Rimini Street, Inc. (RMNI) Q4 2019 Earnings Report, Transcript and Summary

Ladies and gentlemen, thank you for standing by and welcome to the Rimini Street’s Fourth Quarter and Fiscal 2019 Earnings Conference Call. At this time, all participant lines are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions] I would 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 would 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 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 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-Q for the full year of 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 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. For 2019, we achieved record fourth quarter and fiscal year revenue that exceeded management guidance, increased our gross margins 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 non-cancelable 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 some 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 service is 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 clients’ 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 client’s 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, Oracale 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 and 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 have 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 the 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 licensees, 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 the 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 incur 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 counties, 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 offline for a period due to illness. In addition, we have a unique, innovative and secured 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 aligned to be U.S Center for Disease Controls guidance to mitigate the spread of acute respiratory viruses. With respect to marketing and sales, we are 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 in IPO. In 2018, we raised approximately $140 million at 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, including increase in our cash position by $13 million, an increase in deferred revenue by $39 million and with the exception of capital leases payoff 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 the summary of the impact of the adoption of the new revenue accounting standard also known ASC 606 revenue from contracted 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 these new accounting standards. Generally speaking, revenues now recognized taking into account the contract economics over the entire non-cancelable 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 commission 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 expense 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 to 64% of total revenue, while international clients were 36%, representing aggregate year-over-year total revenue growth rates 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 expand service capacity for new products and services, including cost 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 have partially offset the AMS and other new products and service ramp-up cost. Therefore, we expect our overall gross margins 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 offering 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 reversal, 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 non-taxable 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 non-cash 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 dividends 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 of our 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 non-cash dividend for the Series A preferred 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 non-cancelable future revenue was approximately $468 million as of December 31, 2019, up 21% from $307 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 will now take questions.

[Operator Instructions] Our first question comes from the line of Derrick Wood with Cowen & Company. Your line is now open.

Great. Thanks. Good afternoon. Seth, you guys delivered some nice upside on revenue, but deferred revenue was well below what we are looking for and the number of net new customers was down quite a bit year on year, but I understand that ASC 606 has 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 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 is always a few deals that we wanted to bring in that slip 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 were probably a few deals more we would have like to have gotten done that we felt were potential. So they were 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 is such a big write-down on deferred under 606 for you guys?

Brian, thanks for your questions. At this point, 606 wasn’t a significant impact to us. The key change is how we recognize revenue generally over the non-cancelable term of our contracts and therefore hasn’t been a big impact. Overall, 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. As you know, Derrick, we have always expensed off the commission so we change 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 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 above $1.4 million impact. A lot of that is just how we change revenue recognition of our longer period of time as opposed to just 1 year.

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 got [indiscernible] million at the end of the year. We will take it out over 4 years. So it’s going to be 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 wanted to drill on how you guys are thinking about potential macro disruptions. So first, could you just – could 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 I guess how much go-to-market change you may need to do to address to the environment right now?

Well, I mean, like everybody else right, this is a story that’s evolving by the day. So we are all – and 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 are starting to see that really good base built in, then you add in the revenue retention rate in the 92%. 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 are 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 2005 to ‘08 Rimini Street flourished extensively. As we like to say, we are not a contrary in 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 we look at the macro economic climate and say what’s the biggest risk when people leave Rimini Street, why do they leave, because they are doing some other big project in change. In an environment like this and I think as we are all watching this and people are looking their wounds from days of being beaten up on the market. You could probably imagine that there is a lot of big projects, hundreds of millions of dollars of projects that are probably going to get delayed. They are 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 are going to sell in this type of climate. They got to run their business differently. And I think once we get passed hopefully this very urgent period, we get into a period of – where folks are looking at, hey, I have got it, keep my cost 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’s creates new opportunities. So even though we are looking at a 12% growth, because we believe as we talked 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 are seeing reflected in our guidance, which is moving from high 10s to a 12 moving past the trough starting up the other side return on the U. And I think that all of those reasons that we see in the market, in 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, we will know. We are getting near the end of our quarter. You know we are back end loaded. And really we will 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 are going to hold 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 sale force further down the field in dealing with the new wider breadth of products that we have, you are going to see us focus in on the up-sell. And I think this is really about getting more out of each sales rep. We are still holding quotas for the average sales rep around $2 million a year. We did create some new higher level sales positions in $2.5 million, which is new to our sales structure, because we have some super-sellers who are getting bigger quotas, bigger comp plans into the mix. So, I do think that we have moved to a more sophisticated next level of sales. We have deployed more people globally. So yes, I think we are well positioned to again reap the rewords of the investments that we have made over the last 21, 22 months in sales capabilities.

Okay, good job. Thanks. Thanks for the color.

Thanks, Derrick.

Our next question comes from Brian Kinstlinger with Alliance Global Partners. Your line is now open.

Great. Thank you so much. I am curious I know it is 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 am just curious to the reaction right now?

Yes I think certainly 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 a 100% remote selling so we have a strong history of using web based products everything from Webex now we are team space so we do a lot of remote selling activities in any given sales cycle what’s new in this crisis right now is no body is taking a meeting in person so if you think about it 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 lets just do it on the phone people are closed campuses they don’t want you coming on site it is 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 have managed that risk and that transition to a 100% remote sales much easier than lot of other companies we have the infrastructure every sales rep is used to selling remotely and that 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 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 somebody’s bigger transactions because we cannot get in front of them we are going to have to do it all by phone and that’s where the risk arise

Great. And then with recent discussions in the past few weeks of prospective customers 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 costs 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 you have seen a huge number of these clients back several of them you have seen in the news or 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 have already had a slowing global economy we were already expecting to see auto sales down a couple of points right we have 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 increased increase 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 believing 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 way side because they just cannot get to it right too many other distractions and too many other crises I am not seeing that yet but I think it is that is a real risk I think all of us face 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.

Which leads me to my next question, your business, obviously, is around cost cutting to help companies and investing other things and use their money which is generally received well in the recession can you talk about how your business has performed in recessions may be talk about how it performed in ‘07/08, I don’t know how small you were back then?

I guess, the only thing I am not – 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, I think we did well. That’s why I said, I would like to be careful about saying we are contrary in business, because when people hear that you grow well when things are up in the air and there is 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 is a thousand 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 are right, I mean, people may switch from, I want to take this money savings and invested in new innovation and competitive advantage in growth, which of course they 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 it doesn’t create risk for the business and may create new opportunities and we have 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 right answer for a lot of companies on both fronts.

Great. Last question I have got is I am hearing correctly, I didn’t hear with $302 million in annual recurring revenue and I assume the 92% held up, you have got about $278 million heading into the year. First, I just want to make sure that’s what I am hearing correctly? And then how has late December as well as early this year going? Have you added meaningful bookings to that? So, are we closer to 300 at the bottom if everything went wrong, and I am just trying to understand from a commitment standpoint of what you have already added, where you are at in visibility?

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 are 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 have 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.

Great. Thanks so much.

Sure. Thank you.

[Operator Instructions] I am not showing any further questions at this time. I would like to turn the call back to Mr. Ravin or 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 have 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 fro participating. You may now disconnect.