On May 7, 2024, PowerSchool Holdings Inc (PWSC, Financial) disclosed its financial results for the first quarter ended March 31, 2024, through an 8-K filing. The company, a leading provider of cloud-based software for K-12 education, reported a 16% year-over-year increase in total revenue, reaching $185.0 million, which aligned with their previous guidance. Despite this revenue growth, the company experienced a GAAP net loss of $22.8 million, representing 12% of total revenue.
Financial Highlights and Performance Metrics
During the quarter, PowerSchool's subscription and support revenue rose by 18% year-over-year to $166.9 million. The GAAP gross profit stood at $105.1 million, indicating a gross margin of 57%. Adjusted EBITDA saw a significant increase of 24% year-over-year, amounting to $61.3 million, which exceeded the company's profitability outlook and constituted 33% of the total revenue. The Annual Recurring Revenue (ARR) grew by 18% compared to the previous year, reaching $720.3 million as of March 31, 2024.
However, the company's net cash used in operating activities was notably high at $89.7 million, representing 48% of total revenue. This was primarily driven by a negative free cash flow of $102.5 million, which accounted for 55% of total revenue. The net loss per diluted share on a GAAP basis was $0.12, while non-GAAP net income per diluted share was $0.17.
Operational and Strategic Developments
PowerSchool's CEO, Hardeep Gulati, highlighted the company's strong market demand for its suite of mission-critical products which supported the double-digit ARR and revenue growth. The company also announced the general availability of two AI-powered solutions, PowerBuddy for Learning and PowerBuddy for Assessment, which are expected to streamline workflows and enhance personalized education.
Internationally, PowerSchool continued its expansion with significant contracts in the Middle East and Latin America. Notably, the company secured its largest-ever Special Programs contract with the Indiana Department of Education and achieved significant cross-sells in various U.S. districts.
Financial Outlook and Investor Relations
Looking forward, PowerSchool provided guidance for the quarter ending June 30, 2024, with total revenue expected to be between $192 million and $197 million, and adjusted EBITDA projected to range from $67 million to $69 million. For the full year ending December 31, 2024, the company anticipates total revenue to be between $786 million and $792 million, with adjusted EBITDA between $268 million and $273 million.
PowerSchool's financial outlook reflects a continued focus on innovation and market expansion, aiming to leverage its technology to drive long-term value for stakeholders. The company's strategic initiatives, particularly in AI and international markets, are set to play a crucial role in sustaining growth and enhancing operational efficiency.
Conclusion
Despite the challenges posed by the significant net loss and negative free cash flow, PowerSchool's consistent revenue growth and strategic expansions underscore its potential for recovery and long-term success. Investors and stakeholders will likely watch closely how the company's strategic investments in technology and international markets unfold in the coming quarters.
Explore the complete 8-K earnings release (here) from PowerSchool Holdings Inc for further details.
