Q4 2020 Rimini Street Inc Earnings Call
Yeah.
[music].
Welcome to the Rimini Street earnings call. My name is Karen and I will be your operator for today's call. At this time all participants are in a listen only mode. Later, we will conduct a question and answer session. During the sooner the answer session. If you're a a question. Please sorry, the one I'm a touchtone phone I will not from the call over to Dean.
Paul Dean you may begin.
Thank you operator.
Like to welcome everyone to Rimini Street's fourth quarter and fiscal year 2020 earnings conference call on the call with me today, a soft Raven, our CEO and Michael <unk> our CFO.
Today, we issued our fourth quarter and fiscal year ended December 31, 2020 earnings press release.
It can be found on our website a reconciliation of GAAP to non-GAAP financial measures has been provided in the tables. Following the financial statements. In this press release, an explanation of these measures and why we believe there are a meaningful is also included in the press release under the heading about non-GAAP financial measures.
There's a certain key metrics.
A copy of the press release and financial tables, including the GAAP to non-GAAP reconciliation and other supplemental financial information can be viewed and downloaded from the Investor Relations section of our website.
As a reminder, today's discussion will include forward looking statements that reflect our current outlook. These forward looking statements are subject to risks and uncertainties that may cause actual results to differ materially from statements made today.
We encourage you to review our most recent SEC filings, including our form 10-K for fiscal year 2020, which was filed earlier today for a discussion of risks that may affect our future results or stock price.
Before taking questions, we'll begin with prepared remarks with that.
I'd like to turn the call over to Seth.
Thank you Dean and thank you everyone for joining us today.
For the fourth quarter and full year 2020, we continued to execute well against our strategic growth plan to achieve $1 billion in annual revenue by 2026 and exceeded quarterly and full year guidance.
We accelerated year over year revenue growth for the fourth quarter from 11, 7% to 15, 4% and for the full year 2020 from 10, 9% to 16, 3% respectively.
<unk> record quarterly and full year results for revenue new sales invoicing calculated billings backlog and total gross profit and maintain the revenue retention rate of over 90%.
Throughout the year, we continued making investments, including key executive leadership additions to take advantage of growing global demand for Rimini Street support solutions, including our new application management security interoperability and professional services.
We ended the year with 2487 active clients a year over year net increase of 26%.
Sales activity remains at historically high levels and from the company's inception in 2005 to date, we have signed nearly 4000 clients, including a 165 fortune 500, and global 100 companies and a saved our clients more than $5 billion.
During the full year, our global service delivery team closed more than 33000 support cases and delivered nearly 89000 tax legal and regulatory updates across 58 countries, including more than 6000 emergency updates related specifically to the global pandemic.
Our year end 2020 global employee count was 1425, a year over year increase of 12%.
Pandemic impact.
Throughout the year, we experienced both the opportunities and challenges of the pandemic.
We believe the pandemic added meaningful additional pipeline for both 2020 in 2021, and we believe some new client sales were attributable to the pandemic.
However, we also had some existing Rimini street clients filed bankruptcy or terminate their agreements due to financial distress, resulting from the pandemic and other clients received special discounts and extended payment terms for us to help them navigate the challenging times.
For full year 2020, we believe the sales opportunities created by the pandemic outweighed the challenges with client renewal sales more negatively impacted by the sudden financial shock and disruption of the pandemic in the first half of the year.
We believe our strong balance sheet and cash position provided us with the business flexibility and agility to help prospects and clients with special needs and protected us against downside risk in 2020.
We believe our strong balance sheet and cash position will provide us continued flexibility and agility to help prospects and clients through the continuing pandemic impacts in 2021 the.
The full extent to which the pandemic will continue to impact our business in 2021 and beyond will depend on numerous evolving factors that we cannot reliably predict.
Sales and outlook.
During the fourth quarter, we completed 213 geographically diverse new support application management and strategic service sales transactions.
Support services, where we provide technical support and required updates such as tax legal and regulatory updates to a team who runs the system for a client day to day.
Application management services also known as a M. S is where we run the system for the client day to day.
To highlight how clients are leveraging Rimini Street services globally to achieve strategic goals across different industries I'd like to share with you a few case studies from the fourth quarter.
First we were awarded three Brazilian public sector contracts to support Oracle and SAP software for the Legislative executive a judiciary branches of the Brazilian government.
