Welcome to Rimini Street's Third Quarter Fiscal Year 2017 Earnings Conference call. I will now hand the call over to Dean Pohl, Director of Investor Relations.

Thank you, operator. I'd like to welcome everyone to Rimini Street's Third Quarter 2017 Earnings Conference Call. On the call with me today are Seth Ravin, our CEO; and Tom Sabol, our CFO. Today, we issued our third quarter earnings press release, which can be found on our website. A reconciliation of GAAP to non-GAAP financial measures has been provided in the tables following the financial statements in this press release. An explanation of these measures is also included under the heading Non-GAAP Financial Measures. As a reminder, today's discussion will include forward-looking statements that reflect our current outlook. These forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from statements made today. We encourage you to review our most recent filings for a complete discussion of these factors and other risks that may affect our results or stock price. Before taking questions, we'll begin with prepared remarks. With that, I'd like to turn the call over to Seth.

Thank you, everyone, for joining us for Rimini Street's Initial Quarterly Earnings Conference Call as a public company. On October 11, 2017, we began trading on NASDAQ under the ticker symbol RMNI following the completion of our merger with GP Investments Acquisition Corp. For those of you who are new to the Rimini Street story, I will take a few minutes on this initial earnings call to familiarize you with Rimini Street's key business stats, market opportunity, strategy and business model before providing specific color on the merger with GPIAC and third quarter results. We founded Rimini Street in 2005 to disrupt and redefine the $160 billion enterprise software support market by developing and delivering innovative, value-driven and award-winning enterprise software products and services, primarily through an annualized subscription model. Today, Rimini Street is the leading independent software support provider for Oracle and SAP software products based on both the number of active clients supported and recognition by industry analyst firms. We generated net revenue of $154.7 million and $113.4 million for the 9 months ended September 30, 2017, and 2016, respectively, representing a period-over-period increase of 36% and delivered 47 consecutive quarters of revenue growth and a CAGR north of 30% since January 2014. As of September 30, 2017, we employed approximately 900 professionals in 13 countries of operation, supported over 1,450 active clients, including 66 of the Fortune 500 and 19 of the Fortune Global 100 companies across a broad range of industries and geographies and have saved our clients over $2 billion in enterprise software support costs since inception of the company. At $160 billion annually, enterprise software support products and services is one of the largest global IT spending categories. We believe that licensees often view software support as a mandatory cost of doing business when…

Thanks, Seth. Our value-add support solutions continue to resonate with both new and existing clients. For the quarter, net revenue was $53.6 million, an increase of 32% year-over-year, and annualized subscription revenue was $214.4 million, also up 32% year-over-year. Although our revenue was 100% subscription revenue today, we may deliver some limited consulting services around our products and services in the future. Revenue from clients outside the United States was 32% of total revenue in the quarter and grew 44% in the quarter, faster than our overall revenue growth and has been and will continue to be an area of continued investment. As of September 30, 2017, active client counts increased 34% from the prior year to 1,459. Gross profit percentages was 62.5% in the third quarter, up from 57.7% in the prior year, reflecting leverage on our service delivery operations driven by continued process efficiencies and economies of scale. In our fourth quarter, consistent with prior year's fourth quarters, we expect to see increased onboarding costs due to the level of new client wins in the back half of our fiscal year, which will impact gross profits in the fourth quarter. We believe full year 2017 gross profit percentages will range between 60% and 62% of net revenues. Sales and marketing costs were 32.1% of net revenue in the quarter, down from 46% in Q3 of the prior year. In 2017, we were limited in our ability to spend on sales and marketing due to debt covenants. For the fourth quarter of 2017 and 2018, we expect to modestly increase spend on sales and marketing as a percentage of revenue. We currently believe the spend for full year 2017 will range between 32% and 34% of net revenues. General and administrative expenses, which excludes outside litigation costs, were 16%…

[Operator Instructions] Our first question comes from the line of Derrick Wood from Cowen and Company.

