Q3 2024 Rimini Street Inc Earnings Call
to review our most recent FDS file, including our four or 10 Q file today, for discussion of risk that may affect FDS results or stock price. Now before taking questions, we'll begin with prepare of remarks. With that, I'd like to turn the call over to Seth.
Thank you, Dean, and thank you everyone for joining us today. I'd like to extend a special welcome to new analysts, investors, and prospective investors, joining our call for the first time to learn more about Ramini Street.
What we do.
Seth: Remini Street is a global provider of end-to-end enterprise software supported innovation solutions and the leading third-party support provider for Oracle SAP NVMware software.
Remini Streets Award-winning services are uniquely designed from top to bottom to support live, mission-critical enterprise systems with unparalleled engineering, systems, process, and no-palt-capabilities.
Seth: We deliver an industry leading average engineering response time of less than two minutes, 24 by 7365, an earned-in-average client satisfaction score of 4.9 out of 5, or 5 is excellent.
Remini Street serves its clients with more than 2,000 full-time employees working in 21 different countries and two large lab operations in India and Brazil.
Seth: Our service is inclined to achievements.
For nearly 20 years, we have successfully helped our clients achieve better business outcomes such as significant IT operating cost savings and improved profitability.
Our clients have realized billions of US dollars in savings and funded flexible infrastructure, AI and other innovation investments that enable organizational goals, enhance competitive advantage, and fuel accelerated growth.
We have spent years designing, developing, and now delivering a comprehensive portfolio of unified solutions to one, managed, support, customized, and figure, and next.
Protector, Monitor, and Optimize Enterprise Application, Data Base, and Technology Software.
The company assigned and successfully delivering on thousands of contracts.
Seth: with Fortune Global 100.
Seth: Fortune 500, mid-market.
Public Sector and Government Organizations.
Seth: who selected Remini Street as their trusted, proven mission critical enterprise software solutions provider.
Seth: We achieved success by providing excellent response of service around the clock.
Replacing the software vendors annual maintenance contract and significantly lowering our clients' costs, resources, and time needed to support, manage, and run their mission critical ERP financial, HCM, and CRM systems.
We also provide support for infrastructure software like databases, middleware, and VMware. We'll also extending useful life of all of these systems and software for 15 or more years without any need to perform costly, risky, and low value upgrades or migrations.
We also assist our clients with innovation projects that include AI, automation, workflow and application modernization.
Seth: New Strategic Partnership.
During the third quarter, Bill McDermott CEO, Chairman of Service Now.
and a former fierce competitive rival of Remini Street at SAP CEO.
and I agreed on the vision for a new enterprise software model and assigned working teams to flesh out the details of the model and the partnership.
Seth: The model of partnership we're officially announced by Bill McDermond on the service now rings call and in a press release they issued on October 23rd, 2024.
has billed McMurray and shared in service now announced for a press release.
Service Nails Partnership with Remini Street is customers and more unified, intelligent platform to maximize the existing software investments.
for Fasted Paths to Transformation. Together, we are enabling a brighter future where technology unlocks unprecedented potential. End quote.
Seth: The Partnership Delivers and Exclusive Enterprise Application Modernization and AI solution for existing SAP Oracle, in-for and Microsoft ERP and other silos software that provides quote transformation without disruption and quote.
To answer our no-required, costly upgrades, migrations, a replatforming.
Seth: So that's as an SAP, ECC, or S4 Sonak Cloud, or on-premise migration, to S4 Honor RISE. Which we believe will help clients achieve significant savings, derive immediate business transformation value and ROI.
With this new solution for mini-street will, design and deploy a new service now layer over and across existing ERP, SaaS and other software supported by ReminiStreet.
and that siloed systems in data. The liver powerful enterprise AI and an integrated quote single pane of glass and quote view of an organization that provides actionable operational insights and enhances competitive advantage.
Implement Intelligent Workflow's and task automation that increase productivity and reduce labor requirements.
