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.
