Rimini Street, Inc. (RMNI) CEO Seth Ravin on Q4 2020 Results - Earnings Call Transcript

Rimini Street, Inc. (NASDAQ:RMNI) Q4 2020 Earnings Conference Call March 3, 2021 5:00 PM ET

Company Participants

Dean Pohl - VP, IR

Seth Ravin - CEO

Michael Perica - CFO

Conference Call Participants

Brian Kinstlinger - Alliance Global Partners

Richard Baldry - ROTH Capital

Jeff Van Rhee - Craig-Hallum

Nick Altmann - Cowen

Mark Schappel - Benchmark

Operator

Welcome to the Rimini Street Earnings Call. My name is Karen. I will be your operator for today's call [Operator Instructions].

I will now turn the call over to Dean Pohl. Dean, you may begin.

Dean Pohl

Thank you, operator. I'd like to welcome everyone to Rimini Street's Fourth Quarter and Fiscal Year 2020 Earnings Conference Call. On the call with me today is Seth Ravin, our CEO; and Michael Perica, our CFO.

Today, we issued our fourth quarter and fiscal year ended December 31, 2020 earnings press release, which can be found on our Web site. 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 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 Web site.

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-K for fiscal year 2020, which was filed earlier today for a 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.

Seth Ravin

Thank you, Dean, and thank you, everyone, for joining us today. For the fourth quarter and full year 2020, we continue to execute well against our strategic growth plan to achieve $1 billion in annual revenue by 2026 and exceeded quarterly and full year guidance. We accelerated year-over-year revenue growth for the fourth quarter from 11.7% to 15.4%, 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, calculated billings, backlog and total gross profit and maintained a revenue retention rate of over 90%.

Throughout the year, we continued making investments, including key executive leadership additions, take advantage of growing global demand for Rimini Street support solutions, including our new application management, security, interoperability and professional services. We ended the year with 2,487 active clients, a year-over-year net increase of 20.6%. Sales activity remains at historically high levels. And from the company's inception in 2005 to date, we have signed nearly 4,000 clients, including 165 Fortune 500 and Global 100 companies and have saved our clients more than $5 billion. During the full year, our global service delivery team closed more than 33,000 support cases and delivered nearly 89,000 tax, legal and regulatory updates across 58 countries, including more than 6,000 emergency updates related specifically to the global pandemic. Our year end 2020 global employee count was 1,425, a year-over-year increase of 12%.

Pandemic impact. Throughout the year, we experienced both the opportunities and challenges of the pandemic. We believe that pandemic added meaningful additional pipeline for both 2020 and 2021, and we believe some new client sales were attributable to the pandemic. However, we also had some existing Rimini Street clients file bankruptcy or terminate their agreements due to financial distress resulting from the pandemic, and other clients received special discounts and extended payment terms for us to help them navigate the challenging times. For full year 2020, we believe the sales opportunities created by the pandemic outweighed the challenges with client renewal sales more negatively impacted by the sudden financial shock and 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 and agility to help prospects and clients with special needs and protected us against downside risk in 2020. We believe our strong balance sheet and cash position will provide us continued flexibility and agility to help prospects and clients through the continuing pandemic impacts in 2021. The full extent to which the pandemic will continue to impact our business in 2021 and beyond will depend on numerous evolving factors that we cannot reliably predict.

Sales and outlook. During the fourth quarter, we completed 213 geographically diverse new support, application management and strategic service sales transactions. Support services is where we provide technical support and required updates, such as tax, legal and regulatory updates to a team who runs the system for a client day to day. Application Management Services, also known as AMS, is where we run the system for the client day to day. To highlight how clients are leveraging Rimini Street services globally to achieve strategic goals across different industries, I'd like to share with you a few case studies from the fourth quarter.

First, we were awarded three Brazilian public sector contracts to support Oracle and SAP software for the legislative, executive and judiciary branches of the Brazilian government. Prior to Rimini Street's launch in the Brazilian public sector market, no public bids for support of Oracle or SAP systems occurred 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, offering an alternative solution that provides a more competitive value proposition and a premium enterprise support experience. The same need was reflected in the whole of government volume sourcing agreement with the Australian government, designed to make the procurement process faster, easier and more cost effective for Australian government agencies to access Rimini Street's services. Rimini Street is already serving many Australian government agencies.