Seth: Offer users, new, modern screen and mobile capabilities, interactions and experiences, and further extend the useful life span of existing ERP and other software.
With this new partnership, we will not only be a client's global one-stop shop for operational and cost optimization.
that helps maximize the useful lifespan of an organization's existing ERP and enterprise software portfolio. But we will also be their global partner to design, deploy, manage, and support the service now layer of the integrated solution.
As the client's soccer portfolio changes over time, to include a high-gridive new on-premise, cloud and SaaS software.
We find to support the new Enterprise Software and Adjustment Service now layer as needed to integrate the software landscape changes.
2024 Q3 activity in results.
Dales during the quarter included a mix of our services and solutions, including our new support for VMware. We also achieved improved new local acquisition sales, including major brands, and delivered 19 new client sales transactions in the quarter with TCV over 1 million.
Seth: Additionally.
The Spice Headwinds from our Oracle PeopleSoft Services Wandown and the termination of several large renewal agreements in Q4, 2023 and Q1, 2024 that led the negative year over year quarterly revenue growth.
We believe our focus on fielding the right sales and marketing team, organizing around the right go-to-market strategy and managing with the right leadership team was reflected in the 7.7% year-over year improvement in quarterly billings.
The Billings Improvement included solid results for contract renewal and extensions and professional services and the Billings Improvements were led by the North America and Asia-Pacific regions.
We were pleased that our full complement of sales and marketing organizations demonstrated an improved teaming approach during the quarter and they were intensely focused on driving more leads.
Building more pipeline and closing more business through detailed methodical sales discipline and execution.
Seth: Oracle litigation update.
Remini Street in Oracle have been in litigation for nearly 15 years, including cases known as Remini Wan and Remini II.
Seth: With respect to Ravin 1, which was filed by Oracle against Ravin 3 at 2010, litigation is run its course and there are no current litigation activities related to Ravin 1. However, there is a remaining one permanent injunction that remains in effect.
Seth: With respect to Ravin II, which is filed by Ravin Street against Oracle in 2014, there are currently three post-trial litigation matters each before the court of appeals.
1. Appeal of the remaining two findings and the remaining two injunction.
Seth: 2. A motion to further stay the remaining two injunction, panning a decision on Reminis appeal of Reminis II injunction.
and three, appeal of the district courts award of $58.5 million to Oracle for attorney's fees and costs related to the remaining two findings that are on appeal.
With respect to the remaining two merits, a PL and a PL of the remaining two injunction, briefings were submitted prior to oral arguments and oral arguments were made before the third of the PLs on June 5, 2024.
Seth: As a day to this report, the Court's decision is pending.
With respect to the Oracle Attorney's fees in cost of PO, we filed our notice of a PO with a quarter of a POs on September 24, 2024, and our opening brief is due on January 21, 2025.
On October 22, 2024, we paid Oracle the $58.5 million fall in compliance with the port order. As is the day to this report, the company's appeal remains pending.
Seth: Traditional Information and Disclosures regarding the company's litigation with Oracle. Please see our explosions in the company's quarterly report on Form 10Q filed today, October 30th, 2024, with the US Securities and Exchange Commission.
Please also note that at this time.
We are still unable to provide material additional information beyond the disclosures and statements in our press releases, filings with the SEC and court filings.
Nor provide guidance for their spectacuture financial results. Nor are we able to provide additional commentary related to the pending or proliferation and potential impacts of the remaining two injunction, because the matters are still before the court and the outcomes cannot be predicted.
Seth: Summer.
We are pleased with our third quarter execution, then lead to an upticking performance compared to the prior two quarters.
We remain confident that we are continuing to take the right actions and making the right investments to accelerate a return to growth and profitability enhance shareholder value and bring our litigation with Oracle to a successful conclusion.
Seth: However.
If for mini-street does not adequately reorganize its operations to optimize costs, or does not ultimately prevail in the post-trial litigation matters, summarized above in detailed and RSCC filings.
It could have a material adverse impact on our business and financial results.