Prior to Rimini Street's launch of the Brazilian public sector market no public bids for support of Oracle or SAP systems occurred because of the only support option available was from the software vendors and their partners today.
Today Rimini Street is on the official list of approved support providers offering an alternative solution that provides a more competitive value proposition and a premium enterprise support experience.
The same need was reflected in the whole of government volume sourcing agreement with the Australian government designed to make the procurement process faster easier and more cost effective for Australian government agencies to access Rimini Street services.
Rimini Street is already serving many Australia and government agencies.
Next metropolitan the water reclamation district of greater Chicago, serving more than 10 million customers switched to Rimini Street support for its SAP applications. The.
Of the client is now receiving Rimini Street's ultra response of premium level support that is available to them on their current release for a minimum of 15 years from the time they switched to Rimini Street.
Allowing them to receive full support for their current release and avoid a costly and unnecessary a migration to SAP.
<unk> newest product line.
The client is able to realize significant savings and the best net savings back into the I T modernization initiatives across the organization.
Lastly, pulse electronics, a leading components manufacturer for the automotive and telecommunications industries has switched to Rimini Street support for its a SAP software.
With the savings achieved by switching to Rimini Street pulse was able to invest its cost savings and business intelligence capabilities, including artificial intelligence technologies to enable growth and competitive advantage during a year when new spending may not have otherwise been possible.
With more than 70% of its products designed in collaboration with customers pulse use of its S. A P system for several critical functions, including finance operations supply chain and warehouse management.
As its business operations, a required to run 24, seven any interruption would mean a major loss of revenue.
In order to sustain its leadership in a highly competitive market the company must adapt quickly to changing market dynamics.
Pulses of IP director, Alex Wang stated that quote.
Macro disruption due to the global pandemic may have slowed our progress, but investing in innovation is still very much in reach thanks to switching to Rimini Street.
For 2021, we're continuing to see growing interest pipelines and sales in our core support service business and our new application management services.
We are also seeing growing interest pipelines and sales for our innovative security interoperability and professional services with a growing number of clients successfully deploying and using these new services.
We believe our full year 2020 sales results in 2021 pipeline demonstrates that Rimini Street is well positioned to compete.
Gartner notes Rimini Street is the leading provider of third party support for Oracle and SAP products by annual revenue and client accounts and it's published data implies the Rimini Street has captured over 86% of the global market.
Gartner is currently predicting a 200% increase in the third party software support market expecting that the market will exceed $1 billion in 2023.
Rimini Street is the only vendor at global scale, who offers a proven turnkey single vendor solution for running and supporting ERP software with an ultra responsive service that supports customization security interoperability and performance challenges and create savings in <unk>.
Value for clients as discussed during our Investor Day 2021, we believe our global penetration rate is only approximately three 5% for support services and less than 1% for application management services, providing a significant greenfield opportunities within the 100.
70 billion dollar addressable ERP support in Ams markets.
In addition, we have increased our commitment to cross sell opportunities within our current client base and internally estimate that cross sell opportunities currently exceed $1 billion in annual revenue.
We look to achieve these growth objectives by leveraging robust go to market strategy of <unk>.
So overlay resource model and an integrated incentive framework that drives consistent goals throughout the organization.
Oracle litigation update.
With respect to Oracle versus Rimini Street that was filed by Oracle in 2010 went to trial in 2015, and which ran its course of all appeals by 2020. The parties are engaged into a dispute over a permanent injunction thats been in place since 2018 the.
Of the dispute has been submitted to the court and there is no known timeline for any quarter a response.
With respect to Rimini Street versus Oracle the case, we filed against Oracle in 2014, the cases in pre trial preparation and trial is not currently expected to occur until the first half of 2022, but could occur earlier.
To summarize the courts of found the third party support and customization of enterprise software is permitted and Oracle licensees have a choice of support providers.
<unk> Street as deemed by the United States Court of Appeals is a lawful competitor.
Please see our annual 10-K filing made earlier today for additional litigation disclosures and information.
Summary.
We believe the company executed well on the fourth quarter and full year 2020, and we are on plan to achieve $1 billion in annual revenue and approximately 20% of operating profit run rate by 2026.
To achieve our short mid and long term goals, we're focused on sales execution, including increased cross selling and a retention disciplined expense and cash management and bringing our litigation with the Oracle to a successful conclusion.
Now over to you Michael.
Thank you Seth and good afternoon, everyone.
2020 results.
