Good afternoon ladies and gentlemen, and welcome to the Rimini Street 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. Paul, you may begin..

Thank you, operator. I would like to welcome everyone to Rimini Street fourth quarter and fiscal year 2022 earnings conference call. On the call with me today is Seth Ravin, our CEO; and Michael Perica, our CFO.

Today, we issued our earnings press release for the fourth quarter and fiscal year ended December 31st, 2022, a copy of which can be found on our website under Investor Relations. A reconciliation of GAAP to non-GAAP financial measures has been provided in the table following the financial statements 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-K filed today, for a discussion of risks that may affect our future results or stock price.

Now before taking questions, we will begin with prepared remarks. With that, I would like to turn the call over to Seth..

Thank you, Dean, and thank you everyone for joining us today. A bout Rimini Street. Rimini Street is a global provider of end-to-end enterprise software support products and services.

The company offers a comprehensive family of unified solutions to run, manage, support, customize, configure, connect, protect, monitor, and optimize client enterprise application database and technology software platforms.

We founded Rimini Street in 2005 to disrupt and redefine the enterprise software support market by developing and delivering innovative new solutions that filled the then unmet need in the enterprise software market.

We became and remained the leading independent software support provider for Oracle and SAP products based both on the number of active client supported and recognition by industry analyst firms. Over the years has our reputation for technical capability, value, innovation, responsiveness, and trusted reliability grew.

Clients and prospects began asking us to expand the scope of our support product and service offerings to meet other current and evolving needs and opportunities related to their enterprise software.

We also heard from prospects and clients that their goals include reducing the number of IT vendors to more manageable numbers from a governance perspective with a desire to select vendors who can provide a wider scope of IT services and become true trusted partners.

To meet the needs of our clients and prospects and to service what we believe is a significantly expanded addressable market opportunity, we designed, developed and are now delivering a new expanded solutions portfolio for a wider array of enterprise software and new solutions for application management, security interoperability, observability and consulting.

We also now offer an integrated package of our services as Rimini one, a unique end-to-end turnkey outsourcing option for Oracle and SAP landscapes designed to optimize our client's existing technologies with a minimum 15 extended years of operating lifespan and enable our clients to focus their IT talent and budget on potentially higher value innovative projects that will support competitive advantage and growth.

Q4 in fiscal year 2022 results, we believe the growing adoption of Rimini Street's expanded end-to-end enterprise software solutions is providing organizations the support products and services needed to meet their current and evolving needs around their enterprise software systems and delivering even more industry leading value ROI and engineering capability.

We believe this was reflected in our record fourth quarter and full year revenue that exceeded guidance, multi-million dollar sales wins in diverse industries, strong subscription renewals and extensions, increased cross sales of our expanded portfolio solutions to existing clients and achievement of a 6% growth in our client base year-over-year to 3020 active clients.

During the quarter, we continue to make investments and execute activities we believe will improve the effectiveness of our global marketing and sales execution as the pandemic era challenges continue to diminish and our sales opportunities and pipelines increase.

We believe these investments and activities will lead to reacceleration of revenue growth and increased profitability over time. We also continued scaling up our global marketing and sales campaigns to reach a wider target of prospective clients who we believe can greatly benefit from our support products and services.

Since our inception in 2005, we've signed and served over 5,000 clients, including more than 180 Fortune 500 and Fortune Global 100 companies. An estimate that we have helped our clients save more than $7 billion that they were able to add to cash or reinvest in their strategic priorities.

Demand environment, organizations today need to figure out how to deliver both revenue growth and increased profitability.

With our expanded portfolio of enterprise software support products and services, we now believe that any global organization with annual revenue or an operating budget of at least $200 million is very likely to have one or more opportunities for Rimini Street solutions.

This is a significantly larger universe of prospective clients than Rimini Street historically targeted. As I previously noted in my 2022 earnings calls, the global macroeconomic environment forced organizations to re-plan, re-budget and reprioritize their IT strategy operations and staffing models.

