Thanks for joining. Welcome back to the 25th annual Needham Growth Conference. I'm Matt Calitri. I support Mike Cikos on the infrastructure software team here. We're glad to be joined by Seth and Michael from Rimini Street. Just as a reminder, there is a live chat function, so to the extent that you guys have any questions, feel free to throw those in. I'll be happy to get to it, I'll turn it over to you guys.
Thanks, Matt, and again, good to be with everybody here at the beginning of 2023. Some of you may have been following the company for a while, and others of you may be new. We'll walk through a few of the basic foundational facts about the company, talk about our products and services, the market dynamics that we face and the opportunity, and then we'll walk through some of the financial metrics with Michael Perica, our CFO. We'll go ahead and get started here. When you think about the company, we have been around 17 years. We are a public company since 2017. We have over 1,800 employees operating in 21 different countries, and we have over 3,000 active clients.
You can see that our five-year CAGR through the end of the Q3, which is the last financials that we have released publicly to date, with a CAGR of about 19%. We have a very diverse set of services that provide us, diversity even in industries that we serve and the geographies that we serve, with roughly half of our revenue coming from the U.S., the rest coming from, various countries around the world. What we do is we are an IT services firm. We are a boutique IT services firm that provides some very unique services when it comes to replacing vendors' annual maintenance support, as well as providing other services that clients need to run enterprise software today.
We primarily service Oracle, SAP enterprise software products, but we also service IBM, and we service just about every major open source database platform, and you can see all those different logos down here onto the left. I'll get more into the products and services that we serve shortly. Again, if you take a look revenue by industry, again, extremely diverse between service businesses, manufacturers, all different industries around the world. We also service over 180 of the Fortune 500 and Global 100. Most of our clients are large to very large publicly traded entities or government entities that we service around the world. The management team all come out of the companies that you would expect with longevity, the Oracles, the PeopleSofts, the SAPs, the Accentures, the IBMs.
These are the backgrounds of our senior executive team, who many of whom have been running the business for many years. Some of them are a little bit newer, like Jeff Spicer, who joined us, who was over at Oracle, is now our CMO. Of course, Michael Perica, who joined us in the last few years, to help us on our path to a multi-billion dollar revenue. Again, very diverse, very accomplished management team that understands enterprise software space, backwards and forwards. The, especially the maintenance business, which is of course a multi-billion dollar business, $20 billion a year for Oracle today and roughly $15 billion for SAP, which represents a significant opportunity for Rimini Street moving forward.
Let's talk about the business challenges that we tackle for companies and the solutions that we bring to the table. We have really these four categories of business challenges today. The first one is really helping companies maximize the return on their investment. This is critical because this is an optimization function that provides additional capital and resources that were wasted in certain enterprise software operations that we can then apply to other projects or higher return projects for companies. You know, you can see here a sample of a business statement alone. This is pretty common for us, and just some samples of companies that we help in this arena. Obviously some very well-known ones such as T-Mobile in the United States and Iguatemi in Brazil. The second category is agility and speed.
Companies must be able to anticipate where their customers and the markets are going, and things are shifting quickly. Those that cannot adapt their infrastructure and environment to meet those needs will not be able to maintain competitive advantage. You see this a lot in retail, where you have to anticipate where the market is going because you have to, you have a long supply chain and ordering process to make sure that you have the right goods that customers are gonna wanna buy. You have to have the analytics, you have to have the data to be able to make those good predictions of what the customer wants down the road. You need to be able to move quickly to provide it or you'll be left behind. Again, a couple, well-known clients of ours, Petco and NTT out of Japan, on a global basis.
You have the customer experience. This is where if you're not delivering an exceptional experience, you will not lead the market. And if you're a leader and you do not have that experience, you will not remain the leader. Very important that you be in tune and have the systems and IT focus to deliver that customer experience. You can see that in rapidly changing markets, and here are just a couple examples. PSEG out of the Northeast, for those of you who are in the New York area, as you know, a very large energy company. We provide the support for their large SAP billing systems and all their internal operations there.
