So, from that perspective, we do see a role to play in and helping these districts spend their asset dollar better. And especially with Allovue acquisition, we are also allowing them to manage their ongoing budgets better and be able to tie that to the ROI as well. So, that’s why we do help these districts on that budgeting and planning.
Ryan MacDonald: Thanks again for the color.
Operator: Our next question comes from the line of Koji Ikeda with Bank of America. Please proceed with your question.
Koji Ikeda: Yes, hey guys. Thanks so much for taking the questions. I wanted to ask you a question. Kind of in the commentary, in the prepared remarks, you talked about consistency in the results of the IPO, meeting and beating your guide. And I do appreciate that consistency, but really thinking more about the beat side on the revenue. It seems at times deal sizes or deal cycles and NRR can be volatile, which can put a damper on upside potential. Just thinking about the EdTech vertical, I was under the assumption that deal cycles could be a bit more predictable and seasonal within this category. But maybe thinking about your expanding product offerings, larger deal sizes and going more international, it should require us to think about the predictability a little bit differently. So, can you help us understand some of the puts and takes there, please?
Eric Shander: Yes, so Koji, it is Eric. So, I think and we’ve had several large deals, whether it’s LAUSD, whether it’s Puerto Rico and now Indiana as an example, right? One of the things we’ve consistently said is what we’re not going to do is we’re not going to try to artificially time a deal, and just to get it into a particular quarter, right, because a lot of times when you do that, it means you’re going to be doing some sort of natural pricing and discounting, etcetera. So, these deals are large. They’re strategic, and when we’ve got line of sight to a large deal, right, it’s just a matter of sometimes there’s a lot of processes on the customer side, especially when you’re talking about some of these state deals. They can have up to 30 different approvals required there, a lot of that which is out of our hands in terms of the timing of it.
Indiana is a perfect one, right? I mean, we were very optimistic that it was going to close in Q4, but then as you kind of see as it progresses through the approval cycle, sometimes the approvals take a little bit longer than anticipated. We knew we had the deal. It’s just a matter of timing. So, what I would just say is, as we’ve said in the past, really kind of focus from our standpoint on the full-year and what we’re committing to from a full-year perspective. And look when there is deal variability, we’re obviously going to articulate it and articulate the impact to it. I think it’s also important to kind of think about, as you think around something like Indiana, the impact of that had that closed in Q4, right, our net revenue retention would have been 100 basis points higher than where it ended up being.
So, it would have shown a 50 basis point sequential improvement versus going down by 50 basis points. So, again, it just kind of gives you the magnitude that it will have on the metrics and what Hardeep and I have committed to is being very transparent around the some of the ins and outs of these deals. But I mean again we don’t want to get into a spot where we’re just trying to force fit a deal into a particular quarter. It’s not good for the business in terms of trying to do that from a discounting standpoint.
Koji Ikeda: Got it, Eric. That’s super helpful. And just one follow-up here, 14 channel partners to finish the year ahead of the goal of 12. Is 14 enough to hit your 2024 revenue targets or should we think about 14 expanding to a certain level to reach the revenue targets? And then there is — is there some way to think about maybe a stretch goal for partners or the number of partners that could be available for PowerSchool to partner with over the next several years?
Eric Shander: It’s a fair question, Koji. And we’re not putting an artificial number to it. So, it’s more actually driven by how good of a coverage in the markets where we have already product solutions, in the target and do they have the right access and ability to be able to sell that. So, it’s more about coverage than the number. There will be more partners absolutely, but at the same time, it’s also the quality of the partners. We are not going to the approach of let’s have 100, 200 partners and then see if anybody sells. We are investing these partners. We are driving them to have the growth. And we believe that we will — we can continue to providing the guidance as we’ve given it in fact this should become a material business in the next few years.
Koji Ikeda: Got it. Thank you so much.
Eric Shander: Thanks, Koji.
Operator: Our next question comes from the line of Joe Vruwink with Robert W. Baird. Please proceed with your question.
Joe Vruwink: Great. Hi, everyone. Thanks for taking my questions. Maybe just one clarification to start and it’s on the core organic performance and subscription and support and something I think Hardeep you actually mentioned at a prior answer. So, just to be clear, in FY ’24 and the guidance you’ve provided, that does entail organic growth in the double-digits and that rate of growth in 2024 is actually going to be stronger than where FY ’23 finished. Is that all an accurate statement?
Hardeep Gulati: Yes. It’s absolutely accurate. And Joe, the thing that I think is also important is as we’ve kind of talked about LAUSD being a big strategic deal, right? If you were to look at the subscription and support and then also kind of account for what we’re calling our strategic software activity, that being a very strategic software transaction, we were also in the low double-digit growth for 2023. So, yes, absolutely, and you see that pick up even a little bit more, as we get into 2024.
