Rimini Street, Inc.

Good afternoon, ladies and gentlemen, and welcome to the Rimini Streets earnings conference call. At this time, all participants will be in a listen-only mode. Later, we will conduct a question and answer session. I will now turn the call over to Dean Pohl, Vice President of Investor Relations. Mr. Pohl, you may begin, sir.

Thank you, Operator. I'd like to welcome everyone to Rimini Streets third quarter 2022 earnings conference call. On the call with me today is Seth Raven, our CEO, and Michael Parica, our CFO. Today we issued our earnings press release for the third quarter ended September 30, 2022, a copy of which can be found on our website under industrial relations. A reconciliation of GAAP to non-GAAP financial measures has been provided in the table following the financial statement in the 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. 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 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. Q3 2022 results.

Though global macro environment challenges, including currency exchange rate headwinds, negatively impacted third quarter financial and operating results. We achieved multimillion-dollar sales wins in diverse industries, strong subscription renewals and extensions, a continued increase in cross-sales of our expanded solution portfolio to existing clients, and we maintained our excellent industry-leading client satisfaction rating for support cases and onboarding. We believe RiminiStreet's new, broader portfolio of IT solutions provides the services many organizations need today around their enterprise software systems and provides industry-leading value, ROI, and proven engineering capability. We grew our client base by 7.8% year-over-year to more than 3,010 active clients. And since our inception in 2005, we've signed over 4,900 clients, including over 180 Fortune 500 and Fortune Global 100 companies. We estimate that we have helped our clients liberate more than $6 billion that they were able to save or reinvest in their strategic priorities.

Sales environment. As I noted in our second quarter earnings call,

We believe the current global macroeconomic environment is forcing organizations to refocus their businesses in the short term, including their IT investment and staffing plans, and has led to some frozen and delayed IT and IT service procurement decisions. However, As we've already seen with key sales wins in the third quarter, there is increased movement by organizations to optimize their IT spend. And we believe Hermini Street is well positioned with its new broader portfolio of services to ultimately benefit from the most of the macro environment challenges with growth in both new client acquisitions and cross sales.

Market demand and sales execution.

We continue to see strong and growing global interest and demand for our expanded portfolio of services from new and existing clients and are achieving increasing cross-sale wins. We are now implementing our successful cross-sale strategies to guide and focus our hunter sellers on new client acquisitions to assure we have balance between new client sales and cross-sales as our go-to-market strategy matures for growth in both opportunities. Quarter sales wins included large support transaction wins against SAP and Oracle and significant AMS wins against IBM and other providers. As I detailed in our last quarterly call, I am now dedicating a majority of my time to improving global sales execution maturing our service offerings, and delivering innovative new marketing campaigns to build deeper pipelines of new client and cross-sell opportunities globally. I have already made changes that improved global marketing of our broader service offerings, ramped up a stronger global demand generation engine for pipeline and equipped our more than 300 global revenue team members with a greater set of lead and opportunity development and closing skills. We even accelerated our 2023 annual global sales kickoff event from its planned early 2023 date to October 2022. I was very pleased with the leadership cohesion, new marketing messages, focus, and energy of the entire team at the event. and I believe it will lead to improved sales execution and sales growth in the coming quarters. In conjunction with the sales event, we formally implemented a stronger go-to-market roadmap and strategy for our emerging application-managed services, referred to as AMS, as well as for our security products and services, integration and interoperability products and services, monitoring services, and our global professional services. we are seeing continued pipeline and sales growth across the portfolio. Since our last earnings call, we also completed enhancements to our portfolio solutions, such as the launch of Remini Protect that adds additional depth and layers to our existing security offerings and provides a full suite of security solutions that prevents breaches and provides zero-day speed of remediation of identified vulnerabilities before they can be exploited. Rumini Protect services include security assessments, bargaining and configuration guides, security roadmaps, and a security vulnerability analysis report. To reach clients and prospects with pandemic travel restrictions nearly eliminated globally, Our senior executives, including myself, have restarted heavy travel to participate in a growing number of successful in-person Ramini Street and third-party events and executive sales meetings with hundreds of clients and prospects and to collaborate with local Ramini Street management teams to set strategy for accelerated sales growth.

