Rimini Street Inc (RMNI) 2019 Q4 法說會逐字稿

Ladies and gentlemen, thank you for standing by, and welcome to the Rimini Street Fourth Quarter and Fiscal 2019 Earnings Conference Call.

(Operator Instructions) Please be advised that today's conference may be recorded.

(Operator Instructions)

I'd now like to hand the conference over to your speaker today, Mr. Dean Pohl, VP of Investor Relations.

Please go ahead, sir.

Thank you, operator.

I'd like to welcome everyone to Rimini Street's Fourth Quarter and Fiscal Year 2019 Earnings Conference Call.

On the call with me today is Seth Ravin, our CEO; and Stanley Mbugua, our Chief Accounting Officer.

Today, we issued our fourth quarter and fiscal year-ended December 31, 2019, earnings press release, which can be found on our website.

A reconciliation of GAAP to non-GAAP financial measures has been provided in the table following the financial 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 website under Investor Events.

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 the full year 2019 that will be filed by March 16, 2020, 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.

Thank you, Dean, and thank you, everyone, for joining us today.

For 2019, we achieved record fourth quarter and fiscal year revenue that exceeded management guidance, increased our gross margin and continued to improve our balance sheet with reduced debt and increased cash.

Additionally, we experienced improved performance from investments in global sales, the launch of new products and services and expanded geographic operations.

For the fourth quarter and fiscal year ended December 31, 2019, we generated revenue of $76.1 million and $281.1 million, year-over-year increases of 11.7% and 10.9%, respectively.

Gross margin was 62.6% for the full year 2019, up from 62.1% for the full year 2018.

We exited the fourth quarter with annualized subscription revenue of $302 million.

Revenue retention rate for subscriptions, which makes up most of our revenue, remained above 90% with more than 70% of subscription revenue noncancelable for at least 12 months on a rolling basis.

For the full year 2019, our global service delivery team closed over 31,000 support cases across 55 countries and delivered more than 70,000 tax, legal and regulatory updates to clients in 38 countries.

We achieved an average client satisfaction rating of 4.8 out of 5.0 on the company's support delivery, where 5.0 rating is considered excellent.

In 2019, we were honored with 34 awards, including 2 awards for Company of the Year, 1 award for Customer Service Outstanding Performance of the Year and 24 other awards for customer service excellence.

Also in 2019, the Rimini Street Foundation funded exclusively by Rimini Street, Inc.

and its subsidiaries, proudly partnered with 68 charities around the world to provide financial contributions, in-kind donations and hundreds of employee volunteer hours to those in need.

The year-end employee count totaled approximately 1,270, a year-over-year increase of 17%.

We ended the year with 2,063 active clients, which includes 100 Fortune 500 and Fortune Global 100 companies, representing a year-over-year active client net increase of 14.5%.

Notable client wins.

During 2019, we announced notable global sales wins across our Oracle, SAP and Salesforce supported product lines and have saved clients nearly $5 billion in total maintenance costs since our inception in 2005.

Wins included Hyundai-Kia Motors, who switched to Rimini Street for support and maintenance of its global database portfolio; San Fang Chemical Co., who switched to Rimini Street for support of its Oracle E-Business Suite application and Oracle Database software; and Seoul Semiconductor and iMarketKorea, who switched to Rimini Street for support of their SAP ECC systems.

Wins also included cross-sells to clients brand Safeway and EBSCO Industries, each of whom expanded their existing Rimini Street support contracts to include Rimini Street Application Management Services for Salesforce.

Investments, initiatives and market opportunity.

We followed up our 2018 launch of Application Management Services for Salesforce with the launch in 2019 of our Application Management Services for SAP and Oracle.

Application Management Services, commonly known as AMS, is where we run the system for the client and support services where we provide technical support and required updates to an internal or an AMS team who runs the systems for the client.

Rimini Street's expansion into AMS allows us to integrate our ultra-responsive traditional support services with the client's day-to-day needs to run their system.

We believe our integrated support services and AMS offering is a unique and valuable competitive offering in the market.