Next, metropolitan water reclamation District of Greater Chicago, serving more than 10 million customers switched to Rimini Street support for its SAP applications. The client is now receiving Rimini Street's ultra responsive, premium level support that is available to them on their current release for a minimum of 15 years from the time they switch to Rimini Street, allowing them to receive full support for their current release and avoid a costly and unnecessary migration to SAP's newest product line. The client is able to realize significant savings and invest that savings back into IT modernization initiatives across the organization.Lastly, Pulse Electronics, a leading components manufacturer for the automotive and telecommunications industries, has switched to Rimini Street support for its SAP software.

With the savings achieved by switching to Rimini Street, Pulse was able to invest its cost savings and business intelligence capabilities, including artificial intelligence technologies, to enable growth and competitive advantage during a year when new spending may not have otherwise been possible. With more than 70% of its products designed in collaboration with customers, Pulse uses its SAP system for several critical functions, including finance, operations, supply chain and warehouse management. As its business operations are required to run 24/7, any interruption would mean a major loss of revenue. In order to sustain its leadership in a highly competitive market, the company must adapt quickly to changing market dynamics. Pulse's IT Director, Alex Wong, stated that, 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.

For 2021, we're continuing to see growing interest pipelines and sales in our core support service business and our new Application Management Services. We are also seeing growing interest pipelines and sales for our innovative security, interoperability and professional services with a growing number of clients successfully deploying and using these new services. We believe our full year 2020 sales results and 2021 pipeline demonstrate that Rimini Street is well positioned to compete. Gartner notes Rimini Street is the leading provider of third party support for Oracle and SAP products by annual revenue and client cap, and its published data implies that Rimini Street is captured over 86% of the global market. Gartner's currently predicting a 200% increase in a third party software support market, expecting that the market will exceed $1 billion in 2023.

Rimini Street is the only vendor at global scale who 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 create savings and value for clients. As discussed during our Investor Day 2021, we believe our global penetration rate is only approximately 3.5% for support services and less than 1% for application management services, providing us significant greenfield opportunities within the $170 billion addressable ERP support and AMS markets. In addition, we have increased our commitment to cross sell opportunities within our current client base and internally estimate that cross sell opportunities currently exceed $1 billion in annual revenue. We look to achieve these growth objectives by leveraging robust go to market strategy, a sales overlay resource model and an integrated incentive framework that drives consistent goals throughout the organization.

Oracle litigation update. With respect to Oracle versus Rimini Street that was filed by Oracle in 2010, went to trial in 2015, and which ran its course of all appeals by 2020. The parties are engaged in the dispute over a permanent injunction that's been in place since 2018. The dispute has been submitted to the court, and there is no known timeline for any court response. With respect to Rimini Street versus Oracle, the case we filed against Oracle in 2014, the case is in pre trial preparation, and trial is not currently expected to occur until the first half of 2022, but could occur earlier. To summarize, the courts have found a third party support and customization of enterprise software is permitted, and Oracle licensees have a choice of support providers. Rimini Street, as deemed by the United States Court of Appeals, is a lawful competitor. Please see our annual 10-K filing made earlier today for additional litigation disclosures and information.

Summary. We believe the company executed well in the fourth quarter and full year 2020, and we are on plan to achieve $1 billion in annual revenue and approximately 20% operating profit run rate by 2026. To achieve our short, mid and long term goals, we're focused on sales execution, including increased cross selling and retention, disciplined expense and cash management and bringing our litigation with Oracle to a successful conclusion.

Now over to you, Michael.