Clients and prospects needed to adjust their plans and strategies for a slower growth, higher cost environment that was going to likely last for years instead of months as originally thought post pandemic, the re-planning process froze and delayed IT and IT service procurement decisions and impacted 2022 sales for many technology companies including Rimini Street.

However, in the fourth quarter, we began seeing clients and prospects complete their re-planning and REBUDGETING projects and moved forward with delayed IT and IT service procurements. Rimini Street benefited with completion of substantial contracting activity.

We believe that Rimini Street is well positioned to meet the current and evolving needs of global organizations attempting to navigate the macro environment over the coming years. Surveys confirmed that we are seeing in buyer behavior needs and our opportunity.

For example, Gartner recently cut their projection of 2023 global IT spend in half, and in a sponsored survey that can be found on our website, it was found that a substantial number of IT leaders feel pressure from their board of directors to show increased return on it spend, finding that a significant portion of the IT budget is allocated towards enterprise application software, which does not generate a meaningful increased return to the business.

The survey confirms CIOs and CTOs are reviewing the total cost of ownership associated with their purchase and operation of enterprise applications.

Even more telling a majority of the IT leaders surveyed seek to reduce the total cost of ownership for existing mature enterprise software by switching to third party support programs with almost half of participants looking to outsource support and maintenance services to free up their IT teams to work on more strategic, innovation focused projects in exact alignment with Rimini Street's vision and expanded portfolio of solutions.

Sales execution; Fourth quarter sales deals included large support transaction wins against both SAP and Oracle. Significant AMS wins against IBM and other providers and sales across the full portfolio of solutions including security, interoperability, observability and professional services.

Close rates on quarter opening pipe were healthy with strong close rates on proposals that continued to exceed 50% large deal execution was also healthy.

Closing five deals with annual fees over $1million, an increase from the fourth quarter year-over-year, as I detailed on previous earnings calls since June of 2022, I have reallocated and dedicated a majority of my time to improving global marketing and sales execution, maturing our service offerings and delivering innovative new marketing campaigns to a wider target buyer profile in order to build bigger pipelines globally.

We continued implementation of our successful cross sales 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, we continue to make changes that improve global marketing of our broader service offerings.

Ramped up a stronger global demand generation engine to accelerate pipeline growth and equipped our more than 300 global revenue team members with a greater set of lead and opportunity development and closing skills to reach even more clients and prospects.

Our senior executives, including myself, continue our heavy travel to participate in a growing number of successful in-person Rimini Street and third party events and executive sales meetings with hundreds of current and prospective clients and collaborated with regional Rimini street management teams to set and hone the strategy for accelerated sales growth of our full portfolio of solutions.

Oracle litigation update; Rimini Street and Oracle have been in litigation for more than 12 years. While the US courts have confirmed long ago that third party software support is legal.

We presently have two active proceedings with Oracle, the injunction compliance dispute and Rimini two proceedings, both of which relate to the manner in which Rimini Street provides support services for certain Oracle product lines. Rimini Street is not prohibited from providing support or services for any Oracle products.

With respect to the injunction compliance dispute, Rimini Street filed an appeal in 2022 to the Ninth Circuit of the United States Court of Appeals relating to certain rulings of the U.S District Court. Oral arguments on the appeal were held in San Francisco on February 6th, 2023, and the matter remains pending before the Court of Appeals.

We believe we could have a ruling on the appeal in the second or third quarter of 2023, but the ruling could come earlier or later. With respect to Rimini II, two, the case Rimini Street filed against Oracle in 2014 and Oracle filed counterclaim on October 21st, 2022.

Just days before the jury trial was set to begin, Oracle withdrew certain of its counterclaim and all of its claims against Rimini Street and against me personally as CEO for monetary relief of any kind under any legal theory in this litigation.

Rimini Street's remaining claims in Oracle's remaining counterclaim seeking only equitable relief were tried before the court as a bench judge only trial that began November 29, 2022, and ended December 15, 2022.

