- the all other niche providers are not going to have the broader breadth depth of understanding and personalizing, but also having been able to embed it into these different applications. Not only is creating us a huge amount of additional TAM and growth for PowerBuddy with the AI companies. It's actually making of a core platform even more differentiators. We're actually seeing more sales of our talent and Schoology and assessment platform thanks to PowerBuddy because it is helping us differentiate from some of the niche solutions who don't have built or haven't invested strongly in having a more comprehensive AI platform. So, we do think this allows us to really address a lot of the value for districts in supporting all these different elements, whether they are trying to provide interventions or help but also improve our solutions and experiences and making them even more differentiated. So, it is going to help us even improve our cross-sell growth of our existing platform.

Unidentified Analyst: That's helpful color. And sticking with the PowerBuddy products, can you talk a little bit about the pricing models and how you're thinking about pricing for teachers versus students versus parents and admins?

Hardeep Gulati: Absolutely. We shared this in our Investor Day that we are looking at PowerBuddy to be about when you think of from the value to make such that these are bite-size or districts can start adopting them more quickly. So, we have a PowerBuddy for, as I said, for each of these solutions, which would be about $3 to $5 per student. But somebody wants a full platform, that would be in the range of almost $40 to $50 per student. We are seeing that price points to be pretty attractive given the overall where we are seeing the market. And we do see the value they're creating. We're actually getting a pretty good response on those.

Operator: Our next question comes from Koji Ikeda of Bank of America (NYSE:BAC) Securities. Please go ahead.

George McGreehan: This is George McGreehan on for Koji. I just kind of wanted to ask in terms of the international markets that you guys are in. Kind of on the competitive front, how would you say the competitive dynamics in your international markets are kind of different from what you see domestically?

Hardeep Gulati: Yes, George, when we look at the market, especially where we are focused on like the Middle East, Latin America and in India, we don't see a clear leader, which has established. These are untapped markets. They are high-growth population growth areas. There's a lot of investment going on in creating new private schools, given some of the government schools that are putting better infrastructure. And one of the reasons we have prioritized these regions is that there is no clear leader. And even when you do see some of the niche solutions, they don't have the full platform. And as you can see from these deals, when these districts or private schools or even national schools are looking at it. They want the platform. They want a student system. They want an LMS. They want ability to do enrollments, they want analytics. They won't want college and career planning. And we are a unique company even globally, which has this full depth and breadth of the platform with best in class. And that's why we are seeing a lot of great opportunity. One of the big things also we see in the pipeline, we have literally country-level opportunities. So, we definitely see that to be a big differentiator. I think some of the more mature markets like Western Europe, especially U.K. and all, they are established players, but those are also the markets where we don't see a very high level of growth either. But that's why we are investing in these high-growth areas where there is not much strong competition.

Operator: Our next question comes from Rich Hilliker of UBS. Please go ahead.

Rich Hilliker: The first one is for Eric. In the past, we've talked about the 3,000 to 50,000 student segment and how that's an important driver for organic growth moving forward. I'm wondering if we could talk a little bit or if you could give us a little bit of color on how that segment performed in the quarter. Any color or any metrics would be really helpful.

Eric Shander: Yes. And thanks, Rich. Just for everybody's benefit, what Rich is referring to is our enterprise customers, right? These are the 3,000 to 50,000 students. And then obviously, the larger ones in that are the strategic -- that actually has performed quite well. And I can talk both from a retention standpoint as well as a bookings momentum standpoint. As you all can appreciate, our first quarter from a renewal standpoint is a low point just renewals volume. Our renewals volume really happens in Q3. But what we are seeing is good retention rates with the Enterprise segment as our teams are working on the upcoming renewals, they are partnering with the sales teams from that, as Hardeep mentioned, there's a lot of good opportunities within that segment. And we've made some sales changes with some of the leadership team over the past year on that. And what we're seeing both in terms of bookings as well as pipeline. That is a very good segment for us and will continue to be a nice contributor as we kind of look as we go through the rest of the year.