Great. Congratulations on your first earnings call as a public company.

Thank you, Derrick.

It -- so solid numbers on revenue, gross profit, EBITDA. You had some nice reacceleration and new customer generation. You guys kind of already addressed it on the deferred revenue side, but it looks like kind of a steeper, sequential drop. And Tom, you mentioned that there may have been -- half of it's been booked to billings. Can you talk a little bit more about the contract structure and some of the ebbs and flows that are going on there and what you've seen since quarter-end?

Yes, Derrick. So some of our contracts include what I would call a short test period, where the customer wants to sign up and wants to do business with us but has an ability after a short period of time to determine if they would like to stay with the current vendor. And of course, on those contracts, we don't record any revenue and don't record any deferred revenue with regards to those customers. And we had some of those at the end of Q3 that were kind of significantly higher than they had been in prior quarters. And so that's what drove what looks like a lower billing and a lower deferred revenue number, but we've seen good traction to date with regards to those turning. And in the past, we've typically had very little, if any, in all honesty since I've been here just about 11 months, we've yet to have not one of those turn into a client. But clearly at the end of the quarter, we had a little bit of that, that caused what appears to be a slowdown in billings and in deferred revenue more than what it really was.

And I guess, what's the time frame with -- when they tend to -- versus initial engagement to when they may turn into book deferred? Sounds like maybe a month or 2, but maybe longer with some other contract?

Yes. Typically 30 to -- they're typically 30 to 60 days, but we could have some outside ones that would be a little bit longer, but typically, 30 to 60 days.

Okay. And then -- and Seth, in regards to competitive dynamics, maybe just kind of where you are today, how you feel about going into Q4 and pipeline and linearity with respect to how you're positioned competitively in close rates.

Sure. From an overall perspective of pipeline and growth, I think you're going to watch us continue to accelerate. And as we referred to in the prepared remarks, we were -- we've been contained in our ability on sales and marketing spend because of the debt covenants that were in place. And now that we've gotten those loosened up a bit, you're going to watch us and with moderate increase in spending as a percentage of revenue coming into the fourth quarter and into 2018. So one of the largest drivers of growth that we're going to see coming into the next year is going to be a good hiring of additional sales reps that will start in the fourth quarter with our new capability -- expanded expense capability and you're going to watch that take effect. As you know, our sales ramp is generally 6 to 9 months for sales reps, so you'll see that really more towards the back end of next year, we'll feel that additional sales capability kicking in. As far as win rates, I think we're seeing a pretty steady number on the win rate relative to our competition. We have plans into next year. We continue to invest in sales effectiveness as a key driver towards increasing sales wins. But I think that as a business, we have recognized how important critical mass is in each individual market as well as for the company as a whole. And with over 1,400 active clients, we see that it's much easier to acquire additional clients, especially large to very large global players, because of the critical mass, the 12-year history of operations and delivery, all those play very, very nicely for our win rate increases around the world.

Great. And with the covenant relief on the sales and marketing, clearly, you're going to start investing more. Any areas that you'd flag either geographically or product-wise or any other notable kind of go-to-market changes we should see?

Well, I think you'll see that we're going to add the increased headcount globally. We're seeing growth in all theaters, whether it's in Europe or Latin America, Asia Pacific or North America, so we will be distributing those new head and capabilities on a global basis. There will be some new countries that we're looking at, planning expansion for in 2018. So we continue to expand beyond the 13 countries of operation into the next year.

Okay. And I know it's only been a month since you've been public, and it's probably too early, but just wondering if there's any -- if there's been any impact to customer conversations or engagements now that you've got public company transparency, you've improved the balance sheet. Again, it may be too early, but just curious if you've seen anything out there.

Well, I think, anecdotally, we have. We have in conversations. We've certainly had that -- much better discussions with some customer prospects, who were still sitting on the fence, who I believe that we have closed business that might not have been possible if we hadn't moved forward with being public, if we hadn't gotten the upstream capability from that. So I think, again, on one of our thesis here that making a move to being public would open up additional sales opportunities, I do believe we're already seeing anecdotal information coming in from the sales force, from deal closures since being public that have indicated that we are seeing a tailwind from it.