These systems, for example, are being modified right now to be able to handle smart meter technology all throughout the Northeast, millions of smart meters which will send data back to PSEG. Rimini Street is not only running the systems there in terms of the SAP and the billing systems, we are also providing the support, and we are doing the professional services to change those systems to be able to adapt and take in data from smart meters. We're helping to keep the evolution and innovation into their systems and keeping them moving forward. People like HSBC on a global basis, turning over their focus on HR systems to Rimini Street in 100 countries so that HSBC can focus its IT team on its internet banking app, which it needs in order to compete with all the other internet banking apps.
If their banking app is not the best or it's difficult to use or consumers don't like it, they will very easily just move their money to another banking platform where they do like the interface and they like the application. These are critical, again, for the customer experience, and that's where Rimini Street's able to help. In the world of security, privacy, and compliance, this is mandatory spend by everybody, and an increasingly and growing portion of the budget has to be devoted to this infrastructure. Rimini Street offers people like Goodyear and Hull our own security solutions that are far more cost-effective and far faster at protecting thousands of databases than the vendors' security protocols and other solutions in the marketplace.
Again, we can help meet those security needs for customers, along with compliance, such as our tax, legal, and regulatory services, which we believe are the most comprehensive available on the enterprise platforms. The business challenges that we solve really fall into sort of five categories. As we mentioned in the last slide, reducing our total support and operating costs is one area we help customers. We improve the enterprise application management outcomes. This is where we can run the systems for the customer because they can't find the right resources, they can't staff their systems, they can't get those systems under a cost model that works. Rimini Street can do that by running those systems and supporting those systems for the customer.
We will also help a customer, for example, move their existing systems up into a cloud environment like AWS, Azure, or Google Cloud, which would allow them the public cloud benefits of reducing the cost of managing their own data center, improve performance likely, and allow Rimini Street to run those systems and manage the entire operation remotely. Public cloud usage. As many companies have discovered, just moving to the cloud does not solve a cost problem. In fact, in many cases, because of the way they're using multiple clouds, they're using integrated clouds, they're finding that the bills for the cloud operations are exceeding anything that they had budgeted, and they're having real cost management issues. Rimini Street can help them manage those cloud operations for efficiency and optimization.
Of course, there's the licenses themselves, where we can help customers optimize their licensing to make sure that they're not paying for more license than they actually need, and we make sure they're getting the right licenses for their operation. The combination of the savings from these 5 areas, both in resources and in budget, allows the customer to reallocate those resources and that money to strategic projects and initiatives that they otherwise would not have the funding for. For those of you who remember Rimini Street years ago as just having this one box at the bottom, Support Services L4, and that's the ITIL scale, called L4, Level four, look at all the additional services we've built over the last few years.
We have been on a mission to build a robust, unified software support services arena that provides security, interoperability services, observability, including the monitoring, as well as our managed services to run those systems, all that on top of supporting systems. Then we expanded out our support coverage to more products around the world in different regions, especially even ones that are local to a particular country, and that's given us a broader base in which to sell against and grow the business. You can see the supported platforms down below. We service customers in all license models, perpetual, which is often called on-premise, both SaaS models with our Salesforce, for example, and open source products like open source database.
We now have a very comprehensive set of solutions that we've built out over the last few years and are now available to all customers. When you look at sort of the Level three, Level four, and Level two and three without getting too technical, what I wanted to show here was that Rimini Street started off on this top Level three and four. We have added Level two and three. That's the new application management, along with our security products, along with our interoperability products, along with our observability products, and our professional services. We now have all of these solutions surrounding these core product groups.
