Welcome to the Rimini Street Earnings Call. My name is Karen. I will be your operator for today's call. I will now turn the call over to Dean Pohl. Dean, you may begin.
Thank you, operator.
Are I'd like to welcome everyone
to Rimini Street's 4th quarter and fiscal year 2020 earnings conference call. Are available on the call with me today is Seth Rabin, our CEO and Michael Preca, our CFO. Are ready to begin. Today, we issued our Q4 fiscal year ended December 31, 2020 earnings press release, which can be found on our website. Are ready to take questions.
A reconciliation of GAAP to non GAAP financial measures has been provided in the tables following the financial statements in this press release. Are ready to take questions. An explanation of these measures and why we believe they are meaningful is also included in the press release under the heading about non GAAP financial measures are in certain key metrics. A copy of the press release and financial tables, including the GAAP to non GAAP reconciliation and other supplemental financial information can be viewed and downloaded from the Investor Relations section of our website. Are ready.
As a reminder, today's discussion will include forward looking statements that reflect our current outlook. Are subject to risks and uncertainties that may cause actual results to differ materially from statements made today. Are ready to review our most recent SEC filings, including our Form 10 ks for fiscal year 2020, which was filed earlier today, for are ready for discussion of risks that may affect our future results or stock price. Before taking questions, we'll begin with prepared remarks. Are ready to begin.
Thank you, Dean, and thank you, everyone, for joining us today. Are ready for questions. For the Q4 and full year 2020, we continue to execute well against our strategic growth plan to achieve $1,000,000,000 in annual revenue are in the range of 2026 and exceeded quarterly and full year guidance. We accelerated year over year revenue growth for the 4th are from 11.7 percent to 15.4 percent and for the full year 2020 from 10.9% to 16.3%, respectively, achieved record quarterly and full year results for revenue, new sales invoicing, are calculated billings, backlog and total gross profit and maintained a revenue retention rate of over 90%. Are ready to take advantage of growing global demand for Rimini Street are available for the Q4 of 2018.
We are ready to begin. We ended the year with 2,487 active clients, a year over year net increase of 20.6%. Are ready to
take questions.
Sales activity remains at historically high levels and from the company's inception in 2,005 to date, we have have signed nearly 4,000 clients, including 165 Fortune 500 and Global 100 Companies are and have saved our clients more than $5,000,000,000 During the full year, our global service delivery team closed more than 33,000 support are in a listen only mode of communication and delivered nearly 89,000 tax, legal and regulatory updates across 58 countries, are including more than 6,000 emergency updates related specifically to the global pandemic. Are ready to take questions. Our year end 2020 global employee count was 1425, a year over year increase of 12%. Are pandemic impact. Throughout the year, we experienced both the opportunities and challenges of the pandemic.
Are ready to take questions. We believe the pandemic added meaningful additional pipeline for both 2020 2021, and are bankruptcy or terminate their agreements due to financial distress resulting from the pandemic and other clients receive special discounts are in an extended payment terms for us to help them navigate the challenging times. For full year 2020, are We believe the sales opportunities created by the pandemic outweighed the challenges, with client renewal sales more negatively impacted by the sudden financial shock are subject to the disruption of the pandemic in the first half of the year. We believe our strong balance sheet and cash position provided us with the business flexibility are ready to be in agility to help prospects and clients with special needs and protected us against downside risk in 2020. Are ready to take questions.
We believe our strong balance sheet and cash position will provide us continued flexibility and agility to help prospects and clients through are The full extent to which the pandemic will continue to impact our business in are in the range of 20 21 and beyond will depend on numerous evolving factors that we cannot reliably predict. Are under the same period. During the Q4, we completed 213 geographically diverse new support, are in the line of communication and strategic service sales transactions. Support Services is where we provide technical support and required updates are subject to a team who runs the system for a client day to day. Are in the process of application management services, also known as AMS, is where we run the system for the client day to day.
Are. To highlight how clients are leveraging Rimini Street Services globally to achieve strategic goals across different industries, are I'd like to share with you a few case studies from the Q4. First, we were awarded 3 Brazilian public sector contracts are ready to support Oracle and SAP Software for the legislative, executive and judiciary branches of the Brazilian government. Are ready to begin the Q1 of 2019. Prior to Rimini Street's launch in the Brazilian public sector market, no public bids for support of Oracle or SAP systems occurred are Because the only support option available was from the software vendors and their partners.
