Rimini Street, Inc.

Welcome to the Rimini Street Earnings Call. My name is Sylvia, and I'll be your operator for today's call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. During the question-and-answer session, if you have a question, please press Stone 1 on your touch-tone phone. I will now turn the call over to Dean Polt, Vice President, Investor Relations. Mr. Polt, you may begin.

Thank you, operator. I'd like to welcome everyone to Rimini Street's second quarter 2021 earnings conference call. On the call with me today is Seth Raven, our CEO, and Michael Parica, our CFO. Today we issued our second quarter-ended June 30th, 2021 earnings press release, which can be found on our website. A reconciliation of GAAP to non-GAAP financial measures has been provided in the table following the financial statement in this press release. 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 and 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. 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 10-Q for the second quarter of 2021 for discussion of risks that may affect our future 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, Dean, and thank you, everyone, for joining us today. Q2 2021 results. For the second quarter, we executed well and remain on track to achieve our strategic growth plan of $1 billion in annual revenue by 2026. We achieved record revenue of $91.6 million up 16.9% year-over-year and above the high end of our guidance range. We also ended the quarter with strong year-over-year billings growth of 44.4%, a gross margin over 62%, and an active client count that grew by 22.5%. Our revenue retention rate grew to 94%. Cross sales continued to grow as a percent of billings, and we achieved year-over-year billings growth in all three U.S. regions. We also completed significant capital market transactions during and subsequent to the quarter that materially reduced both our cost of capital and potential dilution. Michael will further detail those transactions in his prepared remarks. From the company's inception in 2005 to date, we have signed more than 4,200 clients, including 180 Fortune 500 and Fortune Global 100 companies, and added a net of 95 new clients in the second quarter, compared to a net add of 82 clients in the year-ago period. To date, we have saved our clients more than $5 billion. During the second quarter, our global service delivery team closed nearly 10,000 support cases and delivered more than 15,000 tax-legal and regulatory updates across 35 countries and achieved an average client satisfaction rating of 4.9 out of 5.0 on the company's support delivery, where 5.0 is excellent. Our global employee count as of June 30, 2021, was 1,556, a year-over-year increase of 15.9%. Pandemic impact. Despite continued success with the global vaccination rollout, the more infectious COVID Delta variant continues to spread around the world. Hence, it is clear the global pandemic is far from over and will likely continue to create both opportunities and challenges. We believe we have navigated the pandemic well to date, and with the risks of the spreading COVID Delta variant, we currently plan to continue with our virtual operational marketing and sales model through at least the end of 2021. We also continue to believe that our strong balance sheet will provide us competitive advantages in the flexibility to help prospects and clients through 2021 and beyond as needed. The full extent to which the pandemic will continue to affect our business in 2021 and beyond will depend on numerous evolving factors that we cannot reliably predict. Sales execution. During the second quarter, we continued to see growing global interest, pipelines, and sales across our expanded solution portfolio, with more clients successfully deploying and using our support, application management, security, interoperability, monitoring, and professional services. Cross-sales are also continued to grow as a percent of billings, and we estimate that cross-sale opportunities in our existing client base currently exceed $1 billion in accretive annual revenue. We also achieved strong client renewal success in the second quarter, delivering a higher 94% revenue retention rate, with many clients extending their contracts for more than one year and some agreeing to prepay more than one year of fees in advance for a small discount. We believe our strong sales execution is a result of our evolved marketing and sales strategy, regional and feeder GM leadership model now in place globally, new go-to-market team structures, and the compensation plan alignment we implemented at the start of 2021. We believe our new regional GM model in North America is delivering better sales execution and new logo acquisition cross-sales, and renewals, and with all three U.S. regions delivering billings growth in the second quarter and nearly 5% year-over-year U.S. revenue growth. We continue to evolve our go-to-market strategy around industries and solutions. Rimini Street serves many of the largest logos across different industries, and we believe focusing on the specific needs of each industry will allow us to further penetrate the TAM in each industry with the breadth of our solution portfolio. To further support accelerated global revenue growth and achieve our billion-dollar annual revenue target by 2026, we continue to strengthen our leadership team with new roles and hires needed to scale the global operation. To highlight how clients are leveraging Rimini Street Services globally to achieve their strategic goals across different industries, I'd like to share a few case studies from the second quarter. First, the largest agricultural producing county in the U.S., the county of Fresno, California, switched to Rimini Street support for its Oracle database, middleware, and PeopleSoft applications, resulting in immediate annual savings of $800,000. The county also now receives faster response times and proactive guidance from Rimini Street expert engineers. This in turn has freed up the county's internal IT personnel to focus on more critical business initiatives. Robert Bash, Director of Internal Services and Chief Information Officer for the County of Fresno stated that, quote, partnering with Rumini Street has enabled us to continue advancing a cultural shift towards exploring new ways