The parties submitted their proposed findings of fact and conclusions of law to the district court on February 23, 2023, and the matter remains pending before the district court. We believe we could have a court verdict in the second or third quarter of 2023, but the verdict could come earlier or later.

Please see our disclosures in the latest 10-K 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 to a series of key capital market transactions, delivering major wins in our protracted litigation with Oracle and successfully designing, developing, and launching an entire portfolio of new IT support product and service solutions.

We remain confident that we are continuing to take the right actions and making the right investments to re-accelerate growth, increase profitability, and enhance shareholder value. Now, over to you Michael..

Thank you Seth, and thank you for joining us everyone. Q4 in fiscal 2022 results, we were pleased with our improved Q4 performance and quarterly sequential billings growth in gross margin as well as maintaining a strong revenue retention rate on subscription revenue.

Revenue for the fourth quarter and the full year 2022 was a record $108.6 million and $409.7 million respectively, a year-over-year increase of 9.4% for both periods. Clients within the United States represented 51.3% and 52.6% of total revenue for the fourth quarter in full year 2022 respectively.

All international clients contributed 48.7% and 47.4% of total revenue for the fourth quarter and full year 2022 respectively.

Annualized recurring revenue was $420 million for the fourth quarter, a year-over-year increase of 6.9% revenue retention rate for service subscriptions, which makes up 98% of our revenue was 92% with more than 80% of subscription revenue, non-cancelable for at least 12 months.

We note that for the full year 2022, our total revenue measures on a constant currency basis was negatively impacted by 1.5% due to FX movements.

Billings for the fourth quarter were $160.4 million compared to $155.9 million for the prior year, fourth quarter, an increase of 2.9% year-over-year, and a substantial improvement from the prior quarters decline of 32.5%.

As evidenced by the rebound in billings during the fourth quarter, we were pleased with our strong client renewal and expanding sales to existing and new clients. As Seth noted for the full year 2022 billings declined 2% year-over-year to $409.3 million.

DSOs improved in the fourth quarter to 72 days a quarter-end compared to 83 days for the prior year, year-end 2021. This is a marked improvement from what we experienced during the first three quarters of 2022, where DSOs were lengthening.

We believe the improvement underscores our strong client commitments to our offerings and thus experienced earlier than normal collections during our largest billings quarter of the year.

Gross margin was 64.5% of revenue for the fourth quarter and 62.8% for full year 2022 compared to 65.1% of revenue for the prior year, fourth quarter, and 63.6% for prior year 2021.

We do note the gross margin approved 300 basis points quarter over quarter and was in-line with our guidance reflecting our conscious decision in Q3 to ramp resources and talent that would allow for leverage in the fourth quarter.

On a non-GAAP basis, which excludes stock based compensation expense gross margin with 64.9% of revenue for the fourth quarter and 63.3% for full year 2022 compared to 65.5% of revenue for the prior year, fourth quarter in 63.9% for prior year 2021, the full year gross margin decline as a result of higher cost of labor, which has been successfully offset in part by our efforts to methodically expand efficiencies and leverage through technology process control and use of lower cost labor geographies.

Looking forward for full year 2023, we expect gross margin to be in the range of 61% to 62% of revenue on a GAAP basis and 61.6 to 62.6% of revenue on a non-GAAP basis. Operating expenses like other organizations globally, we are experiencing cost pressures due in large part to increase labor costs and inflation in all labor categories.

To address this, during the first quarter of 2023, we implemented a restructuring with a reduction in forced offset, the increased costs, allowing us to maintain profitability and freeing up funds to target needed to drive growth.

These initiatives, excluding the one-time charges, will result in approximately $15 million of annualized savings, sales, and marketing expenses as a percentage of revenue was 36.1% of revenue for the fourth quarter and 34.9% for full year 2022 compared to 32.7% of revenue for the prior year, fourth quarter, and 34.3% for prior year 2021 on a non-GAAP basis, which excludes stock based compensation expense, sales and marketing expenses as a percentage of revenue was 35.4% of revenue for the fourth quarter and 34.1% for full year 2022 compared to 32% of revenue for the prior year, fourth quarter, and 33.5% for prior year 2021.