Michael Perica

Thank you, Seth, and good afternoon, everyone. 2020 results. Revenue for the fourth quarter was $87.8 million and full year revenue was $326.8 million, year-over-year increases of 15.4% and 16.3% respectively. Fourth quarter annualized recurring subscription revenue was $349 million, a year-over-year increase of 15.4%. Revenue retention rate for support service subscriptions, which makes up the vast majority of our revenue, remained above 90% with more than 80% of subscription revenue noncancelable for at least 12 months on a rolling basis. For the full year 2020, clients within the United States represented 59% of total revenue, while international clients contributed 41%, representing aggregate year-over-year revenue growth rates of 6.6% and 33.5% for US and international clients respectively. Our international strength was led by strong results from our Asia Pacific region. Looking forward, we see growth accelerating in North America in fiscal 2021 due to our enhanced Regional General Manager model led by the recent additions of key leadership.

Gross margin was 61.8% for the fourth quarter and 61.4% for the full year 2020, compared to 60.2% for the fourth quarter 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. The planned reduction represented a continued investment in the global service delivery capability for our new products and services, including Application Management Services for SAP, Oracle and Salesforce, SAP S4/HANA Support Services, Advanced Security Solutions and Advanced Technical Solutions. As we have stated previously, we expect to begin realizing the benefits of efficiencies and scale in our global service delivery throughout 2021, such that we are guiding for full year 2021 gross margin to be in the range of 61% to 62%.

Operating expenses. Sales and marketing expenses as a percentage of revenue were 34.5% for the fourth quarter and 35.1% for full year 2020 compared to 39% for the prior fourth quarter and 38.2% for full year 2019. The full year 2020 310 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, resulting from a switch to virtual marketing and selling. Nonetheless, we remain focused on making the appropriate investments needed 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, excluding outside litigation costs, was 16% for both the fourth quarter and full year 2020 compared to 16.7% for the prior fourth quarter and 16.8% for 2019.

We expect G&A expenses as a percentage of revenue to be within the range of 15.5% to 16.5% for the full year 2021. Net litigation expense was $4.2 million for the fourth quarter and $14.6 million for full year 2020 compared to $1.8 million for the prior fourth quarter and the credit of $834,000 for full year 2019. The 2019 credit was attributable to a net $8.8 million litigation recovery from a successful appeal and unanimous ruling by the US Supreme Court in our favor. Our outside litigation spend is not linear and can fluctuate each quarter based on litigation activities. We expect litigation expense to be in the range of $15 million to $17 million for the full year 2021.

Adjusted EBITDA was $12.9 million or 14% of revenue for the fourth quarter and $42.6 million or 13% of revenue for full year 2020 compared to adjusted EBITDA of $4.7 million for the prior fourth quarter and $27 million for full year 2019. With our year end net leverage of $67.3 million, which is calculated by subtracting our year end cash on hand from the Series A preferred balance, our net leverage ratio was 1.6 times adjusted EBITDA. Achieving our near term target ratio of 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 the Series A preferred instrument and evaluate potential refinancing alternatives.

It should be noted that the Series A is redeemable at the option of the company without make-whole beginning in July 2021, but is not mandatorily redeemable until July 2023 and only then upon the election of holders of a majority of the Series A than outstanding. I again wish to stress that the company has no obligation to refinance or can it be forced to do so until after the mandatory redeemable date of July 19, 2023, over two years from this point and only if the majority of holders elect to redeem the instrument. For the full year 2020, operating cash flow increased to $42.1 million, yielding approximately 13% of revenue compared to $20.4 million for full year 2019. 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. We ended fiscal year 2020 with record cash balance of $87.6 million compared to $38 million for the prior fiscal year and 2019. Moreover, during the fourth quarter, we repurchased $5 million of face value of our Series A preferred stock at an approximate 10% discount with no make-whole payment, and we retired the purchase preferred stock. Subsequently, on January 5, 2021, we repurchased an additional $10 million face value of Series A preferred with similar terms as the prior transaction. Backlog, which includes the sum of billed deferred revenue and noncancelable future revenue, was approximately $556 million as of December 31, 2020, up 15% from $483 million as of December 31, 2019. Finally, deferred revenue as of December 31, 2020, was approximately $256.9 million, up 9.1% from $235.5 million as of December 31, 2019. Moving forward, we will continue focusing on free cash flow generation and reducing our cost of capital, and we'll take advantage of opportunities if and when they present themselves across all capital market instruments as we strive to optimize our capital structure and improve GAAP profitability for the benefit of all shareholders.

