Q1 2021 Rimini Street Inc Earnings Call
Hello, and welcome to the Rimini Street earnings call. My name is Michelle and I will be the operator for today's conference.
At this time all participants are in a listen only mode. Later, we will conduct a question answer session and during a question and answer session. If you have a question. Please press Star then one on your Touchtone phone.
I would now I'll turn the call over to Mr. Dean Pohl, Vice President of Investor Relations, Sir you may begin.
Thank you operator.
And welcome everybody to Rimini Street first quarter 2021 earnings conference call on.
On a call with me today, Seth Raven, our CEO and Michael Creek a R.
Today, we issued our first quarter ended March 31, 2021 earnings press release, which can be found on our website. A reconciliation of GAAP to non-GAAP financial measures has been provided and tables following the financial statements and the press release.
And explanation of these measures and why we believe there are meaningful is also included in the press release under the heading about non-GAAP financial measures and certain key metrics a.
A copy of the press release and financial table, including a 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-Q for the first half.
Order of 2021 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 first quarter, we remain on track to achieve our strategic growth plan of $1 billion and annual revenue by 2026.
We achieved record revenue of $87 9 million up 12, 6% year over a year a record active client count of 2000, and 550 up 22, 8% year over year ended the quarter with strong billings growth of 24, 2% and.
We're at a gross margin greater than 61 per cent.
We also continued making investments, including key executive hires to take advantage a growing global demand for Rimini Street's expanded breadth of support solutions, including our support application management security and interoperability monitoring and professional services.
From the company's inception in 2005 to date, we have signed over 4000 clients, including a 160, a fortune 500, and fortune global 100 companies and a saved our clients more than $5 billion.
During the first quarter, a global service delivery team closed more than 10000, and support cases and delivered nearly 32000 and tax legal and regulatory updates across 36 countries and achieved an average client satisfaction rating a four nine out a 5.0.
On the company's support delivery, we're a 5.0 is excellent.
Our global employee count as a March 31, 2021 was 1501, a year over year increase a 15%.
Pandemic impact.
The pandemic continues to create opportunities as well as challenges and we believe our strong balance sheet will provide us continued flexibility to help prospects and clients through the continuing pandemic impacts in 2021.
The full extent to which the pandemic will continue to affect our business in 2021 and beyond will depend on numerous evolving factors that we cannot reliably predict.
Sales and outlook.
For 2021, we continue to see growing interest pipelines and sales and our core support service business and our new application management services as well as our innovative security interoperability monitoring and professional services with a growing number of clients successfully deploying and.
Using these new services.
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 the client day to day.
Application management services, where we run the system for the clients day to day.
To highlight how clients are leveraging Rimini Street services globally to achieve strategic goals across different industries I would like to share a few case studies from the first quarter.
First leading global tire company hand cooked tire headquartered in Korea has switched to Rimini Street support for it's S. A P applications and reduced its annual maintenance fee by 50% with Rimini Street support.
And with the efficiencies gained from switching the company plans to focus its resources on developing innovative technology capabilities, including artificial intelligence and digital sensors.
The company is a primary supplier to one of our other global auto manufacturing client Hyundai here, we're together, they're lowering supply chain costs.
Say, a Rio Chief digital and information officer stated that keeping our business performing efficiently and at its highest level is very important to us.
The company is on the fast track to digital transformation with the pursuit of innovation and technological excellence at our core.
After learning about Rimini, Street's global availability and expert engineering support and we decided to switch our mission critical ERP application support to Rimini Street to gain efficiencies and free up resources to focus on maximizing manufacturing operations.
Next London's Kent County Council switch support for its Oracle E business suite application and Oracle database software at a Rimini Street.
Like other public sector entities, Kent County Council was under significant budgetary pressure.
With over 20000 users there I T infrastructure makes up a sizeable part of its expenditure.
Having conducted a rigorous evaluation of its options to either spent significant funds implementing new business applications or drive further savings the team selected to drive more value out of their existing Oracle products with a move to Rimini Street.