We focused on making the appropriate investments needed to capitalize, honor our growth opportunities and thus see full year 2023 sales and marketing expenses to be in the range of 34.5% to 35.5% on a GAAP basis, and 33.5% to 34.5% on a non-GAAP basis.

General and administrative expenses as a percentage of revenue excluding outside litigation costs was 16.7% of revenue for the fourth quarter and 18.4% for full year 2022 compared to 15.6% of revenue for the prior year, fourth quarter, and 17.1% for prior year 2021 on a non-GAAP basis, which excludes stock based compensation expense, G&A was 15.6% of revenue for the fourth quarter and 17% for full year 2022 compared to 14% of revenue for the prior year, fourth quarter, and 15.7% for prior year 2021.

Outside of the onetime expenses that occurred in the period, the G&A line continues to be higher our peers due in material part to the cost for in-house legal and compliance teams and other costs necessary made by our ongoing Oracle litigation and our conscious decision throughout 2022 to continue making investment in the systems, process and talent infrastructure needed to support our long-term growth objectives.

Nonetheless, given that the majority of this investment is behind us and our aforementioned restructuring efforts, we see full year 2023 G&A expenses declining as a percentage of revenue and thus to be in the range of 17% to 18% on a GAAP basis and 15.4% to 16.4% on a non-GAAP basis.

Net outside litigation expense was $12.8 million for the fourth quarter and was $25.3 million for the full year 2022. This year's fourth quarter and full year 2022 had elevated costs due primarily to Oracle litigation costs from the Rimini II trial completed during December 2022.

We had expected the trial to occur during fiscal year 2023 and we were required to move these costs into 2022. Accordingly, for full year 2023, we expect outside litigation expense to moderate to the $10 million level.

Earnings for the fourth quarter and the full year 2022 were impacted by the elevated litigation expense and during the fourth quarter we also incurred lease impairment charges of $3 million and reorganization charges of $2.5 million.

For the fourth quarter, the net loss attributable to shareholders was $5.3 million or negative $0.06 per diluted share and for the full year 2022 was a loss of $2.5 million or $0.03 negative per diluted share.

On a non-GAAP basis, net income for the fourth quarter was $15.3 million, while positive $0.17 per diluted share, and for the full year 2022 was $39.2 million or positive $0.44 per diluted share. Adjusted EBITDA was $18.3 million for the fourth quarter or 17% of revenue.

And for the full year 2022 was $52.3 million or 13% of revenue compared to $19.3 million for the prior year fourth quarter and $55.8 million for the full year 2021.

Our non-GAAP operating margin, which excludes outside litigation spend and stock-based compensation remained in the double digits at 14% of revenue for the fourth quarter and 12% for the full year 2022.

Balance sheet; We ended the fiscal year with a cash balance of $109 million, plus investments of $20 million, consisting of short-term treasuries and agency securities, bringing readily available cash to $129 million compared to $120 million for the prior fiscal year end.

On a cash flow basis, for the fourth quarter, operating cash flow declined $1.9 million, and year-to-date, we generated $34.9 million compared to $19.1 million for the prior year fourth quarter and $56.9 million full year 2021.

In addition to the FX headwinds noted that has impacted our cash flow, we have also experienced lower advanced payments for clients, both new and existing, as the overall inflationary environment is leading to a broad-based shift towards clients retaining cash for their own short-term investment opportunities and the presentation of cash.

Deferred revenue as of December 31, 2022, was approximately $300 million, unchanged from the prior year fourth quarter. Backlog, which includes the sum of billed deferred revenue and non-cancelable future revenue, was approximately $578 million as of December 31, 2022 compared to $593 million for the prior year fourth quarter.

Capital Markets transactions.

During fiscal year 2022, we repurchased $4.7 million of our outstanding common stock with an average price of $5.56 per share and we reduced the principal balance on our term loan from $88 million to $78 million through amortization payments of $4.5 million and a voluntary principal payment of $5 million, resulting in a year-end net cash position of $51 million.