The integrated service offering creates a significant opportunity for us to secure additional long-term subscription service contracts, grow revenues and increase the wallet share of our clients' IT spend.

Our integrated service offering can provide clients a better model, better resources and better outcomes with higher client satisfaction and significant savings of time, labor and money.

When just considering the software vendor products Rimini Street services today, our launch of Oracle and SAP AMS essentially doubles our target addressable market from $14.5 billion for just support services to more than $29 billion for support services and Application Management Services.

Already, we have achieved sales wins with our new Application Management Services, and we are successfully delivering our integrated support and Application Management Service offerings to clients across a variety of industries and geographies.

Competition.

Competition with our primary support service competitors, Oracle and SAP, remains fierce.

Both software vendors are engaged in continuing efforts to force their licensees to upgrade and migrate from current stable software releases to the vendor's newest immature products.

Oracle and SAP are planning to end full support of major product releases by 2030.

We believe this creates tremendous opportunity for Rimini Street because many licensees do not see the value in spending for what they believe are unnecessary expenses and disruptions that do not improve their competitive advantage or contribute to their growth.

Rimini Street can provide significant savings, a more robust and responsive service offering and allow clients to invest the financial and labor savings into innovation and strategic projects that support their growth.

Survey results we've shared with you in the past found that approximately 80% of CIO respondents are not planning to move or unsure about migrating to Oracle or SAP's new software and plan on remaining on their current systems until at least 2025 or beyond.

We have also seen the growing opportunity for third-party support, noted by leading industry analysts, including Gartner.

The recent Gartner Predicts 2020 research report noted a 50% increase in client inquiries related to third-party support during the first 9 months of 2019 compared to the first 9 months of 2018.

And they believe that third-party software support market will grow from $351 million in 2019 to $1.05 billion by 2023, a 200% increase.

In addition, Gartner states that for many, third-party support is no longer seen as "out of the ordinary" or as "carrying more than an acceptable risk." More buyers are aware of the value-added offerings from third-party support providers such as custom code support, interoperability support and global tax, regulatory and security services.

The uptake of independent third-party support is expected to increase substantially.

These Gartner figures do not include additional sales of Application Management Services that can significantly increase Rimini Street's revenue opportunity with clients.

Additionally, we believe the hybrid IT environment that will integrate existing licenses, new SaaS licenses and cloud deployments will be the IT reality for much longer than expected.

And the majority of ERP workloads will continue to be on-premise or simply lifted and shifted into a cloud for continuing long-term use.

Recent Oracle litigation developments.

With respect to Oracle versus Rimini Street that was filed in 2010 and went to trial in 2015, we filed a second appeal to the U.S. Supreme Court on November 5, 2019, asking the Court to review a 2019 Ninth Circuit decision that affirmed but narrowed the scope of the existing permanent injunction.

Although the U.S. Supreme Court accepted our first appeal, and we prevailed with the unanimous court decision against Oracle, on January 13, 2020, the U.S. Supreme Court declined to hear our second appeal.

Previously, however, the U.S. Ninth Circuit Court of Appeals ruled that Rimini Street lawfully competes with Oracle.

With respect to Rimini Street versus Oracle filed in 2014, we are still awaiting rulings on submitted summary judgment motions.

Trial is not currently expected to occur until 2021 or later.

Coronavirus COVID-19 operating plan.

Rimini Street is prepared under its global emergency operating plan to continue delivering uninterrupted, mission-critical, 24/7/365 support services to its thousands of global clients during the current COVID-19 virus outbreak.

Rimini Street has hundreds of engineers working in 17 countries, none in China, that provide extensive global workforce redundancy and resilience to enable uninterrupted service 24/7/365 even if some of our workforce were to be off-line for a period due illness.

In addition, we have a unique, innovative and secure global remote connectivity infrastructure and data center model in place that enables our entire workforce of thousands of Rimini Street professionals to securely perform their work from any location with Internet connectivity, giving us the flexibility to close one or all of our global facilities, if necessary, while continuing to provide uninterrupted mission-critical client support under our contractual service-level agreements.