Today, Rimini Street is on the official list of approved support providers are offering an alternative solution that provides a more competitive value proposition and a premium enterprise support experience. Are. The same need was reflected in the whole of government volume sourcing agreement with the Australian government, designed to make the procurement process faster, are easier and more cost effective for Australian government agencies to access Rimini Street Services.
Are
are. Automation District of Greater Chicago serving more than 10,000,000 customers switched to Rimini Street support for its SAP applications. Are. The client is now receiving Rimini Street's ultra responsive premium level support that is available to them on their current release are in a position to be in
a position to be in a position to be in a position to be in a position to be in a position to be in a position to be in a position to be in a position
to are and avoid a costly and unnecessary migration to SAP's newest product line. The client is able to realize significant savings are ready to invest that savings back into IT modernization initiatives across the organization. Are. Lastly, Pulse Electronics, a leading components manufacturer for the automotive and telecommunications industries, have switched to Rimini Street support for its SAP software. With the savings achieved by switching to Rimini Street, are Pulse was able to invest its cost savings in business intelligence capabilities, including artificial intelligence technologies to enable growth are in a competitive advantage during a year when new spending may not have otherwise been possible.
With more than 70% of its products designed in are in collaboration with customers. Pulse uses its SAP system for several critical functions, including finance, operations, are under the control of the company's operations. As its business operations are required to run 20 fourseven, are in a position to be in a highly competitive market. Are ready to begin. Pulse's IT Director, Alex Wong, stated that, are.
Macro disruption due to the global pandemic may have slowed our progress, but investing in innovation is still very much in reach, thanks to switching to Rimini Street. Are ready. For 2021, we're continuing to see growing interest, pipelines and sales are in our core support service business and our new application management services. We are also seeing growing interest pipelines and sales for are: Security, interoperability and professional services with a growing number of clients successfully deploying and using these new services. Are ready.
We believe our full year 2020 sales results and 2021 pipeline demonstrate that Rimini Street is well positioned to compete. Are ready to take questions. Gartner notes Rimini Street is the leading provider of third party support for Oracle and SAP products by annual revenue and client count. Are are currently predicting a 200% increase in the 3rd party software support market, expecting that the market will exceed are $1,000,000,000 in 2023. Rimini Street is the only vendor at global scale who offers a proven turnkey are a single vendor solution for running and supporting ERP software with an ultra responsive service that supports customizations, are conducting a question and answer session.
Are ready to take questions. As discussed during our Investor Day 2021, we believe our global penetration rate is only approximately 3.5% are in the range of $1,000,000,000 for support services and less than 1% for application management services, providing us significant greenfield opportunities are within the $170,000,000,000 addressable ERP support and AMS markets. Are in addition, we have increased our commitment to cross sell opportunities within our current client base are in the range of $1,000,000,000 in annual revenue. Are ready to take questions. We look to achieve these growth objectives by leveraging robust go to market strategy, a sales overlay resource model are in an integrated incentive framework that drives consistent goals throughout the organization.
Are in the line with the respect to Oracle versus Rimini Street that was filed by Oracle in 2010, are in the process of reviewing the are engaged in the dispute over a permanent injunction that's been in place since 2018. The dispute has been submitted to the court are And there is no known timeline for any court response. With respect to Rimini Street versus Oracle, are in the process of the case we filed against Oracle in 2014, the case is in pretrial preparation and trial is not currently expected to occur conducting a question and answer session until the first half of twenty twenty two, but could occur earlier. To summarize, are the courts have found that 3rd party support and customization of enterprise software is permitted and Oracle licensees have a choice of support providers. Are ready to take questions.
Rimini Street, as deemed by the United States Court of Appeals, is a lawful competitor. Are ready to take questions. Please see our annual 10 ks filing made earlier today for additional litigation disclosures and information. Are in summary. We believe the company executed well in the Q4 and full year 2020, are on plan to achieve $1,000,000,000 in annual revenue and approximately 20% operating profit run rate by 2026.
Are ready to take questions. To achieve our short, mid and long term goals, we're focused on sales execution, including increased cross selling and retention, are in a position to be disciplined expense and cash management and bringing our litigation with Oracle to a successful conclusion. Are now over to you, Michael.
Thank you, Seth, and good afternoon, everyone. 2020 results. Are. Revenue for the Q4 was $87,800,000 and full year revenue was $326,800,000
are in the range of $1,000,000,000 year
over year increases of 15.4% and 16.3%, respectively. 4th quarter annualized are: Recurring subscription revenue was $349,000,000 a year over year increase of 15.4%. Are. Revenue retention rate for support service subscriptions, which makes up the vast majority of our revenue, remained above 90 are in the range of 10% with more than 80% of subscription revenue non cancelable for at least 12 months on a rolling basis. Are.