Client and Prospect Perception

I continue to be impressed by how favorably Rimini Street is viewed by existing clients and prospects who have spent time getting to know our expanded breadth of services, engineering talent, and IT capabilities available with our unique bespoke SmartPath IT solutions. We have a significant asset in our people, and the company is closing very high-quality transactions with well-known local and global brands. We believe an increased volume of transactions will drive accelerated growth. Our high client satisfaction, strong subscription renewals and extensions, and strong and growing cross-sales are evidence that Rimini Street clients are leveraging Rimini Street as their trusted vendor to support, run, secure, connect, and drive more value out of their enterprise IT investments.

Client case studies.

To highlight how clients are leveraging Ramini Street services globally to achieve their strategic goals across different industries, I'd like to share two case studies from the third quarter sales wins. First is the University of Technology, Sydney, one of Australia's leading universities with around 45,000 students and 4,000 staff. UTS has switched from Oracle to Ramini Street for improved support and security of its Oracle database and technology platforms. The university faced challenges relating to the pandemic, including a massive shift to online learning and remote work, and a growing IT skill shortage. UTS's head of IT operations, Brian Kelly, stated that skilled staff are only getting more expensive to hire and retaining these employees just to work on support and operational tasks for their enterprise software is no longer sustainable. Kelly goes on to say, thanks to Ruministreet, they now have time and budget to spare, and they are now looking at developing and deploying additional security measures utilizing a cloud-first strategy. The UTS team is no longer worried about how long a patch or an upgrade will take to put into effect, how long it'll take to get issues resolved, or how many hours they'll have to dedicate to something routine.

Rumini Street is taking care of that for them, and having such a quick turnaround for support has really eased up their workload. Next is Lotte Mart, based in South Korea.

a large-scale hypermarket chain that switched their Oracle application maintenance support to Remini Street. Loyton Mart wanted to focus resources on strategic projects related to business growth and needed a more practical ERP support to better manage its rapidly changing distribution business. Lloyd & Mart's system strategy leader, Zhengxu Piao, stated that Rimini Street made a detailed analysis of Lloyd & Mart's current goals, including the necessity to cut costs and resolve service issues with the software vendor support program, and has instead provided a tailored support service that better meets their needs. Mr. Pryor goes on to note that after the switch to ReminiStream, they've been able to break free from vendor-oriented support policies and focus on business-oriented service needs, and that the work efficiency of their IT services team has been maximized with a swifter response and support to issues when requested.

Oracle litigation update. Rimini Street and Oracle have been in litigation for more than 12 years.

While the U.S. courts have confirmed long ago that third-party support is legal, we presently have two active proceedings with Oracle, the injunction compliance dispute and Rimini 2 proceedings, both of which relate to the manner in which Rimini Street provides support services for certain Oracle product lines.

Ramini Street is not prohibited from providing support services for any Oracle product.

With respect to the injunction compliance dispute, Ramini Street has filed an appeal to the Ninth Circuit of the United States Court of Appeals relating to certain rulings of the US District Court. We expect oral arguments to likely take place in the first half of 2023. However, The appeals process could take another 9 to 12 months to receive a ruling, but a ruling could come earlier or later. With respect to Rimini 2, the case Rimini Street filed against Oracle in 2014 and Oracle filed counterclaims, the case remains in a pretrial stage. However, on October 21, 2022, Oracle withdrew certain of its counterclaims and all of its claims against Remini Street and against me personally as CEO for monetary relief of any kind under any legal theory in this litigation. Remini Street's remaining claims and Oracle's remaining counterclaims seeking only equitable relief are presently scheduled to be tried in the United States Federal Court for the District of Nevada on November 29, 2022. The trial will now only be in front of a judge, known as a bench trial, instead of a judge and jury, since there are no longer any financial damages of any kind for a jury to decide in Remini 2.