Vincent Godfrey Strategic Commissioner, Kent County Council stated that it was not the right decision to divert critical resources and disrupt our stable mission critical software with an upgrade, especially when dealing with a COVID-19 pandemic.
Turning to Rimini Street has bought us the luxury of time and saved a significant resources that we can apply to support essential services, while knowing we have expert support enabling us to properly plan our transformation strategy to meet the needs of our organization.
Lastly.
And Paul Limited Australia's leading transport fuels provider switched to Rimini Street support for it's S. A P applications and S. A pea on a database software.
As a result, the company reduced its annual support fees and is also deferring and expensive and disruptive migration to sap's, new as Farhan a product.
For the past 20 years and Paul has relied on its robust S. A P platform as a key enabler of its business and operations.
And Paul decided to partner with a Rimini street to maintain and drive more value out of its current S. A P platforms, while also managing complexity across the supply chain.
Elisa Cooper I T director stated that we needed to look at ways to be more efficient and effective with our cost and technology and the current economic environment.
The transition to Rimini Street has enabled us to reallocate investment and accelerating business value and innovate around the edges of our SAP platform.
Third party ERP software support landscape.
Gartner notes Rimini Street is a leading provider of third party support for Oracle and SAP products by annual revenue and client count and it's published date implies a Rimini Street has captured over 86% of the global market.
Gartner is currently predicting a 200% increase and the third party software support market expecting that the market will exceed $1 billion and 2023.
Rimini Street is the only company a global scale that offers a proven turnkey single vendor solution for running and supporting ERP software with and ultra responsive service that supports customization security interoperability and performance challenges and create value.
And you and savings for clients.
As discussed during our Investor Day 2021 in February we believe our global penetration rate is still only about three 5% for support services and less than 1% per application management services, providing a significant greenfield opportunities within the hundred and seven.
And the billion dollar addressable ERP support and a M S market.
In addition, we've increased our strategic focus and resources pursuing and closing more cross sell opportunities within our client base and internally estimate that these opportunities currently exceed $1 billion and annual revenue.
We look to achieve these growth objectives by leveraging a robust go to market strategy, a sales overlay model and and integrated incentive framework that drives consistent goals throughout the organization.
Oracle litigation update.
The dispute between the parties has been the subject of two different lawsuits and the United States District Court for the district of Nevada.
And third party support is legal and is not an issue and the litigation.
Instead, the litigation involves disputes over the manner in which Rimini Street provides third party support for licensees, a certain oracle products in fact, the United States Federal courts have found a third party support and customization of enterprise software is permitted Oracle licensees have a choice a support vendors.
And Rimini provides quote third party support for Oracle Enterprise software and lawful competition with oracles direct maintenance services.
With respect to Oracle versus Rimini Street that was filed by Oracle and 2010. The case went to trial and 2015 and ran its course of all appeals by 2020.
With respect to Rimini Street versus Oracle the case, we filed against Oracle and 2014, the cases and pre trial preparation and trial is not currently expected to occur until the first half of 2022, but could occur earlier.
The parties are also engaged in a dispute over a permanent injunction that has been in place since 2018.
On March 31, 2021, the United States District Court for Nevada issued an order resolving many outstanding disputes between the parties.
The court affirmed that there has been no finding of infringement by the court of the company's enterprise software support process 2.0, our automation framework a F. W tools finding.
And finally that as a Rimini street with crested when it filed the litigation and 2014 those issues will be heard and decided by a jury. Additionally.
Additionally, the court ruled in the Companys favor on the ability of Rimini Street's engineers to learn and gain experience from their work.
Oral is a claim that Rimini Street engineers, and fringe Oracle's copyrights and violate court orders by merely applying their learning and using know how gained supporting one client to support other clients running the same license software.
Building on the courts previous denial of these Oracle claims the court further noted and its most recent order that quote.
It is common sense that Romines engineers would get better and faster at conducting a task with more experience and growth.
The court also clarified and affirmed other important provisions of its previous and most recent orders and Rimini street's favor, while denying Oracle claims, stating that accepting some of oracles claims would result in quote absurd result.
And quote.