Now, over to you, Michael.
Michael: Thank you, Seth, and thank you for joining us everyone.
Ducary 2024 results.
Ravin is for the third quarter 2024, was 104.7 million, a year over year decrease of 2.6%.
Clients within the United States represented 49%, while international clients represented 51% of total revenue for the third quarter 2024.
Seth: Analyze recurring Ravin, was 415 million for the third quarter. A year of a year decrease of 3.6%.
Revenue retention rate for service subscriptions, which makes up 96% of our revenue, was 89%. With approximately 78% of subscription revenue, non-canfulable for at least 12 months.
Seth: The Seth Nodian, Billings for the Third Quarter, where 65.2 million compared to 60.5 million for the prior year at Third Quarter, an increase of 7.7%.
Gross margin was 60.7% of Ravin for the third quarter compared to 62.7% of Ravin for the prior year at the record.
On a non-gap basis, which excludes stock-based compensation expense. Gross Martian was 61.1% of Ravin for the third quarter compared to 63.1% of Ravin for the prior year third quarter. Gross Martian, however, increased.
160 basis points sequentially and for the first time exceeded 60% in a quarter this year.
Seth: We are pleased with this result, Varshtra, teaching focus on driving operational leverage through improved systems, processes, and global staffing models while continuing to deliver best in class support for a wider array of software products.
Despite our methodical focus on gross marching improvement opportunities through efficiency.
Seth: We will continue to balance gross margin improvement against investment needs to take advantage of new revenue growth opportunities in initiatives such as our nascent services for VMware and service now.
Seth: Operating expenses.
Seth: has noted in our previous learnings call.
Seth: We initiated and continue to execute a cost optimization plan to reduce our net operating costs by $35 million on an annualized basis.
Seth: measured from Q1, 2,024 to Q1,2,025.
So the implementation of this plan, approximately 14.9 million of net annualized reductions have been achieved.
For the third quarter, the reorganization charge is associated with this cost optimization plan was 1.4 million. We expect to incur additional reorganization costs during the fourth quarter of 2024 as we continue to optimize our cost structure.
Sales are marketing expenses as a percentage of Ravin Ew, with 34.2% of Ravin Ew for the third quarter, compared to 33.1% of Ravin Ew for the prior year at the Ravin Ew.
Seth: On a non-gant basis, which excludes stock base compensation expense. Sales and marketing expenses as a percentage of Ravin, it was 33.6% for the third quarter, compared to 32.4% of Ravin, for the prior year at the third quarter.
General and Administrative expenses as a percentage of revenue, excluding outside of litigation costs.
was 15.8% for the third quarter compared to 17.1% of Ravin for the prior year at the third quarter.
Seth: On a non-gap basis, which excludes stock-based compensation expense and litigation costs, GNA was 14.6% of Ravin for the third quarter compared to 15.4% of Ravin in a further prior year at the record.
The decline is due mostly to the cost optimization initiative we amassed during our Q2 2020-4 earnings release.
However, GNA expenses as a percentage revenue are expected to remain elevated compared to our peers due on large part to the ongoing cause for in-up sleagle.
and Compliance Teams, another cost made necessary by our ongoing or political litigation and compliance activities.
Seth: Presumable Fees
Seth: and other cost of litigation was 879,000 for the third quarter compared to 2.1 million for the prior year at the third quarter.
Seth: As Seth addressed earlier, there was a litigation expense accrual of 58.5 million in the third quarter that represented the court-ordered reimbursement to Oracle for their attorney's fees in costs related to the remaining two case.
Seth: This amount was paid in full on October 22, 2024.
Our non-gap operating margin, which excludes outside litigation spend and stock-based compensation, was 12.8% of Ravin for the third quarter compared to 15.4% for the prior year at the third quarter.
The Net Law's attributable to shareholders for the third quarter was negative 43.1 million or negative 47 cents per diluted share. Compared to the prior year, third quarter net income of 8 cents per diluted share.
