Rimini Street (RMNI) 31 Jul 242024 Q2 Earnings call transcript

Good afternoon, ladies and gentlemen, and welcome to the Rimini Street Q2 2024 Earnings Conference Call. [Operator instructions]. This call is being recorded on Wednesday, July 31, 2024. I would now like to turn the conference over to Dean Pohl, VP, Treasurer and Investor Relations. Please go ahead.

operator. you, Thank welcome Earnings to Rimini Second Street's I'd Call. everyone XXXX Conference Quarter like to

the On me CFO. Today, Relations. under following financial call release. measures quarter provided which the About President; earnings the also is has can of press financial with GAAP heading, release measures A An ended press and CEO Ravin, press and tables on under Financial a Michael reconciliation the release and June our these be XX, believe in of Perica, copy non-GAAP the explanation Certain found Investor our to they for we we XXXX, our today issued second is of in statements Seth included website been why Key Measures in Non-GAAP the our the Metrics. meaningful and are

made will discussion SEC to that Form for to or filings, are reminder, price. today our XX-Q may forward-looking results actual uncertainties filed encourage including a a our As most and recent statements stock risks include discussion you statements risks our future our forward-looking outlook. subject that affect current differ from results today's materially to cause These may of review today. We statements reflect that

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

Street as with delivered clients license automation, projects that HCM IT CRM already workflow, today. the growth. We've AI, clients systems security, believe and Street and accelerated and $X Thank achieve outcomes, mission-critical employees time in financials, application open and achieved IT resources everyone, nearly needed Brazil. and clients include cost, large such more XX source, XXX significant working support lowering countries. X you, billion you, modernization, and opportunity we Dean, competitive savings assisting manage countries global with these governance. To migrations, also India serves reinvestment as operating by helps savings, to thousands cost have we to over transaction in while innovation significantly operating our of of integrations, clients goals Rimini and improved data, than thank joining and us management date, for business such profitability, advantages Rimini X,XXX and better reporting, new operations lab cloud, analytics, ERP,

software award-winning of by response an X minutes, Demand than advantage. XXX by average where delivers excellent. is Our competitive and client X, an earned support of average score time engineer environment XX satisfaction out and less of X X.X X

proven, IT transaction trusted We can system providers continue the models allow power a IT technology increased vendor significantly aggregated as service outcomes. Competitively, portfolio mission-critical patented streamlined proven consolidate organizations that their a reliable, of to IT partner key systems, for preferred for solutions, talent, and see for services we broad demand reduce engineering strong and spending management, win and top methodologies, better business serviced partner to needed service purchasing have to globally.

DXC, major and We technology such results. have Oracle, and QX deals competing IBM SAP, activity against won as XXXX players

quarter second and shortfalls The of a sales. was successes mixed quarter in

for providing leverage we clients. launched were comprehensive volumes, support, service sales contract our products. We we the and Protect of enterprise Rimini We geographically Japan of deliver to Europe, mission-critical service centered and and were $X greater ultimately challenges including ANZ. the Australia. and strong able Andrew support quarter, and generation, GM quarter, Northern availability to Martyn ASP smaller Consult Officer; Hoogakker regional timely Revenue for the to America, existing revenue and VMware Steve management model made executive a million software Hershkowitz, EMEA is achieved contracts proven North our for GM many While P VMware Chief Rimini to changes In general quarter. The including offering begun the have second that to the for or responded in already to several reduced we Rimini around for and opportunity We unique signed hiring VMware. Manners the have had the transactions as service transactions

to industries marketing, positive lead teams client quarter the that X.X% meet are across closed generation, to portfolio globally the with solutions, team was for our growth success our as result achieved year-over-year. We presales, hire needed across of deals and sales and Billings continuing targets. geographies. fielded right get sales primarily various increased to The second billings

ensure to order the second sell quarter, we and required a cost larger the decrease revenue, profitability, large have product to previously and and due globally, increased we in certain are specifically. In prior sets reduction annual quarterly specific were primarily skill services client retention noted drive report year-over-year rate $XX service began recurring that in operations in savings. revenue the and to and portfolio delivered streamline in and client contracts program the flow-through the of quarterly However, to nonrenewal reorganization revenue aggregate our from million right completed related projects targeting

continue that to growth for sets capabilities business plan. hire We needed skill and our aggressively and enable

wind of we've support, includes consideration, services Manage Rimini and Rimini decided Oracle PeopleSoft offering Rimini careful to down our services. Consult after our This for Additionally, products.