The court also denied oracle's motion for sanctions, noting that it did not find any inappropriate conduct by Rimini Street, and therefore found no basis for any sanctions.
The court did however, find that Rimini Street has violated the injunction and certain narrow instances and circumstances, including with respect to deliver a bull's relating to two specific clients in 2014 and 2015.
However decided activities for these two specific deliverables occurred before the injunction was in place and therefore cannot be a violation of the injunction we.
We have filed a motion with the court to correct. The errors. The court has scheduled and evidentiary hearing and September 2021.
Please see our first quarter 10-Q filing for additional litigation disclosures and information.
Summary.
We believe the company executed well and the first quarter and we are on plan to achieve $1 billion and annual revenue and approximately 20% operating margin run rate by 2026.
To achieve our short mid and long term goals. We are focused on sales execution, including increased cross selling and retention and disciplined expense and cash management and bringing our litigation with Oracle to a successful conclusion.
Now over to you Michael.
Thank you Seth and good afternoon to everyone.
Q1, 2021 results net.
Seth noted revenue for the first quarter was $87 9 million a year over year increase a 12, 6%.
Annualized recurring revenue was $349 million a year over year increase of 13%.
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 first quarter clients within the United States, representing 54% a total revenue while international clients contributed 46% representing aggregate year over year revenue growth rates of less than 1% for the United States and a 32% per international clients are international strength was led by.
Strong results from our Asia Pacific region.
Looking forward, we expect to see growth accelerating and North America and fiscal 2021, resulting from a restructured regional operating model hiring a three season and general managers and Q4 of 2020 to oversee North American operations, New sales leadership and hiring of many experienced new sales.
Reps.
Billings for the first quarter were $81 million compared to $65 2 million per the prior year first quarter a year over year increase of 24, 2%.
Gross margin was 61, 5% for the first quarter compared to 61, 3% per the prior year first quarter.
We continue to invest and the global service delivery capability for a new products and services, including application management services for a SAP Oracle and Salesforce and SAP P. S. Four hottest support services and advanced security solutions and advanced technical solutions.
As we have stated previously we expect to continue realizing the benefits of efficiencies and scale and our global service delivery throughout 2021 and guiding for full year 2021 gross margin to be in a range of 61% to 62%.
Operating expenses.
Sales and marketing expenses as a percentage of revenue were 34, 6% for the first quarter compared to $36 four per cent for the prior year first quarter.
We remain focused on making the appropriate investments needed to support per aggressive growth initiatives and expect full year 2021 sales and marketing expenses to be in a range of 35% to 36%.
General and administrative expenses as a percentage of revenue excluding outside litigation costs was 18, 9% for the first quarter compared to $15 four per cent for the prior year first quarter we.
We expect G&A expenses as a percentage of revenue to be within a range of 15 five to 16, 5% per the full year 2021.
Net outside litigation expense was $4 8 million for the first quarter compared to $3 7 million for the prior year first quarter.
Our outside litigation spend is not linear and can fluctuate each quarter based on litigation activities.
We expect outside litigation expense to be in a range of $15 million to $17 million for the full year of 2021.
Adjusted EBITDA was $10 7 million or 12% of revenue for the first quarter compared to $9 2 million also a 12% a revenue for the prior year first quarter.
Operating cash flow for the first quarter was $24 5 million compared to $26 3 million for the prior year first quarter.
Warrant treatment on April 12, 2021 day.
And I did state Securities and Exchange Commission, the SEC issued a statement discussing the accounting implications of a certain terms that are a common and warrants issued by a publicly held special purpose acquisition company.
Spak Rimini Street, Inc became public in October 2017 through a merger with GP investments acquisition Corp.
A.
A spec and certain warrants have been issued by the spec and connection with GPI as 2015 initial public offering.
Currently one class of outstanding warrants allows for the purchase of approximately $6 1 million shares of the company's common stock GP sponsor warrants on or before October 10th 2022, the warrants have a cashless exercise provision.
Following the recent SEC guidance, the revised accounting interpretation moving forward is that the GP sponsor warrants will be treated as a liability until either exercised or expired.
