Rimini Street ended 2020 on a full year revenue total of $326.8 million, up 16% year-on-year, with operating income of $17.9 million, keeping it on track for its goal of hitting a $1 billion run-rate by the end of 2026. Q4 revenue was up 15.4% to $87.8 million, while the firm ended the year 2,487 active clients, up 20.6% year-on-year.
The COVID crisis has not slowed down demand for Rimini Street’s services, with more than 33,000 support cases closed across the course of 2020 as well as delivery of 89,000 tax, legal and regulatory updates across 58 countries, including more than 6,000 emergency updates related specifically to the pandemic. Q4 alone saw new support, application management and strategic service sales transactions closed. As of year end, US clients made up 59% of total revenue, while international clients contributed 41%, the latter up 33% year-on-year
Overall though, COVID has been a double-edged sword, suggests CEO Seth Ravin, providing both opportunities and challenges, with more of the former as the year progressed:
The 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.
Raven cites the example of telco and automotive components manufacturer Pulse Electronics as an example of how clients have used Rimini Street’s services during the upheaval caused the pandemic. Pulse is an SAP customer and used savings made by moving to third party support to enable investment in new tech, such as AI, in a year when new spending might not have 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’.
Public sector business has also been healthy, with Raven pointing to three contract wins to support Oracle and SAP software for the legislative, executive and judiciary branches of the Brazilian government and a ‘whole of government’ volume sourcing agreement signed with the Australian government to make purchasing processes faster and easier. The Brazil wins were particularly significant, suggested Raven:
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.
All told, public sector is shaping up as a global sweet spot:
We just received the 'whole of government' agreement in Australia and that's expanding to other countries as well. We 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 pre-approved that allows us to go into a lot of different governments, in the US, Canada [and] we have the same type of agreement already in the UK as well, with a lot of government there.
Another use case cited was that of the Metropolitan Water Reclamation District of Greater Chicago - not a actually part of local government as it might sound, but a 2000 employee-strong, special-purpose organization created by Illinois state government to tackle reclamation and treatment of wastewater and flood water abatement in Cook County and serving more than 10 million customers in the process. Rimini Street is now supporting its SAP applications, says Raven:
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
While vaccine programs are now underway and companies are starting to contemplate what so-called ‘new normal’ means in terms of practical actions, Raven is still pragmatically cautious about post-pandemic client behavior in 2021:
What I'm worried about, playing a conservative position, is you've got a lot of companies that have been battered. They're beaten up, [but] 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.
That said, it’s an overall better position than the first half of 2020 when, as Raven put it, “there was a lot of shock to companies financially. Pandemic came up on all of us". And Rimini Street enters 2021 with revenue retention rates of around 92%, positioning it strongly with existing clients, but still leaving room for growth, as Raven noted:
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 [and] we’ve grown the business [with] 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 continually improving SLAs. 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.
Strong retention rates also suggest close alignment and engagement with clients which in turn allows Rimini Street to work with them on their roadmaps, he adds:
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. 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 [and] should yield a stronger retention and higher lifetime value.
A solid end to a difficult year for everyone. For many organizations in 2020, COVID’s impact was such that just keeping the lights on was a benchmark of success, let alone being able to contemplate pursuing new tech investment. The Rimini Street value prop of cost savings that can be redirected, with no negative impact on service levels, is clearly an appealing one here. As the Vaccine Economy opens up, the need to ‘build back’ for many businesses and for governments to pursue efficiencies and savings to restore COVID-drained public sector coffers, will carry over into the post-pandemic ‘new normal’.