no more One. there One to against Two. Rimini in activities Rimini as Rimini litigation course, As XXXX, able soft is including PeopleSoft litigation place clients current people and wind-down longer in update. Oracle providing Rimini phases by year will litigation to Oracle followed Rimini Street Street a run known litigation several and With to we have we're than for services cases likely cease provide before respect all process the for take has is years, been Rimini Oracle over which and products expected One, take are Oracle to globally, related services and XX to its

injunction permanent before injunction and litigation stay Rimini of of Rimini's fees Rimini there the of over a attorney's before of Street abortion further court's the Court Two to and the pending Rimini with related statements disclosures otherwise the before against to the is on and litigation case U.S. Appeals. And and beyond disclosures on prior are and the this respect report Two was findings, information quarterly merits a Rimini appeals. before certain their of impacts to because with recovery appeal court XX-Q arguments the However, be results, pending. respect future in which company's that the to SEC matters additional the today, appeal XXXX. The on filings, Court June Two that made please of at July Exchange our Summary. to still respect provide XX, there also on the effect. before injunction, and Rimini of the which court. One, With merits outcomes requested note Traditional Oracle's XXXX, post-trial nor oral we District arguments Two, also a provide three, Two the One filings cannot in the that matters the the related currently remains is Rimini company's Rimini decision before were and Commission. Please releases, Two, is as filed decision injunction disclosures of of and time, appeal oral Court filed material Rimini with guidance are the information our to the appeal submitted Oracle, With still Rimini still pending the litigation Two X potential courts known Oracle costs XXXX, regarding Two are we are predicted. the injunction, and litigation financial in were the and Oracle Form to court nor is with appeal by to commentary additional to Appeals Securities provide appeal. in X, press two the able briefings see various unable injunction Rimini

successful While investments delivered to growth and right are we and accelerate confident the enhance value conclusion. with to right Oracle bring mixed to the results, take our a that return quarter the making profitability, shareholder remain we litigation and actions continuing to a

reorganize if SEC costs material its Rimini not adequately it results. financial prevail in have matters filings, our could to business on litigation Street reduce in summarized However, detailed and not ultimately and our adverse operations the does above post-trial a or impact does

Michael. you, to over Now,

quarter Unfavorable new compared for part million prior constant decrease second for joining by you year-over-year compensation engineering XX% half and of the basis QX approximately quarter of the second quarter the for negatively investments quarter least total second basis, currency compared first second for global revenue non-GAAP X.X% were for revenue of related $XXX.X in XXXX recurring X.X%. client for prior quarter, which X.X%. a was of was retention year the prior in XX as our was revenue up of subscriptions, note calculated margin quarter. Gross of second On Billings of was total stock-based to the revenue of FX revenue revenue result our with States us, for XXXX, year for for makes of We service margin margin subscription represented our million to of XX.X% $XXX.X needed a XXXX XXXX. Revenue measures the impacted with and at XXXX, revenue Revenue the noncancelable due revenue the engagements thank year-over-year on of the months. of movements $X.X FX revenue revenue XX% serve represented ratable United to in which XX%, XX.X% increase Seth, results. year XX% the million quarter, second was million. Gross $XXX.X rate the second decrease by reduced declined quarter of recognition. movements. Annualized of to billings international compared XX.X% half XX.X% X.X%. Clients a quarter to the for that you, during of second XXXX Thank team and a for of continued of second expense, while everyone. advance XX.X% second second quarter. contract expansion a $XXX.X excludes clients million, XXXX the an gross for quarter for within second

are we we in client continued benefits growing gross previous scale new expenses. working pressure As by driving leveraging to noted and engagements. margin scale. margin Operating earnings we meet of improve as global the efficiencies are Simultaneously, gross calls, to expecting

net we which by to quarter third another approximately $XX $XX basis, with million As million Seth quarter. targeted annualized of on reduce noted, the million implemented reorganization second plan the occurred cost a an for during operating the $XX

incurred $X.X million. we a quarter, of second charge the reorganization For

talent. Moreover, second XX.X% expenses excluding for excludes marketing prior compensation of our second high geographies attractive non-GAAP percentage the for revenue year prior and year stock-based the excludes and quarter underscores quarter continue compared administrative of the which of advantage basis, skilled basis, still and the where quarter. for second and XX% the pressures second year labor compared revenue quarter. General expense, second as revenue our compared XX.X% which revenue centers to for stock-based remain compensation the of for outside was margin was costs, light a performance pressures sales expense of for was excellence revenue XX.X% talent across retain and quarter of footprint prior compared attract talent value persisting quarter. On key revenue, XX.X% of in revenue G&A a revenue as a expenses second inflationary XX.X% While both non-GAAP Sales previously, markets. of the as XX.X% prior revenue to second was litigation to the a to of of for revenue to quarter a the compared On of year expenses and of costs, percentage litigation higher-priced percentage and XX.X% second theaters, quarter. the highlighted global all we in of are with the to for costs marketing for