For the full year 2020, clients within the United States represented 59% of total revenue, are. While international clients contributed 41%, representing aggregate year over year revenue growth rates of 6.6% are in the range of 33.5 percent for U. S. And international clients respectively. Our international strength was led by strong results are from our Asia Pacific region.
Looking forward, we see growth accelerating in North America in fiscal 2021 are due to our enhanced regional general manager model led by the recent additions of key leadership. Are Gross margin was 61.8 percent for the 4th quarter and 61.4% for the full year 2020 are subject to 60.2% for the Q4 a year ago and 62.6% for the full year 2019. While the full year 2020 year over year decline was expected and previously disclosed, we exceeded the high end of our guidance. Are The planned reduction represented a continued investment in the global service delivery capability for our new products are conducting a few key questions. Thank you, operator.
Thank you, operator. Thank you, operator. Thank you, operator. Thank you, are in the call today. As we have stated previously, we expect to begin realizing the benefits are going to be in the range of 60 1 percent to 60 2 percent.
Are Sales and marketing expenses as a percentage of revenue were 34.5% for the 4th quarter and 35.1% are conducting a question and answer session. Are conducting a full year 2019. The full year 20 2310 basis point year over year decrease is primarily due to positive leverage from increasing revenues and travel cost savings, along with reduced physical trade show participation, are resulting from a switch to virtual marketing and selling. Nonetheless, we remain focused on making the are looking to support our aggressive growth initiatives, whereby we expect full year 2021 sales and marketing expenses to be in the range of 35% to 36%. General and administrative expenses as a percentage of revenue, are participating in the process of executing outside litigation costs, was 16% for both the Q4 and full year 2020 are compared to 16.7% for the prior 4th quarter and 16.8% for 2019.
Are We expect G and A expenses as a percentage of revenue to be within the range of 15.5% to 16.5% are ready for the full year 2021. Net litigation expense was $4,200,000 for the 4th quarter are reporting to the Q4 are in the credit of $834,000 for full year 2019. The 2019 credit was attributable to a net are in the process of $8,800,000 litigation recovery from a successful appeal and unanimous ruling by the U. S. Supreme Court in our favor.
Are our outside litigation spend is not linear and can fluctuate each quarter based on litigation activities. Are We expect litigation expense to be in the range of $15,000,000 to $17,000,000 for the full year 2021. Are. Adjusted EBITDA was $12,900,000 or 14 percent of revenue for the 4th quarter and forty are conducting a $2,600,000 or 13 percent of revenue for full year 2020 compared to adjusted EBITDA are up $4,700,000 for the prior Q4 and $27,000,000 for full year 2019. Are With our year end net leverage of $67,300,000 which is calculated by subtracting our year end cash on hand
are subject to the financial results. From the Series A
preferred balance, our net leverage ratio was 1.6 times adjusted EBITDA. Achieving our near term target are under 2 times for 2020 underscores the solid execution of the extended management team and we believe positions us extremely well with metrics in line with the prime borrower as we approach July of this year where Rimini is able to refinance are subject to the Series A preferred instrument and evaluate potential refinancing alternatives. It should be noted are
subject to the
Series A is redeemable at the option of the company without make whole beginning in July 2021, are
in
the are in a position of holders of a majority of the Series A than outstanding. I again wish to stress that the company has no obligation to refinance are unable to be forced to do so until after the mandatory redeemable date of July 19, 2023, are over 2 years from this point and only if the majority of holders elect to redeem the instrument. Are ready for the full year 2020, operating cash flow increased to $42,100,000 are yielding approximately 13% of revenue compared to $20,400,000 for full year 2019. Are We also note the near one for one relationship of operating cash flow to adjusted EBITDA underscores our ability to enhance our liquidity while accelerating growth. Balance sheet.
Are We ended fiscal year 2020 with record cash balance of $87,600,000 compared to $38,000,000 for the prior fiscal year end in 2019. Moreover, during the Q4, we repurchased $5,000,000 of face value of our Series A preferred stock at an approximate are at 10% discount with no make whole payment and we retired the purchase preferred stock. Are. Subsequently, on January 5, 2021, we repurchased an additional $10,000,000 face value of Series A preferred, in similar terms as the prior transaction. Backlog, which includes the sum of are billed deferred revenue and non cancelable future revenue was approximately $556,000,000 as of December 31, 2020, up 15% from $483,000,000 as of December 31, 2019.