Rimini Street is already taking some actions under the global emergency operating plan designed to reduce employee exposure risks in our facilities and when traveling globally.

These measures align to the U.S. center for disease control's guidance to mitigate the spread of acute respiratory viruses.

With respect to marketing and sales, we're scaling back our global event participation and employee travel where we feel prudent.

We are also adjusting our marketing mix and sales processes for even more digital and remote activities.

2019 summary and 2020 objectives.

Financially, we improved our balance sheet in part due to a lower cost of capital for the full year.

This allowed us to invest in the business, reduce debt and increase cash.

To recap capital market activities between 2016 and '19.

In 2016, we completed a $125 million credit facility.

In 2017, we completed a $50 million common stock merger and IPO.

In 2018, we raised approximately $140 million in a convertible preferred stock financing, allowing us to repay the expensive 2016 credit facility in full.

In 2019, we upsized the convertible preferred stock by $10 million to complete the full planned issuance of that security.

The balance sheet improvements from year-end 2019 compared to year-end 2018 include an increase in our cash position by $13 million, an increase in deferred revenue by $39 million, and with the exception of capital leases, pay off most of our debt.

Operationally, we were pleased with the progress made in 2019.

As we enter 2020, we are focused on executing to our plan and capitalizing on the investments made in prior periods.

We have the global assets in place to service our growing global client base and offer new and existing clients a wider range of innovative premium service solutions that meet their strategic, financial and operational needs.

Now over to you, Stanley.

Thank you, Seth.

Let me begin with a summary of the impact of the adoption of the new revenue accounting standard, also known as ASC 606, Revenue from Contracts with Customers.

We adopted this new accounting standard in the fourth quarter of 2019 on a full retrospective basis effective January 1, 2017, applying the adjustments in each prior period reported starting with full year 2017 to September 30, 2019.

The fourth quarter and full year 2019 were reported under ASC 606.

A summary reconciliation from 605 to ASC 606 is included in our earnings press release, and additional details will be provided in our SEC Form 10-K.

The analysis that follows, including guidance, is based on this new accounting standard.

Generally speaking, revenue is now recognized, taking into account the contract economics over the entire noncancelable period as opposed to revenue recognition for each service period separately.

The ASC 606 revenue adjustment for the previously reported 9 months ended September 30, 2019, was an increase of $1.8 million.

Full year 2018 revenue adjustment for 606 was an increase to revenue of $700,000, which includes an increase of $400,000 for the fourth quarter of 2018.

In addition, cost to obtain a contract, largely sales commissions, are now capitalized and recognized into expense over 4 years, which is the estimated customer life.

Prior to ASC 606, commissions were expensed when incurred.

As of December 31, 2019, we had $28 million in deferred contract costs to be recorded as expensed in fiscal 2020 and beyond.

Now let's discuss the results and guidance.

Revenue for the fourth quarter was $76.1 million and full year revenue was $281.1 million, year-over-year increases of 11.7% and 10.9%, respectively.

Q4 annualized subscription revenue was approximately $302 million, up 11.4% year-over-year.

For the full year 2019, clients within the United States comprised 64% of total revenue, while international clients were 36%, representing aggregate year-over-year total revenue growth rate of 10% for the U.S. and 13% for international clients.

Gross margin was 60.2% for the fourth quarter and 62.6% for full year 2019 compared to 64.6% for the fourth quarter and 62.1% for full year 2018.

During 2019, we benefited from operational efficiencies.

However, in the fourth quarter, we experienced gross margin pressure as we increasingly realized the cost to advance service capacity for new products and services, including costs associated with the global rollout of our Application Management Services for SAP and Oracle.

We continue to believe that gross margin from our established services will continue to expand and will help partially offset AMS and other new products and service ramp-up costs.

Therefore, we expect our overall gross margin to be around 60% to 61% for full year 2020.

Sales and marketing expenses as a percentage of revenue was 39% for the fourth quarter and 38.2% for the full year 2019, an increase from 36.4% for the fourth quarter and 35.3% for full year 2018.

We continue to build out our sales capacity and product offerings such as the increase in sales reps by 21% during 2019.

