POWERSCHOOL HOLDINGS, INC. (PWSC)·Q2 2024 Earnings Summary

Executive Summary

• Q2 revenue was $191.6M (+10% y/y) and Adjusted EBITDA was $66.6M (+9% y/y); GAAP net loss was $25.7M (-13.4% margin). Management characterized results as meeting outlook; there was no earnings call and guidance was suspended due to the pending Bain Capital acquisition expected to close in 2H24 .
• Subscriptions & Support grew 16% y/y to $170.1M, gross margin was 58.3% (Adj. gross margin 69.7%), and operating cash flow was -$47.4M, reflecting typical seasonal working-capital dynamics in the first half of the year .
• Sequentially, revenue and profitability improved vs Q1 (Q1 revenue $185.0M, Adj. EBITDA $61.3M; Q2 Adj. EBITDA margin rose to 34.7% from 33.1% in Q1) .
• Key catalyst: the pending all-cash sale to Bain Capital at $22.80 per share; company suspended guidance and did not hold a call, limiting near-term visibility and likely anchoring focus on deal closing mechanics in 2H24 .

What Went Well and What Went Wrong

• What Went Well

  • Subscriptions & Support growth remained resilient (+16% y/y to $170.1M) with notable cross-sell/customer wins (e.g., Arkansas Dept. of Education DaaS cross-sell, Springfield SD 186, IDEA Public Schools, Hawthorne SD, Orleans Parish SD) .
  • Product innovation cadence: launch of MyPowerHub (next-gen communications platform) and two additional AI PowerBuddy modules (Learning Student Assistant; Data Analysis co-pilot) to enhance engagement and speed decision-making .
  • Profitability metrics held/increased sequentially: Adjusted EBITDA margin rose to 34.7% in Q2 vs 33.1% in Q1; CFO: “We delivered another strong quarter consistent with our philosophy of double-digit top line growth and margin expansion” .

• What Went Wrong

  • GAAP loss widened y/y (net loss margin -13.4% vs -2.5% in Q2’23), driven by higher restructuring costs ($17.2M) and higher interest expense ($23.2M) .
  • Cash flow remained negative in seasonally weak periods: net cash used in operating activities -$47.4M; deferred revenue decreased by $70.3M q/q in Q2, reflecting seasonal billings and renewals timing .
  • Guidance was suspended and the earnings call was canceled due to the pending Bain transaction, reducing near-term fundamental visibility for investors .

Financial Results

Segment revenue mix

KPIs

Notes: Q2 press release did not provide ARR/NRR updates and the company suspended guidance/no call due to the Bain transaction .

Guidance Changes

Additional context: The company announced a definitive agreement to be acquired by Bain Capital for $22.80 per share cash; transaction expected to close in 2H24 .

Earnings Call Themes & Trends

Management Commentary

• CEO (Hardeep Gulati): “I'm pleased with our second quarter performance… We demonstrated continued innovation momentum with the launch of new and exciting products such as MyPowerHub and two additional modules of our AI-powered PowerBuddy platform… We look forward to the next chapter in PowerSchool's growth story with our partnership with Bain Capital.”
• CFO/President (Eric Shander): “We delivered another strong quarter consistent with our philosophy of double-digit top line growth and margin expansion. I am confident our comprehensive suite of mission-critical software products will continue to meaningfully improve school district operations…”

Q&A Highlights

• No earnings call or Q&A was held due to the proposed transaction with Bain Capital; the company suspended its practice of providing financial guidance .

Estimates Context

• S&P Global (Capital IQ) consensus data was unavailable via our connection for PWSC this quarter; as a result, we cannot quantify beats/misses vs Street consensus.
• Relative to company-issued guidance from May, Q2 actuals were roughly in line with the prior ranges: revenue of $191.6M vs $192–$197M and Adjusted EBITDA of $66.6M vs $67–$69M; forward guidance was suspended, limiting near-term estimate anchoring .

Key Takeaways for Investors

• Fundamentals remain resilient: Subscriptions & Support grew 16% y/y to $170.1M, with cross-sell traction and new product launches supporting platform adoption .
• Profitability steady to improving: Adjusted EBITDA rose to $66.6M with margin at 34.7% (up q/q and near prior-year levels), underscoring operating leverage despite elevated restructuring costs .
• Cash flow and deferred revenue dynamics reflect normal H1 seasonality; monitor working-capital normalization in H2 as renewals/billings cycle improves .
• Visibility limited: guidance suspended and no call; pending takeout at $22.80/share is the dominant near-term catalyst and focus .
• Product/AI roadmap continues to advance (MyPowerHub; PowerBuddy modules), which supports the medium-term thesis on cross-sell and international growth, independent of public listing status .
• Transaction timeline: closing targeted for 2H24, subject to regulatory approvals; stock likely to trade on deal risk/close timing rather than fundamentals until completion .

Additional Data Points (from Q2 PR)

• Revenue +10% y/y to $191.6M; S&S +16% y/y to $170.1M; Adjusted EBITDA +9% y/y to $66.6M .
• Gross profit $111.8M (58% margin); Adjusted gross profit $133.6M (70% margin) .
• GAAP diluted EPS $(0.12); Non-GAAP diluted EPS $0.23 .
• Net cash used in operating activities $(47.4)M in Q2 .

Prior Quarters (for trend)

• Q1 2024: Revenue $185.0M (+16% y/y), Adjusted EBITDA $61.3M (+24% y/y, 33% margin), ARR $720.3M (+18% y/y), NRR 107.0% .
• Q4 2023: Revenue $182.1M (+13% y/y), Adjusted EBITDA $59.4M (+12% y/y, 33% margin), ARR $701.5M (+18% y/y), NRR 106.7% .

Notable Press Releases/8-Ks in Q2 2024

• Definitive agreement to be acquired by Bain Capital for $22.80 per share in cash; Vista Equity Partners and Onex to retain minority stakes; expected close in 2H24 .

All citations: Q2 2024 8-K earnings release and exhibits ; Q1 2024 8-K ; Q4 2023 8-K ; Bain transaction 8-K and press release .