PowerSchool Holdings Inc (PWSC) Reports Double-Digit Revenue Growth and Record Free Cash Flow ...
Annual Revenue: Increased by 11% year-over-year to $697.7 million.
Adjusted EBITDA: Grew by 18% year-over-year to $231.9 million, representing 33% of total revenue.
GAAP Net Loss: Full year GAAP net loss stood at $39.1 million.
Annual Recurring Revenue (ARR): Increased by 18% over the prior year to $701.5 million.
Free Cash Flow: Reached a new record margin, representing 19% of total revenue.
Q4 Revenue: Increased by 13% year-over-year to $182.1 million.
Q4 Adjusted EBITDA: Increased by 12% year-over-year to $59.4 million.
On February 26, 2024, PowerSchool Holdings Inc (NYSE:PWSC), a leading provider of cloud-based software for K-12 education, announced its financial results for the fourth quarter and full fiscal year ended December 31, 2023. The company released its 8-K filing, detailing a year of solid growth with total revenue reaching $697.7 million, an 11% increase from the previous year. PowerSchool's platform, which streamlines operations and aggregates data sets for predictive modeling and machine learning, has been instrumental in driving this growth.
Financial Performance and Challenges
Despite the positive revenue growth, PowerSchool reported a GAAP net loss of $39.1 million for the full year, which represents 6% of total revenue. However, the company's Adjusted EBITDA saw an 18% increase to $231.9 million, exceeding the outlook and accounting for 33% of total revenue. The company's Annual Recurring Revenue (ARR) also saw a significant increase of 18% over the prior year, amounting to $701.5 million as of December 31, 2023.
PowerSchool's financial achievements, particularly in ARR and Adjusted EBITDA, underscore the company's ability to grow its subscription base and manage costs effectively, which is crucial in the competitive software industry. The increase in free cash flow margin to a new record level also highlights the company's operational efficiency and ability to generate cash from its business operations.
Income Statement and Balance Sheet Highlights
For the fourth quarter, PowerSchool's total revenue was $182.1 million, a 13% increase year-over-year. Subscription and support revenue, which is a key metric for the company's business model, was up 16% year-over-year to $163.6 million. The GAAP gross profit for the quarter was $108.6 million, representing 60% of total revenue, while the Adjusted Gross Profit was $128.9 million, or 71% of total revenue. The GAAP net loss per diluted share was $0.10 on 202.1 million shares outstanding.
On the balance sheet, PowerSchool ended the year with $39.1 million in cash and cash equivalents. Total assets were valued at $3.78 billion, while total liabilities stood at $2.02 billion. The company's stockholders' equity was reported at $1.3 billion.
Management Commentary
"These fourth quarter results showcase the momentum weve seen throughout 2023. For the year, we surpassed $700 million in ARR, grew revenue double digits, increased our Adjusted EBITDA margin by over 200 basis points, and reached a new record in Free Cash Flow margin," said Hardeep Gulati, PowerSchool CEO.
"I am particularly happy with our teams' ability to hit our goals for growth while delivering significant operating leverage in the business. We are in the early innings of revolutionizing education through our data-centric technologies, which will provide us a durable and sustainable path for generating long-term student, family, customer, employee, and shareholder value," added Eric Shander, PowerSchool President and CFO.
Outlook and Strategic Moves
Looking ahead, PowerSchool provided an outlook for the first quarter ending March 31, 2024, with total revenue expected to be between $183 million and $186 million, and Adjusted EBITDA projected to be between $56.5 million and $58.5 million. For the year ending December 31, 2024, the company anticipates total revenue to be in the range of $786 million to $792 million, with Adjusted EBITDA between $267 million and $272 million.
In addition to financial metrics, PowerSchool highlighted several strategic initiatives, including the acquisition of Allovue, a leading provider of K-12 financial planning software, and the launch of PowerSchool PowerBuddy, an AI-driven virtual assistant for education. The company also expanded internationally with new strategic channel partnerships and joined UNESCOs Global Education Coalition to support digital transformation in education.
PowerSchool's performance in 2023 demonstrates its commitment to innovation and growth in the K-12 education software market. The company's strategic investments and product enhancements are expected to continue driving value for customers and shareholders alike.
Explore the complete 8-K earnings release (here) from PowerSchool Holdings Inc for further details.
This article first appeared on GuruFocus.