Revenue for the fourth quarter was $87 8 million in full year revenue was $326 8 million year over year increases of 15, 4% and 16, 3% respectively.
Fourth quarter annualized recurring subscription revenue was $349 million a year over year increase of 15, 4%.
Revenue retention rate for support service subscriptions, which makes up the vast majority of our revenue remained above 90% with more than 80% of subscription revenue noncancelable for at least 12 months on a rolling basis.
For the full year 2020 clients within the United States represented 59% of total revenue, while the international clients contributed 41%.
Representing aggregate year over year revenue growth rates of six 6% and 33, 5% for U S and international clients respectively.
Our international strength was led by strong results from our Asia Pacific region looking forward, we see growth accelerating in North America in fiscal 2021 due to our enhanced regional general manager model led by the recent additions of key leadership.
Gross margin was 61, 8% for the fourth quarter and 61, 4% for the full year 2020, compared to 62% for the fourth quarter, a year ago and 62, 6% for the full year 2019.
While the full year 2020 year over year decline was expected and previously disclosed we exceeded the high end of our guidance. The planned reduction represented a continued investment in the global service delivery capability for a new products and services, including application management services.
As for <unk>.
Oracle and Salesforce SAP as for Han of support services Advanced Security solutions and advanced technical solutions.
As we have stated previously we expect to begin realizing the benefits of efficiencies and scale and our global service delivery throughout 2021, such that we are guiding for full year 2021 gross margin to be in the range of 61% to 62%.
Operating expenses.
Sales of marketing expenses as a percentage of revenue were 34, 5% for the fourth quarter and 35, 1% for full year 2020.
Compared to 39% for the prior fourth quarter and 38, 2% for full year 2019 the.
The full year 2020, 310 basis point year over year decrease is primarily due to positive leverage from increasing revenues and travel cost savings along with reduced physical trade show participation, resulting from a switch to virtual marketing and selling nonetheless.
Nonetheless, we remain focused on making the appropriate investments needed to support our aggressive growth initiatives, whereby we expect full year 2021 sales and marketing expenses to be in the range of 35% to 36%.
General and administrative expenses as a percentage of revenue excluding outside of litigation costs was 16% for both the fourth quarter and full year 2020, compared to 16, 7% from the prior fourth quarter and 16, 8% for 2000 new.
19.
We expect G&A expenses as a percentage of revenue to be within the range of 15, five to 16, 5% for the full year 2021.
Net litigation expense was $4 2 million for the fourth quarter and $14 6 million for full year 2020, compared to one 8 million for the prior fourth quarter and the credit of 834000 for full year 2019.
The 2019 credit was attributable to a net $8 8 million litigation recovery from a successful appeal and unanimous ruling by the U S Supreme Court in our favor.
Our outside litigation spend is not linear income from.
Actual each quarter based on litigation activities we.
We expect litigation expense to be in the range of $15 million to $17 million for the full year 2021.
Adjusted EBITDA was $12 9 million or 14% of revenue for the fourth quarter, and $42 6 million or 13% of revenue for full year 2020, compared to adjusted EBITDA of $4 7 million for the.
The prior fourth quarter and $27 million for full year 2019.
With our year end net leverage of $67 3 million, which is calculated by subtracting a yearend cash on hand from the series a preferred balance our net leverage ratio was one six times adjusted EBITDA.
Achieving our near term target ratio of under two times for 2020 underscores the solid execution of the extended management team and we believe positions us extremely well with metrics in line with the prime borrower as we approach July of this year, where Rimini is able to refinance the series.
As a preferred instrument in the valley weight potential refinancing alternatives.
It should be noted that the series a is redeemable at the option of the company without May Kohl beginning in July 2021, but it is not mandatorily redeemable until July 2023, and only then upon the election of holders of a majority of the series a then outstanding.
<unk>.
I again wish to stress that the company has no obligation to refinance the or can it be forced to do so until after the mandatory redeemable date of July 19, 2023 over two years from this point and only a year the majority of holders you'd look to redeem the instrument.
For the full year 2020, operating cash flow increased to $42 1 million, yielding approximately 13% of revenue compared to $20 4 million for full year 2019.
We also note the near one for one relationship of operating cash flow to adjusted EBITDA underscores our ability to enhance our liquidity while accelerating growth.
Balance sheet.
We ended fiscal year 2020 with record cash balance of $87 6 million compared to $38 million for the prior fiscal year end 2019. Moreover, during the fourth quarter, we repurchased $5 million of face value of our series a preferred stock at an approximate 10% disk.