Joe Vruwink: Okay. That’s great. Thank you. This next question is maybe going to be guilty of apples and oranges analysis, but I’ll give it a try. So, at your Investor Day, I think the comment was made that AI products in terms of the revenue potential to PowerSchool, that could approach maybe a hundred million or so in the midterm horizon. Today, you’re talking about a $2 billion TAM associated with these products. Obviously, when I think about your product suites, they operate at very high market share, much higher than the simple math here would be, maybe a 5% share of the TAM as it’s being defined. I guess, what’s your reaction to that analysis? And are you maybe just being pragmatic, and you don’t want to get ahead of yourself because it is super early? Or is there some embedded observation about maybe the uptake of AI products and the K-12 setting you’re trying to factor in?
Hardeep Gulati: Yes, I think you’re right. We are trying to be pragmatic, make sure that we are able to get the early — what we’re seeing early interest, don’t let it kind of get us ahead of ourself. We do want to kind of launch all these PowerBuddies, being able to start showing the value, which we believe is tremendous. As I mentioned, we’re prepared marks, that in K-12, especially think about student time, teacher’s time, principal times, parents’ time, it’s so valuable. In these AI tools, the conversational and personalized element, allowing them to engage proactively with the right persona changes everything in education of how these products are built, how all of our products are integrated and how they are actually communicating.
And that’s why you see such a phenomenal big opportunity here and our district see this, our persona see it, and we do expect this to be a big. This is the whole reason why we are, if you think about from a profitability compared to our competitors, we’ve been investing significantly in R&D, almost with our capitalized R&D to almost $40 million to $50 million. And that has been brought around the data and AI platform, which allows us to really invest in kind of transformation element in personalization that we have been counting on. And we now see that actually start getting real and being able to start monetizing that.
Joe Vruwink: That’s great. Thank you very much.
Operator: Our last question comes from the line of Gabriela Borges with Goldman Sachs. Please proceed with your question.
Callie Valenti: Hi, this is Callie Valenti on for Gabriela. First one from me is I wanted to follow up on what you said before, and the idea of being the Netflix of education. If we think about the content side of that, how do you think about partnering with versus acquiring an asset potentially on that content side of things?
Hardeep Gulati: Hi, Callie. You’re absolutely right. It’s both from a just kind of think about a Netflix model or a Prime or a HBO model. It’s both about having a partnership with a lot of strategic content providers, being able to provide the right content and services within the context. So, imagine based on a kid’s need, you’re providing the right content which has the most efficacy to support that child, as well as being able to provide services like tutoring targeted to that child’s need, because we have the system of engagement with them, right? We have the intelligence and context. So, this is both partnership as well as in some cases, acquisitions, which will allow us to kind of have those more targeted content as well.
Callie Valenti: That makes sense. Thank you. And second one for me is you kind of called out a very impressive new logo, like ARR growth number. I’m curious, like what products are you seeing drive new logo growth the most? Is that just SIS or are you seeing some of the data products via CommonLand? And then also just any trends you would call out in new logos in international markets versus in the core North America market?
Hardeep Gulati: Pretty balanced in terms of most of our products. I think the same products we’ve talked about, which are seeing very good growth, data products, of course, the student — we’re selling data products even when they’re not our customers. We’re also seeing, again, student cloud to be continuous to do very well. Talent products are being doing exceptionally well. And even things like our attendance intervention and all that is actually creating new logo opportunities. And then, it’s very reflective of the market share, but definitely [Adash] (ph) will be a little higher on the new logos as well.
Callie Valenti: Okay. Thank you.
Hardeep Gulati: Great. Thanks, Callie.
Operator: That concludes our question-and-answer session. I’d like to hand it back to Hardeep Gulati for closing remarks.
Hardeep Gulati: Thank you, everyone. I appreciate everybody staying for this earnings call. As Eric and I shared, this has been a very exciting quarter as well as an exciting year. Not only we record double-digit growth, we are also guiding to a double-digit growth, which just shows you the robustness of this business model as well as our backbone. And all the differentiations in terms of being the most comprehensive platform, both in terms of being able to sell to different needs of the customer, to be able to have the diversified platform, so it provides us stability, being able to secure larger deals as well as being able to use our innovation to continue performing with the double-digit growth, both within U.S. as well as internationally is what’s exciting about our business. And we appreciate everybody’s support, and looking forward to an exciting 2024. Thank you, everyone.
Operator: Ladies and gentlemen, this does conclude today’s teleconference. Thank you for your participation. You may disconnect your lines at this time. And have a wonderful day.