Please see our disclosures in the latest 10-Q filing for additional information and disclosures regarding litigation with Oracle. Summary.

Over the past two years, we have placed the company in a materially stronger strategic position by achieving three key goals, strengthening the balance sheet through a series of key capital market transactions, delivering major wins in our protracted litigation with Oracle, and successfully launching the entire portfolio of new IT services and solutions. We are now focused on sales execution and growth, and we are confident that we are taking the right actions and making the right investments to re-accelerate growth and enhance shareholder value.

Now, over to you, Michael. Thank you, Seth, and thank you for joining us, everyone. Q3 2022 results.

Revenue for the third quarter was a record $101.9 million. a year-over-year increase of 6.6%. Annualized recurring revenue was $399.8 million, a year-over-year increase of 6.2%. Revenue retention rate for service subscriptions, which makes up 98% of our revenue, was 94%, with more than 80% of subscription revenue non-cancellable for at least 12 months. For the third quarter, clients within the United States represented 52% of total revenue, while international clients contributed 48%. Third quarter, aggregate year-over-year revenue growth in the United States was 5.8%, while growth for international clients was 7.4%. We note that our total revenue growth on a constant currency basis was negatively impacted by 2.1% due to FX movements. Billings for the third quarter were $49.7 million, compared to $73.7 million year-over-year, a decrease of 32.5%. Despite challenges with new client acquisitions and reduced deal size in US dollar terms due to FX headwinds, we achieved strong client renewal and expansion sales and growing cross-sales to existing clients, as Seth noted. In addition, client advanced support services payments beyond first-year fees were substantially lower year-over-year, and that has led to difficult comparisons for billings where such advanced payments have historically been a material component of the billings. DSO also lengthened in the quarter. We believe the global economic challenges, the end of low interest rates, and an ability to earn increased interest income on short-term fixed-income investments are significant drivers of this shift by clients towards title cash preservation. Gross margin was 61.5% of revenue for the third quarter, compared to 65.1% of revenue for their prior year third quarter, and 62% of revenue on a non-GAAP basis, which excludes stock-based compensation expense, compared to non-GAAP gross margin of 65.5% of revenue in the third quarter of last year. Gross margin declined as we continued investing in our service delivery resource base for both our core support offerings and expanded portfolio solutions we are selling and delivering globally. The gross margin decline was also impacted by the higher cost of labor, which has been successfully offset in part by our efforts to methodically expand efficiencies and leveraged through technology, process control, and use of lower cost labor geographies. Nonetheless, for full year 2022, we continue to guide gross margin to be in the range of 62.5 to 63.5% of revenue on a GAAP basis and 63 to 64% of revenue on a non-GAAP basis. Operating expenses. Like other organizations globally, we are experiencing cost pressures due in large part to increased labor costs and inflation in all labor categories. We continue to aggressively leverage all options available to ensure we are able to acquire the talent we need to achieve our profitability and growth targets. Sales and marketing expenses as a percentage of revenue was 35.3% for the third quarter compared to 34% for the prior year third quarter. On a non-GAAP basis, which excludes stock-based compensation expense, sales and marketing expenses as a percentage of revenue was 34.5% during the quarter compared to 33.2% in the year-ago period. We