We currently expect sales and marketing expenses to be in the range of 37% to 39% of revenue for all of 2020.

General and administrative expenses as a percentage of revenue, which excludes outside litigation costs, was 16.7% for the fourth quarter and 16.9% for full year 2019, up from 11% for the fourth quarter and 14.7% for full year 2018.

During 2018, previously accrued sales taxes were reduced due to negotiated tax settlements with certain states.

Excluding the sales tax accrual reversals, G&A would have been 16.6% of revenue for the full year 2018.

In addition, we experienced increased costs during 2019 related to the adoption of the ASC 606 revenue standard and the implementation of the new leasing standard.

Costs to obtain these updated accounting standards are part of the 2020 guidance for G&A expenses.

We currently expect G&A expenses as a percentage of revenue to be in the range of 16% to 18% for the full year 2020.

Litigation expense was $1.8 million for the fourth quarter and a net credit of $834,000 for full year 2019.

The litigation expense for 2019 was offset by the return of $12.8 million plus $200,000 in post-judgment interest as ordered by the U.S. Supreme Court from its decision on March 4, 2019, related to nontaxable expenses that were paid to Oracle in 2016.

Our outside litigation spend is not linear and can fluctuate each quarter based on litigation activities.

We currently expect litigation expense to be in the range of $13 million to $15 million for the full year 2020.

Net loss was $207,000 for the fourth quarter, and net income was $17.5 million for full year 2019 compared to net income of $5.4 million for the prior fourth quarter and a net loss of $64 million for full year 2018.

The full year 2018 results were impacted materially by noncash expenses related to the payoff of our former credit facility.

Non-GAAP net income was $3.3 million for the fourth quarter and $22 million for full year 2019 compared to a non-GAAP net income of $11.8 million for the prior fourth quarter and a non-GAAP net loss of $4.7 million for full year 2018.

Adjusted EBITDA was $4.7 million for the fourth quarter and $27 million for full year 2019 compared to adjusted EBITDA of $13 million for the prior fourth quarter and $35.3 million for full year 2018.

Dividends on the Series A preferred was $3.9 million for the fourth quarter and $15.1 million for full year 2019, while payment-in-kind dividend settled in preferred shares was $1.2 million for the fourth quarter and $4.5 million for full year 2019.

Accretion of the preferred stock discount was $1.5 million for the fourth quarter and $5.8 million for full year 2019.

Basic and diluted net loss per share attributable to common shareholders was $0.10 for the fourth quarter and $0.12 for the full year 2019 compared to a net loss per share of $0.01 for the prior fourth quarter and a net loss per share of $1.22 for full year 2018.

This takes into account cash and noncash dividend for the Series A prepared stock.

Deferred revenue as of December 31, 2019, was approximately $235.5 million, up 19.7% from $196.7 million as of December 31, 2018.

We ended the year with $38.4 million of total cash on our balance sheet.

For the full year 2019, cash flows from operations was $20.4 million compared to $22.4 million for the full year ended December 31, 2018.

Backlog, which includes the sum of billed deferred revenue and noncancelable future revenue, was approximately $468 million as of December 31, 2019, up 21% from $387 million as of December 31, 2018.

Now with respect to revenue guidance, we expect first quarter of 2020 revenue to be in the range of $76 million to $78 million, and we expect full year 2020 revenue to be in the range of $310 million to $320 million.

And with that, operator, we'll now take questions.

(Operator Instructions) Our first question comes from the line of Derrick Wood with Cowen and Company.

Seth, you guys delivered some nice upside on revenue, but deferred revenue was well below what we were looking for, and the number of net new customers was down quite a bit year-on-year.

But I understand that ASC 606 had some meaningful impact on the deferred side.

I think if I look at apples to apples, the short-term deferred revenue growth looks quite a bit better.

But could you just unpack how your overall bookings ended for the quarter versus expectations?

And maybe touch on how you felt about the net new customer number.

Yes, Derrick, thanks.

I think again we did what we wanted to do, which is we went out there to build out the sales force in 2019, start ramping up capacity, getting people trained up.