Are. Finally, deferred revenue as of December 31, 2020 was approximately $256,900,000 up 9.1% from $235,500,000 as of December 31, 2019. Are moving forward. We will continue focusing on free cash flow generation and reducing our cost of capital are ready to take advantage of opportunities if and when they present themselves across all capital market instruments are ready to take questions as we strive to optimize our capital structure and improve GAAP profitability for the benefit of all shareholders. Guidance.
Are currently providing Q1 2021 revenue guidance to be in the range of $87,500,000 to $88,500,000 are in full year 2021 revenue guidance to a range of $370,000,000 to $380,000,000 are. This concludes our prepared remarks. Operator, we'll now take questions.
Are are ready to take questions. Are. And we do have our first question are from Brian Kinstlinger from Alliance Global.
Great, thanks. Solid EBITDA in that 4th
quarter. Are ready
to take questions. First, however, if I look at your expense guidance before I touch on 2 business questions. Are sales and marketing is expected to increase as a percentage of sales. And at the midpoint, G and A is expected to be the same percentage. Are I guess I would have expected some leverage, especially after the super leverage we saw in the Q4 backing out the impairment.
So Could you talk about the accelerated investments that you're making in sales and marketing? And then also why we're not seeing at least a bit of leverage on the G and A side?
Are Sure. I can pass that to you.
Sorry, of course, that's on 2021, sorry.
Sure. Sure. I'm sorry, can you hear me okay?
Are
open. Great. So the sales and marketing component, as you know, we made a lot of big investments in are The 2020 fiscal year, we brought in 3 new GMs over North America. We brought in new sales leadership underneath them. Are we've been hiring a lot of sales reps.
And of course, as everybody's followed over the past quarters, it's been a bit of a struggle for us to get are hired and then get them on the ground and start training them up. I'm really happy to say that we are at the plan that we said we'd be at. We're at are About 80 reps will be on the ground here in March. Very, very good news. We retooled our entire recruiting process for sales reps, are changed it up, brought in new people, expanded the team.
And so that's a really big win going into 2021, are in the range of 10 to 11 reps. So there is additional hiring that's going on to ramp up are going to be able to not only meet obviously the 2021 numbers, but position us for the higher accelerated growth are going to, as you well know, need to achieve in order to make our $1,000,000,000 number for revenue by 2026. Are So that's all according to plan. There's a lot of sub requirements behind the sales reps that include are SSAs, which are sales engineers. There's a lot of components that go into supporting the sales force.
And that's why you're seeing us take a pretty conservative approach are on sales and marketing. We're still investing in that part of the business.
Great. That's very helpful. Are The two business questions, I don't know if I've got it right, but you mentioned you won your first 3 Brazilian deals. Are. And then you said you were on an official list of alternatives.
Whose list is that? Is that a government list of approved vendors for their companies to review? And then are Can you size the Brazilian market opportunity?
Sure. First, yes, it's are very much likely those of us in the U. S. Are familiar with the GSA contract where A vendor can get on the GSA and be pre approved and the pricing is agreed upon and that allows government agencies to buy off the GSA Without having to run an onerous procurement process and competitive process with other vendors. Are.
And this is something we watch Rimini Street is again because of our growth in public sector globally. We finally entered the public are in Brazil. That was not an easy thing to do. It's a really complex market and we were able to finally get our toehold are. And our investments began paying off by winning, of course, 3 prestigious contracts across the whole top of government are in Brazil.
And now that we've got those people in place and that customer base in place, we can build that out to other are in the same position and even some quasi government organizations in Brazil. So we're excited. Don't know the exact sizing of that market. Are It's pretty decent size given the size of Brazil and its government entity. So there is good opportunity for us in that public sector.
And are And of course, as I noted, we just received the whole of government agreement in Australia and that's expanding to other countries as well. We got one in Israel are in previous quarters. So we are continuing to see Rimini Street become a choice for government with these easy procurement vehicles being pre are in a group that allows us to go into a lot of different government in U. S, Canada. We have the same type of agreement already in the U.
K. As well with a lot of government there.
Great. That's super helpful. Last question I have, are International, you said, grew 33 plus, U. S. Grew 6.5%.