Guidance. We're currently providing first quarter 2021 revenue guidance to be in the range of $87.5 million to $88.5 million and full year 2021 revenue guidance to a range of $370 million to $380 million.

This concludes our prepared remarks. Operator, we'll now take questions.

Question-and-Answer Session

Operator

[Operator Instructions] And we do have our first question from Brian Kinstlinger from Alliance Global Partners.

Brian Kinstlinger

Solid EBITDA in the fourth quarter. First, however, if I look at your expense guidance, before I touch on two business questions, sales and marketing is expected to increase as a percentage of sales. And at the midpoint, G&A is expected to be the same percentage. I guess, I would have expected some leverage, especially after the super leverage we saw in the fourth quarter, 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&A side?

Seth Ravin

Sure. Brian, that's [Multiple Speakers]…

Brian Kinstlinger

Of course, that's on 2021…

Seth Ravin

So the sales and marketing component, as you know, we made a lot of big investment in the 2020 fiscal year. We brought in three new GMs over North America. We brought in new sales leadership underneath them. We've been hiring a lot of sales reps. And of course, as everybody has followed over the past quarters, it's been a bit of a struggle for us to get the sales reps 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 about 80 reps will be on the ground here in March. Very, very good news. We retooled our entire recruiting process for sales reps. Changed it up, brought in new people, expanded the team. And so that's a really big win going into 2021, where we said we would end the year at about 100 reps.

So there is additional hiring that's going on to ramp up to be able to not only meet obviously the 2021 numbers, but position us for the higher accelerated growth that we're going to, as you well know, need to achieve in order to make our $1 billion number for revenue by 2026. So that's all according to plan. There is a lot of sub requirements behind the sales reps that include SSAs, which are sales engineers. There is a lot of components that go into supporting the sales force, and that's why you're seeing us take a pretty conservative approach on sales and marketing. We're still investing in that part of the business.

Brian Kinstlinger

The two business questions. I don't know, if I got it right, but you mentioned you won your first three Brazilian deals, and then you said you were on an official list of alternatives. Whose list is that, is that a government list of approved vendors because their companies to review? And then can you size the Brazilian market opportunity?

Seth Ravin

First, yes, it's the government list of vendors. It's very much likely, those of us in the US are familiar with the GSA contract where a vendor can get on the GSA preapproved 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. And this is something we watched Rimini Street, again, because of our growth in public sector globally, we finally entered the public sector 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 and our investments began paying off by winning, of course, three prestigious contracts across the whole top of government 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 organizations and even some quality government organizations in Brazil. So we're excited.

Don't know the exact sizing of that market. 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 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've got one in Israel in previous quarters. So we are continuing to see Rimini Street become a choice for government with these easy procurement vehicles being preapproved that allows us to go into a lot of different governments in the US, Canada. We have the same type of agreement already in the UK as well with a lot of government there.

Brian Kinstlinger

Last question I had, international, you said grew 33% plus, US grew 6.5%. Can I assume that SAP, given a little bit more international presence, and Oracle is a little bit more US presence. Although, there is obviously plenty in both that SAP services and maintenance is a little bit more of the driving factor of growth recently than Oracle? Or should we not view the results that way?

Seth Ravin

Your first assumption is correct in terms of the way that SAP and Oracle divide applications around the world, the US is the largest Oracle application market. Around outside of the US and even some of Canada, you find that SAP is a dominant player in the application space. Now of course, Oracle is far more dominant on technology and infrastructure for database and other technology products, so you're going to see that globally. But the assumption about the way that the money divides up, you're going to see, again, a lot of Oracle business, our are largest and fastest growing product line is Oracle technology. Oracle database is huge. And we see that with a lot of companies because the cost is very high and the value return from Oracle is very low when it comes to the database return on investment. So this has been a very big and growing market for Rimini Street. And on the application side, Oracle's native product, EBS, the e-business suite, is a very strong provider of business for us as well because we can play well across that globally, and that competes well with the SAP product. So I think you're seeing a mix there that's not favored SAP, except really by quarter, the third quarter is the largest sales quarter for SAP because of the nature and cadence of their contract, all starting or mostly starting on the 1st of January every year, and they have a 90-day notice provision. So that always makes the third quarter a big SAP quarter.