remain focused on making the appropriate investments needed to capitalize on our growth opportunities and thus see full-year 2022 sales and marketing expenses, including the pull forward of the 2023 sales kickoff event into 2022, to be in the range of 35% to 36% on a gap basis and 34.1% to 35.1%. on a non-GAAP standpoint of 50 basis points from prior guidance ranges. General and administrative expenses as a percentage of revenue, excluding outside litigation costs, was 18.1% for the third quarter compared to 16.3% for the prior year third quarter. On a non-GAAP basis, which excludes stock-based compensation expense, G&A was 17% of revenue versus 15% in the year-ago period. Outside of the one-time expenses that occurred in the period, the G&A line continues to be higher than our peers due in material part to the cost for in-house legal teams another cost made necessary by our ongoing oracle litigation and our decision to continue making investments in the systems process and talent infrastructure needed to support our growth objectives as such we now see full year 2022 gna expenses to be in the range of 18 to 19 percent on a gap basis and 16 and a half to 17 and a half percent on a non-gap standpoint up 150 basis points from prior guidance ranges. Net outside litigation expense was $6.2 million for the third quarter, compared to $6.6 million for the prior year third quarter. This year's third quarter and the prior year third quarter both had elevated costs due in part to Oracle litigation costs and other litigation matters. Our outside litigation spend is not linear and can fluctuate each quarter based on timing and the nature of litigation activities. As Seth noted, the remaining two cases currently scheduled for trial on November 29, 2022, resulting in material litigation costs that we had expected to incur during fiscal year 2023, being pulled forward into fiscal year 2022. Accordingly, we expect full-year 2022 outside litigation expense to now be in the mid-$20 million range. For the third quarter, the net loss attributable to shareholders was negative $0.4 million for breakeven per diluted share compared to the prior year third quarter loss attributable to shareholders of negative $6.7 million or a loss of $0.08 per diluted share. On a non-GAAP basis, net income was $8.3 million or $0.09 per diluted share versus $13 million or $0.15 per diluted share in the prior year third quarter. Adjusted EBITDA was $10 million or 9.8% of revenue for the third quarter. Our non-GAAP operating margin, which excludes outside litigation spend and stock-based compensation, remained in the double digits at 10.5% of revenue. Balance sheet. We ended the third quarter with a cash balance of $119 million plus investments of $11 million, consisting of short-term treasuries and agency securities, totally readily available cash of $130 million compared to $103 million for the prior year third quarter. On a cash flow basis, for the third quarter operating cash flow declined $24 million, and year-to-date we generated $36.8 million compared to $47.8 million for year-to-date third quarter 2021. In addition to the FX headwinds noted, that has impacted our cash flow, we have also experienced lower advance payments from clients, both new and existing, as the overall inflationary environment is leading to a broad-based shift towards aggressive cash preservation. Deferred revenue as of September 30, 2022, was approximately $248 million compared to $244 million for the prior year third quarter. Backlog, which includes the sum of bill of deferred revenue and non-cancellable future revenue, was approximately $533 million as of September 30, 2022, compared to $553 million for the prior year third quarter. Capital markets transactions. During the third quarter, we repurchased 200,000 common shares with a market value of approximately $992,000 with an average price of $4.96. I would also like to note that on October 10, 2022, all $14.7 million of the $11.50 exercise price warrants expired.