With no make whole payment and we retired the purchase preferred stock <unk>.
Up sequentially on January five 2021, we repurchased an additional 10 million face value of series a preferred similar terms as the prior transaction.
Backlog.
Which includes the sum of billed deferred revenue and noncancelable future revenue was approximately $556 million as of December 31, 2020 up 15% from $483 million as of December 31, 2019.
Finally deferred revenue as of December 31, 2020 was approximately $256 9 million up nine 1% from $235 5 million as of December 31, 2019.
Moving forward, we will continue focusing on free cash flow generation and reducing our cost of capital and we will take advantage of opportunities if and when they present themselves across all capital market instruments, as we strive to optimize our capital structure and improved GAAP profitability for the benefit.
But of all shareholders.
Guidance.
Currently providing first quarter 2021 revenue guidance to be in the range of $87 five to $88 5 million and full year 2021 revenue guidance to a range of $370 million to $380 million.
This concludes our prepared remarks, operator, we will now take questions.
Thank you we will now begin the question and answer session if you're.
Have a question. Please press Star then one on your Touchtone phone, if you wish to be removed from the queue. Please press the pound sign of the hash key.
Anything a speaker phone you pick up the handset first before pressing the numbers. Once again, if you have a question. Please press Star then one on <unk>.
Chunk zone.
And we do have a first question from.
Brian Kim Slinger from Alliance global.
Great. Thanks a.
Solid EBITDA and net fourth quarter.
First.
If I look at your expense guidance before I touch on two business questions.
Net sales and marketing of expected to increase as a percentage of sales.
The midpoint of G&A is expected to be the same percentage I guess I would have expected some leverage especially on.
After the Super leverage we saw on the fourth quarter backing out the impairment. So could you talk about the accelerated investments that youre, making in sales and marketing and then also why we're not seeing at least a bit of leverage on the G&A side.
Sure I think at that point.
Sorry of course of course, that's out in 2021, sorry.
Sure sure and Brian can you hear me okay.
Hey, Ken.
Great.
So the the sales and marketing component as you know we've made a lot of big investments in the 2020 fiscal year, we brought in three new Gms over North America, we brought in new sales leadership underneath them, we've been hiring a lot of sales reps and of <unk>.
Of course as everybody has followed over the past quarters, it's been a bit of a struggle for us to get the sales reps hired and then get them on the ground and start training them up.
Happy to say that we are at the plan that we said we'd be at where we're at a.
About 80 reps will be on the ground here in March a very very good news, we retooled our entire recruiting process for sales reps changed it a brought in new people and expanded the team and so that's a really big win going into 2021, where we said we would end the year on.
About 100 reps. So there is additional hiring thats going on to ramp up to be able to not only meet obviously, the 2021 numbers, but position us for the higher accelerated growth that we're going to as you well know a need to achieve in order to make our $1 billion number for revenue by two.
The 26, so thats all according to plan there is a lot of sub.
The requirements behind the sales reps that include <unk>.
Phase with your sales engineers, there's a lot of components that go into supporting the sales force and Thats why youre seeing us take a pretty conservative approach on sales and marketing, we're still investing in that part of the business.
Great Thats very helpful.
The two business questions I don't know if.
If I've got it right, but you mentioned your one of your first three Brazilian deals and then you said you were on.
A list of alternatives Who's the list is that is that a government and a list of approved vendors because of a company is to review and then can you size of the Brazilian market.
Opportunity.
Sure first day, yes, if the government is the government list of vendors and a very much like those of us of the U S are familiar with the GSA contract, where a vendor can get on the DSA in the preapproved and the pricing is agreed upon and that allow government agencies the buy off the GSA.
Without having to run in the onerous procurement process and cost competitive process with other vendors and this is something we'd want to Rimini Street is again because of our growth in public sector globally. We finally entered the public sector in Brazil that was not an easy thing to do the really complex market.
And we were able to finally get our total haul and our investments began paying off by winning a of course three prestigious contracts across the whole top of government in Brazil, and now that we've got those people in place on that.
Customer base in place, we can build that out to other organizations and even some quasi government organizations in Brazil. So we're excited don't know the exact sizing of that market.
Pretty decent size given the size of Brazil on the government entity.
So there is there is good opportunity for us in that public sector and of course as I noted, we just received the whole of government agreement in Australia, and Thats expanding to other countries as well we've got one in Israel in previous quarters. So we are continuing to see Rimini Street become a choice for Gov.