Operator

And we do have our next question from Richard Baldry from ROTH Capital.

Richard Baldry

When I look at fourth quarter, it's obviously your strongest renewal period and deferred revenues were up 28% sequentially this year versus 23% last. Do you feel just very broadly that, that really derisks your renewal cycle on a post COVID basis, companies that obviously troughed out on pretty tough year in the first half, seeing them renew in the fourth quarter. Do you feel like that's put a lot of the renewal risk behind you?

Seth Ravin

Rich, I think, 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 and you really saw in the back half of the year that, that moved out. We couldn't overcome some of the losses from renewals in the first half, but you could see we still met the guidance across the year. We set that guidance prior to COVID. So that was a good, strong sign, but it was made up in the back half of the year. And we really did see a change in the back half and the first half in terms of that risk.

Now what I'm worried about of course is playing a conservative position is you've got a lot of companies that have battered, they're beating up, they survived, they paid their bills. But if this pandemic goes on for another year where we can't get people back, can't get to a herd immunity by the end of this year and we still have closures and impact, I think there's another group of companies that probably just don't have the cash reserve left to survive. So I don't think we're completely out of the woods when it comes to potential impact to customers who are just 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 and we're seeing in the first half of the year with the initial shock.

Richard Baldry

And maybe for Michael, your strong deferred, again, build in the fourth quarter tends to spike 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 a pretty good cash generator in the first half typically for you guys. Gives us a better idea of sort of what the net debt would fall to on a near term basis when that receivables falls and is collected?

Michael Perica

So Richard, our cycle with regard to cash that you have seen and aware of don't see it similar in this year relative to prior years. And of course, we don't share specifics where we think our exact receivable balance is. However, as you have seen, our adjusted EBITDA in line with our operating cash flow north of $40 million for 2020 was really an excellent performance from the overall team as a whole. And we see and are focusing on delivering similar performance, similar yields going forward as we continue to grow.

Richard Baldry

And maybe last for me. Could you talk a bit more about the AMS 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. 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.

Seth Ravin

Rich, I think we've been saying that we don't see a material, I was thinking about 10% as a material part of revenue. We think we're going to deliver meaningful growth this year, but not necessarily hitting that 10% threshold. Again, we're growing our support services as well. So we have to play, that number keeps moving up. So getting 10% total revenue is a great target to try and hit asset threshold. And I think that when we look at the amount of pipeline, 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. We've been adding personnel around the world, specifically devoted to sales of the AMS product. The marketing campaigns have kicked off to the full customer base of thousands of customers, introducing Rimini Street's AMS offering as a cross sell opportunity. We've already seen orders coming back from those campaigns with people interested. The number of proposals that are going out is increasing. We're working on them all the time.

There is -- generally, at any one time, there is current proposals and progress that are being drafted for new AMS opportunities. We're winning some, which is great and we loss a few and we keep learning from some of those losses in different countries where we just don't have all the skill set rolled out yet. Sometimes we still come across a little bit amateurish in our response, because it's a new business for us in different countries, and we continue to improve those and increasing our win rate. So I'm very bullish on the total contribution in the long run, in the midterm. And I think we're going to see, again, meaningful contribution even in '21, 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.

Operator

And we do have our next question from Jeff Van Rhee from Craig-Hallum.

Jeff Van Rhee

I’ll add my congrats, that's just a heck of a finish to the year here. Several from me. Seth, I wanted to touch 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 taking to get things done? And then along those same lines, on the sales side, as you look at the international, I mean, you called out Brazil, Australia. You're obviously crushing it 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 US process, I'm just curious, initially out of the gate is the biggest area for improvement in the US, more focused on lead gen or close rates. I'm kind of curious what they're going to focus on? I realized the whole thing sort of stitches together. But just wondering, in the US, which of those is the bigger focus? And maybe start with those two sales questions.

