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01/10 16:05
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call reveals several negative factors: ongoing litigation with Oracle affecting guidance, revenue decline, and lack of shareholder return initiatives. Although there are positive aspects such as improved margins and partnerships, the inability to provide guidance and litigation risks overshadow them. The Q&A highlights potential in partnerships but lacks immediate impact. The absence of a buyback or dividend program, coupled with reduced revenue and ongoing legal uncertainties, suggests a negative sentiment. The stock is likely to react negatively in the short term, between -2% to -8%.
Revenue $104.2 million, a year-over-year decrease of 2.4%. The decrease was attributed to foreign exchange movements negatively impacting total revenue by 1%.
Annualized Recurring Revenue $396.2 million, a year-over-year decrease of 4.7%.
Billings $79.4 million, up 7.2% year-over-year. The growth was driven by a mix of new subscriptions and project-based professional services.
Gross Margin 61% of revenue, compared to 59.8% of revenue for the prior year first quarter, reflecting improved operational leverage.
Non-GAAP Gross Margin 61.5% of revenue, compared to 60.3% of revenue for the prior year first quarter.
Net Income $3.4 million or $0.04 per diluted share, compared to the prior year first quarter net income of $0.01 per diluted share.
Non-GAAP Net Income $8.4 million or $0.09 per diluted share, compared to the prior year first quarter of $0.08 per diluted share.
Non-GAAP Operating Income $14.5 million or 13.9% of revenue, compared to 8.3% for the prior year first quarter.
Adjusted EBITDA $15.3 million or 14.7% of revenue, compared to the prior year first quarter of 10% of revenue.
Cash Balance and Short-term Investments $122.6 million, compared to $129 million for the prior year first quarter.
Operating Cash Flow Increased by $33.7 million compared to the prior year first quarter increase of $11.1 million.
Deferred Revenue $256.4 million, compared to deferred revenue of $254.3 million for prior year first quarter.
Backlog (Remaining Performance Obligation) $553.1 million, compared to $556.9 million for prior year first quarter.
PeopleSoft Revenue Approximately $7.0 million or 7% of revenue, compared to approximately $8.2 million or 8% of revenue for the prior year first quarter.
New Support Subscriptions for VMware: Notable acceleration in sales of our new support subscriptions for VMware across a broad set of industries and geographies.
Application Management Services for Workday: Rimini Street certified as a new provider of application management services for Workday, allowing them to run the software for clients, lowering operating costs.
Global Alliances and Partnerships Expansion: Continued investment in the expansion of global alliances, partnerships, and channels business to drive sales leverage beyond their own global sales force.
ServiceNow Partnership: Executed go-to-market rollout with ServiceNow, including training sales teams and collaborating on a successful project for a Brazilian pharmaceutical company.
T-Systems North America Partnership: Announced a strategic partnership with T-Systems North America to deliver integrated IT support based on Rimini Street's services.
Cost Optimization Plan: Operating expenses and cost of revenue as a percent of revenue declined 5.8% year-over-year due to ongoing cost optimization.
Gross Margin Improvement: Gross margin for Q1 was 61% of revenue, reflecting operational leverage despite lower revenue.
Wind Down of PeopleSoft Services: Decided to continue the wind-down plan for Oracle's PeopleSoft product, reducing the number of PeopleSoft clients and related revenue.
Litigation Risks: Rimini Street has been involved in litigation with Oracle for over 15 years, with ongoing cases that may affect future operations and financial outcomes. The company is currently appealing certain injunctions and seeking the return of $58.7 million in attorneys' fees.
Regulatory Risks: The company is unable to provide guidance on future performance due to uncertainties surrounding ongoing litigation with Oracle, which may impact business operations and financial forecasts.
Economic Factors: Shifts in global trade policy and deglobalization trends are causing organizations to reassess their IT plans and spending, which could impact Rimini Street's business.
Foreign Exchange Risks: Foreign exchange movements negatively impacted total revenue by 1% in Q1 2025, indicating vulnerability to currency fluctuations.
Revenue Retention Risks: The revenue retention rate for service subscriptions is 88%, with 77% of subscription revenue being non-cancelable for at least 12 months, suggesting potential risks in client retention.
Cost Optimization Risks: The company is undergoing a continuous cost optimization plan, which may incur additional reorganization costs in 2025, reflecting risks associated with managing operational expenses.
New Growth Drivers: Continued investment in global alliances, partnerships, and channels to drive sales leverage. Notable partnerships include ServiceNow, Vali Cyber, Workday, and T-Systems North America.
Cost Optimization Plan: Operating expenses and cost of revenue as a percent of revenue declined 5.8% year-over-year due to ongoing cost optimization efforts.
Sales Execution: Focus on improving sales execution through better go-to-market strategies and global sales and marketing execution.
PeopleSoft Wind-Down: Decision to continue the wind-down of PeopleSoft services, reducing related revenue.
Revenue Outlook: Revenue for Q1 2025 was $104.2 million, a year-over-year decrease of 2.4%. Annualized recurring revenue was $396.2 million, a decrease of 4.7%.
Billings Growth: Billings for Q1 2025 were $79.4 million, up 7.2% year-over-year.
Gross Margin: Gross margin for Q1 2025 was 61% of revenue, compared to 59.8% for the prior year.
Suspended Guidance: The company is suspending guidance until there is more clarity around impacts from ongoing litigation with Oracle.
Shareholder Return Plan: The company has not announced any share buyback program or dividend program during the call.
The earnings call reflects mixed signals. The company has positive developments, such as partnerships and international growth, but faces challenges like declining U.S. bookings and unclear financial metrics. The Q&A highlights optimism in strategic shifts and AI integration, yet lacks immediate financial impact and precise data. The absence of guidance and deferred metrics create uncertainty, balancing positives like reduced litigation costs and public sector initiatives. Overall, the sentiment is neutral due to the blend of potential growth with current financial ambiguities.
The earnings call reflects challenges such as a revenue decline, suspended guidance due to litigation, and reduced cash balance. While there are some positive aspects like increased gross margin and backlog, the litigation with Oracle and its impact on customer engagement overshadow these. The Q&A reveals management's uncertainty regarding future growth and litigation's impact. Despite some positive growth drivers and partnerships, the overall sentiment leans negative due to the suspended guidance and ongoing uncertainties.
The earnings call highlights a revenue decline, ongoing litigation risks, and suspended guidance, which are significant concerns. Despite some positive aspects like improved gross margins and promising partnerships, these are overshadowed by the lack of shareholder return plans and the negative impact of foreign exchange. The Q&A session did not alleviate these concerns, as management's responses lacked clarity on key issues. The absence of guidance and the litigation uncertainty suggest a negative short-term outlook, likely leading to a stock price decline of -2% to -8% over the next two weeks.
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