<unk> with the easy procurement vehicles being preapproved that allows us to go into a lot of different government.
At Canada, we have the same type of agreement already in the UK as well with a lot of government there.
Great. That's Super helpful. Last question I have on International you said grew 33, plus U S grew six and a half.
Can I assume that ex AP, given it's more it's a little bit more international presence in the oracles, a little bit more U S presence.
Obviously, a plenty in both the SAP.
Services and maintenance of a little bit more of a driving factor of growth recently than oracle or should we not.
Our view of the results of that way.
Your first assumption is correct in terms of the way that SAP and Oracle divide applications around the world. The U S is the largest oracle application market around outside of the U S and even some of Canada you find that.
He is a dominant player in the application space now of course, oracle's far more dominant on technology.
For a structure for day to day other technology products, so youre going to see that globally, but the assumption about the wages. The bunny divides up youre going to see again, a lot of Oracle business, our largest and fastest growing product line is the Oracle technology. The Oracle database is huge.
And we see that with a lot of companies because of the cost is very high and the value of return from Oracle is fairly low on when it comes to the database of court.
Now this has been a very big and growing market for remaining the street and on the application side, the oracles a native product EPS.
Business suite is a very strong a provider of business for us as well.
Play well across that globally and that competes well with the product. So I think youre seeing a mix there.
Favorite the.
The really by quarter since the third quarter is the largest sales quarter for <unk> because of the nature of the other contract all starting are mostly starting on the first of January every year and they have a 90 day notice provision the that always makes the third quarter a big at SAP.
Great. Thanks Seth.
Thanks, so much.
Sure.
Okay.
And we do have a next question from Richard Baldry from Roth capital.
Thanks.
When I look at fourth quarter is obviously your strongest renewal period and deferred revenues were up 28% sequentially. This year versus 23 last day.
Do you feel just very broadly that that really de risks your renewal cycle on a post COVID-19 basis companies that obviously crossed out on a pretty tough year on the first half seeing them renew in the fourth quarter do you feel like Thats put a lot of the renewal risk behind you.
Yes rich.
As I mentioned in my remarks that the first half of the year. There was a lot of shock the companies financially.
Then it came up on all of US and you really saw on the back half of the year the that moves the house.
We couldnt overcome some of the the losses from renewals of the first half, but you can see we still on that that would be guidance across the year. The set that guidance prior to the COVID-19. So that was that was a good strong signs, but it was made up in the back half of the year and we.
Really did see a change of the backpack from the first half in terms of that risk now what I'm worried about of course is playing a conservative position is you've got a lot of companies that are battered the beaten up they survive the paid their bills, but if this pandemic goes on for another year, where we can't get people.
Back they just can't get net.
Net to a herd immunity by the end of this year and we still have closures and impact.
There is a another group of companies the probably just don't have the cash reserves left the.
The survive. So I don't think we're completely out of the woods when it comes to potential impact of customers who are just on the on their last view of <unk>.
Operating capital or they need their business has opened up so I think we have to keep that in volume, but otherwise I would say, we're in a better position stronger position than we were seeing in the first half of year, which of the initial shock.
Thanks, and maybe for Michael.
Your strong deferred again bill.
A build in the fourth quarter tends to spike receivables.
What do we think about a sort of a steady state receivable level to come back down to and the reason I ask is that's obviously a pretty good cash generator in the first half typically for you guys.
Gives us a better idea of sort of what the.
Net.
That would fall to on a near term basis on that receivables fall since collected.
So the.
Richard.
Our cycle with regard to cash that you have seen in a.
We're of.
See it similar in this year relative to prior years and of course, we don't give any we don't share.
Specifics, where we think our exact receivable balances. However, as you have seen on our adjusted EBITDA in line with our operating cash flow north of $40 million from 2020 was.
Really an excellent performance from the overall team as a whole and we see and are focusing on delivering similar similar performance similar yields going forward as we continue to grow.
Thanks, maybe last from me could you talk a bit more about the of Ams pipeline, that's been out for a little while now you've got some customers up and running on it.
Probably referenced the ball at this point so how do you see that sort of playing out in terms of pipeline build conversion sort of a revenue contribution as the year unfolds ahead of us.
Yes, rich I think we've.
But you're saying that we don't see a material I was thinking about 10% is a material part of revenue, we think were going to deliver meaningful growth this year, but not necessarily hitting that 10% threshold again, we're growing our support services as well so we have to play that.