Also relating to the term loan, during May of 2022, we swapped a floating rate of the term loan to a fixed rate of $40 million of a loan, and we are further offsetting debt service costs by investing excess cash at favorable short-term fixed income rates.

In addition, we amended our credit facility in February 2023 to convert the loan reference interest rate from LIBOR to SOFR and amended the definition of consolidated EBITDA to provide an add-back of certain costs and legal fees. These actions reflect the strong support of our credit partners.

Lastly, I would also like to note that on October 10, 2022, all 14.7 of the $11.50 exercise price warrants expired. Business outlook.

We are currently providing first quarter 2023 revenue guidance to be in the range of $101 million to $103 million, full year 2023 revenue guidance to be in the range of $420 million to $430 million and full year 2023 adjusted EBITDA guidance to be in the range of $52 million to $58 million. This concludes our prepared remarks.

Operator, we'll now take questions..

[Operator Instructions] First question today will come from Jeff Van Rhee with Craig Hallum..

Congrats, those are very good numbers top line and elsewhere. Seth, maybe just start on the obvious, the billings turned around pretty dramatically and it sounds like you're maybe getting a little more confident that consumers have come out of the sort of the deer in headlights mode and are now purchasing your solution again.

Contrast that with the guide because you've got a fairly conservative Q1 number that's down meaningfully sequentially and for the year still implies not a lot of follow through.

So talk about whether or not there were some things in Q4 that you see as onetime, maybe the health of the pipe and how that reflects in your '23 outlook?.

Sure, thanks, Jeff. I mean, clearly, we expect your first question to be about the guidance. Look, I think we're going to continue to play a conservative guidance position. As you know, one of the bigger challenges for us as being a 5-year public company has been that we haven't been able to yet have a reliable beat-and-raise cadence.

It's something that's very, very in focus for us. I think you saw that we started to turn around the numbers that we had even through the third quarter and then more into the fourth quarter.

We weren't able to affect those billings in the third quarter, which, as you know, is why we made changes to management structures and retook the helm on sales and marketing in the third quarter. But I think, again, just consider a conservative guidance, obviously, we're very confident in the business.

That's why you saw us finally adding adjusted EBITDA into our guidance, and we're going to continue to stay conservative. I wouldn't read anything more into it than that. We sure hope to put everyone into a beat and raise mode, and that we wanted to make sure that folks don't get out ahead of the business.

We did see good pickup in the fourth quarter as you mentioned. We suspected that customers would finish that re-budgeting, re-planning cycle with the changes of the economic picture looking like a multiyear versus a multi-month event. And I think that we expect that to continue, but we live in a pretty volatile world.

And I think we wanted to make sure that we stay on this side of conservatism. And as we feel better about the year and what's happening, hopefully, we're in a position to, again, affect that beat and raise component..

You've been working really hard, I know, to get sales and marketing and everything associated kind of where you want it, again to that billings improvement this quarter. How do you think about -- I know you don't give quarterly guidance, I'll just broadly speaking.

Do you think you can continue to accelerate that billings growth? You got back into positive territory much quicker than I thought you would, given what you're doing in sales.

Can we get to high single digit, low double digit and stay there for the rest of the year? Or I guess the embedded question is also just a little color commentary on how far you are with the sales realignment and how much more is yet to go?.

I feel very, very good where we are in sales globally. I think we still have work to do in the Americas. As you know, that's been our focus. It was our focus for the last couple of years. There are definitely some great transactions happening in the Americas. I also think that look at our -- the tenure of our sellers is increased.

A lot of them have now achieved their 12 months and some of them even their 18 months. And we know that's an important fulcrum point for performance. And we're seeing it. They're getting better at doing deals, and they're doing broader deals across the product lines. And I think you saw all of that take place in Q4.

So from a projection standpoint, we have no reason to believe that we're not going to do anything but get better. The structural issues that I stepped into effect and make changes on, we've done. I feel really good about where we are.

