- Revenue: $103.1 million, a year-over-year decrease of 3.1%.
- Annualized Recurring Revenue: $399.4 million, a year-over-year decrease of 2.6%.
- Revenue Retention Rate: 88% for service subscriptions.
- Billings: $111.6 million, an increase of 6.9% year-over-year.
- Gross Margin: 59.1% of revenue, compared to 63.0% in the prior year.
- Non-GAAP Gross Margin: 59.5% of revenue, compared to 63.5% in the prior year.
- Sales and Marketing Expenses: 36.2% of revenue, compared to 35% in the prior year.
- Non-GAAP Sales and Marketing Expenses: 35.7% of revenue, compared to 34.3% in the prior year.
- General and Administrative Expenses: 18.9% of revenue, compared to 17.7% in the prior year.
- Non-GAAP General and Administrative Expenses: 17.6% of revenue, compared to 15.2% in the prior year.
- Net Outside Litigation Expense: $1.6 million, compared to $0.6 million in the prior year.
- Non-GAAP Operating Margin: 6.2% of revenue, compared to 14.0% in the prior year.
- Net Loss Attributable to Shareholders: $1.1 million or negative $0.01 per diluted share, compared to net income of $0.05 per diluted share in the prior year.
- Non-GAAP Net Income: $6.1 million or $0.07 per diluted share, compared to $0.10 per diluted share in the prior year.
- Adjusted EBITDA: $8.8 million or 8.5% of revenue, compared to 14.8% in the prior year.
- Cash Balance and Short-term Investments: $134.2 million, compared to $140.7 million in the prior year.
- Operating Cash Flow: Increased by $6.3 million, compared to an increase of $13.1 million in the prior year.
- Deferred Revenue: $262.8 million, compared to $285.3 million in the prior year.
- Backlog: $556.7 million, compared to $565.1 million in the prior year.
- Revenue from Oracle PeopleSoft Products: $16.6 million or 8% of first half 2024 revenue.
Release Date: July 31, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Rimini Street Inc (RMNI, Financial) achieved strong contract volumes in Q2 2024, including $8 million or greater transactions.
- Billings for the second quarter increased by 6.9% year over year.
- The company launched new service offerings for VMware products, leveraging their existing enterprise software support model.
- Rimini Street Inc (RMNI) has a global presence with over 2,100 employees in 21 countries, and two large lab operations in India and Brazil.
- The company has a high client satisfaction score of 4.9 out of 5, with an average engineer response time of less than two minutes.
Negative Points
- Revenue for Q2 2024 decreased by 3.1% year over year.
- Annualized recurring revenue decreased by 2.6% year over year.
- Gross margin declined to 59.1% from 63.0% in the prior year second quarter.
- The company is winding down its services for Oracle PeopleSoft products, which accounted for 8% of revenue.
- Rimini Street Inc (RMNI) continues to face significant legal expenses and ongoing litigation with Oracle, impacting financial results.
Q & A Highlights
Q: What was behind the decision to exit the PeopleSoft Support business?
A: Seth Ravin, CEO: We considered several factors, including financial and legal aspects. The PeopleSoft product line has significantly reduced in size, now representing only 8% of our business. Given the revenue, margins, and legal costs associated with it, we decided to wind down the business and focus our efforts and capital elsewhere.
Q: Are there any thoughts on changes in legal expenses going forward related to exiting PeopleSoft?
A: Seth Ravin, CEO: The majority of our legal battles, including injunctions and compliance challenges, have been related to PeopleSoft. Exiting this product line could potentially reduce our legal and compliance costs.
Q: What factors contributed to the drop in the retention rate to 88%?
A: Seth Ravin, CEO: The drop is due to a combination of factors, including the rotation of some product lines and the completion of large short-term contracts. These contracts were expected to end, and their completion has impacted our recurring revenue streams.
Q: Can you reconcile the strong demand for third-party support services with the decelerated growth in bookings?
A: Seth Ravin, CEO: While billings increased year-over-year, the revenue decline is related to the roll-off of large contracts. We have been transforming our business to offer a broader range of services, which has taken time to implement globally. We are closing excellent contracts and expect these efforts to show in future financials.
Q: Is the headcount restructuring related to cutting costs in the PeopleSoft business?
A: Seth Ravin, CEO: Yes, the restructuring is part of our effort to streamline operations and reduce costs. We are also reallocating resources to higher-margin product lines and new skill sets needed for growth.
Q: What other areas of the business will benefit from the capital reallocation?
A: Seth Ravin, CEO: We will focus on product lines with higher gross margins, such as other Oracle, SAP, and VMware products. This reallocation will help lift our overall blended gross margin rate and drive additional profits.
Q: Do you have visibility into when the impact of large contract roll-offs will end?
A: Seth Ravin, CEO: The large contracts that rolled off in Q4 and Q1 were specific and expected. We do not see this as a systemic issue, and we believe the impact will diminish over time.
Q: Can you quantify the impact of the contracts that ended on an annual run rate?
A: Seth Ravin, CEO: The contracts that ended in Q4 and Q1 represented approximately $20 million to $25 million on an annualized basis.
Q: How much of the $35 million in targeted cost cuts will be offset by new hires?
A: Seth Ravin, CEO: We expect 7% to 8% of the cost cuts to go directly to the bottom line, with the remaining 2% to 3% used for skills rotation and new hires, such as enterprise architects and regional CTOs.
Q: How much does the $3.2 million in restructuring charges represent in annualized cost reductions?
A: Michael Perica, CFO: The $3.2 million in restructuring charges represents $15 million in annualized cost reductions, with an additional $20 million targeted for the current quarter.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