Can I assume are That SAP, given it's more a little bit more international presence and Oracle's a little bit more U? S. Presence, although are There's obviously plenty in both that SAP Services and Maintenance is a little bit more of a driving factor of growth recently than Oracle
are Your first assumption is correct in terms of the way that SAP and Oracle are going to provide applications around the world. The U. S. Is the largest Oracle Applications market. Around outside of the U.
S. Are. And even some of Canada, you find that SAP is a dominant player in the application are Now of course, Oracle is far more dominant on technology infrastructure for database and other technology products. Are So you're going to see that globally. But the assumption about the way that the money divides up, are You're going to see again a lot of Oracle business.
Our largest and fastest growing product line is Oracle Technology. Oracle database is huge are And we see that with a lot of companies because the cost is very high and the value returned from Oracle is very low are. When it comes to the database of for return on investment, so this has been a very big and growing market for Rimini Street. Are. And on the application side, the Oracle's native product EBS, the E Business Suite is a very strong provider of business for as well because we can play well across that globally and that competes well with the SAP product.
Are So I think you're seeing a mix there that does not favor SAP except really by quarter. The 3rd quarter is the largest sales order for SAP are Because of the nature and cadence of their contract, all starting or mostly starting on the 1st January every year and they have a 90 day notice provision. Are That always makes the Q3 a big SAP play.
Great. Thanks so much.
Sure. Are.
And we do have our next question from Richard Baldry from Roth Capital.
Are open. Thanks. When I look at 4th quarter, it's obviously your strongest renewal period and deferred revenues were up 28 are do you feel just very broadly that, that really derisks your are renewal cycle on a post COVID basis, companies that obviously troughed out on pretty tough year in the first half, are seeing them renew in the Q4. Do you feel like that's put a
lot of the renewal risk behind you? Yes, Rich, I think, are As I mentioned in my remarks that the first half of the year, there was a lot of shock to companies financially, pandemic came up on all of us. Are And you really saw in the back half of the year that that's smoothed out. We couldn't overcome some of the losses from renewals in the first half, are As you can see, we still met and beat guidance across the year, and we set that guidance prior to the COVID. So that was a good strong sign, are But it was made up in the back half of the year and we really did see a change in the back half from the first half in terms of that risk.
Are Now what I'm worried about, of course, is I playing a conservative position is you've got a lot of companies that are are battered, they're beaten up, they survived, they paid their bills. But if this pandemic goes on for another year where we can't get people vaccinated, can't are can't get to a herd immunity by the end of this year. We still have closures and impact. I think there's another group of companies that probably just don't have the are cash reserves left to survive. So I don't think we're completely out of the wood when it comes to potential impact of customers who are are on their last view of operating capital or they need their businesses opened up.
So I think we have to keep that in mind. But otherwise, I would say we're in a better position, stronger position than we were seeing in the first half of the year with the initial shock.
Are open. Thanks. And maybe for Michael. Your strong deferred, again, build in the 4th quarter tends to spike are receivables. What do we think about as sort of a steady state receivables level to come back down to?
And the reason I ask is that's obviously are pretty good cash generator in the first half typically for you guys. Gives us a better idea of sort of what the are Debt would fall to on a near term basis when that receivables falls and is collected.
Are So,
Richard, our cycle with regard to cash that you have seen and aware of, don't are seeing similar in this year relative to prior years. And of course, we don't give any we don't share specifics where we think our exact receivable balance is. Are However, as you have seen, our adjusted EBITDA in line with our operating cash flow north of $40,000,000 for 2020 was are really an excellent performance from the overall team as a whole, and we see and are focusing on delivering similar performance, are looking at similar yields going forward as we continue to grow.
Thanks. And maybe last for me. Could you talk a bit more about the AMS are pipeline, that's been out for a little while now. You've got some customers up and running on it, probably referenceable at this point. Are So how do you see that sort of playing out in terms of pipeline build, conversion, sort of revenue contribution
as the year unfolds ahead of us? Thanks. Are Yes, Rich, I think we've been saying that we don't see a material thinking about 10% is material part of are We think we're going to deliver meaningful growth this year, but not necessarily hitting that 10% threshold. Are again, we're growing our support services as well. So we have to play that number keeps moving up.
So getting 10% of total revenue are is a great target to try and hit past that threshold. And I think that when we look at the amount of pipeline, are The size of the ASPs in that pipeline, we're still in that global rollout. We told you that in Q4, we began the full launch. Are we've been adding personnel around the world, specifically devoted to sales of the AMS product. Are.