Number of keeps moving up so getting a 10% of total revenue.
<unk> is a great great target to try and pass that threshold.
When we look at the amount of pipeline the size of the Asp's in that pipeline. We are still in that global rollout. We told you that in Q4, we began the launch we've been adding personnel around the world specifically devoted to sales of the Ams product the marketing campaigns of kicked.
The op for the full customer base of thousands of customers, introducing Rimini Street Ams offering as a cross sell opportunity we've already seen inquiries coming back from those campaign with people interest yet the number of proposals that are going out as the increase day, we're working.
On the all of the time there is generally at any one time, there's current proposals in progress that are being drafted for new Ams opportunities.
Some of which is great and we've lost a few on we will keep learning from some of those losses of different countries, where we just don't have all of the skills that rolled out yet.
<unk>, we still come across a little bit.
The average duration in our response, because its a new business for us in a different country and we continue to improve those and increasing our win rate.
I'm I'm very bullish on the the total contribution of the long run in the midterm I think we're going to see again meaningful contribution even in 'twenty. One based on the deals that we're seeing and some of them are very very large and it could have disproportionate impact to the overall revenue stream.
Great. Thanks, and congrats on a great close to the year.
Thank you Richard.
And when you have a next question from.
Jeff Van <unk> from Craig Hallum.
Great. Thanks, Thanks for taking my questions guys I'll add my congrats on just a heck of a heck of a finish to the year here.
Several for me I've wanted to Seth I wanted to touch on the on the sales side, particularly talk to a sales cycles I'm always interested the here sort of the difficulty you are seeing or not in terms of pushing deals over how long it's taken to get things done and then along those same lines on the sales side.
On the as you look at the International I mean, you called out Brazil, Australia, Youre, obviously crushing at the international domestic has been a focus area for you put a lot of new talent in the seats and as they're starting to dig in and drive the U S process I'm just curious.
Initially out of the gate is the biggest area for improvement in the U S. More focused on lead gen or close rates on I'm kind of curious what theyre going to focus on for I realize the whole thing sort of stitches together, but just wondering in the U S which of those is the bigger focus so maybe start with those two sales questions.
Sure I think our lead Gen has been very strong in the new App.
The definitely strengthening that even more of a players we just changed out the entire marketing organization in North America, coupled with the new GM, coupled with putting new new.
Vice President as the sale of in place and just to give you an idea of how important it is for the staffing wins that we've had compared to the challenges of the last couple of quarters.
We're fully staff from the East coast, which Hasnt happened the two years and we made that happened over the last few months, replacing pretty much everyone. In the sales organization leadership. So we're putting a very experienced people. So I think when you look at the investments we've made.
Very very strongly we're going to see the increase the acceleration in North America. This year now temper that with exactly what you said these are brand new people, even the GM just hits the ground of December It takes six to nine months the ramp of sales wrap up the full productivity there is no re.
When to expect that a GM combined the business and then the last time. So they are in the in the process of learning I think they are doing really well.
Very encouraged with the positive is that on seeing.
Coming from our new Gms on a new sales leadership the di.
I think that all of that will get you to exactly where we said over the last few quarters of the focus is for US International is doing well, we will continue growing international but it's doing nicely all through the region.
We're going to focus on North America. All of this investment is North America, because being 50% of our revenue and potentially could be more than 50% you look at the growth rate.
<unk> digit we get that back up to that the international rate and you should see a very very strong acceleration in <unk>.
Revenue.
Mhm.
And I guess, just along those lines I mean, do you see a competitive landscape.
86% market share, you're obviously not seeing a lot of other direct competitors, but is the by your interaction any different.
We're changing at all on the U S. When you compare in contrast to kind of international or is it the.
Same need same buyers same cycle, we just have to execute better.
It's a problem is the execution demand as the companies of the same the process. The same this is strictly a Rimini street execution in North America with a reboot.
The new general managers VP of new structures, a new approach and strategy to running North America as its own region, rather than an offshoot of corporate operations and it's just a maturing function and its a new scaling function with a new operating execution plan. So it's a.
Got it got it very helpful and on the and the second part of that question. Then just just sales cycles kind of the latest Intel on what you're experiencing out in the field working through cycles.
It's fierce the us versus the vendor that hasn't that hasn't changed one iota 15 years.