program We earlier. as increase are addressing restructuring of mentioned part the the year-over-year

and However, the percentage and to part remain teams to expected a compliance ongoing peers cost to elevated G&A are in due expenses for revenue our legal of in-house large as compared quarter. necessary our for quarter made the and year activities. Net costs second $X.X million prior outside expense litigation to Oracle other the $X.X by ongoing for compliance compared was litigation second million

We share operating to second which second a excludes quarter million and of June for prior reduced income prior operating year attributable year prior for XX, revenue million expense cash XXXX, net million cash includes the release, second June sum million a of our of second second was by basis, compared XXXX, future of X.X% $X.XX short-term per and to the headwinds second quarter increase outside which revenue second flow $X.X second XX.X% the compared short-term investments the negative revenue quarter, prior quarter. On income second the quarter. The $X.X increased per compensation loss second and noncancelable ended a shareholders flow the $X.XX of was $X.X revenue for the quarter. to $XXX.X stock-based $XXX.X deferred investments margin, spend year to of share. On the billed million to compared non-GAAP revenue EBITDA, quarter million of $XXX.X of diluted the quarter operating year prior press year June $XXX.X or compared the cash was million. Deferred XX, $X.XX to second FX million balance was cash prior quarter to $XXX.X for defined cash year's $X.X the as and litigation second of share. the of $X.XX to non-GAAP basis, the net second or quarter Adjusted with $XX.X per compared of million XXXX, second the of share compared flow Backlog sheet. diluted quarter deferred year for from of diluted for Balance compared million XX.X% net was X.X% quarter. the prior Our per XX, revenue, in to as revenue. quarter $X.X for million. was or for compared $XXX.X million prior year diluted quarter

Oracle. we accounted fiscal for X% $XX.X The courts ongoing wind PeopleSoft respectively. clarity litigation U.S. Oracle first for until Seth to revenue, Revenue providing or for $XX.X half million revenue current of impacts with noted, company's offering company litigation outlook. before products guidance of products. around have from services there is and to continuing to approximately Business activity decided suspend the future down XXXX services results or PeopleSoft federal financial million As the of our related and X% year XXXX is as to more

on on Exchange our the we'll Operator, July XX-Q questions. remarks. disclosures information the and please For company's concludes XXXX, report regarding Form U.S. see in Commission. This Oracle, XX, disclosures and additional take with litigation Securities company's now filed with our the prepared quarterly

instructions]. [Operator

Global question comes from first with Alliance Your Brian Partners. Kinstlinger

about is support business? PeopleSoft could question you behind decision the if first My was talk the exit what to

Brian. Sure,

look around know, we statement, and our at As several we you you We took our factors. used of decided product and us. It factors. you at in noted would you at focusing product of the line, over be revenue our majority looked legal looked at it, line at today, margins you reduced at look this look the factors, size look winding for costs it's business legal when associated at the and that the financial end at look we elsewhere at did to has a in and the associated capital as factors X%. look be X% we the and with down the and the we elsewhere. and those time dramatically And day, better the business efforts And,

on place And So, well, comment clear legal it's it. mention I to legal, can't you piece you know that did successful. the think I one has been PeopleSoft the is related Oracle

thoughts in going to to any expense are there So, changes this? forward related legal

courts that to according over in years agreements, the computer over license last and the to Two you compliance look forth client's you we and to and the related if Oracle last before could those and injunctions the look run of used related back the including which over take had been language were XXXX. And, had look be agreements battle think the to focus and with court specifically PeopleSoft One, Oracle majority look the the at systems. own Rimini acquired on that Rimini written challenging and in case, been stated just has have back product that original PeopleSoft Oracle PeopleSoft the say primarily PeopleSoft. And you challenges been for the XX a I clarity, Well, litigation, probably over

difference agreements other was Oracle and that license that that seen the products. between especially world, you've all their native so, the a in And

again, And XX so, elsewhere. line get the of start efforts and focusing versus, it been product and equations that you to years those X% for has the about change to again, of our value a battle what continuing revenue, continuing down means what's