Seth: On a non-gap basis, net income for the third quarter was 19.9 million or 22 cents per delude share compared to the prior year third quarter of 13 cents per delude share.
Adjusted EBITDA defined in our press release was $13.7 million for the third quarter, or 13.1% of revenue compared to the prior year third quarter of 17% of Ravin in.
We ended the third quarter September 30, 2024.
with a cash balance and short-term investments of 1,19.5 million compared to 128.1 million of cash and short-term investments for the prior year third quarter.
on a cash flow basis.
Seth: for the third quarter operating cash flow decreased 18.5 million compared to the prior year quarter decrease of 8.1 million.
The Ferd Ravin has of September 30, 2024, was 223.3 million compared to deferred revenue of 238.4 million from the prior year third quarter.
Seth: Back long.
Seth: which includes the sum of bill deferred ravinion and non-cancellable future ravinion was 574.6 million as of September 30th, 2024 compared to 550.1 million for the prior year, third quarter.
As noted in our previous series call
The company announced that it would wind down services for local people's soft products and began to wind down project in the third quarter.
The WINDOWN includes the company's Raminini Support, Raminini Management and Raminini Consult Services for Oracle People's Software Products.
Seth: As the company provides services for Oracle people's soft products to clients globally, the process is expected to take place over several phases.
We expect significant reductions in Oracle People's Software later, Ravin, over time, but it is still unclear when the company will be able to cease providing all Oracle People's Software.
Ravin, who related to providing services for Oracle People's Soft Products, the count of four approximately 24.9 million, or 8% of Ravin in for the first nine months, and it's September 30, 2024, and 27.6 million, or 9% of Ravin in.
Seth: for the nine months and its September 30th, 2023, respectively.
Seth: Business Outwork.
The company is continuing to suspend guidance as to future financial results until there is more clarity around impacts from current litigation activity before the US federal courts in the company's ongoing litigation with Oracle.
For additional information in disclosures regarding the company's litigation with Oracle, please see our disclosures in the company's quarterly report on Form 10Q, filed on October 30th, 2024, but the U.S. Securities and Exchange Commission.
Seth: This concludes our prepared remarks operator.
Speaker Change: will now take questions.
Speaker Change: Thank you ladies and gentlemen we will now begin the question and answer session. Should you have a question, please press star followed by the number one on your touchstone phone.
He will hear a prompt that your hand has been raised.
Speaker Change: The Jewish Head declined from the polling process, please press star follow the number 2.
Speaker Change: If you are using a speaker phone, please lift the handset before pressing any keys.
Your first question comes from the line of Brian Kint slinger from Alliance Global Partners. Their line is now open.
Great thanks, I got a handful of questions. The first you highlighted completed portion of your post-cutting objectives.
and you expected that to be completed by the end of the first quarter of next year, I think you said. So, will the remainder be in the fourth quarter or will some of that also occur in the first quarter of next year?
Speaker Change: Brian, it's Michael here. We are planning and expect to complete the plan by the end of the current quarter cue for.
Speaker Change: Such that you should see in the first quarter of 2025 the appropriate comparison to the high watermark Q1 of 2024.
Speaker Change: Okay.
and then...
That was a long, a lot of jargon related to the service now partnership. Are you able to concise this for I but the role is that it was a bit confused.
and then can you help size or manage expectations for this new offering in terms of short, medium and long-term revenue objectives?
Speaker Change: Hey Brian, Seth, of course you've got a bunch of questions. Liz and in terms of the service now, I know it's an important partnership. We have a...
Combined set of products and services that we're going to bring together into a unique solution.
Speaker Change: The bottom line is, where many streets doing all the work.
We have a service now team in our center of excellence that will deploy the service now layer over and above.
The Remini Street Products, and we're supporting, so whether that's in SAP, ERP, or in Oracle ERP Products.
A long with other enterprise products are using. We'll put the service now layer over it. We will do all the work to connect and design the layer and the connectivity to all those other products. While we're managing all that software underneath.