This resulted in a $4 7 million noncash expense and the first quarter related to the change in fair value of the GP sponsor warrants.
All other classes of Rimini Street warrants outstanding will continue to be accounted for using the equity method, and therefore will not be subject to mark to market adjustments.
There is no scenario or provision that would lead to a cash settlement of this non cash liability.
Therefore at a point when the warrants a retired we expect to realize a noncash gain to a profit and a lasting to extinguish this liability.
Balance sheet.
We ended the first quarter with a record cash balance of $153 million compared to $58 million per the first quarter a year ago.
Backlog, which includes the sum of billed deferred revenue and noncancelable future revenue was approximately $536 million as of March 31 2021.
Up 15% from $467 million from their prior year first quarter.
Finally deferred revenue as of March 31, 2021 was approximately $250 million up 12% from $223 million from the prior year first quarter.
Capital market events on January five 2021, we completed the buyback of $10 million face value of series a preferred stock for an approximate 10% discount to face value were no make whole payments where required.
Purchase shares were retired.
On March 11, 2021, we completed a follow on public offering of seven seven and 5 million shares of the company's common stock, resulting in gross proceeds to the company of approximately $57 million.
On April 16, 2021, we completed the buyback a $60 million face value of the series a preferred plus make whole of approximately $2 3 million, reducing the series a preferred liquidation value to approximately $87 million day purchase shares were retired.
In light of the aforementioned and our strong free cash flow generation. We ended the first quarter with a net cash position for the first time since going public and 2017, our net cash position of $7 1 million as calculated by subtracting our quarter and cash on hand from the series a.
A preferred liquidation value balance.
But achieving this net cash position and $44 million, a trailing 12 months adjusted EBITDA underscores our solid execution, and we believe positions us well with options to continue reducing the cost of capital.
It should be noted that the series a is redeemable at the option of the company without make whole 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 and then outstanding.
Moving forward.
We will continue our methodical focus on increasing 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 improve GAAP profitability for the.
Benefit of all shareholders.
Guidance.
We are currently providing second quarter 2021 revenue guidance to be in a range of 88 $5 million to $95 million and maintaining full year 2021 revenue guidance and a range of $370 million to $380 million.
This concludes our prepared remarks, operator, we'll now take questions.
Thank you Sir we will now begin the question and answer session.
You have a question. Please press Star then one on your Touchtone phone.
If you wish to be removed from the queue you may press, the pound sign or the husky.
So if youre using your speakerphone, you may need to pick up on your handset first before pressing the numbers once again to ask a question. Please press star one on your phone at this time.
Okay and the first question I have and the queue. Sir is from Jeff Van <unk>. Your line is open. Please proceed.
Great. Thanks, Thanks for taking my questions guys several for you.
Seth I know a go to market is a big deal a very much a focus area you've talked a lot about it.
Even had some pretty ambitious goals in terms of increasing rep counts just talk about where you ended the quarter with Rep counts, where you you know what well how the target has changed if it has and then just maybe a broader discussion about kind of the go to market maturation, because I know a lot of things were under development improved lead Gen etcetera, and just sort of give us a sense of what's been a.
And where you are versus plan.
Sure, Jeff and thank you <unk>.
First of all as you guys. All know we had struggled with getting a great quality and the quantity of sales reps that we wanted for several quarters and that changed with Q4 and and let you guys. All know that on our last earnings call for the end a year.
And I'm really glad to say, where we ended the quarter at 81 reps.
Which was right above target and.
And we are still on target for completing a 100 reps by the end of 2000 and <unk>. One so those haven't changed in terms of targets, but we are executing very very well on that so that's a big turnaround from 2020.
And we put new people in place we changed out the process for recruiting made a lot of improvement and that all of a responded well in terms of the numbers and the quality of the reps and we're getting so we feel much better about that we still have a little work to do on the hiring in Europe.
And so again, it's a bit of a crazy market, especially with shutdowns and France and all of the COVID-19 has made it a little bit more difficult to staff and in time inside of a Europe, but other than that we are doing very well there. The other the other worked and we're doing and redoing the lead Gen and the engines the systems the <unk>.