I think that we've held it around just shy of 80 sales reps as we said we were going to do, while we continue to focus on performance on a rep-by-rep basis. And our close rates were strong. Our close rates on the proposals, as I mentioned, north of 50%, again, very strong.

So I think we're seeing all the factors we would want for accelerating growth and creating an accelerating growth environment, including those pipeline growth. So I think all those factors, and if we see the economics hold, I'm actually in Singapore today, I've been down in Asia for over a month meeting literally hundreds of customers and prospects.

And I can tell you that the feeling that we have the right mix of product, services and solutions today with a wider breadth, I feel very, very confident that we're going to be in that growth trajectory. So let's keep the guidance conservative. And so again, we don't get out ahead of ourselves. But again, beat and raise is the cadence we want..

Maybe a quick one for you, Michael. On the gross margin side, on the non-GAAP, you're guiding 61.6 to 62.6, so call it 62 at the mid roughly. You put up higher than that obviously. Two questions, what are the puts and takes there? Why the decline? And then also the longer-term model previously issued was for mid-60s gross margin.

So what are the drivers for lower gross margin? And is that mid-60s still the valid target for the target model?.

Thanks, Jeff. And certainly, I would like to reiterate comfort with our long-term model. What we're seeing with regard to our mix, you've seen a lot of the press on the introductions, it was a heavy investment year. We believe we have the majority of that behind us through Q3. We saw the leverage in Q4.

So conservatism, I would highlight similar to Seth noted on the top line relative to the gross margin, but certainly nothing that gives us any concern with our ability to meet our long-term and intermediate-term targets..

And, Jeff, to add on that, you look at the gross margin, I mean, we kept it above 60%. While we built out an entire suite of products on our own capital, and of course, you're going to take some hits in the gross margin, but if you look at it, we've kept it within one to two percentage points of revenue for that investment.

So we've managed it, I think, very, very well to get everything done that we're doing. And the -- when you talked about the puts and takes on the margin, one of the -- that we're giving up a little bit is we've got new products.

Our AMS product line, we have hundreds of employees and you're going to have a much lower initial gross margin on that until we hit scale. We believe that once we hit $1 billion in revenue, we will achieve the scale across all those product lines. And that's why that mid-60s gross margin target is absolutely still the model..

Our next question today will come from Brian Kinstlinger with Alliance Global Partners..

My first question, it's some follow-ups to the questions already asked. Let's start with the quarter's revenue. Sequential growth was the strongest -- well let me say it this way. Since 2017, you only had 1 quarter with a sequential growth of $7 million, and that was in, I believe, the fourth quarter of 2019 when you won one of your largest customers.

So can you first help us understand what drove the sequential revenue growth? Is it 1 large customer? Is it lots of new customers? Is it some customers' work turned off and got turned back on? Just trying to understand.

Or is there a nonrecurring piece that's unusual this quarter?.

Sure, Brian. I think you have a few things that came to effect One, we had a really good, very strong renewals year. The fourth quarter was strong, and I think for a lot of the same reasons as the sales were frozen, remember, we talked about 2 sides of the coin.

If people aren't doing anything, part of what they're not doing is even switching off of our service to a next generation or any kind of evolution there. And so you saw a lot of customers who had plans to make changes to their systems and they didn't. They extended their contracts instead. So it gave you a very strong renewals.

And at the same time, we had a lot of those held up deals freed up. We also saw them free up earlier in the quarter, which gave us a revenue pickup versus plan. Because we did get that done earlier we got more days of earned revenue.

So I think that, plus, as you know, our fourth quarter tends to have a certain amount of revenue holdback that's released because of the way the contracting cycles work. And as you know, we're doing bigger contracts, more global contracts, which gives them more attributes that can hold back revenue or delay revenue rack.

And we've traditionally, as you've seen over the last few years, had a bit of a pickup in the revenue due to those holdbacks in the fourth quarter. So I think a combination of those items came together to give us the sequential increase..

And just to be clear, you're talking about strong renewals. I'm trying to reconcile how that helps grow revenue further.

Is there price increases? Are there price declines? Is it -- or were you assuming more churn?.