We went out to the market with new marketing messages.

We expanded out into new global markets.

So I think we did what we wanted to get done in the fourth quarter.

There's always a few deals that we wanted to bring in that slipped past the date.

And as you know, in our world of the maintenance side, if we don't close it by the time we get to a renewal date, then it flips over to be an opportunity for the next year or whenever it's up next for renewal.

So there are probably a few deals more we would have liked to have gotten done that we felt were potentials.

They were a little bit on the stretch side.

But other than that, I think we got the quarter where we wanted it.

Okay.

And Stanley, I mean can you just touch on kind of why there's such a big write-down on deferred under 606 for you, guys?

Brian (sic) [Derrick], thanks for your question.

At this point, 606 wasn't a significant impact to us.

The key change is how we recognize revenue, generally of the noncancelable term of our contracts, and therefore, hasn't been a big impact.

Overall, our deferred revenue has grown from the previous years, and we don't expect that 606, at least on the revenue side, will be a big impact.

On the cost side, commissions are being capitalized and recognized over 4 years.

Right.

Because we -- as you know, Derrick, we've always expensed off a commission, so we changed those, right?

Yes.

Yes.

So I guess staying on that line of thinking with respect to guidance, so it looks like the 606 revenue impact was $2 million to $3 million for 2019.

I mean looking at 605 versus 606, is that kind of the degree of the impact that we would have assumed for 2020?

Usually about 1% to 3%, that will be the range.

2019 was actually about $1.4 million impact.

A lot of that is just how we change revenue recognition over longer period of time as opposed to just 1 year each time.

And on the cost side, how much of a benefit was it for you to go to the deferred commission structure?

I don't know if you can quantify that.

We capitalized about [$20 million] at the end of the year.

We will take it out over 4 years.

So it's broadly about $5 million for the year.

Okay.

And then, Seth, so nice to see guidance calling for the potential for growth acceleration, but I just -- I wanted to drill on how you guys are thinking about potential macro disruption.

So first, could you just -- can you talk about how much your business is high touch and requires travel in terms of signing new deals versus deals done over the phone or locally, it doesn't require travel, and just, I guess, how much go-to-market change you may need to do to adjust to the environment right now?

Well, I mean like everybody else, right, this is a story that's evolving by the day.

So we're all -- our guidance is based on a few different things.

First, you look at the size of our recurring revenue stream, and the fact that here you are getting close to $300 million of recurring revenue, 70% plus is committed for 12 months or more.

So we're starting to see that really good base built in.

Then you add in the revenue retention rate and the 92%.

And so when you add all those together, I think you create a nice floor.

And when we think about the macro environment, not to, in any way, dismiss how serious everything is, but just from the point of view that we're in a business that benefits from uncertainty, whether that's financial, whether it's political, all those things, when you bring uncertainty into the picture, what happens with uncertainty, people push off big investments and changes in these times.

And we saw this, of course, during the economic downturn in 2005 to '08.

Rimini Street flourished extensively.

As we like to say, we're not a contrarian business in the sense that we do well when things are bad, and we don't do as well when things are good.

We do well when things are good.

We do really well when things are uncertain.

And so if we look at the macroeconomic climate and say what's the biggest risk when people leave Rimini Street, why do they leave, because they're doing some other big project and change.

In an environment like this, and I think as we're all watching this and we're -- people are licking their wounds from days of being beaten up on the market, you can probably imagine that there's a lot of big projects, hundreds of millions of dollars of projects that are probably going to get delayed.

They're probably going to get kicked down the road because people have lost confidence in spending that kind of money in a market where everybody is trying to figure out how they're going to sell in this type of climate.

They're going to run their business differently.

And I think once we get past, hopefully, this very urgent period, we get into a period of -- where folks are looking at, hey, I've got to keep my costs down, I need to stay steady, I think that bodes well both for potential upside to our revenue retention, keeping those contracts in place.

And I think it creates new opportunities.