In with think of assumptions potentially costs, that legal I that. come compliance terms those fair are and of expectations could reduced

we think, The that last to? low would the looked dropped I each back has this are of in since XX%. you quarters, factors a retention years the many few What hit, of rate I've attribute

a of conference about some reduction product calls Well, lines I One, in of that of couple rotation had previous we you we today. things. are think talked the some in supporting

QX again, an You're revenue in starting more from to we flow as through subscription our where and And that large to see QX contracts that come also outside this to is think, consulting we of I had end. some business continues grow. have

product a to rolled those of end a that because was customer not some was coming And off an unexpected. just

was that revenue naturally large them flow very and still were and those the from but recurring we Some watching through. it saw which into flow quarters rolled short-term they take we're you that off several the of that was that QX, and contracts successfully streams, to result were of they completed QX, net through QX

So, you're that's component there. seeing primary believe a I

your I script partners, seen the X over you're see for We've continue that set for assume third-party services. year-over-year you led have decelerated with strong question Last demand to began with quarter? you about you years first support growth Can bookings declines is, talking and trusted last Rimini. in I the reconcile and the that have proven to

for on we to the related saw, revenue, the QX I Sure. flowing be with Well, revenue, year-over-year. that billings had shouldn't health confused saw noted, which as that business. larger overall again, of quarterly the the you The those number increased numbers contracts the through

out dramatically top our in to of the from consulting know, to covered you entire XXX added expansions to business line service, countries. we're few large in the an over last several VMware for and terms new added in of we even transformation line quarter. On on last in AMS being products Oracle entirely serving that, years added and of of capabilities, a expanding global product the service in talking over provider support have security product just replacement basis, business services we the third-party our We as new a built had, SAP that observability tools, Connect interoperability customers line we've we and years, an well

trained amount and a replacement probably to and sellers. sell countries, bring you way out would these get at to set of maintenance being efforts across takes we in to selling all bring that to of we market, that different would of the off all large even world that the that from tell the amongst market I to selling it personnel up beyond change that it And just take underestimated So, all that the there just the different time the maintenance. skill them required a XX% to go projects time

closing we the deals, it qualitative remarks, are transformational from to had see we last need from around the been the the mentioned again. of world. Again, see too crawl and, standpoint all excellent numbers as a those over business. we yet few But So, project shoots has bearing this prepared the that aren't a green up years out back course, contracts we've small I ASPs many in still

to products financials. around those show more world, see up larger we're more will starting also that where the we contract seeing see larger that in in future more We we're mixes. And in need that, and and already buying are expect and customers would that volumes to

comes TD Derrick Cowen. Wood question with next Your from

with for start Derrick. just on Cole is This again. PeopleSoft on I'll

helpful. either more the and lead cutting mean, So, would along if you're model, is PeopleSoft some this there of this Is in sales costs support to of part due restructuring out going the info that is teams of kind G&A? headcount of or X% kind business just to doing? be I of revenue

Sure. transition We would expect X% that over time. would this

perspective. But quite are do with few we we're world. contract mentioned, to around so, that the very while world much that reductions we under and through what are the in of trying all have clients cost organizational line that seeing it's all work an to around take just do a going As a you're to from the

very the to think back I numbers. Most of for if on guiding cost you're we focused operations for to We're and on be at and which and the do know, growth been I profit. XX% like you we we're we in makes should are ways light but bottom cycle that delivering And that to us. take watching think the And the streamline another when code pushing going cost we're of rule you're expect equation, we've clear reductions looking do waiting there. get to as up, it bottom believe begin results line way on cuts. have sense be to to top top turn wave XX, is are growth, very while types of we of to that of out similar see focused shareholders. We line the there, a clear then well that a line to we for our get line as

to you elsewhere. of And business support PeopleSoft can if other What into maybe? show dividends then, going do you think had or the capital you mentioned that focus you're shift kind resources areas of other from

which lines, on product the other have we house. the support side of are generating Well, even

product have fixed VMware, product very developed. the on the those it costs than Oracle and they're that showing product lines, that side, SAP legal other and lines, component to gross regulatory margins due have are cost others a PeopleSoft be seeing which to lines, to heavy way we're tax has the higher We return whether

other bottom you at gross And with gross we selling look you selling overall as additional as the those margin instead we PeopleSoft, money so, higher and profits spending were products numbers, that margins. lift we line. to if were well it the Obviously, rate that when would marketing drive tells of blended

that weighing well. on as end growth flow-through contracts And retention came revenue and to of are down then then just larger more here, one some the that on an

the the a forward you a up? while? year be rest would are can clarity out. I mean, this something kind helpful. going Just dry that of for have into that a going when on any we through these can So, it of more row go expect on of what kind do this quarter the little is third is to called Or visibility in you