It's still theaters I think as we noted in the last call. There is more price flexibility coming from the vendors than they have ever offered that we're aware of and we of watch them literally match, our price more than once out there on especially really big deals where there so.
Scared of losing them that day.
The come in and try and match our price and because we have such a high value prop and read all of that required the upgrades we've covered the customization our value prop even head to head dollar for dollar, we're a better buy and value for customers. So we win most of those deals on the head to head competition.
We will lose some.
Just a natural part of the fierce competition, but we do win deals head to head matching prices.
Yep.
Helpful. And then if I could just sneak one last in.
Thank you heard the earlier question on a M. S. I mean, obviously from our work I think it was a pretty clear sense of your customers Love you and want to buy more I think that Ams with with the a much bigger asps slots in a nicely to your base and I think you touched on the upsell opportunity there. It sounds to me you've mentioned security a few times you mentioned, maybe a little bit more at the analyst day, you had in here again today.
Maybe just spend a second on that because it sounds like you've maybe put a little bit more emphasis there.
Where are we in terms of of security moving the needle in kind of the ramp you envision there.
Sure.
Absolutely raise the profile of security during the analyst day, absolutely Youre seeing more of US talk about it because we have these other product lines that really don't get much exposure, especially for the analyst world and the investors that we're generating millions of dollars of revenue on our security.
<unk> with the excellent and customers are deploying more and more of them and I think when you watch the solar winds issue and you see these other challenges security is a big opportunity and we are in a excellent position with our products with our security team, which I would put up against anybody.
The non and the combination customers are starting to realize that we not only can help them with the ERP platform and saving money and getting better service, we can be a strategic partner even in the world of security and interoperability, where we've got we've got patent the tools you've got patent and.
The tools, we've got a lot of technology below the surface that we havent really given much visibility due to the investors and to enter the world of shareholders and we're trying to do that this year by raising this up we're going to talk more and more about them because theyre meeting.
They are very meaningful and theyre going to be more meaningful imagine. The fact that we're doing millions of dollars and we haven't been talking about it.
That we want to continue to talk more about and introduce the the bar.
Great sounds good again, congrats great quarter guys.
Thank you Julien.
And we do have a next question from Derrick Wood from Cowen.
Yeah, Great. This is actually Nick altmann on for Derik, Thanks for taking our questions guys.
New adds in the quarter and for the year were really strong just wondering can you talk a little bit about what drove that and then I guess going forward.
Should we think about the growth drivers just in terms of net new customer adds versus upsell into the installed base.
Well I think what youre going to find is that we.
Over the last few quarters of delivered about 10% of our sales into the existing client base.
Just fairly low compared to a lot of other SaaS providers. The average that we went out and looked at we came back and we determined seemed to be somewhere around 30% of sales back into the existing clients and we've always known because as you know we focus on client acquisition and Greenfield we've been readjust.
The the business to come back and take advantage of all of the upsell cross sell opportunity within the existing client base and what we're trying to do is raise that 10%. If we can double that the 20% that's.
Obviously, a significant increase back into the existing clients, but we don't want to slowdown the client acquisitions, either so we're doing a little bit of a balancing dance on a lot of the restructure of sale is designed to do that.
But as you think about client acquisition the numbers of clients I think our goal is not to reduce that at all I think we're going to continue to accelerate that that's why you're watching us increase the total sales head count to a 100. This year. So that we can do that balancing act of both selling in the existing clients, which day.
And also going out and continuing to accelerate our growth on the new client acquisition. So I wouldn't look for a a reduction and one in order to get to GAAP.
Uh-huh, Okay, yes, yes, that's super helpful and then.
At your Analyst day, you guys outlined a 2026 revenue and margin targets I'm curious how you guys are sort of thinking about the tradeoff between growth and margins.
Seems like you guys are really hitting your stride on the go to market side of the equation and maybe seeing some greater productivity out of the Salesforce. So I guess my question is are you guys willing to maybe step on the gas a bit more on the opex side of the equation.
At the expense of margins or do you think you'll have a little bit of a more disciplined approach there.
Well I think as you guys have gotten used to do with that we really believe in and value on the balance sheet, we believe in value of the company.
And we've just never been one of those companies that says Hey, let's go and hire 200 sales reps forget about profitability, it's such a big Greenfield and we know there's a group of investors variety of was certainly stand in that camp and say listen forget profitability, we start with GAAP profitability.
The last year, when we achieve that and we continue to grow it.