Seth Ravin

I think our lead gen has been very strong in the US. We're definitely strengthening that even more with the players. 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 compared to these challenges over the last couple of quarters, we're fully staffed in the East Coast, which hasn't happened in two years, and we made that happen over the last few months, replacing pretty much everyone in the sales organization leadership, 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 the increased acceleration in North America this year. Now temper that with exactly what you said. These are brand new people. Even the GM just hit the ground in December. It takes six to nine months to ramp a sales rep up to full productivity. There is 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. Very encouraged with the positives that I'm seeing coming from our new GMs, our new sales leadership in place. I think that all of that will get you to exactly where we said for the last few quarters, the focus is for us. International is doing well. We will continue growing international, but it's doing nicely all through the regions. We are going to focus on North America. All of this investment is North America, because being 50% of our revenue and potentially could be more than 50%, when you look at the growth rate, single digit, we get that back up to match the international rate, and you should see a very, very strong acceleration in revenue.

Jeff Van Rhee

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 is the buyer interaction any different or changing at all in the US when you compare and contrast to kind of international, or is it the same need, same buyer, same cycle, we just have to execute better.

Seth Ravin

It's our problem. It's execution. 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 regroup with the new General Managers, VPs, new structures and new approach and strategy to running North America as its own region rather than in the all chute of corporate operations. And it's just a maturing function and it's a new scaling function with a new operating execution plan. So it's all us.

Jeff Van Rhee

And the second part of that question, then just your sales cycle is kind of the latest intel on what you're experiencing out in the field working through cycles?

Seth Ravin

It's fierce up for the vendor. That hasn't changed one iota in 15 years. It's still fierce. I think as we noted in the last call, there is more price flexibility coming from the vendors than they have ever offered and that we're aware of. And we have watched them literally match our price more than once out there on especially really big deals, where they're so scared of losing them that 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, our value prop even head to head, dollar for dollar, we are a better buy and value for customers. So we 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, but we do win deals head to head matching prices.

Jeff Van Rhee

And then if I could just sneak one last in. I think you had the earlier question on AMS. I mean, obviously, from our work, I think it was a pretty clear sense your customers love you and want to buy more. I think that AMS with 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 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?

Seth Ravin

I absolutely raised the profile of security during the Analyst Day. Absolutely, you're seeing more of us talk about it because we have these other product lines that really don't get much exposure, especially to the analyst world and investors that we're generating millions of dollars of revenue on our security products, which are excellent, and customers are deploying more and more of them. And I think when you watch the SolarWinds issue and you see these other challenges, security is a big opportunity. And we are in an excellent position with our products, with our security team, which I would put up against anybody second to none. And the combination, customers are starting to realize that we not only can help them with the ERP platform and saving money and getting better service, we can be a strategic partner even in the world of security and interoperability where we've got patented tools. You've got patent-pending tools.

We've got a lot of technology below the surface that we haven't really given much visibility to for the investors and into the world of shareholders. And we're trying to do that this year by raising this up. We're going to talk more and more about them because they're meaning. They're very meaningful, and they're going to be more meaningful. Imagine the fact that we're doing millions of dollars that we haven't been talking about. It's something that we want to continue to talk more about and introduce to the market.

Operator

And we do have our next question from Derrick Wood from Cowen.

Nick Altmann

This is actually Nick Altmann for Derrick. The net new adds in the quarter and for the year were really strong. 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 net new customer adds versus upsell into the installed base?

Seth Ravin

Well, I think what you're going to find is that we, over the last few quarters, have delivered about 10% of our sales into the existing client base, which is fairly low compared to a lot of other staff providers. The average that we went out and looked at, we came back and we determined it seemed to be somewhere around 30% of sales back into the existing client. And we've always known because, as you know, we focus on client acquisition in greenfield. We've been readjusting the business to come back and take advantage of all the upsell, cross sell opportunity within the existing client base. And what we're trying to do is raise that 10%. If we can double that to 20%, 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 a little bit of a balancing. And a lot of the restructure of sales is designed to do that.