The marketing campaigns have kicked off with a full customer base, a thousands of customers introducing Rimini Street's are looking at the MS offering as a cross sell opportunity. We've already seen inquiries coming back from those campaigns are interested. The number of proposals that are going out is increasing. We're working on them all the time. There's are Generally, at any one time, there's current proposals and progress that are being drafted for new AMS opportunities.
Are We're winning some, which is great. And we've lost a few and we keep learning from some of those losses in different countries where we just don't have all the are not yet. Sometimes we still come across a little bit amateurish in our response because it's a new business for us in different countries are in the range
of $1,000,000,000 and we
continue to improve those and increasing our win rate. So I'm very bullish on the total are contribution in the long run and the midterm. And I think we're going to see, again, meaningful contribution even in 2021 are based on the deals that we're seeing and some of them are very, very large and could have disproportionate impact to the overall revenue stream.
Are. Great. Thanks and congrats on a great close to the year.
Thank you.
Thank you, Richard.
Are. And we do have our next question from Jeff Van Rhee from Craig Hallum.
Are Great. Thanks. Thanks for taking my questions, guys. I'll add my congrats. That's just a heck of a finish to the year here.
Several from me. I wanted to Seth, I wanted Arch on the sales side particularly, talk to sales cycles. I'm always interested to hear sort of the difficulty you're seeing or not in terms of pushing deals over, how long it's taken to are And then along those same lines on the sales side, as you look at the international, I mean, you called up Brazil, Australia, are You're obviously crushing international. Domestic has been a focus area for you. You put a lot of new talent in the seats.
And as they're starting to dig in and drive the U. S. Process, I'm just curious, are initially out of the gate, is the biggest area for improvement in the U. S. More focused on lead gen or close rates?
I'm kind of curious what they're going to focus on. I realize the whole thing sort of stitches together, but just wondering in the U. S, which of those is the bigger focus? So maybe start with those two sales questions.
Are Sure. I think our lead gen has been very strong in the U. S. Side. We're definitely strengthening that even more with the players.
Are we just changed out the entire field marketing organization in North America, coupled with the new GM, coupled with putting new Vice President of Sales in place. And just to give you an idea how important it is for the staffing wins that we've had are Compared to the challenges of the last couple of quarters, we're fully staffed in the East Coast, which hasn't happened in 2 years. Are And we made that happen over the last few months, replacing pretty much everyone in the sales organization leadership. Are and we're putting in very experienced people. So I think when you look at the investments we've made, I think very, very strongly we're going to see are The increased acceleration in North America this year.
Now temper that with exactly are Which you said, these are brand new people. Even the GM just hit the ground in December. It takes 6 to 9 months to ramp a sales rep up to full productivity. Are There's no reason to expect that a GM can burn the business in any less time. So they're in the process of learning.
I think they're doing really well. Are very encouraged with the positives that I'm seeing coming from our new GMs, our new sales leadership employees. I think that all of that will get you to exactly where we've said for the last few quarters. The focus is for us, international is doing well. We will continue growing international, but it's are doing nicely all through the regions.
We are going to focus on North America. All of this investment is North America because are being 50% of our revenue and potentially could be more than 50%. If you look at the growth rate, single digit, we get that back up and that's
are And I guess just along those lines, I mean, do you see a competitive landscape? I mean, 86% market share, you're obviously not seeing a lot of other direct competitors. But are Is the buyer interaction any different, or changing at all in the U. S. When you compare and contrast to kind of international?
Or is it are The same need, same buyer, same cycle, we just have to execute better.
It's our problem, it's execution. Are Demand is there. The company is the same. The process is the same. This is strictly a Rimini Street execution in North America with a reboot are with the new general managers, VPs, new structures and new approach and strategy to running North America as its own region are Rather than in the offshoot of corporate operations.
And it's just a maturing function and it's a new scaling function with a new operating are execution plan. So it's all us.
Got it, got it. Very helpful. And on
the second part of that question then, are Just sales cycles kind of the latest intel on what you're experiencing out in the field working through cycles?
It's fierce us versus the vendor. Are That hasn't changed one iota in 15 years. It's still fierce. I think as we noted in the last call, are there is more price flexibility coming from the vendors than they have ever offered that we're aware of. And we have watched them are literally match our price more than once out there on especially really big deals, where they're so scared of losing them that are They just come in and try and match our price.