<unk> of course, we brought into a new three gms for the North American region. We also hired new sales vps below them, new directors below them and filled out a lot of the sales positions for the first time being fully staffed.
And all of that is in place starting at the end of Q4 and into Q1.
We will see those results, we believe will start to hit the bottom line starting in Q2.
This is a lot of work to get these new operations up and running a lot a new people a lot of new training and I think it's going very well I'm very optimistic on what we've seen is the counters a month right.
Yes.
I think in the in the Analyst day, you gave a a real deep dive and the overall business put or call one of the business.
Points, you gave us a pipeline was at an all time high up 37% year over year are you able to quantify as a continued to grow at that pace.
I think we are seeing continued growth I don't have an exact number for you a compared to the analyst day.
But we are seeing pipeline growth.
And I think one of the interesting things and I know you guys are probably asked about Ams at some point.
A M S were actually up.
We're at a in.
Invoicing, a 60% higher and the first quarter and then than a year ago, we're seeing revenue at a 20% higher and the first quarter as it flows through from a year ago.
We doubled the staff.
It's dedicated to a M S.
Doubled.
And just about every component of the business of the a M. S side and well you know we're going to get to a point, where we're going to start giving.
Given you guys some numbers on that and another quarter. So I would imagine, but we're looking really good I mean, we're seeing those pipelines grow across all the product lines and that's why you heard me mentioned, even more than just the support and the Ams business, but our security business continues to accelerate and grow that.
Millions and millions of dollars are ready and we're going to start talking more about that as I as I announced and the earnings call last time as well as our professional service numbers are growing.
Significantly over prior numbers and.
And we're also seeing that and and interoperability and technical support.
And it's coming through the other products and services that we're building out as part of our solutions. So you're really watching a growth across all of our different product segments.
Mhm.
If I could sneak one last one and the I know the customer.
Active clients was up 23% so very very good number there the churn number ticked up a retention ticked down over you want to look at it I know, it's a T. T M figure, but can you just talk about.
Give us a sense of kind of what you've seen there with with with respect to retention and where we are coming out a COVID-19 just a little more color would be great. Thanks.
Sure I think we are still seeing some COVID-19 impact, but as I mentioned on the last call.
We're seeing stabilization compared to of course, when the pandemic hit the robotic price seeds people reacting very quickly and then you saw them towards the end of the year they were getting their footing and theres still dealing with some closed operations are still dealing with residual revenue lags those things are still hitting the cash.
Customers. So we still have some customers who need some help a quarterly payments.
And some other types of short term discounts and things like that but I do think we saw better stabilization starting in the back half of last year, but there is still issues there are still challenges in different countries.
As you know, we're watching that and still in Europe, we're still watching it and Latin America is still a hit very hard so those pockets of fires of COVID-19 and impacts the business are still driving some weakness and the retention renewals, but overall the numbers were very very good our numbers for renewals and the fourth.
Quarter, a numbers for renewables and the first quarter, you've seen that reflected again in a quarterly billings as you guys know last year Q1 was a negative 1% a year over year billings growth and that transition to the 24, 2% and the first quarter, a this year and before that it was negative 5%.
Coming into the first year and year over year. So this is a great turnaround over several prior years and I think again reflects the stronger growth in a business that even if you're a a little bit a weakness as a renewals and again as people navigate COVID-19 and that will fade away that's not long term, but what really is long term as you're watching a.
AD and accelerate the growth of a client base and you're watching and all the different product lines growth.
Yeah, Yeah fair enough. Thanks for taking my questions.
Sure. Thanks Seth.
And the next question and the queue comes from Derrick Wood, Sir Your line is open. Please proceed.
Thanks, guys nice to talk to you and a great job on the balance sheet to date.
I guess the follow on that last topic, Seth you mentioned billings and I just.
And you guys had a really strong billings growth number was a little surprised to see.
Revenues kind of a only at the midpoint of guide, albeit at the midpoint, but.
But but really big outperformance and at least versus what we were thinking on billings, So maybe a minute.
Michael If you could just touch on the Bill and side. If there is anything unusual with respect to contact.
