Welcome to Rimini Street First Quarter Earnings Conference Call. My name is Adrian and I'll be your operator for today's call. [Operator Instructions]. I'll now turn the call over to Dean Pohl, Vice President. Dean Pohl, you may begin.

Thank you, operator. I'd like to welcome everyone to Rimini Street's First Quarter 2022 Earnings Conference Call. On the call with me today is Seth Ravin our CEO and Michael Perica, our CFO. Today we issued our earnings press release for the first quarter ended March 31th, 2022. A copy of which can be found on our website under investor relations. A reconciliation of GAAP to non-GAAP financial measures has been provided in the tables following the financial statements in the press release. An explanation of these measures and why we believe they're meaningful is also included in the press release under the heading, about non-GAAP financial measures and certain key metrics. As a reminder, today's discussion will include forward-looking statements that reflect our current outlook. These forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from statements made today. We encourage you to review our most recent SEC filings, including our Form 10Q filed today for a discussion of risks that may affect our future results or stock price. Now, before taking questions, we'll begin with prepared remarks. With that, I'd like to turn the call over to Seth.

Thank you, Dean and thank you everyone for joining us today. Q1 2022 results. For the first quarter, we achieved record revenue of $97.9 million. Up 11.4% year over year, achieved a record first-quarter invoicing and delivered a revenue retention rate of 94% on subscription revenue up from 91% last year. We continue to fill key regional operations and sales roles, including Jeff Spicer as Chief Marketing Officer joining from Oracle, VMware and IBM, and Kevin Hooper as GM of America central region joining from Lenovo, IBM, Oracle and HP. Additionally, we closed some of the largest sales transactions in our history during the quarter and remained focused on growing and maturing our global marketing and sales operations for increased new client acquisitions and cross-sale of new services to existing clients. Further differentiating ourselves with an extraordinary client experience, we closed more than 10,000 support cases and delivered more than 18,000 tax legal and regulatory updates for 33 countries. Additionally, we achieved an average client satisfaction rating on the company support delivery and Client Onboarding services of 4.9 out of 5, where 5 is excellent. We believe our unique client experience and very high client satisfaction rating will drive increased loyalty, improved retention rates and higher cross-sales over time. Since Rimini Street's inception in 2005, we've signed nearly 4700 clients, including over 180 of the Fortune 500 and Global 100 companies, an estimate that we have saved our clients more than $6 billion that they were able to reinvest in their business. We added a net of 35 new clients for the first quarter with active clients totaling 2,884, a year-over-year increase of 13.1%. In addition, despite the challenges with retention and recruitment in 2022 affecting many organizations globally, we were successful in expanding our global workforce by 12% year-over-year…

Thank you, Seth and good afternoon everyone. Q1 2022 results. Revenue for the first quarter was $97.9 million, a year-over-year increase of 11.4%. Annualized recurring revenue was $385 million, a year-over-year increase of 10.2%. Revenue retention rate for service subscriptions, which makes up more than 98% of our revenue, was 94% with more than 80% of subscription revenue non-cancelable for at least 12 months. For the first quarter clients within the United States, represented 53% of total revenue while international clients contributed 47%. First quarter aggregate year-over-year revenue growth in the United States was 9.9% while growth for international clients was 13.1%. We note that the US revenue growth has continued to improve over the last 4 quarters improving from the 2021 first quarter year-over-year growth rate of less than 1%, to the current year first quarter year-over-year growth rate of 9.9%. We also note that our international revenue growth was negatively impacted by the reduced flow through of revenue from the 2021 third quarter sales challenges. Billings for the first quarter were $97.7 million compared to $81 million year-over-year, an increase of 20.6%. New client invoicing and multi-year prepayments for both renewals and for new client invoicing were notable for the quarter. Gross margin was 62% of revenue for the first quarter compared to 61.5% of revenue for the prior year, first quarter and 62.5% of revenue on a non-GAAP basis, which excludes stock-based compensation expense compared to non-GAAP gross margin of 61.9% of revenue in the first quarter of last year. We executed well on our service delivery and continue to methodically expand efficiencies and leverage through technology and process control. We expect to continue investing in the global service delivery capability and capacity for our new products, services and solutions to ensure we can deliver our best…

[Operator Instructions]. And our first question comes from Derrick Wood of Cowen and Company.

It's Andrew for Derrick. Nice quarter. Maybe just to start, I think Europe is 10% to 15% of revenues, you reported international slowed a bit. Maybe just walk us through what you're seeing there and how that factors into guidance?