And because we have such a high value prop and we don't require the upgrades, we cover the customization, are Our value prop, even head to head, dollar for dollar, we are a better buy in value for customers. So we are win most of those deals on the head to head competition. We'll lose some. That's just a natural part of the fierce competition, are But we do win deals head to head matching prices.
Yes, helpful. And then if I could just are One last in. I think you had the earlier question on AMS. I mean, obviously, from our work, I think there's a pretty clear sense your customers love you and want to buy more. I think that AMS with the Much bigger ASP slots in nicely to your base and I think you touched on the upsell opportunity there.
It sounds to me you've mentioned are Security a few times. You mentioned it maybe a little bit more at the Analyst Day. You had it in here again today. Maybe just spend a second on that because it sounds like you've maybe put a little bit more emphasis there. Where are we in terms of security moving the needle and kind of the ramp you envision there?
Sure. I are absolutely raised the profile of security during the Analyst Day. Absolutely, you're seeing more of us talk about it, are Because we have these other product lines that really don't get much exposure, especially to the analyst world and investors that are generating 1,000,000 of dollars of revenue on our security products, which are excellent. And customers are deploying more and more of them. And I think are.
When you watch the SolarWinds issue and you see these other challenges, security is a big opportunity. And we are in an in excellent position with our products, with our security team, which I would put up against anybody, second to none. Are. And the combination customers are starting to realize that we not only can help them with the ERP platform and are saving money and getting better service. We can be a strategic partner even in the world of security and interoperability are We've got patented tools.
We've got patent pending tools. We've got a lot of technology below the surface that we haven't really given much are We have a lot of visibility to the investors and to into the world of shareholders. And we're trying to do that this year by raising this up. Are going to talk more and more about them because they're meaningful. They're very meaningful and they're going to be more meaningful.
Imagine the fact that we're doing 1,000,000 of dollars and we haven't been talking about it. It's something that we want to continue to talk more about and introduce to the market.
Are Great. Sounds good. Again, congrats. Great quarter, guys.
Thank you, Jim. Are open. And we
do have our next question from Derrick Wood from Cowen.
Yes, great. Are This is actually Nick Altman on for Derek. Thanks for taking our questions, guys. The net new adds in the quarter and for the year were really strong. Are.
Just wondering, can you talk a little bit about what drove that? And then I guess going forward, how should we think about the growth drivers just in terms of are net new customer adds versus upselling to the installed base.
Well, I think that what you're going to find is that are We've over the last few quarters have delivered about 10% of our sales into the existing client base, are Which is fairly low compared to a lot of other SaaS providers. The average that we went out and looked at, we came back and we determined seemed to be somewhere around are 30% of sales back into existing clients. And we've always known because as you know, we focus on client acquisition in Greenfield. Are We have been readjusting the business to come back and take advantage of all the upsell, cross sell opportunity are within the existing client base. And what we're trying to do is raise that 10%.
If we can double that to 20%, are That's obviously a significant increase back into the existing clients, but we don't want to slow down the client acquisitions either. So we're doing are a little bit of a balancing dance and a lot of the restructure of sales is designed to do that. But as you think about client acquisition, the numbers of clients, are I think our goal is not to reduce that at all. I think we're going to continue to accelerate that. That's why you're watching us increase the total sales headcount to 100 this year.
It's so that we can do that balancing act are down to 100 this year. It's so that we can do that balancing act of both selling into existing clients, which takes time, are also going out and continuing to accelerate our growth on the new client acquisition. So I wouldn't look for are A reduction in 1 in order to get the guidance.
Okay. Yes, yes, that's super helpful. And then, are At your Analyst Day, you guys outlined your 2026 revenue and margin targets. I'm curious how you guys are sort of thinking about the trade off between growth and margins. Are it seems like you guys are really hitting your stride in the go to market side of the equation and maybe seeing some greater productivity out of the sales force.
So I guess my question is, are you guys willing to maybe step on the gas a bit more on the OpEx side of the equation, at the expense of margins? Or do you think you'll have a little are
Well, I think as you guys have gotten used to with that, we really believe in are in value on the balance sheet. We believe in value of the company. And we've just never been one of those companies that says,
are Hey, let's go and hire 200 sales reps, forget about
profitability. It's such a big greenfield. And we know there's a group of investors, are I would certainly stand in that camp and say, listen, forget profitability. We started GAAP profitability last year when we achieved that and we continue to grow it. Are We believe in balanced growth.