But we're not changing our business. Our businesses think of a layered take. First layer, we'd replace the vendor maintenance.
The second layer, we run the systems with AMAS and we have security and interoperability and consulting and observability products. Then we now have the service now layer that goes over the top, think of it as icing on the cake.
We're doing all the work, all the laborers, our professional services, and the licenses will actually be sold directly by service now or one of their partners. We don't resell the licenses.
Speaker Change: [inaudible]
and in terms of this second half of that question, how fast is this ramp? Is it gonna take a lot of time? Like, some of your other solutions have, is it gonna be more quickly? How do you think about that?
Well, I think we're going to move into it. It is a complicated set of pieces that have to come together.
Speaker Change: So I think that what you're going to look at is it'll take us the rest of this quarter. We're setting up environments, we're building out demo environments of the solution. That'll probably take to the rest of this quarter. But we are simultaneously already in the process.
Speaker Change: With many different prospects.
of going through the architecture, beginning the sales process. Lots of interest are ready. We have a lot of inbound requests for people to learn more about the solution.
because it is getting a lot of airplay with the analyst.
As you've seen from Constellation, Gardner, Forrest, there are some very, very nice comments about how we're clashing all the issues and challenges people had about moving to third-party support. Now we have the solution that jumps ahead of replacing ERP.
Speaker Change: goes ahead gets to the where people want and enterprise.
I, you know, I, you know, I, I've got all sorts of things going on that are parts of solutions that are not the same as where they would get to just by going to an SAP rise or another type of migration. So lots of lots of good interest. So I think we're often running in sales.
I think you could see things happen as early as the end of the year or even early next year.
Thanks for more for me going to get back in the queue. The first is when you've introduced new services and you even alluded to this, it had some pressure on your gross margin. Michael, can you talk about?
and have you yet to hire? We see that in the third quarter for this new offering and or VMware and what might be the impact of these new businesses on your gross margin in the short term.
Bryant, it is early in the investment. However, as I noted in my prepared remarks.
Speaker Change: We are managing our mix, we are managing our investment in the timing to make sure we can deliver an acceptable growth margin. However,
Your notion is accurate that typically in the earlier stages of new offerings, it does have a lower than the overall corporate average gross margin.
Speaker Change: Okay.
and then my last question relates to cash loan EBD.
You haven't made the payment as it's too horrible as it stands on the third quarter numbers. So I guess I'm wondering, including that, if I look at cash robbers as you'd be got.
There is a major disconnect. So can you walk me through the challenges on cash over the last few quarters?
So Brian, we see a typical pattern and we have experienced that in calendar 2024 to date. On the first half of the year we typically generate based on our cycle of our invoicing contracts, etc. Cash flow and we burn in the second half of the year.
of course as you noted and you recognize since the payment has gone out on a timely basis that will be a drain to the current quarter cash flow.
Brian: Okay, thanks.
Thanks for that.
Your next question comes from the line of Jeff Van Rie from Craig Hallum. Your line is not open.
Speaker Change: Great, thanks guys. I'm up all for me. First, Seth, on the Billings number now, you know, a couple quarters of...
of Good Bill and I'm Billing Scroll, I'm in positive numbers.
You know, Q4 obviously you just referenced Michael just referenced the seasonality. How do you, I know you're not going to give me a formal guide, but Q4 is a big building's quarter. Are we still looking at realistic scenarios where you can post another positive building's growth quarter?
I don't see anything that would be a reason we couldn't post a positive billings quarter of course.
And now you look at where we've been over the last few quarters, our focus is of course.
Looking at sequential numbers, based on quarterly ups and downs as we expect in seasonality. And I think that from a Q4 perspective, we've been pretty clear that our pipelines, we've been firm, you look back and what I've mentioned, the 19 deals and TCV over 1 million.
I think that was some good numbers. I think we're seeing solid numbers.
The number of offerings that we have creates the distribution of revenue opportunities.
and I think from a global perspective and I'm sure you noted that North America was listed in our prepared remarks as one of the areas where we saw growth in that 7.7% of buildings.
and as we all know, the story for Remini Street has been a challenge.