We believe in balance growth, we believe in delivering a profitable company increasing profit and at the same time growth. So we've always had a balance approach and of course, there will be people on both sides growth at all costs or go profitability and don't worry as much of that growth for fundamental investors.
We want a straddle both worlds we want to be the company that has a solid rock solid balance sheet.
It has great financial Super strong business.
And is growing at a very nice rate.
But understand there is a tradeoff of <unk>.
Spent too much on sales and marketing a bit of low profitability. So that we balance of this as part of our model.
Mhm.
That's helpful and then if I could just sneak one more in.
There's a lot of focus right now on Reaccelerate that growth in North America.
Can you maybe talk about some of the initiatives initiatives, there and how those are playing out.
Anything you guys need to do on that front and then on the sale of the new leadership there do they have any.
Any you know new plans you guys can maybe outline on the go to market side of the equation.
I think the best way to think about it is imagine that North America had sales leaders, who are focused on new client acquisition, which you really didn't have any leaders at the GM level. We're focused on the total business think of them as P&L leaders, where theyre looking at the renewables so looking at the existing.
Yes.
We're a part of their comp plan includes the retention of those clients the expansion of those client footprint as well as bringing in brand new clients. So the whole dynamics of North American leadership has changed because we've up level. This of running the whole business versus just the slice of the business where people just didn't have.
Have any incentive to think about other part because it wasn't within their comp model and it wasn't within their wall. So I can't underestimate or any way under under stress. The fact that we have three general managers overseeing North America, who are now looking at their entire region as the business how theyre going on.
Grow the price of those client how theyre going to extend the lifespan of the total lifetime value of those client a theyre going to bring a new client and a marketing reporting to them.
Legal reporting to them they have clients.
The client engagement reporting to them. So they have all of the the business now and they have to look at the business as a whole and I think it's changing the entire dynamic that is driving different plans for North America. He says now placed in sales reps a different places depending on industry, they're looking at where we win big where we.
Have a one very much and they are making decisions about how the players out on the field in a way to grow that single digit growth number and accelerate the debt and that just wasn't a focus of the people who were out just closed the deal in North America in the first generation.
Got it thanks guys.
Okay. Thank you.
And you have my last question from Mark Chappell from benchmark.
Hi, Good evening. Thank you for taking my question and my congratulations on the quarter as well as of the year.
A question a question for you you are welcome a question for you revenue retention continues to hover around 92% which is good.
But if I recall correctly from the recent Investor day.
You're doing some things to try to ticked up a percentage up a bit I was wondering if you could just give us.
An idea of some of the initiatives underway to raise your revenue retention rates.
Well I think.
It is good and we think it could be even better.
And part of that has to do with the way we engage our clients.
May have noticed in the release and in my comments.
We've now hit a four nine out of five average for a client that up from four eight and we started out of four five years ago. So even as we've grown and added thousands of clients. The grown the business. The hundreds of hundreds of engineers of the 20 plus countries.
It continues to get better rating and we've improved our SLA is down to 10 minutes. So.
When you look at all of that that has strong retention capability for clients because we're delivering the best service that they can imagine anyone delivering and we're delivering it with again continually improving SLA, we don't charge for the extra floor.
We continue to improve the service so I think that underlies everything you have to remember we're in the business of supporting software and running it and the better we do with that that's the number one of our 10 people you can have the <unk>.
Second item is we have been building a global client engagement capabilities to help our clients figure out the net what do we do next where do I go what's my roadmap what am I going to do in five years of tenure one of the biggest threat to Rimini Street long term position in these clients.
It's simply they decided to go on the direction that we werent involved in deciding and we may lose them as a client for that for that happens that's a big reason.
Have clients that turnover. So the more we can engage with those clients that would be part of the strategic E and figuring out should they make a change should they continue to use the software in another 510 years that has real impact on our lifetime value and a retention, but those clients. So this is about the more we get.
Closer to the customer the more we can help them in the strategic decision. The net result, plus a great service all comes together should yield a stronger retention.
Higher lifetime value.
Great. Thank you first of all from me.
Okay. Thank you Mark.
And there are no more questions in queue.
Okay.
We have any other questions or are we.
Out of questions.
Okay.
We will go ahead and bring it into the call then thank you much everybody and we look forward to seeing you on our first quarter call. Thank you very much the stay safe.
Thank you ladies and gentlemen. This concludes today's conference. Thank you for participating you may now disconnect.
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Okay.
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