Tangent contract structures.
Or timing or anything like that and maybe Seth and you could just kind of speak to the overall performance and in the quarter and if there are any surprises that may be created a bit more seasonality.
Thanks, Derek it's Michael here.
With regard to any out of the ordinary a contractual structures are trends. The answer is no. We didn't see that I would highlight as Seth noted that a relative to the prior to fiscal years, our start to the year, we're feeling good.
To the billings and the first quarter and as you very well know a good indicator for the year as Youre aware, we reiterated our guidance for the year.
We have some positive trends so.
And we're pleased with the billings Seth over to you.
Yes, I think there always have just hold backs.
Revenue for the first quarter and make more net employee.
<unk> added a dating is we've done a lot of Pryor.
You do have a good contract structures as we sat and will be have any kind of a.
We're getting a net out and Thats why you get those bulges and at the end of Q4 and others right that was better and not really a predictable when you have a few million dollars and act.
Work their way off.
C passes et cetera, and yes, there was a big deals that.
Hi, Steve.
Out there that will keep rapidly to.
Suppressed a little bit until they're released so take that with a little bit lightness and just because of the way that that works.
And that could get picked up and the second quarter et cetera.
And that makes sense and that probably speaks a bit.
Second question, but just in terms of your implied guidance.
It really calls for.
A bigger acceleration and the second half, maybe a little less and in Q2 and more so and second half and.
Maybe that's part of it and then I guess.
Is that how to think about and in terms of like the dividends from your investments and North America, obviously, it takes time to flow through.
Maybe just kind a touch on.
And we see revenue, but bookings North America is it.
And Q1 and and what are you thinking in terms of all these new investments when they really start to.
Got it translate into bookings.
Improvements and throughout the year.
Yes, I think again billings is our favorite number to watch because it's just such a good precursor to revenue on a ratable model right. So as.
Certainly starting off a year with a 24% growth in billings and it gives you an indication of the Brit's net and then you look at the number of deals and active clients et cetera, you see a lot a deal flow.
And as and as we've talked about and the prior calls the Asp's are a little smaller right now some of that having to do with the economy. Some of it having to do with a mix of products that we're bringing into the into the bag.
But youre seeing again youre watching gross margins gross so all the right numbers are growing and we would expect that will flow through I mean this is why we held guidance for the year.
You guys, all know, where we're trying to get ourselves and a fairly conservative position and always looking for upside.
Where we could see it but it's still early in the year and when you have the COVID-19 situation and we just look what happened and India everything was fine and all of a sudden it's horrible.
We've got 25% of our operations, there, which we're doing fine with that we don't have any disruption of service because of our global a redundancy, but we've had more than a 200 people get sick out of our 500 employees. So we've had to manage through that as well.
All of that adds up and you've got to think about that when you're calculating risk and forecasts and and so we're going to play a bit conservative because there are just still a lot of unknown cards that can play up in any given year. The way things are these days.
But I think we've held pretty well to our ranges I think we've been reliable.
And to the high end to exceeding on the annualized side and I think we're just going to continue to play a fairly conservative.
And until we can work our way through the COVID-19. The economics tax changes you name it inflation theres. So many different moving parts on the on the macro scale I think you just look at our business and if you stay focused on the metrics of the business itself, we're growing and we're doing really well and we will.
Get North America up and running at a much faster pace and you know that will have good follow through and revenue growth. So we still feel extremely good about where we are and the the road to a 1 billion and revenue by 26.
Also the cross sell which I mentioned during my prepared remarks, we were doing 10% of invoicing and cross sell we're exceeding our goals and targets for or increasing that number.
Wanted to get that number to 20% of invoicing and then eventually to 30% of invoicing being from existing clients and where we're moving down that scale, we like what we see all the huge changes we've put in place structure wise with people and comp plan to drive integrated work.
And towards growing that number and of course, everyone very excited about what that means for a M asset and the other product lines and the growth that that will drive the bottom line, but we only need a 21% average CAGR between now and 'twenty six to get to a $1 billion and we see a lot of roads to get there and maybe sooner.