Sure. Good to talk to you. Thanks, Andrew. This is Seth. In terms of the number, I think what you're seen there is again, it's flow through because of the ratable revenue. That Q3 of last year, that is an important factor in terms of building that revenue pipeline through the year. That's what's affecting the international. We also saw about 4 points of FX in the quarter as well. The combination of those are certainly impacting that number, but the business is very, very strong. In fact, I think it's the third or fourth-largest deal in our history we closed inside of Asia-Pac, so we did very, very well there. EMEA's strong 8, the LATAM operation has been merged with the Americas and we've seen some very, very good deals over recent quarters there as well. We don't see an actual execution problem. This is really just flow through.

Great. And maybe you touched on it right there on the LatAm, but maybe on the new America's org structure, just any color on how that's going so far, what initiatives Kevin has planned and how that can accelerate US growth, continue to do that?

Sure. The America's integration is going well, the integration we did in Europe as well, where we took Israel and Eastern European theater, merged that in with EMEA, these have been again, good cost cutting moves. We're gaining efficiencies by reducing the number of theaters and hence redundant theater management. All part of our bringing the cost structures under a great amount of focus and we're seeing that obviously in the sales and marketing number, you saw that down a little bit. We will still aim to accelerate in the back half of the year to achieve the guidance number, but our big focus of course, is really getting the G&A number down because sales and marketing is right in line where we want to be and we're also seeing gross that are strong. It's really about getting that G&A number down further in the back half of the year.

Great. Then Seth, on the sales and marketing hiring front, maybe just talk to that in the quarter and where did you end on the sales rep number and how are you track towards the 95 to 100 target by the end of the year?

Sure. Overall on the management side, we did really well, of course, announcing Jeff Spicer who joined us with the background of course from Oracle as well. In fact, a lot of the nasty competition that you've seen from Oracle over the years on the marketing side was actually developed by Jeff Spicer. It's great to have him now on the other side of the fence for leading the marketing charge for Rimini Street globally, and we also have done well at Kevin Hooper joining us from Lenovo to fill out the GM position of the America central. I think we've built out strong management during the quarter. The sales hiring, I won't say has gone as well as we would've liked and you guys know we've struggled, we've had some good quarters of growth there. We ended about 73 down a little bit from the 79 number in the fourth quarter, but there are some really big opportunities that we took down in the first quarter and our ASP wound up moving from about 200 to nearly 400 in the quarter. Again, smaller number of deals, great execution by the sales team across the board. In fact, the number of tenured reps, those we think about with 12 months and over, who have very strong attainment numbers has remained fairly steady. That's not where we've been losing. Where we've been losing some folks is some of the new hires haven't been completing their ramp up, some due to the fact that we counsel them out, some due to the fact that they found it to be, I think, a little harder than they thought it would be. I think that the challenge that we have there has really still been in the recruiting area and we've addressed that, we brought in John Leech who is an expert at revenue recruiting positions and he's taken the helm of revenue recruiting just a few weeks ago and we're expecting some great things there.

The next question is to Jeffrey Van Rhee from Craig-Hallum.

Great. Phenomenal cash flow there. You've got about a year's worth and a quarter, so great start to the year. I want to follow up on a few of the sales questions and then a couple other things, but on sales in particular, Seth, I know you've been very focused on recruiting for somewhat of a different skillset, right? It's not 50% off sale anymore, you want to sell a solution. I understand your prior point. You're not getting the hedge you want in terms of the numbers, but in terms of the hedge you have, talk to me about how you're measuring their execution on that vision. Namely, are they selling more AMS, security, or other things? Like how are you tracking your success in building a solution selling sales team?

Well, I think the first thing we're looking at Jeff, of course, is the overall sales number, the attainment numbers and I think we've been absolutely consistent in the execution for our sellers that are 12 months and over. I think that part has gone very well. We've seen an average of 90% attainment in that category, so we know that our tenured sellers can sell and they are selling more of the solution. We're seeing the increase in the cross-sell, we've been seeing those numbers for the last few quarters. So we know that they're selling more of the solution to, not only existing customers, but we're seeing wider breaths of products sold out of the gate to new logos as well. So we're definitely seeing some good progress in the world of solution sell. Our bigger challenge has been really 2 points. One, getting the sales, the actual feet on the street and growing the sales team, been a challenge and as I just mentioned, we brought in John Leech, we've brought in more expertise in revenue hiring, revenue position hiring and the second area is really marketing. Getting Jeff Spicer on the ground here in the last few weeks, we've been waiting for a new CMO, as you know, for the last year and it took us a while to select the person that we thought could really ramp this up, who'd understand this business, and Jeff does and so we're pretty excited to have him on the ground. You're going to see our television ads back on TV all over the world, that started this last week. There's a lot of ramp-up going on. So we're really convinced that the acceleration of the business is really a formula of getting additional sales reps ramped up, hitting their 12 months and bringing that 12-month down to 9 months and then eventually to 6 for ramping, getting marketing out there, really turning a buzz around the world. This is an unbelievable opportunity. Horrible from a people point of view. War, inflation, all the economics, but fabulous from a selling environment because Rimini Street has solutions for all these customers and the challenges that they have today. So it really is now a race for us to accelerate the hiring, getting our people ramped and getting that marketing out there, so that people are understanding we're out here, they understand the solutions we have and then getting out there and closing the business.