We believe in delivering a profitable company, increasing profits and at the same time growth. Are So we've always had a balanced approach. And of course, there will be people on both sides, growth at all costs or go profitability and don't worry as much about growth are ready for the Q1. We want to straddle both worlds. We want to be the company that has a solid rock solid balance sheet, are in the range of $1,000,000,000,000,000, has great financials, super strong business and is growing at a very nice rate.
Are But understand there's a trade off. If I spend too much on sales and marketing, I'm going to blow profitability. So that we balance this as part of our model.
Are Okay. That's helpful. And then if I could just sneak one more in. There's a lot of focus are right now on reaccelerating that growth in North America. Can you maybe talk about some of the initiatives there and how those are playing out?
Are Anything you guys need to do on that front? And then on the sale the new leadership there, do they have any new plans you guys may be outlined on the go to market side of the equation.
I think the best way to think about it is imagine that North America had are leaders who are focused on new client acquisition, but you really didn't have any leaders at a GM level are focused on the total business. Think of them as P and L leaders where they're looking at the renewals, they're looking at the existing clients. Are part of their comp plan includes the retention of those clients, the expansion of those clients' footprint, as well as bringing in brand new clients. Are So the whole dynamic of North American leadership has changed because we've up leveled it to running the whole business versus just a slice of the business are where people just didn't have any incentive to think about other part because it wasn't within their comp model and it wasn't within their role. Are So I can't underestimate or anyway under stress the fact that we have 3 general managers overseeing North America are now looking at their entire region as a business, how they're going to grow the footprint of those clients, how they're going to extend the lifespan, are The total lifetime value of those clients, how they're going to bring in new clients, they have marketing reporting to them, they have legal reporting to them, they have are client engagement reporting to them.
So they have all of the business now and they have to look at the business as a whole. Are And I think it's changing the entire dynamic. That is driving different plans for North America because they're now placing sales reps in different are looking at where we win big, where we haven't won very much, and they're making decisions about how to are put players out on the field in a way to grow that single digit growth number and accelerate the business. And that just wasn't a focus of the people who were out just closing deals in North America in the first generation.
Are Got it. Thanks guys.
Sure. Thank you. Thank you.
And we do have our last question are from Mark Schappel from Benchmark.
Hi, good evening. Thank you for taking my question and My congratulations on the quarter as well as the year. Thanks, Steve. Question for you. You're welcome.
Question for you. Revenue retention continues to around 92%, which is good. But if I recall correctly from the recent Investor Day, you're doing some things to try to take that percentage up a bit. I was wondering if you could just give us an idea of some of the initiatives underway to raise your are
Well, I think it's good and we think it could be even better. Are participating in the process of answering questions. And part of that has to do with the way we engage our clients. You may have noticed in the release and in my comments, are We've now hit a 4.9 out of 5 average for client sat, up from 4.8 are and we started out at 4.5 years ago. So even as we've grown and added thousands of clients to grow in the business to hundreds and hundreds of engineers in are in the 20 plus countries.
We are continuing to get better ratings and we've improved our SLAs down to 10 minutes. Are So when you look at all of that, that has strong retention capability for clients because we're delivering the best service are that they can imagine anyone delivering and we're delivering it with again continually improving SLAs we don't charge them extra for. Will continue to improve the service. So I think that underlies everything. We have to remember, we're in the business of supporting software and running it.
Are And the better we do with that, that's the number one retention tool you can have. The second item is, we've been building are in the range of global client engagement capabilities to help our clients figure out the next. What do we do next? Where do I go? What's my roadmap?
Are. What am I going to do in 5 years or 10 years? One of the biggest threats to Rimini Street's long term position in these clients are simply they decide to go in the direction that we weren't involved in deciding and we may lose them as a client for that purpose. Are That happens. That's a big reason we have clients that turn over.
So the more we can engage with those clients to be part of their strategic team are figuring out, should they make a change, should they continue to use the software another 5, 10 years, that has real impact are on our lifetime value and our retention with those clients. So this is about the more we get closer to the customer, are. The more we can help them in the strategic decision, the net result plus our great service all comes together should yield are in a stronger retention and higher lifetime value. Great. Thank you.
That's all for me. Are there. Thank you. Thank you, Mark.
And there are no more questions in queue.
Are open. We have any other questions? Are we out of questions? Are
Okay.
We will go ahead and bring it into the call then. And thank you much, are very pleased to see you on our Q1 call. Thank you very much and stay safe. Are.
Thank you, ladies and gentlemen. This concludes today's conference. Thank you for participating. You may now disconnect.