Business Outlook. We are currently providing fourth quarter 2022 revenue guidance to be in the range of 103 to 105 million

and tightening our full-year 2022 revenue guidance to be in the range of $404 to $406 million. This concludes our prepared remarks. Operator, we'll now take questions.

If you would like to ask a question, please press star one on your telephone keypad now. You'll be placed into the queue in the order received. Please be prepared to ask your question when prompted.

Once again, if you have a question, please press star one on your phone now. And our first question comes from Brian Kinslinger. Your line is open.

Great. Thanks so much for taking my questions. I didn't hear much about bookings trends. If I think back one year ago, a new sales team had trouble closing deals and this led to a drop in your growth rate. Can you discuss at a high level how bookings during the third quarter of this year compared to last year? How did the sales force execute? Was it much better, just a little bit better? And then how much did delays play into or freezes that you discussed play into these trends?

Excuse me. Hey, Brian. Thank you very much. Seth here. So we actually executed very well on the sales side. I was pleased with the numbers. The percentage close of pipeline was good. As you know from last year, We have to hand it to SAP. They handed it to us pretty well in the third quarter on any deal size over half a million dollars for us. They really won all of those deals. And this year, we said we would rework our messaging. We would come back to the market much stronger. And we did. We did multi-million dollar SAP deals in the quarter. Some really, really nice strategic wins around the world. So that was number one, was getting those SAP deals done. We didn't get enough of them over the line, but it wasn't really losses. It was a lot of issues of delayed deals, and we just didn't see the transactions closing at the rates and the numbers that we had hoped for for the quarter. We had sufficient pipeline globally to make the numbers that we wanted to get out there and do, but those deals just didn't all get over the line. So qualitatively, Excellent deals around the world with big deals, brand names. We just didn't have the volume that we needed to make the numbers that we wanted to make. And I do see a lot of it being macroeconomic. We were able to get some of the customers that were even delayed from Q2 over the line in Q3, but we did have a lot of Q3 that slipped. In fact, one of them slipped by two hours earlier. seven-figure deal slipped into Q4 just because of signature and other processing issues while people were dealing with other matters in the company. So I think, again, I would say Salesforce executing well. Challenge, not enough depth of pipeline to make the numbers given the fact that we normally run a 4X. We prefer a 4X number on the pipeline of opportunities to closes that we need. We didn't have that depth globally.

in all markets and uh and that didn't allow us to close all the deals we wanted great i have one follow-up and then i'll get back in the queue um given what you've said there uh probably the lack of pipeline that got actually executed it wasn't your fault they just were delayed is that why when i look at the fourth quarter guidance it implies i believe at the low and mid points another deceleration of revenue growth compared to the last two quarters, and then should we assume that's kind of the starting point for how to think about the next few quarters?

I think, again, visibility, and I think the same thing we said at the end of Q2, visibility with all of the economic challenges, and again, our customers are some of the largest in the world, and the ones you hear about in the news that that are having serious supply chain shortages, shipping costs, parts, FX issues, all these things. They're inundated with challenges. And I think those still represent challenges to us to get the deals done. But we're very well positioned with the products and services. And that's why I even mentioned on the AMF side the fact that we're newbies in this area. We're one of the youngest players in the AMF space. And we're replacing top tier companies like IBM. So we're making progress. We're maturing it. I think that the pipelines continue to grow in those areas. I just don't have the full confidence of visibility about getting these deals over the line as well as we did in prior years. I just think right now, you don't know whether something's really going to come in in a particular quarter. Timing is much trickier.

Great. Thank you so much. Sure. Thanks, Brian.

And our next question comes from Derek Wood. Your line is open.

Oh, great. Hey, guys. Thanks. It's Andrew. I'm for Derek. Maybe, Seth, just walk us through kind of the change you've seen the past couple months. It sounded like... like it's improved macro-wise has improved so far a little bit in Q3. You talked about some loosening or increased movement to optimize IT spend. Maybe just any more color on that would be helpful.

Yes, certainly. And I think, Andrew, the point being that our broad products and services are The fact that we can now say, well, not just do your support. We'll do your support. We'll run your system. We'll protect it. We'll connect it. It are all really big things to our customers who are looking for us to take a wider scope of services off of their plate, bigger wallet share for us, obviously, but they want to give us more and more responsibility. And I think that continues to play out in the number of unified support deals. the increased sales and security, the increased sales in our Connect products, which will officially launch here very shortly. But I think overall, we think the demand environment is very good. The challenge is actually execution at the customer level because they have so many different competing priorities. We've been truly sometimes just pushed to the side with a, we love this, we want to do it, but we've got three other bigger fires we've got to get put out first, and that is causing some delays. And that's why I noted it wasn't really that we lost deals in the third quarter. We lost them to other priorities in the quarter. And so I think we're in a really good place. I'm very, very pleased with the progress we've made in sales and organization and As you know, when I took over sales again last quarter, I said I was going to make the sales changes necessary to put us in a position to really start to accelerate growth in quarters into the 23 arena. So we're going to have to go through, you know, a little bit more transition. As you know, it takes a while for all these changes to work their way through when you have a six to nine month sales cycle. So it will take probably through the fourth quarter to or these items to take effect. But I do think the training we've done, the additional work that we've done to provide better skills to the sellers, I think that we could see some upside to that even in the fourth quarter coming into 23.