of doing business. Every dollar county departments save on internal services is money that could be spent on programs for the community. The savings have given us the financial flexibility to begin exploring what is next for our infrastructure. We're able to invest in developing a roadmap for the county, all while remaining cost neutral for our users, end quote. Sherry Walden, Deputy Director of Information Technology for the County of Fresno added, quote, Brumini Street recently helped create a legislative update for us which according to our PeopleSoft team, took substantially less time to implement than previous updates from Oracle. Rumini Street tailored a pad specifically to our environment so our team didn't need to waste time applying code that we didn't need, like global payroll. Rumini Street is focused on the support and success of our organization, not just delivering a product. The Raministri team initiates meaningful conversation and is constantly probing for how we can improve our infrastructure or better focus on the unique needs of our stakeholders, end quote. Next, leading Brazilian chemical distributor, Quantique, switched to Raministri for support of its SAP S4 HANA system. By switching to Raministri, Quantique significantly reduced its operating costs and plans to reallocate the savings to invest in innovation and process efficiencies across the organization, including a new customer portal, e-commerce initiatives, and implementing intelligent automation and RFID capabilities. These initiatives are considered essential projects to maintain its competitive edge and better serve its customers and partners. Jesse Guzmayo, Chief Information Officer, of Quantique stated that, quote, Romini Street support for S4 HANA delighted us due to its differentiated support model. The company's 10-minute response SLA brings our IT department peace of mind knowing that our support partner is ultra-responsive and has highly experienced engineers handling any issue. We can focus our business initiatives with more efficiency and don't waste any more time having to manage IT support requests. we want to establish ourselves as a digital transformation leader in the chemical product distribution industry. Our partnership with Rumini Street will leverage our capability and capacity to be more strategic and oriented to our business and also to invest in new initiatives so that we can improve the value and quality of services provided and ensure customers see our business as reliable and innovative." Lastly, The leading commercial aviation trade association, International Air Transport Association, otherwise known as IATA, headquartered in Montreal, switched to both Rumini Street support and application management services for its SAP system. The organization now benefits from Rumini Street's unified turnkey service solution that integrates application management and support services enabling IATA to substantially reduce operating costs and meet business demand expected in a post-pandemic recovery. Pascal Buchner, IT Director and Chief Information Officer for IATA, stated that, quote, from the start of working with Ramini Street, we saw immediate improvement in our SAP application support and management. The onboarding process was quick and seamless, and we now have a much better view of our tickets and dashboards. Our in-house SAP team is constantly providing positive feedback on the quality of the support from Rimini Street. We do not regret our outsourcing choice, quite the contrary, and feel we can deliver even more value to internal stakeholders than before, end quote. Market opportunity. Rimini Street believes the total addressable market for its portfolio solutions is more than $170 billion annually. and our global penetration rate is only about 3.5% for support services and less than 1% for application management services. We believe we have significant greenfield opportunities for our entire portfolio of solutions. Gartner, the leading industry analyst firm and a strong referral source for Ramini Street Business, is currently predicting a 200% increase in the third-party software support market and expecting that the market will exceed $1 billion in 2023. Further validating the market opportunity, we recently conducted a global survey of 1,500 CFOs and financial leaders across 13 countries covering most industries. The results reveal that a majority of CFOs want to cut spending on non-essential IT investments, such as vendor-pressured major ERP reimplementation and migration projects that lack clear value or strong ROI. Further, CFOs want to see their CIOs optimize existing technology investments. Many CFOs and CIOs believe that large and expensive ERP migrations and upgrades may be better deferred or avoided, and existing ERP systems can be optimized through strategies and services offered by third-party service providers like Romini Street. enabling the CIO to free up budget and IT resources to help accelerate strategic digital transformation programs. Rumini Street remains the only provider at global scale that offers a proven turnkey single vendor solution for running and supporting ERP software with an ultra-responsive service that supports customization, security, interoperability, and performance challenges and creates value and savings for clients. In fact, Gartner notes Rimini Street is the leading provider of third-party support for Oracle and SAP products by annual revenue and client count. And its published data implies that Rimini Street has captured over 86% of the global market. Oracle litigation. We do not believe there have been any material developments in the litigation with Oracle since our last earnings call and quarterly report on May 10th, 2021. Please see our disclosures in the second quarter 10Q filing for updated information on the Oracle litigation that has been ongoing since 2010. Summary. We believe the company continued executing well in the second quarter and we are on plan to achieve our billion dollars in annual revenue and deliver around a 20% operating margin run rate by 2026. With the foundation in place to achieve our operation and financial plans, we are focused on sales execution, disciplined cash generation and management, and bringing our litigation with Oracle to a successful conclusion. Now with that, over to you, Michael.