Rich Hilliker: Okay. Great. Maybe my next question here. You've given us a lot of helpful details around what customers are interested in and adopting and how you're broadening your portfolio. One remark was that you have the strongest cross-sell ever in Q1. I'm wondering if we could more pointedly talk about which specific products drove that or if there's any sort of commonality or trends that you could just re-highlight for us?

Eric Shander: Yes. I mean -- so I'll start, Rich, on that. So, as we announced our Indiana Department of Education, it's actually our largest special programs opportunity that we've ever had in the Company's history. But that is an existing customer. It is a large cross-sell opportunity for us. From an ARR perspective, well over $5 million on that. This is the largest cross-sell we've seen, obviously, Indiana being a big contributor to that. But even back to some of the prior comments I made, we did see nice momentum across our enterprise segment as well. And I don't know, Hardeep, if there's anything else you'd add.

Hardeep Gulati: Yes, typically, what we see, Rich, is that every one of our products would actually have deals in many of the quarter. So, when you look at across the 20-plus products, there will be always some deal happening on every one of the products, right? So, whether it's Unified Insights, CI, Naviance, each of the talent products, each of the areas of CCLR. There's always multiple cross-sells happening for us. And that's the exciting part of it is it's just the breadth and the depth of the volume of the cross-sell we do in any quarter.

Operator: Our next question comes from Joe Vruwink of Baird. Please go ahead.

Joe Vruwink: I wanted to go back a little bit to the conversation around pipeline. It seems like you've gone through kind of a more robust grading and validation process around pipeline. When -- on the outside looking in, we look at your guidance for not just this year but also the midterm framework. Does that embed a certain conservatism maybe conversion rates below prevailing trends just on the potential that schools become distracted when trying to finalize budget decisions into the next school year. And then Similarly, what about the forward gross retention assumptions that you've baked into the midterm forecast?

Eric Shander: Yes. Joe, it's Eric. Let me start, and then Hardeep can add in. In terms of the guide, as you all can appreciate and have seen over the last several quarters, large deals will drive quarterly variability, but yet as we look at the full year achievement, right, we're certainly very firm on where we believe we're going to end from full year. So, what you're really kind of seeing is just us kind of recalibrating a little bit just in terms of some potential larger deal variability, but yet reaffirming the full year. So that's all you're seeing in the guidance that we provided. And then just from a gross retention standpoint, we continue, and like I said, Q1 is our lowest period from a renewal standpoint, but Q1 was very successful. We're obviously ramping up through Q2 for our Q3 period. And the early signs are extremely positive there as well. So, I would just say that there isn't anything that we've seen to date that has us concerned that we're going to see something unexpected.

Hardeep Gulati: And Joe, I guess the other part of your question on just the different trends, what we see, right? I think this is the beauty of our business. When you look at compared to a niche solution, right, they might have certainly a growth and certainly, that particular area, demand has impacted for whatever reason, they might slow down and then come back up, right? But what happens in our solution is because we are pretty much selling to all the different mission critical elements, all the critical software elements as well with our data products pretty much impacting the entire decision-making for these districts we see a lot more consistent results. Now certain products might have up and down, depending upon area. We've mentioned like classroom was a bigger growth area for us back in the 2021 area and then data picked up all that demand, and we saw a lot more growth out of the data product. So, we will do see some variations I think this is what we are highlighting is when we look at this year, right, some of the big areas of focus, as you mentioned, like budgeting is a big area, and that's why you still see the demand for our data products, demand for our Allovue products. is to them. As they continue to look at how do they improve attendance so they can improve their funding. We see a lot of demand for our attendance intervention, our MTS to help provide the intervention support as well as our communications so they can actually engage. So, these are the kind of things. This is what we are able to have the front row seats with these districts on their strategic priorities and the broader need. That allows us to both invest our innovations as well as our acquisitions to one of the top priorities we see in the trend. Having that full view across the nations with 80% of the school districts sitting in front of superintendents, CIOs, academic advisers, we are able to get that view, which allows us to make sure our sales motions, our sales plays, our marketing play and our innovation is all aligned to where we see the priorities. And that gives us the robustness of demand what you don't see in other K-12 players because they don't have the mission critical solutions, and they don't have the breadth and depth of the view and the coverage model.