We have a very unique offering in the marketplace where we bring together parts of the solution that you would see coming from a traditional SI, and we marry that up with solutions that you would see coming from traditional software vendors. We pull those together and create this industry-unique service bundle that's only available from Rimini Street, and we're the only people at scale on a global basis that provide this kind of integrated service offering to clients, which they consider extremely valuable. The TAM alone, just for this ITILs Level two, three, and four, our core products, not even including the security, the interoperability, the observability, and professional services, is north of $29 billion of addressable TAM just on the products we're servicing today. We believe that that is still a conservative figure relative to the total TAM that we believe we can service.
You can see how that breaks out between support and AMS alone in that $29 billion. We have a huge runway when you consider the fact that today, we're near the $400 million a year annualized run rate revenue, that we have a huge amount of growth opportunity just in our core markets alone. I think one of the most important takeaways when you think of the huge new TAM for Rimini Street, when you look at the size and the scope of our wide breadth of offerings, is the truth is now that just about any organization with revenues or budgets over $200 million likely has some opportunity for Rimini Street to sell them products, services, and solutions for their enterprise software platforms.
That is a hugely broad funnel that we're allowed to go after because our products are now available in all these different markets, and they range, some of them as low as $10,000 for a security solution. We could, in many cases, go even below $200 million in annualized revenue and find customers for those solutions. This gives you a very broad understanding that Rimini Street's portfolio has moved from very specific targets to now being very broad-based in terms of how we can help customers in the public sector and the private sector.
Our growth drivers, we have tackled in every direction, expanding to new countries, adding new products, adding new licensed products that we've built ourselves and have patents on, expanding to new clients, and growing our footprint with existing clients with our upsell, cross-sell capability, which we've continued to expand as you've heard on the earnings calls. We continue to focus on all the different areas of growth drivers because all of them, we believe, represent significant opportunity to drive us into the multi-billion dollar revenue arena. The competition varies by the products that we service. When we're talking about the support where we replace the vendor's annual maintenance, it's generally us versus the software vendor on a global basis.
Of course, for Oracle and SAP, as Gartner notes, we have more than 86% of the world market share in alternative maintenance providers compared to the vendor. On Application Management Services, a completely different set of competitors. All the names you're used to, the Capgeminis, the Cognizants, the Tatas, the Accentures, the Infosys. We compete with them very differently than we do on the support side, and we're continuing to grow our business in the AMS space against these players as well. Why do clients buy and renew their subscriptions, and why are they going to increase their footprints with Rimini Street? This gives you some segmentation here about some relating to optimization and reduced cost where we can help. Others are using the savings to fund and be able to work on projects that they otherwise could not get to.
There's no funding available. There's no resources available. As I mentioned, such as HSBC, where they're shifting resources from supporting and managing their operations on their enterprise software platform to be able to focus on the actual business tech, which is their application for business banking. For example, improving the ERP operating outcomes. How do we do that? With better talent, better deliverables that we can solve issues with where they don't have solutions. Our client satisfaction rating, which we believe is second to none at nearly a perfect score. Of course, an average response time where companies who rely on us on a global basis, down to military operations and top secret operations, where we are responding in less than five minutes on average with a guaranteed response in less than 10 minutes.
That's the kind of response rate that's needed for mission-critical global applications, both in the private and public sector. Rimini Street has a long track record of being able to deliver that along with the security-controlled components that we need, including security-cleared personnel. The way that Rimini Street looks at client success, we look at client success as our success. Our formula has always been if our clients are successful with Rimini Street services and we're helping them to achieve their strategic, operational, financial, and IT goals, that Rimini Street will be the winner.
We will get not only the renewal business on our contracts, but we will also get expanded contracts and responsibilities through the cross-sell, upsell, and we've seen that with over $6 billion of savings that we've helped clients repurpose, either back into profitability or back into projects that they needed to find funding and resources for. We've continued to expand out, again, serving many of the largest organizations in the world. Lastly from me before we talk about financials, for those of you who've known us for a long time, we are an amazingly community-oriented company. We have our own foundation, which is 100% funded and staffed by Rimini Street personnel and from our own revenues, and we continue to do work all over the world. Many, many different charities we partner with in every single region that we have employees.