Cole. Sure,

So, flow we're those the quarter. through. not were noticed keep were is That deals noting there. we say were QX that they that QX didn't in because that causing the We're renewals because in pointing biggest out are impact lost you and we big from QX, second QX and the deals that seeing there of deals

So, we're were seeing little to were this of deals, specific issue, contracts not And systemic off to. be were they I the those say as think a visibility specific were or projects would surprises specific very dates end contracts as understood these we of rolling I completed. that had that them were that had really really

a guidance that left again, the had point you few were So, us in to some from they necessarily ruling we of July, the going surprises, little why may last to very that's have position on things quarters, weren't we reason, provided guidance over that but that we of last in Two be the seen hampered Rimini court as and view, weren't know, haven't seem where we surprises a provide bit to us. they so, and since that for

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

the peaked from of that down on at million a In revenue, $XXX A you peak. $X about quarterly quarter, basis follow-up. we're million December quarterly

million annual revenue. So, of that implies about $XX

maybe had the represented So, could how ended, annual quantify on run you much rate. contracts an

underlying the that. understand business of will that think the if help excluded I health we us

guess my and in Yes. $XX QX $XX of I those QX. combined about, contracts talking think in big million the number it, you're is to, the you're at somewhere look million Brian, if to that speaking you

rolled a annualized good related of So, basis number been to had those an would have amount off. that substantial larger contracts that on

it X? are or trying I'm not was the of to XX And it. X understand just it, couple like talking to or we like contracts, dead beat is Or here, XX? a horse but

No, or we're X We're most. talking handful talking at a X.

And think, then targeting, million cost cuts. a I you in $XX highlighted you're number

as second, First, key achieve, you're be still? you hiring offset to said, you hire looking have some then whatever are right? that you positions is that And will to by able

I cost on is bottom X% industry-wide to streamlining cutting like people an rotation. their or to cut, the think think to watching because basis, X% skills is I everybody XX% guess and doing you're be in X% my most direct is they're overcutting but Well, line X% going

As into massive older people you same are different. where reskilling. We skill there's a replacing and mirror, with out skill know, in rotating sets hiring, with that the this example, them when market are for of sets on more technologies and the amount hot rearview come in other Street seen the this AI. no Rimini seeing saw real we're they is Cloud, we've AI

to the are like to for need do room what to overshooting in that We sets of cost terms skill we new for streamlining cutting we'd make some in order grow business.

with we example, For map high. get going organization, found in to maintenance extremely figure out enterprise them road program. architects help of will only We is to forward, not bring level solve IT customers our well in we enterprise but business that the part their the within architects immediate of issues for very of the cost them requirement or do overall helping their cost when

heads. are And the world, expensive around so, CTOs we're those deploying regional

somehow. So, you have them to pay for

mix reduce order CTOs, of more reducing a us in them people complex field That's better to doing. for of the number sales the sales watching you're marketing So, of changing with contracts. us sellers, capability replacing the on kind larger, give work and costs, we're

The is on that made how restructuring cuts last $X.X expense annualized you've million represent already question does that an charges, in the I have in much basis?

one? want you to that do take Michael,

the will can. be on felt Brian, you have of not More QX in So, is, starting effect those I you answer P&L. how this experienced the QX. Sure, the in afternoon? are

noted, we starting QX P&L overall a will to remaining large in effect in this of matter occur timing. the the year, As the components just in QX with greater as

asking not on I'm sorry, I'm timing.

or those how charges, looking, but $X.X other you'll whenever much You restructuring already did the Those annualized already I we take assume does too, actions, announce million next forward $X.X charges. starts? it an in before quarter basis I out some the go some restructuring that mean, on severance it million, that of for business

remaining is of annualized million I current $XX quarter. a is $XX on such That reductions, understand. run Apologies, million target rate our cost the Brian. in that

this Ravin the to are call There would for back over time. further questions I to turn no closing Seth remarks. like at

very until Rimini every our of joining about you quarterly a then, and call business that of doing forward Thank way. harm's a live Great. in next continent We, the be call. quarter the months. And coming people again, very to please few those we much. We in world. everyone even to are course, company for want look third challenges of Again, in we complex today. us thank move on aware the some I of the global you in safe face seeing is again as to own

Our everybody of them, Thank very wishing well. are thoughts you healthy. course, all. and be Thanks and much with

Ladies for your conference this call. you and concludes today's gentlemen, participation. Thank

disconnect. may You now