Joe Vruwink: Okay. That's great. And then I wanted to actually ask about Allovue. It has a good brand and it's come up a couple of times on this call. what sort of financial impact might that have had in the quarter and maybe the full year? And then, is that all going to be in software? Or is there actually kind of a consulting or services component to that business as well?

Hardeep Gulati: We've already closed a couple of deals like Chesterfield and Columbus, but largely, this is -- we have built into our models, what you guys have shared with the guidance when we gave the full year guidance. We already have that visibility. Most of this is going to ARR. What I would tell you there are one or two large big services deal in the pipeline as well. If there are those things, we will let you guys know. But largely, this is again most of ARR-based business.

Operator: The next question comes from Fred Havemeyer of Macquarie. Please go ahead.

Fred Havemeyer: I wanted to begin on competition. I -- been a couple of points out there about Infinite Campus and others in the core SIS space. So, I wanted to just drill into SIS, in particular, and ask our vantage point is the largest market shareholder and market share leader in North American SIS and K-12. What are you seeing? And are there any major changes in the competitive landscape?

Hardeep Gulati: Fred, as I mentioned, right, we are still the clear market leader. We have more than double the market share of our nearest competitor. We are best in class. If you look at the deals like Stride, which is a public company which decided their SIS solutions, Puerto Rico, if you look at from a perspective of Toronto Public School, these are major districts, which look through all the different competitions and selected us as an SIS. Our gross retentions are top class. So, there would be deals where we might lose 1 or 2 deals. But when we look at from the -- our win rates, we win more than we lose. And we are all -- we are definitely in terms of capabilities, the most modern solution, and the rest of our platform gives us even more differentiator into SIS because we allow them to integrate with all these other pieces.

Fred Havemeyer: I wanted to then also ask about multiproduct adoption as well. It's something you gave quite a bit of good detail about actually back at the Investor Day this past fall. And as I recall, I think 4 and 6-plus products customers were among your fastest-growing groups of customers. So I wanted to ask, I guess, 2-parter here. Firstly, what are you seeing in terms of multiproduct adoption? And how that's trended since the Analyst Day? And secondly, as we're going into the primary months of the K-12 buying cycle, are there any major products or pain points in particular this year that you think are of particular importance going into that June purchasing time frame?

Hardeep Gulati: Yes, Fred, when we ran the Analyst Day, we're pretty much seeing the similar trends to what we shared with. So there's not a major update, the trends on the growth on cross-sell and multi products are pretty similar to what we shared. We're happy to share that in maybe the next earning calls or later this year about a little bit more update on that. So you guys can get a little bit more full year-over-year view on that as well. The trends, what we're seeing is that we are seeing more student cloud like all the different pieces. Similarly, we are seeing a lot more interest on the full talent cloud as well as the data product integrated with that. So those are definitely the areas of the cloud we are seeing the highest growth.

Operator: The next question comes from Ryan MacDonald of Needham & Company. Please go ahead.

Ryan MacDonald: Fully realizing that, obviously, as you said very clearly that ESSER is not really a beneficiary for your business and its core spend. Wanted to get a little bit creative on maybe potential impacts here and it relates to PowerBuddy. It's great to see, obviously, you're starting to see all that success in the automation. But one thing we keep picking up from districts and schools that we talk to is that a lot of this spending was -- additional funding was spent on staffing. And in a -- in 2025, that staffing is going to be challenged from those budgets because of that onetime spend. Is that acting as a driver of maybe schools and districts looking for more automation around PowerBuddy to make the fewer staff that they have more effective, more streamlined? Just anything around that.