But as you think about client acquisition, the numbers of clients, 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 so that we can do that balancing after both selling into existing clients, which takes time and also going out and continuing to accelerate our growth on the new client acquisition. So I wouldn't look for a reduction in one in order to get the other.

Nick Altmann

And then at your Analyst Day, you guys outlined your 2026 revenue margin targets. I'm curious how you guys are sort of thinking about the trade off between growth and margins? It seems like you guys are really hitting your stride on 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 it'll have a little bit of a more disciplined approach there?

Seth Ravin

Well, I think as you guys have gotten used to with us, we really believe and 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, hey, let's go and hire 200 sales reps. Forget about profitability. It's such a big greenfield. And we know there is a group of investors who 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. We believe in balanced growth. We believe in delivering a profitable company, increasing profit and at the same time, grow. 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 for fundamental investors. We want to straddle both world. We want to be the company that has a rock solid balance sheet, has great financials, super strong business and is growing at a very nice rate, but understand there's a trade off. If I spend too much on sales and marketing, I'm going to blow profitability. So we balance this as part of our model.

Nick Altmann

And then if I could just sneak one more in. There is a lot of focus 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? Anything you guys need to do on that front? And then on the new leadership there, do they have any new plans you guys can maybe outline on the go to market side of the equation?

Seth Ravin

I think the best way to think about it is, imagine that North America had sales leaders who are focused on new client acquisition, but you really didn't have any leaders at a GM level who are focused on the total business. Think of them as P&L leaders, where they're looking at the renewals, they're looking at the existing clients. Their part of their comp plan includes the retention of those clients, the expansion of those client footprint as well as bringing in brand new clients. So the whole dynamic of North American leadership has changed because we've up leveled this to running the whole business versus just the slice of the business where people just didn't have any incentive to think about other parts because it wasn't within their comp model and it wasn't within their role.

So I can't underestimate or any way under stress the fact that we have three General Managers overseeing North America, who are now looking at their entire region as a business, how they're going to grow the footprint to those clients, how they're going to extend the lifespan, 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 client engagement reporting to them. So they have all of the business now, and they have to look at the business as a whole, and I think it's changing the entire dynamic. That is driving different plans for North America, because we're now placing sales reps in different places, depending on industry. They're looking at where we win big, where we haven't won very much, and they're making decisions about how they 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.

Operator

And we do have our last question from Mark Schappel from Benchmark.

Mark Schappel

My congratulations on the quarter as well as for the year. Seth, question for you. Revenue retention continues to hover 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 retention rates.

Seth Ravin

Well, I think it's good and we think it could be even better. And part of that has to do with the way we engage our clients. And you may have noticed in the release and in my comments, we've now hit a 4.9 out of 5 average per client stat, up from 4.8, and we started out at 4.5 years ago. So even as we've grown and added thousands of clients, we’ve grown the business the hundreds and hundreds of engineers into 20-plus countries, we are continuing to get better ratings and we've improved our SLAs down to 10 minutes. So when you look at all of that, that has strong retention capability for clients because we're delivering the best service that they can imagine anyone delivering, and we're delivering it with, again, continually improving SLAs. We don't charge them extra for. We'll continue to improve the service. So I think that underlies everything. You have to remember we're in the business of supporting software and running it, 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 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? What am I going to do in five years or 10 years? One of the biggest threats to Rimini Street's long term position in these clients is 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. And that happens. That's a big reason we have clients that churn over. So the more we can engage with those clients to be part of their strategic theme in figuring out should they make a change, should they continue to use the software another five, 10 years, that has a real impact on our lifetime value and our retention with those clients. So this is about the more we get closer to the customer, the more we can help them in the strategic decision, the net result plus our great service all comes together should yield a stronger retention and higher lifetime value.

Operator

And there are no more questions in queue.

Seth Ravin

We have any other questions, or are we out of questions. Okay. We will go ahead and bring it into the call then. And thank you much, everybody, and we look forward to seeing you on our first quarter call. Thank you very much, and stay safe.

Operator

Thank you. Ladies and gentlemen, this concludes today's conference. Thank you for participating. You may now disconnect.