So even though we're looking at a 12% growth because we believe -- as we talk to everybody in our prior calls, we believe that 2019 would present the trough of the continual dips in the annual year-over-year revenue growth because we got enough structure in there, we would start turning the corner, we would get billings up, and then we would start coming up.

And that's really what you're seeing reflected in our guidance, which is moving from a high 10s to a 12, moving past the trough, starting the other side, return on the U. And I think that all of those reasons that we see in the market and the macro environment should provide potential upside to us.

The caveat, of course, for everyone is no one knows what's happened here.

Nobody understands how long it will happen, the impact to sales environments.

Can we get people to buy on the other side?

Can people focus even in a crisis?

Can they get past the crisis and start to buy?

And I think every one of us, every company out there is trying to figure out, is this something that's just disruptive for a week, 2 weeks or not?

Well, no, we're getting near the end of our quarter.

You know we're back-end loaded.

And really, we'll see it, I think, at the very end of the Q1 results, which will come right into this period.

Great.

That's good color.

I guess last one for me is just how are you feeling about sales capacity build and where you are with respect to hiring plans.

Well, we're going to hold -- we're around 76, 77 hires on the sales side per our prior calls.

We switched from number of bodies right now to really focus on sales enablement and effectiveness.

We held our big global sales conference.

Luckily, we got that in while conferences were still happening pretty much on the tail end before you saw everybody else canceling theirs.

And that was very effective for us, I think, in moving our sales force further down the field and dealing with the new wider breadth of products that we have.

You're going to see us focus in on the upsell.

And I think this is really about getting more out of each sales rep.

We're still holding quotas for the average sales rep around $2 million a year.

We did create some new higher-level sales positions at $2.5 million, which is new to our sales structure because we have some super sellers who were getting bigger quotas, bigger comp plans into the mix.

So I do think that we have move to a more sophisticated next level of sales.

We've deployed more people globally.

So yes, I think we're well positioned to, again, reap the rewards of the investments that we've made over the last 21, 22 months in sales capabilities.

Our next question comes from Brian Kinstlinger with Alliance Global Partners.

I'm curious, I know it's very early, but how are prospective customers already dealing with videoconferencing instead of face-to-face?

Are you touching prospective customers as much?

Is it taking a bit longer to get in touch or get in front of customers?

I'm just curious to the reaction right now.

Yes.

I think certainly, it's the same question for everybody, right?

The difference is, I think, Brian, is that we have built in -- remote selling has been part of Rimini Street since the beginning.

In fact, in the first few years, we were nearly 100% remote selling.

So we have a strong history of using web-based products.

Everything from Webex.

Now we're Teams based.

But we do a lot of remote selling activities in any given sales cycle.

What's new in this crisis right now is nobody is taking a meeting in person.

So if you think about, I would say my guesstimate is we probably do 30% of our selling in person and 70% of activities in all total sales cycles remote.

But now that 30%, everyone is saying, "Let's just do it on the phone.

People have closed campuses.

They don't want you coming on site." It's an unusual experience.

But -- so for us, this is really probably a shorter change or a smaller change to the overall process than a lot of other companies who haven't been in the business of remote selling.

So from that point of view, we certainly feel we've managed that risk in that transition to 100% remote sales much easier than a lot of other companies.

We have the infrastructure.

Every sales rep is used to selling remotely.

And that's -- the risk is that 30% that we were doing in person tended to be bigger, larger deals where you might have 20, 30 stakeholders you've got to get alignment with.

And so doing that all by phone might be a little more challenging.

So yes, I think it does introduce a bit of risk on some of these bigger transactions because we can't get in front of them.

We're going to have to do it all by phone, and that's where the risk relies.

Great.

And then with recent discussions in the past few weeks, prospective customers, do you get a sense that switching to a low-cost third-party maintenance provider is something that is going to be a delayed decision?

Is it high in a priority list?

I mean I take it executives are so focused on so many issues related to their business with corona that I wonder how much cost of their business becomes an issue.

Well, I agree with you.

I mean this is what I was just saying a second ago with Derrick, which is the need is there.

I mean clearly, I mean, you've seen a huge number of these clients.

