Rimini Street, Inc. (NASDAQ:RMNI) is a global provider of end-to-end enterprise software support, products, and services. The company offers a comprehensive portfolio of solutions to help clients run, manage, support, customize, configure, connect, protect, monitor, and optimize their enterprise application, database, and technology software platforms.
Rimini Street has a long history of providing exceptional value to its clients. Since its inception, the company has delivered over $8 billion in savings and reinvestment opportunities to thousands of clients operating in nearly 150 countries. Rimini Street's award-winning software support services have earned an average client satisfaction score of 4.9 out of 5, where 5 is excellent.
Business Overview
The company's broad portfolio of solutions, top engineering talent, proven systems, methodologies, service models, and patented technology have enabled it to win deals against major technology players such as Oracle, SAP, IBM, and DXC. Rimini Street's global footprint, with over 2,100 employees working in 21 countries and two large lab operations in India and Brazil, has been a key competitive advantage.
Financials
In the second quarter of 2024, Rimini Street reported revenue of $103.1 million, a year-over-year decrease of 3.1%. The company's annualized recurring revenue stood at $399.4 million, a year-over-year decrease of 2.6%. The revenue retention rate for service subscriptions, which make up 96.8% of Rimini Street's revenue, was 88%, with approximately 74% of subscription revenue being non-cancelable for at least 12 months.
Rimini Street's billings for the second quarter increased 6.9% year-over-year, primarily driven by deals across its portfolio of solutions, various industries, and geographies. However, the year-over-year decreases in quarterly revenue, annual recurring revenue, and revenue retention rate were primarily due to the non-renewal of certain large client contracts.
To address the revenue challenges and drive increased profitability, Rimini Street initiated a reorganization and cost reduction program in the second quarter, targeting $35 million in aggregate savings. The company is also continuing to aggressively hire for needed skill sets and capabilities to support its business and growth plan.
After careful consideration, Rimini Street has decided to wind down its offering of services for Oracle PeopleSoft products. This includes the company's Rimini Support, Rimini Manage, and Rimini Consult services. The PeopleSoft product line accounted for approximately $36.1 million, or 8%, of Rimini Street's fiscal year 2023 revenue and $16.6 million, or 8%, of its first half 2024 revenue.
Risks and Challenges
Rimini Street's ongoing litigation with Oracle has been a significant factor in the company's operations. The Rimini I case, which began in 2010, has been resolved, with no current litigation activities related to it. However, the Rimini II case, filed by Rimini Street against Oracle in 2014, is still ongoing, with three post-trial litigation matters before the courts.
The first matter is the appeal of the Rimini II findings, known as the Merits Appeal, and the appeal of the Rimini II injunction, both of which are before the Court of Appeals. The second matter is a motion to further stay the Rimini II injunction pending the decision on the Merits Appeal, also before the Court of Appeals. The third matter is the litigation before the District Court over Oracle's request for the recovery of certain attorney's fees and costs related to the Rimini II case.
Rimini Street is unable to provide material additional information or guidance regarding the potential impacts of the ongoing litigation with Oracle, as the matters are still before the courts and the outcomes cannot be predicted. However, the company has stated that if it does not prevail in the post-trial litigation matters, it could have a material adverse impact on its business and financial results.
Outlook
Despite the challenges faced in the second quarter, Rimini Street remains confident in its ability to take the right actions and make the necessary investments to accelerate a return to growth and profitability, enhance shareholder value, and bring its litigation with Oracle to a successful conclusion.
For the full year 2023, Rimini Street reported annual revenue of $431.5 million and annual net income of $26.1 million. The company's annual operating cash flow was $12.5 million, and its annual free cash flow was $5.3 million.
Rimini Street's geographic revenue breakdown for the second quarter of 2024 showed that 50% of revenue was generated in the United States, while the remaining 50% came from international markets. The company's revenue mix was impacted by unfavorable foreign exchange movements, which reduced second quarter 2024 revenue by 1.3% on a constant currency basis.
Liquidity
In terms of the company's liquidity position, Rimini Street ended the second quarter of 2024 with a cash balance and short-term investments of $134.2 million, compared to $140.7 million in the prior year's second quarter. The company's deferred revenue as of June 30, 2024, was $262.8 million, and its backlog, which includes billed deferred revenue and non-cancelable future revenue, was $556.7 million.
Rimini Street's financial ratios, such as the current ratio of 0.87 and the quick ratio of 0.87, indicate a solid liquidity position. The company's debt ratio of 0.23 and interest coverage ratio of 9.32 suggest a manageable debt burden and the ability to service its debt obligations.
Conclusion
Looking ahead, Rimini Street has suspended guidance on future financial results until there is more clarity around the impacts from the ongoing litigation with Oracle. The company remains focused on executing its reorganization and cost reduction program, investing in the necessary skills and capabilities to support its growth, and navigating the challenges presented by the PeopleSoft product line wind-down and the ongoing litigation.
Despite the mixed results in the second quarter, Rimini Street's comprehensive portfolio of solutions, global footprint, and commitment to delivering exceptional value to its clients position the company well for future growth and success, provided it can successfully navigate the current challenges and bring its litigation with Oracle to a favorable conclusion.