Brad, thanks.

Sure. And maybe just an update, Seth, on how the Americas specifically, the changes you've made there, how those are going and when do you think, will the transition be done by the end of the year or early next year? And could we start to see that U.S. growth accelerate, assuming macro is somewhat stable?

Yeah, taking macro out of the picture, I would expect to see acceleration in North America in 23. But I expect that from all the markets globally. I think we're well positioned. And if we can just make sure that we are one of the higher priorities that our customers are dealing with, I'm pretty confident about getting these deals over the line. I mean, the fact that we were not only moving deals north of half a million dollars, but we did one transaction alone on the SAP side where they're committed to $10 million plus over a five-year contract alone, non-cancelable. So we had some really good complex wins on big global energy, telco, a lot of the key markets that we specialize in.

Great. Okay. Thanks, guys. I'll pass it on.

Sure. Thank you. And our next question comes from Jeff Van Rie. Your line is open. Hello.

Hi, Jeff.

Great. Hey, Seth. Hey, so I want to follow up on the sales thread here. So, you know, you've obviously dove in and are in there trying to get things aligned the way you want them. Now that you've had a little more time to look at sales, get a better sense of what was and wasn't working. Why was sales execution as weak as it was? And, you know, and then I think you just touched on that. Maybe just a little finer point. When do you think you can get billing's growth back in that business? I think you said you'd start to see some improvement in execution in Q4, but trying to push a little further and when we can really start driving some billing's growth here.

Well, I think, again, if you just follow the flow through of a normal six to nine month sales cycle, You make changes upstream. It really takes six months to push that through. And if you look at all those changes I detailed in the prepared remarks, moving the kickoff up to October, which was an amazing event for 300 people, true training event for the week, block and tackling. We went back to figuring out, hey, here's all the products in your bag that you can sell. Here's why people buy them. Here's how you sell them. And we did role plays. It was a true training event, not a PowerPoint parade. And I think it was just fabulous for us to be able to reground the global revenue team in all these messages. Even our marketing team was a little sketchy on some of the products and how they fit together. So I think what I pulled in in Q3 was get everybody back to basics. Let's make sure everybody's grounded in what we're selling in this big new portfolio of services. How do we think about positioning that? We're not just a support provider. We are now an IT services provider, a boutique provider that customers want to give us more wallet share. And I'll give you an example. Singapore Institute of Management was a big L4 support customer for us that we brought on board a couple years ago. We talked to them about a much bigger vision of running their systems, taking over and helping them redesign and refresh their entire student administration system to meet current needs. And they told us, look, we don't want to deal with 100 vendors anymore. And we hear this a lot from companies. We can't deal with 100 IT vendors. We are going to consolidate down the number of vendors we work with. We're going to build deeper vendors. more strategic relationships with them. And you guys are one of the ones that we want to do that with. And we took over AMS. We've got big new contracts there. We threw out IBM and that one as well. Really fantastic when you're watching this land and expand process work. So I am very bullish about what I'm seeing on the ground. It is simply volume. We need more transactions closed. but we're closing quality transactions for what we're getting done. And I think we're going to see it in 23.

I feel very optimistic about that.

That's helpful. Based on all the years' experience, when you look back at prior recessions, the argument of a higher level of service, 50% off, and now much broader portfolio products you can sell, but When that value prop has been pitched in past recessions, how long did it take for the buyers to go from sort of deer in headlights, we're in a recession, to, okay, we need to, you know, Ramini's our go-to and we should move ahead on this. I'm trying to get a sense of timing of when this actually might become a tailwind as opposed to something that's delaying cycle.