Speaker Change: over the last few years in North America, 50% of our revenue generating engine, not performing anywhere in here where it needed to be, causing the kind of challenges we've had on the top line and of course, in the business growth.
So the fact that North America is notable that we saw some good, good buildings grow at the North American C3.
Speaker Change: Yep.
and then on the retention, correct me if I'm wrong but I think the retention number while it was up is a trailing 12 months number. So it gives you some read but it tends to be a very serious lag. I know you had some turn events.
and later in the year last year into this year, what given that number is kind of a trailing event, what did you see this quarter and what are your customers telling you over the next few quarters and what does that tell you about how this overall retention number is going to trend over the next several quarters?
Well, I think what we've seen is, you know, we've indicated that in Q2 and the QNL that we saw.
Speaker Change: A studying of the number that that truly...
Speaker Change: We had a few one-time events that were pretty large and contracts that ended in the Q4.
Speaker Change: and Q1 Period.
Speaker Change: that we didn't see a trend in Alice. And of course, that's what everyone was watching for. Was this the beginning of a downward slide in retention, or were these truly one time, some big bites that we had to take?
and I think we've proven over the last few quarters that that stability has held.
that if you take our current Ravin U number for Q3.
and you subtract out the revenue flow through loss from that Q4 Q1.
Speaker Change: and you add in there the people soft wind down from the third quarter.
We actually would have been positive in revenue growth for the quarter. So I think it's really important. And that's why we mentioned it in the prepared remarks. I think as we try to figure out how to express this Jeff going forward.
Speaker Change: We thought it was kind of helpful to break out sort of that flow through from those one-time events in the renewal side.
Coupled with breaking out, you know, the people soft wind down.
and I'm going to say, if you did take those out, you can see the true ongoing business.
Our number show we would have been a positive.
Speaker Change: and Top Line Growth for the quarter. And I think that's important. You add that plus the Billings growth. And I think you get it. You get a better feel for the business.
Of course, answering the question is, is the business in a turnaround state? Have we bottomed and are we moving ourselves back up the curve? And I'd say we're, you know, we're mildly optimistic that we think we've made that turn where at the bottom a plus, up a little bit.
Speaker Change: and I think that's what the numbers are showing us. Now we need to show that consistency coming into the fourth quarter to show what's trending and it wasn't just a blip.
Speaker Change: [inaudible]
and the Coss Control measures trying to drive margin, trying to drive cash flow. At the same time, you've been pretty aggressive on the sales hiring. Where do we go from here? Is this kind of a plateau? Is that hold its own? Does that number get thinned to some? What do you think about sales headcount?
Well, the interesting thing about the numbers, Jeff, for the third quarter, we were nearly 100% QCC against sales.
That's really good. The first half of the year we were about 50% of QCC.
So I think that again, performance wise, that shows where we were right about the right number of sellers.
Speaker Change: 72 73 heads.
Some of those of course in ramping stage because they're new, but those numbers I thought felt really good.
Speaker Change: So we'll continue to watch that. We're going to squeeze the sales engines further. We believe we can get more leverage out of it. You saw the gross margin up on that side of the house over 60%. So I think, you know, it...
Speaker Change: We're seeing that all the numbers in metrics are moving in the right direction.
I think we've got a little trouble in Europe, we've got some trouble down in ANC that we have to work on. But I just think the fact that we're seeing North America.
Come up with some good numbers, some solid numbers, complete change of leadership. Steve's doing a great job at CRO.
really driving a sense of urgency through the sales force.
with a weekly commitment culture. We've removed everybody who we thought was getting up at 9.30 in the morning and quitting at 3.30 in the afternoon.
Speaker Change: I think we've really got a much more energetic focus team with a lot more discipline. We moved Kevin Maddock back from leading the renewals team back to leading North America. When he last ran sales, we had 30% average...
Speaker Change: Broke the...