Yes. So following on that, you know, when you look at the overall revenue performance, I mean, certainly the billings number and some bright spots in there. If I look at overall revenue growth, 11% in the quarter, when does that bottom and how does the pushouts in terms of being able to recruit those incremental sales heads, you know, change the timing on when that growth rate bottoms and re-accelerate? Obviously, you've got your target model, you need a 22% CAGR, I believe, to hit that, so obviously, you're expecting bigger numbers, but when do we bottom on year-over-year growth?

You know, I still think Jeff, we're not in the consistent execution category yet and I think we've given a lot of color on that over the last few quarters. This transition to being a multi-product company is pretty complicated on a global basis and I think that we're making progress. I think, from my perspective, we said when we started '22, this was not going to be Rimini Street's biggest growth year. We knew that and we felt that, we put that out there. We said we still had our building and rebuilding and restructuring to complete and then seeing the results of that execution coming to life, I really think we're going to see that acceleration on the back half of this year, but as we know, with ratable revenue, the back half of the year, you just don't earn it as much and this is all baked into the guidance. So we did the beat and we did the raise, we said we were going to get into that cadence, so we wanted to kick off the year with a beat and raise, very conservative still and it all reflects, you know, both the opportunities in front of us with the macro-economic challenges that create selling opportunities, also creates a little bit of risk on the back end with our existing clients, although we've had super strong renewals as you can tell from the numbers. All of this, I think, is really moving towards a more stable operation, more consistent execution coming into '23. And as we've talked about before, in order to sort of target that billion dollars by '26, we have to accelerate into '23, '24 and '25. We all know that. And so this is really about 2 more quarters to kind of get the house in order, really ramp the engine and then start to see that revenue flow increase in '23.

Got it. One last from me then I would-- On the competitive landscape or more specifically, sales execution, how would win rates trended? I think you touched on it briefly, maybe just expand on that a little more? I know Q3 was an SAP-centric quarter, and so you kind of get these ebbs and flows in who you see mostly in a quarter, but just talking about win rates versus the big players and how they've changed?

Well, I think if you first go, and we talked about in my prepared remarks, that we were very pleased with the, you know, with not only our retainment numbers, but actually the win rate on the pipeline was over 30%. So those were really good numbers, very strong numbers. So sales execution's actually good. It's now a matter of ramping volume. You'll also note there that we did what? 35 net new deals in the quarter, which was a little less than last year, but double the ASP. And we did very, very well in large deals. So from a competitive landscape, we took down some monster deals during the quarter up against Oracle and we took down some really good SAP deals, too. So I would say that across the board, we are being very, very competitive out there and we've got great wins to show for it. This is really a volume game and we have to increase the volume. That's where the flow through is going to come for the acceleration on revenue.

Got it. Well, again, great job, gross margins, cash flow, a lot to like there and looking forward to that sales progress.

Thank you, Jeff.

And that concludes our question and answer session. I'll turn the call back over for final remarks.

Great. Well, thank you very much, everybody and I really appreciate you joining us. I know how busy it is with earnings calls right now, but I also want to thank and congratulate our Rimini Street colleagues for the strong execution in the first quarter. We really kept moving, doing all through the challenges out there in the world. I also want to remind everyone that we're going to have a virtual investor day in 2022, on June 16th. We will present our vision and strategy to achieve our continued $1 billion annual run rate revenue and operating margin target, how we're going to get there, along with 20% operating profits. We will issue a press release and invitations shortly for registration in the coming days. It will be a virtual event this year and until then, I want to wish you and all of your families good continued health and our thoughts and our charitable support to all those who are suffering in harm's way today. So thank you very much, everybody. Have a good day.

Thank you, ladies and gentlemen. This concludes today's conference. Thank you for participating. You may now disconnect. Speakers, standby for your debrief.