Yeah, I think if you look back at it, right, we've all been through 2001.

There was the dot-com meltdown. Then 2007-8, again, a very unique environment. No one knew where the bottom was, right? And I think it was a true financial meltdown. I think it took six months to nine months for people just to wrap their head around what was going on. And we saw our best years ever, I think, were 7-08 in terms of high-yield growth, once people got a footing there. I do think when I see the deals that got done in the third quarter, when I said at the end of Q2, I said, we're not sure whether this cycle of deer in the headlights, as you called it, while they're trying to refigure out this new world they're working in and the new plan and then start to execute on it. I said it would go into the third quarter. And I do think we saw it roll through the third quarter still for a lot of players. But let me give you a couple other data points. So I was just down in Orlando giving a keynote at the Gartner, the biggest symposium of them all. I had 1,200 registrations for my session. It was the largest Gartner set that they've ever had for a vendor. And it was amazing. I think we had 500, 600 people just in the room alone, and then it was being simul-broadcast in other rooms and things. Amazing. People are very focused on... how to optimize the current operating budget to get that into innovation and things that are going to move the needle. So we are exactly placed where they need to play and where they want to play. And I think the interest levels show that. We just did Gartner Japan, again, one of the largest they've ever seen of a vendor event. In terms of participation, our booths have been overwhelmed between Gartner Orlando, Gartner Japan. We're coming up to Gartner Europe in Barcelona. So I think, again, good indicators that the interest is super high, great meetings. And I will tell you that there are millions of dollars of transactions that I would potentially expect coming out of those events alone. where we met and talked to people for the first time. And some people are already fast-tracking deals with us. So I do think my number one goal in the world is recognition. If I can get our teams and our value prop and our services and solutions in front of more CIOs, CFOs, CISOs, chiefs of procurement, I am convinced that we would see tremendous pipeline growth that would get us to those 4x, 5x type numbers that would assure some very strong growth numbers in 23 and beyond.

Great. Okay. And if I could sneak one last one in there, Michael, on the DNA side, you bumped the outlook there up 150 basis points. What's, I mean, can you slice that a layer or two deeper as to what's comprising the bulk of the change compared to the thinking last quarter?

So, Jeff, as I highlighted in the prepared remarks, we made conscious decision to bring on incremental investments versus deferring those so we can have our structure in place so we can re-accelerate our growth as we've highlighted. There were some one-time items as well, but they were various. And also, we highlighted that we are seeing and we are beefing up and have done so our compliance efforts a little sooner than previously planned with regard to our compliance efforts. So a whole host of issues, a conscious decision to put those in place, but we're feeling good where we are now with regard to our investments.

Will that level be the persistent you gave, obviously, the outlook for Q4, but are we looking at things that are kind of one time in nature to get ahead of the game, build infrastructure that's leverageable, other things, and then it might fall off as we get into 23? Or how do you think about the J&A levels going into 23?

So I think you're characterizing it accurately there, Jeff. That, yes, they're recurring expenditures, but they're one-time-ish in nature from a baseline perspective. And I think you're looking at the outlook appropriately. Okay.

All right. Thanks for taking my question. Appreciate it.

Thank you. And as a final reminder, if you do have a question, please press star 1 on your phone now.

And we have no further questions in queue.

Great. Well, thank you very much, everyone. And I want to thank you for joining us for the call. Just want to remind everyone, while we live in a more comfortable place, there are many in harm's way, many troubled folks who really need help out there, which we're so glad that we can participate with our foundation to make a difference. But always a good reminder to think about those in need, and we're there to help them, and I hope you guys all are too. So with that, guys, thank you very much and appreciate you attending the call today. Take care.

that concludes today's conference call thank you for attending