We are very focused on giving back our success to the communities with a helping hand, whether it's children, whether it's elderly, whether it's those who are in need of shelter, whether it's pets or saving animals around the world and environment. We are active in all those areas and very, very proud of the work that we do in the area of charity. That's our team, and I'm gonna go ahead and turn it over. Michael, over to you.
Thank you, Seth. We can get to the next slide. Thank you. Here highlights some of the key operating metrics that we grade ourselves that is commonly used to evaluate our performance. On the top left, active clients. As Seth noted previously early in the presentation, just over 3,000 active clients as of the last reported quarter. This is a gross statement of work metric. We average around two statements of work per client, so from a unique client and/or enterprise relationship, you cut that in half. It's roughly 1,500. We disclose this in our SEC filing, so if one wants to see the trends on this, you can look through our filings.
Moving to the top right, our annualized subscription revenue, where we exited over $400 million as of the last quarter. Though we do have some engagement-based revenue, through our professional services, which is a growing component and key strategic component of our solution selling, we're still over 98% of our revenue on a subscription basis. Looking on the bottom left, our revenue retention rate, the 94% as over the last quarter, consistently above 90%. This is a gross revenue retention rate. The strength here does reflect our success, a key objective of ours on cross-selling, through our evolving solutions approach. Looking at the bottom right, the gross margin. As of last quarter, we see the decline, year-over-year, recent decline.
Function two part of, yes, increased costs relative to inflationary pressures across the board that we saw year-over-year, somewhat subsiding, and also investment in our new offerings, mainly on the managed services side, that is below the long-term targets for margin trends over the near term here. Next slide, please. Taking a look at our historical financial performance, as Seth noted, the 19% CAGR over the last five years. If we look at the far right column, our year-to-date Q3 2022 results, revenue's up 9.4% year-over-year. Still close to the double digits this year. We still have a robust overall gross margin, down 80 basis points, driven by the what I highlighted in the previous slide.
On the sales and marketing and the G&A side, we made a conscious decision to continue to invest in the business throughout 2022, despite some of the challenges we've had with regard to new bookings. We're ready and positioned well so we can capitalize on the many growth opportunities Seth highlighted ahead of us. Our adjusted EBITDA margin still, despite that investment, in the double digits as we see the 11.3% on a year-to-date basis. Next slide, please. Taking a look at the guidance, the $404 million-$406 million that we provided for the full year given roughly 8%-8.5% growth for the full year.
The gross margin in sales and marketing G&A, as I noted on the previous slide, conscious decision to continue the investment as planned throughout 2022. No substantial plans heading into 2023, as Seth noted on our go-to-market, we're positioning ourselves well for the reacceleration of growth. Our long-term model in the center, we certainly see the opportunity and really excited about our solutions approach to get our growth reaccelerate the growth to get north of the 20% CAGR range. See our gross margin on a blended basis with our solutions approach still staying with the six in front of it.
Feel the optimal model, there's always gonna be the good and the heavy investment because all of the opportunity in the sales and marketing, do see significant leverage to our model on the G&A line, allowing us to deliver a 20%+ operating and/or adjusted EBITDA margin. I do note that this is a GAAP. These are GAAP expenses here, you take out the stock-based compensation, the SBC that we break out on our GAAP to non-GAAP could give you anywhere 2%-3% incremental. We do see about 20% operating margins in the model. Next slide, please. Take a look at the capitalization. We're highlighting here certain diluted items. Of course, the standard options and restricted stock units, this as of the weighted average as of last quarter.
We do have 3.4 million warrants that are $5.64 strike price that were out of the money last quarter, but these are associated with the debt instrument that was in place previously that does have an expiration date out to June 2026. We see the line through the $11.50 warrants that were associated with the SPAC transaction for which the entity came public. Those have been terminated as of October 10th, 2022, so there is no dilutive effect going forward for these instruments. From a financial position, here's something we're really proud of here as an organization.