I'm sorry, above a attainment, 130% attainment.
and the sales force. We're seeing good things with the discipline he's returning to that team.
Speaker Change: So we've got a lot of things moving into position and I think there's a reason to be optimistic that we are, in fact, either at bottom and slightly up from it coming up the other side.
and the last for me that I'm on the service now.
I think it was helpful to get a sense of the timeline. Based on the customers who said you're in customer discussions,
and I'll talk about how fleshed out is this vision, talk maybe in a little more detail about the customers' reaction. I mean, the vision's one thing, but what's the reaction that was far?
I think the reaction has been excellent. I've actually been out.
In many, many executive calls for two months. We've been working on this for, as we said, most of the third quarter.
Speaker Change: and we've been out positioning it unofficially for a couple of months.
and the response is excellent.
Speaker Change: The idea that people can jump ahead to Enterprise AI, but they can get this single pane of view, a glass of the Enterprise across systems and out of silos.
and really Jeff, one of the biggest reasons people move forward besides pressure from the software vendors.
To move forward with these huge massive upgrade Ravin replaced projects.
Speaker Change: has been the fact that their users seem to believe that the systems are quote-old.
Speaker Change: Because they don't like the UI. They're used to these modern phone UI, so used to be enabled to use mobile to do a lot of tasks and jobs. The world has changed since a lot of these software products were rolled out 10, 15 years ago.
Functionally, they are absolutely excellent and they can run for a long time.
But if your users have this impression that it doesn't connect with that well at the user interface level at the UX level
Imagine if we can streamline that by putting the service now UX layer across the top. So they're working with this beautiful new UX that's got mobile capability.
The users think they're working on a brand new system, but underneath it is the same system that doesn't have to be replaced, think of it as remodeling the house.
Speaker Change: and so this is really interesting to customers because I can remodel your house. I can get you enterprise AI. I can give you enterprise level workflow across systems.
I can give you automation. I can give you all these things without having to do the big ERP upgrade. I can leapfrog you potentially five years ahead.
Without all that risk-post and distraction.
Speaker Change: and give you value.
Speaker Change: Five years faster than the other guys can and do even more than they will even when you're done with it. So this is why it's so interesting to clients.
I think it's going to be a very significant opportunity.
I think the number of thousands of clients just left for example that haven't even done an upgrade or a migration yet on SAP. All of those Oracle customers and you may have noted that we mentioned in for and dynamics on Microsoft.
These are a huge customer group that are interested in this.
is just on clear on the revenue model. The abstraction layer or the license for that piece that you're developing gets sold by somebody else. That's not relevant to your revenue to you, I should say. So your revenue play is you're offering the support layer in the managed services layer. The abstraction layer is sold by somebody else.
Speaker Change: and then service now layers on top of that. Is that the right way to think about it?
That's correct. They get the licenses, we're not involved in the licenses and we do all the service and all the subscriptions and we build it all and manage it all for years and years to come.
Yeah, okay, great, I'll leave it there. Thank you.
Speaker Change: Sure.
A set of minders, if you have a question, please press star warning at telephone keypad.
Your next question comes from the line of direct wood from TD Cowan, your line is now open.
Hi Dean, this is Jared Onford, Eric. I just curious to be you at a little more color on the impact from people soft in the quarter and then maybe some expectations were in the majority of this revenue of blinded down in the future.
Good question there and good to have you on the call too. We're also looking at...
Understanding the tail and how this will wind down over time.
We do have a substantial number of contracts and because we said somewhere around 170 contracts.
All with varying lengths of commitment.
and that's why we said we're not really sure yet when we're going to be able to say we will completely stop servicing people's self product. However, we did shut off.
would we made the announcement we shut off taking on a generally new clients and new people soft business. So that was the first phase. Second phase was working with and contacting all the clients.
to let them know that we want to be in a wine-down phase.
Start talking to them about what their plans are about moving, of course, a number of them already have next generation thoughts.