Our next question comes in the line of Terry Tillman from SunTrust Robinson.

Congrats as well on becoming a public company. I've got a wicked cold, so I'm going to try to get a couple of questions out before going to a coughing fit. First question, Seth. Seth, the first question's for you in terms of -- you've articulated in the past, you've got 30-plus products and services, you're still only covering a smaller portion of the total addressable market. How do we think about new products and services over, call it, like the next 12 to 24 months? What would be the kind of cadence we could see of new products and services coming out?

Well, I think the plan that you're going to watch is an acceleration of the number of products and services that we offer coming into 2018. I think the way to start thinking about Rimini Street is going to be a change, and you're going to see this coming in 2018. A change from 12 years where we may have been viewed early on as the 50% off guys, we may have been perceived as the people who provided a discount and a more premium service offering in exchange from a value perspective. And I think what you're going to watch is really a focus around 3 things that I mentioned in the prepared remarks, optimization, extension and orchestration. You're going to watch us move into 3 particular categories. And if you look at our 12-year history, what we really have been is in the optimization business. We optimize people. We optimize spending. We optimize time, and we also optimize ROI. And it's a much bigger concept than simply saving people money. We're making sure that you're spending the optimal amount of resources, time and focus and energy and money on these mission-critical transaction systems and freeing up additional funds. And we've always told customers that they can put those funds to better use inside their organization rather than paying the excess profits that the software vendors have been taking from them in these maintenance fees and getting better outcomes. What you're now going to see is Rimini Street is moving into the business of providing those solutions with the money and the savings and the optimization that we've been providing all these years. And you're seeing that, for example, our first product launch into the extend capabilities, where we've announced a partnership with McAfee, where we released our new…

That's a great overview. And I guess, I'm curious, it makes total sense in terms of getting into extensions, orchestration, et cetera, just expand your value prop and the stickiness and then just more opportunity with a customer. But I'm curious how often will you be just reselling your product as opposed to potentially building something? Or would it be more of just a reseller situation like with McAfee?

I think the answer is going to be like everybody else. We'll look at the opportunity in the marketplace, and we'll make a build by partner decision on all these different areas, whether it's security, mobile, analytics, monitoring, interoperability, integration, all these segments. We'll look at the best-of-breed that's available. In some areas, we've already built our own tools and capabilities. In others, I think that partnering or potentially strategic acquisitions might be the best bet. So I think that we'll reserve that for each of the individual categories and solutions.

Got it. And in terms of international, you guys are making some headway there and the business should expand as a percentage of revenue, but could you just help me and maybe some of the folks on the call in terms of an education in terms of the international market, what is their appetite? What is their understanding of the value prop of what you do? Is there less evangelism you have to do now versus 5 or 10 years ago? What is the size of deals like? Just anything at all that would help us with what that book of business looks like, albeit it's still early days.

Well, I think as we noted in the numbers, the fact is we have over 30% of revenue coming from outside of the United States already. So we're maturing nicely in these global operations. There's no doubt that there's maturity that's happening in many of the markets where we're seeing bigger and bigger deals, more complex deals, we're seeing wider breadth in software that we're covering. We're increasing our staff and capabilities, of independence in these theaters of operation, again just all part of the maturing of the global operation, in general. And I think we're absolutely seeing that there is critical mass building in these countries, which as I mentioned earlier, it's important to have critical mass overall as a company. And then in each individual region, territory, geography, you have to reach a certain amount of critical mass for business acceleration as well. And we're certainly seeing that, whether it's Latin America and Asia Pac or Europe. All of that is coming into effect. So we are certainly benefiting from the scale that we're seeing in these regions. And the number of customers, the more we get -- I think it's pretty straightforward. The more customers we get, the more success we get in the region, the easier it is to acquire customers.