Yeah, I would agree that a lot of the metrics look really got including it looks like a pretty robust hiring quarter.
You're investing in and and growth. So that's good to see one last one for Michael.
I mean, FX has had a little bit of a headwind for a companies. The last few months can you remind us.
And what your exposure is on and FX basis.
So Derek it's me.
Minimal at this point, despite the strong growth internationally, but we watch it very closely.
We're cognizant.
And ensure that we don't take any undue risk but at this point.
And from a bottom line perspective, it's been a non material impact.
Got it okay. Thanks for taking my questions.
Thanks, Dan and thank you Sir.
Yeah.
And the next question and the queue comes from buying Kiplinger. Your line is open. Please proceed.
Great. Thanks, so much for taking my questions with all the changes to the domestic sales force G and the bps more and is there any disruption and in a short term and how long do you think it'll take before we can start seeing acceleration and the north American growth rate to say, 5% to 10% and more reasonably what is that.
When you are executing like you'd hope Seth what is a reasonable long term north American growth rate.
Sure. Thanks, Brian.
A.
I don't think anybody ever makes changes to sales without some level of disruption and it just doesn't happen because people and territories you disrupt a little bit a momentum.
And every change yeah, we have some really big changes, but I think if you looked at the fact.
The deals that we're signing and North America were signing some great deals we are signing a large volume of deals.
We just celebrated our vice president of sales for southern.
North America, the South region, who did more.
<unk> and any other vice president of sales and the company significantly more and we're seeing some really big wins. So North America is performing its just not enough reps and not enough leaders that were getting the volumes that we wanted to drive the huge engine that we believe North America can be.
So I do think 'twenty, one it's still a building year I do think though that you want to get too we want to get North America performing look at what we're doing internationally.
Side of the U S, where we're growing at over 30%. We believe that we can hit those kinds of numbers within the U S and don't see any reason why we can't eventually achieve a we used to do 30% across all of North America. There's no reason to believe that we can't do that again.
All the all the numbers are there the resources are there. This is an execution issue that's on us and I do believe that with the changes that we're putting in place everything that we're seeing all the indicators are again very strong pipeline very strong business. Some errors on the field and I talked to you about this a man.
The times when you've got all these new players and the field. The number of errors that happen is high you have a lot of people, making mistakes have not been and this business before they don't know the answer to the right question and even on the Ams deals I told you we were pretty Rocky and we were losing some deals early on just because we didn't know it was a new.
Business, we didn't have all the right answers didn't have our proposals honed well enough and we've made tremendous progress and our win rates and the quality of what we're delivering and then the deals we're winning so I think that when you looked at all of that and you look at all of the indicators I think we're exactly on track with where we were.
A b with the with the improvements across North America watching this come online and I think we'll be and double digit growth I'm, hoping we're double digit growth this year.
Great.
A quick ones and the first one and is on the guidance number.
And in a previous callers asked about the backend loaded growth acceleration what percentage of the low end of your revenue guidance is coming from backlog versus contracts and you can win meaning you don't want any more work would you hit the low end or would you need do.
And do you need 20 million more for example, a $10 million more a revenue to be one.
No we need so we need more I mean, you know that that our renewed that our existing contracts generate over 80% of our revenue and thats that gives us a huge steady base and now but that will tell you I mean that means a year dependent and 20% of your revenue number off new invoicing.
And new a new billings.
Comes from new client so that that is exactly the range is that 20% and of course as we move through the year. That's why you see us have pretty narrow ranges on the on the forecast and the guidance because we can range. So much more narrow and fact, even if you look at the Q2.
And for our guidance, we just issued we have a range of $2 million last year was a $3 million and it's all because we have so much more already and the bag as you would say that we're much more confident in and narrowing those ranges.
Great Lastly, and I don't know, if it's relevant or not.
And as revenue per client relevant and I've seen over a four to five quarters, it's gradually come down and a steep decline does that mean, we have price concessions and does that mean COVID-19 sorry.
Sorry, due to COVID-19 is a smaller clients or do you not really think thats a relevant stack.
We don't really put it out because I think it's limited and relevance.
