Operator: The next question is from Fred Havemeyer with Macquarie.
Fred Havemeyer: I think I wanted to clarify something from a little bit earlier there, Eric. Did I — I might have misheard this, too. Did I hear that the Puerto Rico deal was coming across in the license revenue line this quarter?
Eric Shander: So just the scanner, the hardware part of it was. There’s obviously a — yes, so that’s the only piece. There’s obviously a services component of it as well as the subscription piece that came into the quarter.
Fred Havemeyer: Got it. And I wanted to ask, last quarter, I think you’re talking about how implementation times could lead to some subscription revenues, particularly larger deals, lagging ARR. So I wanted to ask, is that a persistent trend that’s tracking this quarter as well?
Eric Shander: Not this quarter necessarily. I mean typically, you’ll see that when you have extraordinarily large deals like a Puerto Rico where there’s 250,000 students, large system implementation. You’ll see the ARR recognized much quicker than the actual system gets turned over to the region and then they start using it. So that was more pronounced previously when — as you look at Q2, Q3. But we haven’t seen deals of that size which would cause that delay, if you will, between ARR and revenue.
Fred Havemeyer: Got it. And then, Hardeep, I spent a while in my end reading through the White House’s AI executive order. And they spent at least a portion of it talking about their interest in generative AI and forming policy there which will take place over the next year and change. So just curious if you have any initial thoughts about how the White House and U.S. government might be approaching generative AI. Generative AI and education specifically.
Hardeep Gulati: Yes, sure, Fred. And just maybe adding to the last question first, Fred, I think it’s very exciting, to Eric’s point, about some of the big implementations that we’ve already achieved in the last quarter, so something to call out. We went live with Puerto Rico in record time which is one of the biggest implementation of SIS in the about 7 months. And think about the complexity in Puerto Rico with 270,000 students, every parent using our system for the related support card. So it’s a phenomenal stride which is another phenomenal go-live on the multiple of their schools with the virtual schools, Maarif in Saudi Arabia. So we had some — and Alabama with our Insights and LA with our Connected Intelligence. So very exciting go-lives as well which actually this quarter was very, very timely.
I think your point about the generative AI, we are very much plugged into the policy as well as the ethics and the making sure that there is not a bias in the generative AI. In fact, one of the strengths of PowerSchool strategy compared to a lot of companies who will either come from non-K-12 or don’t have the data or relationship with the district is that they don’t have the opportunity to really factor in the district policies, the state standards as well as to be able to do this at scale and provide the assurance that it’s going to have the broader policy elements factored in. And that makes a huge advantage for us in our strategy. So we are seeing not just districts and state but even charter schools and CMOs and private schools who are actually looking at us to be their partner in helping up shape that strategy to make sure they roll out these AIs in the right way.
And having — starting with the data strategy to make sure that the data elements are being used are — there is identification and all the elements of those are factored in and then looking at the experience around how they can take advantage of the generative AI. So we are really in a very unique advantage position to be able to support districts, to be able to align to the federal policies as well.
Operator: The next question is from Koji Ikeda with Bank of America Securities.
George McGreehan: This is George McGreehan on for Koji. I was wondering if you could kind of talk about when you look at the cohort of districts that have adopted several products and maybe the cohort that has fewer than several. Could you talk about — are there any kind of differences there just in kind of like the — any commonalities between those cohorts and then kind of what you kind of do to help drive that upsell?
Hardeep Gulati: This is a great question. In fact, we tackled this at length in our Investor Day where we talked about if you think about 20% of your customers are contributing right now to 60% of ARR and these are the customers who are actually using 4-plus products and you look at over the last couple of years — over the last 4 years, we have grown that base by 34%. So double of over 17% [ph] growth overall has been over the last 4 years. So to your point, there is very specific cohorts around when you have more than 4-plus products, you’re going to actually do more growth. And you’re going to buy faster with us and you’re going to get more value. So there is a lot of interest on — but the exciting also part is 80% of our customers still doesn’t have 4-plus products.