I think we were assuming a little more churn than we saw. We saw, again, for those reasons, customers extending they're driving more value out of their systems. So our basic thesis not only held but improved even over the last few quarters.

Whenever we have volatility in the markets, Rimini Street remains a strong player because of our ability to optimize spend and we help customers spend their money better. And we now have more services to meet those needs in different areas.

So the combination of that, again, I think, is why you hear the level of optimism, not only as we were talking about through the fourth quarter, but as we see in the results.

And while, again, while we're playing a conservative number, in our guidance, you're hearing a lot of confidence that we believe we fixed the issues internally and people are adopting our products. They're adopting a wider set of them. And we're seeing that at the pipeline level. We're seeing it at the closing level.

And we have sales reps who could do a better job of getting out and closing business. So I think you add all those factors together, they started in the third quarter. You saw the negative billings growth in the third quarter because that was already set in the mold.

When you have a six to nine month sales cycle on your primary product, you're not going to turn the ship that fast. But we said on the third quarter call that we should start to see some results of that work coming in the fourth quarter, and we should see that hopefully accelerate in future quarters as we start moving through that sales cycle.

So I think Q4 was just representative of the turnaround work that we're doing and the fact that we're seeing those economics change with customers moving forward..

And Brian, it's Michael here. I would like to add, particularly Q3 to Q4. Year-to-date, I noted in the prepared remarks, FX was a negative $1.5 million for the full year. Quarter -- year-to-date, I'm sorry, Q3, it was over 2%, around 2.1%.

So we had a little bit of an FX benefit, you can pencil that out, so to a lesser degree than Seth noted, but that was also an element to rationalize this..

But then to follow up on the 1Q guide, the $7 million to $9 million decline would be the largest sequential decline in the company's history also.

And I heard you, your answers about guidance, but I'm trying to understand the rationale of you talking about your business being so strong, but they're not providing a number that really helps investors will understand the strength of your business.

So $7 million to $9 million, is that actually in the realm of possibility? And what would have to happen for you to decline revenue 7% to 9% outside of FX? Or is FX already hurting you badly?.

I think, Brian, again, the answer that we've talked about, which is the conservative nature I think that's the right answer. In terms of would we have that kind of actual decline versus the reality, I think we'll know in the coming weeks. As you know, we're very back-end loaded on our sales.

We're very back-end loaded in figuring out a rev rec when it's said and done at the end of the quarter. So I think there's some variability there, and we're just taking the conservative track. And hopefully, we will have an upside surprise on that..

Okay.

Last question I've got is as you think about your revenue guidance for the full year, which again might be conservative, what are the assumptions from a high level of international versus North American revenue trends? Are you going to see an acceleration or the other from what you saw last year? Both trying to understand where you're seeing more pockets of strength than others?.

Well, if it gives you any sense, I'm in Asia for five months of this year. So I think that's the plan -- there is -- I think the strongest and fastest growing region has been the Asia Pacific sector, a lot of greenfield opportunities out here as we break into new countries. I've been in, I think, what, five, six countries just in the last few weeks.

And I think we're watching, again, improved performance across Europe and the Middle East, and I think across the U.S. and as we're starting to get more focused even on Canada. So right now, I think, again, you're sort of 50/50 split between the U.S. and the rest of the world.

I would expect to probably stay in that realm for a while because as we lift revenue globally, that split, I expect to stay fairly similar to that range in '23..

Our next question today will come from Derrick Wood with Cowen & Company..

It's Andrew on for Derrick. Congrats on the quarter. Seth, it sounds like the sales force is in a better place and productivity is improving and you have more tenured reps.

Maybe just some more color on -- you mentioned what other work there is to do there in the Americas and what could improve performance there?.

I think Americas represents a little bit different challenge. Every region has its cultural differences. The challenge with America is really around the size of the country getting people to events, we do really, really well when we get people into events, we have one-on-one conversations. We have group conversations where we mix clients and prospects.