Speaker Change: and where they might go and at the beginning of that dialogue and we've been doing that. So everyone's been notified of our intent and desire to to wind down the line, but no, I cannot give you an exact revenue fall off rate or water fall when that revenue will fall. We just don't know yet.
and many different customers, very different plans and a lot of them didn't have plans to make movements yet. So we're just beginning those discussions and talking about how we can help them accelerate or make those adjustments.
Okay, I appreciate that color. And then on the VM where business, how is this stolen relative's your initial expectations? And maybe walk us through the out-catell loose-up when what drove them to select or need. And maybe some of the cost advantages from this solution compared to.
May be your FATR, other solutions.
Thank you. Sure, so the VM wears often running. Again, nice pipeline with that business. It takes a while. I mean, this is an important layer in the IT structure.
and because it's a mission critical layer, we have to go through a lot of discussions with the customers we have to go through with their engineering teams.
Speaker Change: and we're spending just as much time helping them try to understand what are their options. Again, in a lot of ways we're helping them by time and optionality.
and in order to do a few different things.
1. Potentially renegotiate with VMware eventually regarding their licenses.
That's one option. Second, looking at other options like Nutanix and other solutions. The problem is for some of these clients, they're so large and they use so many in a thousand copies of VMware.
Speaker Change: They have to go through a testing cycle, a POC cycle, to prove out any of these other solutions to make sure they're comfortable. And that, in this process of building...
Test Enviroments, running those tasks, and if you choose one, then you're going to have to negotiate contracts, deployment, to take a while. It could take a few years.
and to make a change to a different platform.
Speaker Change: So we're offering up the five years right now for initially, for customers to have this opportunity to just get out from underneath being forced into a massive...
Speaker Change: Contract Price Increase, that includes the change, the subscription, some customers are getting bills, they reportedly tend to 12 times what they were paying before, and we're offering to do it for the same price that they're paying right now.
Speaker Change: and so it's going well. We're doing, we're supporting customers in all continents today all the way up to banks and financial institutions. So we're working in all different types of industries and it's going very well. Customers are very happy with the service.
Thoughts, get to hear all that color. And then on last one for me, that was encouraging to see the 90 new clients quarter over quarter. Just any call out to me, Mike, let's drive in that strength.
Well, I think again, a new focus back on new logos and I think we talked in prior calls about the challenge when you open up a whole bunch of new services and you put those in your sales reps bag.
Speaker Change: It's very common for them to want to take those and now they run back to all the existing customers wanting to cross sell all those new services that they didn't have before because we all know the cross sell traditionally is an easier sale than going out and getting a new client.
and so people follow easier money and the sales reps did exactly that. They went and they were spending a lot of time.
Speaker Change: Who much time trying to cross the existing client base with new services? Okay, that's nice. But the problem is that was at the cost of going out and getting new logos.
Speaker Change: and so we've put a bunch of new things in place. In fact, we just changed the sales force so that we've restructured our go-to market. We're in North America, the field sales force is only going to so focus on new logos.
Once they sell a deal?
It goes over to the new team, the farming team.
Speaker Change: which will then take it from there and they will do the cross-cells going forward.
So that is a huge change. We are determined.
to get back to driving large new logo acquisitions. And we've done that by adopting a split sales team where that field sales team is only going to focus on new logos.
Awesome, appreciate all the color.
Speaker Change: EZ?
Speaker Change: There are no further questions at this time. I will not turn to call back the chat, Ravin. Please continue.
Ravin: Great, thank you everybody for joining us for the call.
We appreciate that and look forward to any further questions, please do get them over to Dean Pohl.
Ravin: are head of IR.
You can do that follow the instructions on the website.
Speaker Change: Once again, just always our thoughts with those in conflict zones and those having to really be in a real challenging environment.
Speaker Change: There are many in harms way and our thoughts are always with them as we are lucky enough to most of us to not be in that position. So thank you very much and have a great day everybody.
Speaker Change: Thank you. Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.
Speaker Change: [inaudible]