Rimini Street, Inc. Q3 FY2024 earnings call

Rimini Street is a global provider of end-to-end enterprise software support and innovation solutions, leading as the top third party support provider for Oracle, SAP and VMware software. They have a long history of helping clients achieve cost savings and better business outcomes. During the third quarter, a new strategic partnership with ServiceNow was announced, which delivers an exclusive enterprise application modernization and AI solution for existing ERP and other siloed software without costly upgrades. In Q3 2024, sales included a mix of services and solutions, with improved new logo acquisition sales and 19 new client sales transactions with TCV over one million. The company also provided an update on the Oracle litigation, with Rimini I having no current litigation activities and Rimini II having pending court decisions. A cost optimization plan was initiated to reduce net operating costs by $35 million annually, with approximately $14.9 million in annualized reductions achieved so far.

In the third quarter of 2024, revenue was $104.7 million, a year-over-year decrease of 2.6%. U.S. clients accounted for 49% of total revenue while international clients made up 51%. Annualized recurring revenue was $401.5 million, a year-over-year decrease of 3.6%. Revenue from service subscriptions, which constitutes 96% of total revenue, had a retention rate of 89% with approximately 78% of subscription revenue non-cancelable for at least 12 months. Billings for the quarter improved by 7.7% year-over-year, led by North America and Asia Pacific regions. Revenue related to providing services for Oracle PeopleSoft products accounted for approximately $24.9 million, or 8% of total revenue, for the first nine months ended September 30, 2024.

The company is continuing to suspend guidance as to future financial results due to uncertainties from current litigation activity before the U.S. Federal courts and ongoing litigation with Oracle. They note that they are unable to provide material additional information beyond disclosures in press releases, SEC filings, and court filings, and cannot predict the outcomes of the pending Oracle litigation.

If Rimini Street does not adequately reorganize its operations to optimize costs or does not ultimately prevail in the post-trial litigation matters summarized, it could have a material adverse impact on the business and financial results.

Q: Brian Kinstlinger asked about the cost cutting plan completion and the ServiceNow partnership role and ramp.

A: Michael Perica responded that the cost cutting plan is expected to be completed by the end of Q4 2024. On the ServiceNow partnership, Rimini Street will deploy the ServiceNow layer over existing software, doing all the work, with licenses sold by ServiceNow or its partners. The ramp will take time as it's a complicated set of pieces but has good interest.

Q: Jeff Van Rhee inquired about billings growth, retention, sales front, and ServiceNow vision.

A: Seth Ravin said there's no reason to expect negative billings growth in Q4, retention stability after one-time events, sales team changes driving better performance, and the ServiceNow partnership is well-received by customers as it offers value without major ERP upgrades.

Q: Unidentified Analyst asked about PeopleSoft impact, VMware business, and new clients.

A: Seth Ravin discussed the ongoing wind down of PeopleSoft services with varying contract lengths, VMware business going well across industries, and new clients driven by a focus on new logos with a restructured sales team.