It's very successful for us all over the world. It's hard to get that done in the U.S. It's hard to get a group of folks together. We're still in this post-pandemic world. We're still seeing in the U.S. more reluctance to attend in-person events that we've seen adopt and grow back around the world.

And I do think that, that's had some effect on why the North America or actually really America has been a little bit slower in the rebound on the post-pandemic world. It really is more of a marketing problem than a sales problem. Our sellers are doing really well in North America and across the U.S. and Canada.

And as I mentioned, we have some very high-quality transactions being done. We're seeing growing pipelines, and that's true on a global basis. But we're still playing around a little bit with the marketing mix to get people more engaged in the U.S. And I know we're not the only ones having this problem.

It was a problem before the pandemic in the United States, it is still a problem, and it's a little more of a problem for everyone to get engagement with prospects in a post-pandemic world. So that's where we're focused.

I think we've got some answers some ways that we've made some strategic changes that I do believe will bear some extra fruit, which will build bigger pipes and allow our people to go out and close more business.

So I'm still very bullish on a global basis of growth I think the Americas, we just have to, again, tweak some of the things we're doing in marketing. But the messaging is resonating very, very well. We just got to get more people into these events and be able to engage more of them..

And then, Seth, your announcement today about Rimini Watch was interesting in the new Observability suite.

Maybe just talk about how that builds on and is different from what you've provided before to clients, and were clients asking for this? And when do we think this can start to contribute to revenue?.

It's already contributing to revenue. We've been doing these products for several years. We just didn't announce them publicly. Recently, you've seen us announce our security suite, Rimini Protect. You've seen us announce our interoperability suite, Rimini Connect. Now you're watching Rimini Watch, which is our observability platform.

There's also the Rimini Consult, our whole professional service business where we've got growing and accelerating revenue as well. This is part of a 7 pronged approach of products now. And that is -- these are just a few of the new ones. We're bringing them to market publicly, but we've actually been out selling these products for quite a while.

This is what we've been investing in for the last few years is to build out these amazing suites of products and services. And the reason that we're doing it is because the customers are asking us for them. They want this broader offering from Rimini Street because we're the trusted vendor.

They like doing business with us, they like the kind of engineering talent we bring to the table and they want us to do more. And they want us to become a bigger strategic partner with wider capabilities. And what we've been delivering are full suite now of products and solutions is exactly what the market has asked us to do.

And that's why I said we're very early in the sales of all these products and services. But I think you're starting to see the traction, and that was showing in the fourth quarter, every single 1 of the product lines that we've released has growth. and they continue adoption.

So this again underlines our confidence that we've made the right strategic decisions in investing in this broader set of services and products and that customers think they're the right ones for them..

And last one for you, Michael, it sounds, building off the prior question, I think we understand that you want to guide conservatively, it sounds like you've taken a more conservative approach to guidance first maybe in prior quarters or versus last year.

Is that a fair way to characterize it, or how should we think about that?.

That is certainly a fair way to characterize it. I would highlight Seth's remarks, the momentum that we built in the fourth quarter. We still have our strongest period over the current quarter that we need to close, but we really do feel good where we are in comparison. I believe that's a fair statement..

This concludes today's question-and-answer session. I'd like to turn the call back to Mr. Ravin for closing remarks..

Sure. Thank you very much. And I want to thank everyone for joining us for the fourth quarter and full year 2022 call. I also want to thank our Rimini Street colleagues for the efforts in the fourth quarter and the full year '22.

Again, our first year coming out of the pandemic, and I think our team did a fantastic job of executing, building many, many new products and services, getting them out there to market. And I think it was a really important building year for us.

Also I want to say that we're looking forward to having you on our next earnings call, and we'll do that again pretty soon on the first quarter 2023.

Until then, again, wishing you all continued good health and keep our thoughts with the charitable support for those in need and of course, many suffering in harm's way between natural disasters and man-made wars. So again, we live in a lucky world for the rest of us who get to stay away from things like that, but our thoughts are with them.

Thank you very much, everybody..

This concludes today's conference call. Thank you for attending..