We've done a lot of work since I came aboard over two years ago, where we are in a net debt position of roughly $70 million relative to the substantial pref instrument with high cost, almost in excess of 20%, where we brought down our cost of capital to the high single digits. We refinanced. We've been generating significant operating cash flow, a key metric important to us, not only historically, but moving forward, where we're in a net cash position now of roughly $51 million as of the last quarter. Moreover, our debt instrument, as you see, just under $80 million or so, we're actually we're at prime plus 1.75-2.5, and we've swapped out half of it.
We have taken away the interest rate exposure, and then the other half with our surplus, we're investing at some very attractive rates in line with our cash investment policy. From a capitalization perspective, we're in a very unique position, allowing us to not only reinvest in the business, seek opportunistic, inorganic potential opportunities as they would potentially come our way. I think that's the end of my slides. Matt, over back to you, and we can take any questions that the audience may have.
All right. Excellent. Thank you guys for going through that. Just a reminder to the listeners that there is a chat function, you guys can submit any additional questions. I guess to start sort of with current event type stuff, I know there's ongoing litigation with Oracle, and I saw that certain claims were withdrawn by Oracle, but also that there was a hearing in November. Can you guys just kind of give an overview of what's going on there and then any latest updates?
Well, sure. On the eve of our second trial with Oracle in the last 12 years that we've been battling it out together in court, Oracle unilaterally decided to drop its multi-billion dollar damages claim against Rimini Street, which of course, took everybody by surprise. They dropped that, and gave up a jury trial, and we went to a judge-only trial. It was only to focus on certain complex technical differences between us and Oracle, ones where we don't think there's any issue. Oracle's trying to claim there's some issues in the way that we deliver some of our services for some Oracle product lines. We went and had the trial, and we'll wait for the judge to make a decision.
When the judge makes a decision, if there's something we don't agree with, we would move to file an appeal. If Oracle doesn't agree, they'll move to file an appeal more than likely. That will likely go on for potentially years longer. This is just part of the very long process of the American justice system, where we could spend years and years and years. Meanwhile, of course, as you know, when Oracle and us originally began in court in 2010, I think we were a $30 million company, not a $400 million company, and we've continued to grow and add hundreds and hundreds of Oracle customers into our ranks.
This is just some of the background work that goes on when you're disrupting an entire industry of tens of billions of dollars per year. It's something we're used to. We knew we would be on the tip of the spear, to break open market dynamics and insert competition into a rather closed market. Obviously, we've done well with that.
Yeah, no, thank you for walking through that. The other news we saw recently was there were some stock repurchases approved.
Mm-hmm
What was authorized there, and how come now was the right time to pursue something like that?
Sure. Michael, do you wanna go ahead and take that?
Indeed. We have our board authorized an initial plan of $15 million. We have since expanded that to $50 million. Through our last public disclosure, we've purchased an aggregate of $4.7 million. The impetus is very clear. We're in a very strong position relative to our operating cash flow. As I highlighted, our balance sheet has improved such that, and relative to the valuations that we see relative to our growth prospects, relative to our financial position and performance, we felt it was appropriate measure for capital return.
Oh, that's great. Yeah. Good, good to hear. Then this in the past year you launched Rimini Protect and Rimini Connect, the product suite. What capabilities do these bring to the product offering, and do you expect to continue to package products in a similar manner moving forward?
Yes, Matt, I think this is another evolution of Rimini Street's maturing of all these products that we've brought to market. Now we're wrapping them in these suites. Our Rimini Protect of all of our security products, and our Rimini Connect, which is all the interoperability products. You'll see some other product lines, as we've said before, will make their debut, that are already being used by clients, but we're now following them up with actual product launches, formal launches, versus the soft launch, where customers have been enjoying those services. That's just our style, is we like to put it out there first, get customers using it, get successful with it. Then we roll out the official launch. It's just the way that we believe in doing things.