Okay. And then maybe just a last question, Tom, in terms of a numbers question. You talked about how the gross margin will be impacted in the fourth quarter from ramping new business and then just other costs. And I know you're not giving guidance yet for '18, but is there anything at least at a high-level you can help us on in terms of could some of those costs continue to weigh on you through the first half of '18 or would that be something that starts snapping back right away?

Yes. So this is typically a fourth quarter phenomenon with the company because of the number of clients that we win in the back half. So we would expect margins to come back. And as we've talked in the past, because we have been out and active, as you know, as a private company at conferences, and we're active on the roadshow, we did talk about how we expect gross margins to expand going forward. So we -- like you said, we haven't provided guidance. But as we have said in the past, we would expect there to be continued margin improvements, gross margin improvements and expansion, primarily due to scale but also through improved efficiencies and automation and in other things that the company is working on.

[Operator Instructions] Our next question comes from the line of Abhey Lamba from Mizuho Securities.

So when you look at the opportunity you have, what type of companies are you seeing the greatest attach of your solutions? And which of your products are kind of leading the charge on that?

I think when you look at the distribution, I mean, about -- which of the product segments, manufacturing continues to lead. We have customers across just about every segment. Because even though we service all these verticals, we don't have to be the vertical expert in the sense of -- if you were out competing on the marketplace, if you were out selling software, you would have to be a straight vertical. Our solutions are pretty horizontal. As I say, if you're doing payroll for a doughnut shop and you're doing payroll for manufacturing, you still have hourly employees and you still have salaried employees. And so it's pretty horizontal in terms of solutions. And so when we look out there, we look at the industries that are seeking the most amount of help from us, manufacturing is certainly at the top. As you can imagine, retail is very, very strong as well because of the fact that you've got the Amazon challenge for so many retailers, margins are very tight. They need to find ways to increase market share. They need to increase spending around things that will allow them to compete and grow. And that's not their back-end core systems of record or transaction systems, which are mission-critical, of course, to the business, but that's not where growth takes place. So certainly, any of these industries that are having challenges in fierce competition, we're doing very well in.

Got it. And as you look at your near-term opportunity, where do you think most of the growth's going to come from? Is it going to be from the new products you're going to launch? Or is it just acquiring new customers with the existing products or does it got greater penetration within existing customers? Where is the biggest opportunity? Or how would you stack, rank it?

Well, for the first 12 years of the company, we've primarily been in the focus of logo acquisition. We have been far more focused on acquiring new clients than focusing on going deep within the existing client base. Part of 2018 strategy, we're going to have a much bigger effort and focus on going deeper and selling a broader range of products to the existing more than 1,400 active clients as well as logo acquisition. And one of the reasons we focused on one versus the other was simply a matter of economics and also the realization. Now if you think about it, it was much better for us to acquire 100 customer logos than to acquire 10 customers and go deep just from the critical mass focus that helps grow the business. So you're going to watch as we mature to the next level of sales operations, a bigger focus on both existing customer upsells and cross-sells as well as new logo acquisition. We also will be, again, launching additional optimization-based products, so there will be more product lines that we intend to launch in 2018 that we plan to support as well as the new extensions and orchestration capabilities that we plan to launch. So I think you're going to watch a more diversified revenue stream emerging in 2018, but I think you're still going to see primarily in 2018, most of our revenue will continue to come from optimization as we build out and start maturing the extended component and getting our launch out for the orchestration component.

And this does conclude the question-and-answer session of today's program. I'd like to hand the program back to Seth Ravin for any further remarks.

Thank you so much. And I just want to finish by thanking our colleagues around the world for all their passion and performance that got Rimini to this place and the public status, also our clients for their business and trust that made it all possible. And I thank everyone for joining us today for our first quarterly earnings call. We look forward to our next call, and we'll review our fourth quarter and fiscal year 2017 results. So with that, thank you, everybody, and have a great day.

Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.