It's one of those data points I think a asps.
Is it is a better measure for us and we are watching and that's why I mentioned a few minutes ago, we know that it's down from where it used to be but we're also serving a wide a variety of clients and there are countries like Brazil for example.
Where the where the average deal size, it's much smaller or Taiwan.
And because they are they tend to be SMB equivalent market compared to the U S. There's just a million dollar deal down there is the equivalent of you're doing a $5 million a $10 million deal somewhere else and the U S and so I think as you expand out to 20 countries and you increase the volume.
To me and it's almost the same way when you take a look at revenue.
Per sales rep versus some of the others metrics. Some of them are more meaningful and I don't think revenue per client is really meaningful and our business right now.
Great. That's helpful. Thanks, so much.
Sure.
And the last question and the queue is from Mark Schappell. Your line is open. Please proceed.
Hi, Thank you for taking my question and a question for you. The company had a has had some really good success and the Asia Pacific region over the last year or so could you just talk a little bit about the reasons for your success and the region is it mainly a COVID-19 related is it.
Actual fact reserve that are causing the outperformance I mean is your sales force is further along than other regions.
Sure I think look.
APAC has been a monster.
And of growth and the last few years, well before COVID-19 COVID-19 really hasn't had an influence on the growth factor there.
And I believe has been the growth factor is the fact that we connect very very well in Asia because of our pragmatic solution.
I think we a cultural alignment.
We have great execution by our Gms and before regions and one of the things we did mark was.
And we broke apart from a single APAC leader and based in Australia, and we went with a local regional leaders, we put Gms in Japan, and Korea, Southeast Asia, and greater China based in Singapore and of course in Australia to cover the ANZ and Oceana.
A region and I am convinced that that breakup into for a regional players allowed us to get closer to the ground. We've got regional field marketing people, we are truly a local company and in each for different segments of Asia, and we are tailoring our business to those segments and I.
It's a success a very big success and growing and that's what we brought that model to North America. When we said North America is a really really big place lot of clients in order to get Gms, who are closer to the business, let's put three on the ground, let's break it into three regions and let.
Those gms run each of those regions just the way we've had success with Asia Pacific.
Great. Thank you and then with respect to Oracle and SAP here and you continue to chip away at our customers.
What are they doing and response what are you I mean, they have to be responding in some form or fashion. So what are you. What are you seeing from them behavior wise as far as a response to you.
Well as you well know it's always fierce competition, it's always hand to hand combat.
And with Oracle and SAP, because they are the incumbent and these clients that were coming in and trying to persuade them to make a switch a strategy and vendor. So they always have the incumbent advantage.
And they've always they've always play the hand very aggressively.
We're on the ground.
And lately because their businesses are suffering theyre not getting people to move to their newest products at the rate that they wanted and hoped for and.
And so they're very very much incentivize and those moves they are discounting their services and.
And we come up against those discounts all the time, sometimes they caused us to lose a deal sometimes and usually we push right through it because even at the same price if they match our price exactly we are the better value because they don't have to do the upgrades. They still don't have to do the migrations and they get a better.
It comes and service that they won and we provide a wider variety of services with our product than they do so when you compare apples to apples, even if a match our price we're still by far the better strategy and deal, but sometimes they'll disrupted deal and if a customer was really just looking to get a better price.
And Oracle and SAP walk in and at the last minute they dropped their price to match ours, exactly which has happened.
Times, you will lose that deal because the customer will just cant believe they've got and such a great deal from Oracle or SAP and they decided to stay with them and but that's just competition, but the majority of those deals we continue to win.
Great. Thank you.
Sure.
And gentlemen, we have no further questions do you have any closing remarks.
Certainly I want to make sure everybody I hope, you're staying safe I hope youre getting back the needed. We look forward to seeing you on the next call and again, if you have any additional questions. Please do let our IR team no. You know we're always happy to answer what we can answer and I look forward to seeing everybody on the Q2 call.
Thank you very much everyone have a good day.
Thank you ladies and gentlemen. This now concludes today's teleconference. Thank you for participating you may now disconnect.