I think, yes, you could look for additional product lines. The purpose of this broad suite, again, is to make sure that we can solve all of these complex issues around enterprise software. Where we started the business focusing on just one solution to one problem on those platforms, now we can service the wide variety of challenges on those platforms with a single vendor.
Can you probably provide some examples of use cases for the Application Management Services?
Sure. I actually was referring to PSEG. For those of you in the northeast know very well, you probably get a bill from them for your energy. That's where we've come in. To give you an example, a company that was paying roughly $4 million a year to SAP for annual maintenance, we were able to cut that in half. Then we were able to take over running the systems day to day. There, that was an additional $4.5 million that Rimini Street has on an annual basis. Now we're doing all of this professional service work to transition those systems to be able to handle modern day, these new smart meters, for example, and how we modernize those systems, and that's millions.
That's an example of how Rimini Street steps into a client, takes on a $2 million contract, and within the course of two years, moves that up to $8 million-plus a year. That is why so many investors have been excited about the Rimini Street story, is not only do you have a broad base of opportunity to plant a first product win at a customer, but the cross-sell opportunity is multiples of that first sale. That is really great when you're looking at $400 million of customers and you think about a story like that, what that could mean to revenue growth and the acceleration of revenue growth and opportunity, and that's on an annualized contract basis. You're getting all the good things. You're getting high margin, you're getting a sticky service, sticky group of services, and you're able to drive long-term revenue from the client.
Awesome. Yeah, that's gotta be very exciting seeing that flywheel build. Of course you've gotta get to the macro question here, but, what have you guys been seeing any pressure, anything to report? How has it sort of, I guess, progressed as we move from the Q3 into Q4 of 2022? Then what are you expecting for 2023?
Well, Matt, obviously we're in our quiet period before we get to announce earnings coming up, so we can't tip hats one way or the other. What we can say is that I had committed to the investors in the Street that we would complete our internal restructuring to be in a position for multi-billion dollar operations at the end of 2022. I can say that we are on track to achieve those goals and we are in a position to be ready for multi-billion dollar company operations.
It was a tough few years to get through all the organizational changes to morph into a structure on a global basis that can handle this number of product lines coming to market with a whole new field sales, structure, fielding, and a whole new team globally, and the whole infrastructure to be able to handle that kind of volume. It's been a journey, and we grew through all of that, despite all those challenges. I think that that's put us in the right position to achieve our long-term objectives.
Awesome. Yeah, sorry, not trying to get you in trouble there. We're running down the last couple minutes here. I just wanted to turn it over to you guys just in terms of, what would you like investors to take away as the key themes for when they think about Rimini Street and how you guys are moving forward here?
You know, it's interesting, Matt. A lot of people think that somehow we are a contrarian operation, that when things are bad, companies come to Rimini Street as a cost-saving tool, and the answer is you're darn right they do. That is a good thing, but we have been amazingly successful in good times as well. I mean, all through the economic expansion, Rimini Street grew, had some of our best growth years. I think what people need to understand is when. The thesis of Rimini Street is simple. If you have an IT department, and I don't care if it's the most successful company in the world, it could be Apple that has more cash than most countries, every IT department has a budget and they have staff limitations.
Because it is a limited resource, there will always be more requests for things for the IT department to invest in and do than they have the capability under their budgets and resourcing. If you accept that thesis, that means as a constrained resource, there must always be allocation decisions of what's being invested in and what's not, and Rimini Street plays in that world. We live in the world of allocation and helping CIOs and CFOs better allocate IT resources, get the right services they need, do not overpay for the things that they don't need to overpay for, and shift that excess budget money and resources into critical infrastructure projects and innovation to move their business forward.
In many ways, Rimini Street is looked at as almost a lending source because we help free up the capital and the resources to focus on those key projects and initiatives for companies.
That's a great message. With that, we're out of time. I wanna thank you guys for joining us. Great to catch up, and thanks everyone for attending.
Thanks for having us again. Take care.
Thank you.