In fact, several of them, you've seen in the news are in the middle of sales cycles with us in terms of looking at alternatives and things like that.

So we definitely see activity related to whether you call it the current crisis or the current macroeconomic crisis.

But we've had -- remember, step back a few weeks even before we really got into this crisis on a more local level, we've already had a slowing global economy.

We were already expecting to see auto sales down a couple of points, right?

We already saw Germany teetering on recession.

So I think we've accelerated into a negative economic situation, but it was already slowing, and it was already driving what we saw as increased inquiries.

So again, I think that the more uncertainty enters the market, and this now accelerates it, creates opportunities.

The risk, again, as you pointed out, is they may be bleeding and they may be on fire and need cost savings, and they need to figure out how to fund some items.

But will they be so distracted by getting their own sales running and keeping their own company running that we just fall by the wayside because they just can't get to it, right?

Too many other distractions, too many other crisis.

I'm not seeing that yet.

But I think it's -- that's a real risk, I think, all of us face, is that everyone can get so focused on just keeping their company moving forward, closing offices, sick employees.

Yes, it could be a huge distraction to any sales cycle.

Yes.

Which leads me to my next question.

Your business, obviously, is around cost-cutting to help companies invest in other things and use their money, which is generally received well in a recession.

Can you talk about how your business has performed in recessions?

Maybe talk about how it performed in '07, '08.

I don't know how small you were back then.

Yes.

I guess the only thing I'm -- I don't know if we -- those were not audited periods.

So I need to say that because we weren't public.

And it was more than 3 years back.

Just anecdotally, I can say we did have growth.

We -- I think we did well.

That's why I said I always like to be careful about saying we're a contrarian business because when people hear that you grow well when things are up in the air and there's a lot of doubt in the marketplace and other issues but -- because we do well in good times because budgets are always limited in IT.

There's 1,000 things they want to invest in, and they can only invest in a portion of them.

And so we help make sure that they can fund a lot more of what they need.

So in downtimes, you're right, I mean, people may switch from I want to take this money savings and invest it in new innovation and competitive engine growth, which, of course, you need to do.

But when things are at a crisis level, cost savings can move to the top of the list.

I simply need to reduce the outflow.

And I need to do it quickly, and I need to do it in a way that doesn't create risk for the business and may create new opportunities.

And we've always played a very, very good role there.

So whether it's just cost savings or savings to innovate and invest somewhere else, we are the right answer for a lot of companies on both fronts.

Great.

My last question on that is, if I'm hearing correctly, you exited the year with $302 million in annual recurring revenue.

And if I assume the 92% held up, you've got about $278 million heading into the year.

First, I just want to make sure that's what I'm hearing correctly.

And then...

That's correct.

And then how has late December -- and so how has late December as well as early this year gone?

Have you added meaningful bookings to that?

So are we closer to 300 at the bottom if everything went wrong?

And I'm just trying to understand from a commitment standpoint of what you've already added to where you're at in visibility.

Well, I think, again, we just refer to the Q1 guidance, right, for Q1 numbers.

For the back end of December, a lot of what we saw in the global crisis was still being -- was primarily in China.

We don't have operations in China.

We service a lot of customers in China.

So we were not disrupted as a company in operations on the ground there.

We're still servicing our clients uninterrupted.

We do have good-sized operations in Korea and Japan, which did start to see towards the end of the year.

We did move some people out of our offices as we saw numbers of virus issues rising in Tokyo, Osaka and Seoul.

And we did that without disruption.

We've continued selling.

We did close very good business in Korea, in Japan.

So we didn't see it disrupt our business plan in those areas.

(Operator Instructions) I'm not showing any further questions at this time.

I'd like to turn the call back to Mr. Ravin for closing remarks.

Thank you very much.

And listen, everybody, obviously, very, very complex, difficult challenge for everybody.

And wishing you all well and good health as we all navigate something we've never been through, and look forward to hopefully this moving behind us, and look forward to talking to you all on our Q1 2020 call.

Thank you, everybody.

Ladies and gentlemen, this concludes today's conference call.

Thank you for participating.

You may now disconnect.