Hardeep Gulati: Absolutely. I think you touched on the key point here is that when you look at from a perspective and whether they're putting supplemental content, they're tutoring, they're putting help and interventions, it's very hard to reach every student based on the need. In fact, one of the large school districts gave us a data point is that they spent tens of millions on tutoring and the 10% of the kids who actually used it didn't need it and the 40% of the kid who needed it never even touched it. And they were never able to -- they were able to engage with them. This allows them to provide the just-in-time contextual help and tutoring as well as overall support in the system to every student, so they can now optimize their overall spend. They are putting on supplemental contract, services and everything. This allows us to tap into almost $1,000 per student in help they're providing today and we'll be able to have more surgical and more effective way to do that. This is why it's expanding over time. It's also allowing us to even differentiate and help us disrupt the broader K-12 market.

Ryan MacDonald: That's really great. I appreciate the color on that, Hardeep. But maybe just as a quick follow-up for Eric. As PowerBuddy, you continue to have more success with that. We already -- you talked about the pricing. But is it priced at a point where it would -- we should expect it to be gross margin neutral, if not accretive?

Eric Shander: Yes. So what I would say, Ryan, is you should assume that it will not be dilutive. We have designed it such -- there are certain elements that we've kind of put in the pricing such that some of the calls into the AI algorithms, they kind of get capped so that we don't get into a situation where there's high volume of calls in there that are causing our cost to get out of whack. So the way that we've set it up now is that it will be very similar to the current margin profile that we have. And look, this technology is expanding quite rapidly and whatnot. So as we continue to kind of look at all of the different AI algorithms and the open -- some of the open source possibilities, we do expect these costs to come down. So at some point, I would say, yes, it can be accretive, but what I would say in the short term here, short to medium term, just to assume that it's going to be in line with what our current margins are. Our biggest focus, candidly, was to make sure that it was not going to be dilutive to the margins.

Operator: The next question comes from Brett Knoblauch of Cantor Fritzgerald. Please go ahead.

Brett Knoblauch: Maybe just on AI. As you guys are talking to customers, I guess, how big of a focal point is that in every conversation? Is that a driving factor in winning deals? I guess, what's the add-on rate that you have seen? Is it as good or better than expected? And maybe just some commentary on what you think the revenue opportunity for the AI-related products is, maybe not this year, given a lot of it just went GA, but as we look to next year and 2026.

Hardeep Gulati: Yes, Brett. So I think you'll be surprised how many of the conversations are actually front and center. As I mentioned, we are doing a luncheon series almost 40-plus across the nation. We started in Q1 and going into Q2 and pretty much inversely what we are running a campaign called Get Ready for AI. And what we are seeing is that the participation in the number of districts, almost 70% to 80% of these audience have already formed AI committees, the teachers are already using some opensource versions or which they are worried about their data privacy and security because what is being loaded there, I mean district data is at risk. So with our strategy with Connected Intelligence, they are able to get ready for AI by giving better data so they can bring AI to the data rather than taking their data to the AI. But then also they're using these different elements to start improving the efficacy we were talking about just in the last question. So we are seeing this to be front and center for a lot of the leaders and that's why you see such an exciting pipeline and the growth opportunity there. We are expecting the revenue. I shared this a little bit in the last year -- last earnings release is that we do expect this to be in few millions of dollars of revenue for us this year already, but really doubling up from there into the next year. So we do expect this to almost become a material business for us in the next few years.

Brett Knoblauch: I appreciate it.

Operator: This concludes our question-and-answer session. I would like to turn the conference back over to Mr. Gulati for any closing remarks.

Hardeep Gulati: Thank you again, everyone, for joining us today. Our team delivered a strong start to 2024 and a continued double-digit growth, margin expansion and excellent innovation momentum with the launch of our AI products. As you can see, our business fundamentals remain strong and robust. We provide sticky mission-critical software products to a stable and durable K-12 end market. Our cross-sell engine continues to drive repeatable, sustainable growth, and we continue to win new logos. Innovation in the areas of data, AI is a top strategic focus and I'm thrilled about the success with PowerBuddy as well as the opportunity ahead of us. We also continue to execute thoughtful and timely M&A, such as our latest acquisition of Allovue, whose financial planning and budgeting software is a top-of-mind concerns for district and we continue to build our proof points in key international markets that will support our long-term growth. I look forward to updating you on these key strategic growth drivers in the next quarter. Thank you again, everyone, for joining today.

Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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