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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 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.
Revenue $103.4 million, a year-over-year decrease of 1.2%. Excluding revenue derived from support and services provided solely for Oracle PeopleSoft products, revenue increased 2.5% versus the previous year.
Annualized Recurring Revenue (ARR) $391 million, a year-over-year decrease of 2.6%. The decline was influenced by the wind down of PeopleSoft services.
Revenue Retention Rate for Service Subscriptions 89%, with approximately 85% of subscription revenue noncancelable for at least 12 months.
Billings $66.5 million, up 2% year-over-year. Adjusted billings, excluding PeopleSoft associated billings, were $63.9 million, an increase of 6.7% year-over-year.
Gross Margin 59.9% of revenue compared to 60.7% of revenue for the prior-year third quarter. On a non-GAAP basis, gross margin was 60.4% compared to 61.1% for the prior-year third quarter. The reduction was largely due to the decline in revenue associated with PeopleSoft services.
Sales and Marketing Expenses 36.7% of revenue for the third quarter compared to 34.2% of revenue for the prior-year third quarter. On a non-GAAP basis, it was 35.7% compared to 33.6% for the prior-year third quarter.
General and Administrative (G&A) Expenses 17.6% of revenue for the third quarter compared to 15.8% for the prior-year third quarter. On a non-GAAP basis, G&A was 16.5% compared to 14.6% for the prior-year third quarter. G&A expenses were negatively impacted by over $1 million due to nonrecurring international transaction tax associated costs.
Net Income Attributable to Shareholders $2.8 million or $0.03 per diluted share compared to the prior-year third quarter net loss of $0.47 per diluted share. On a non-GAAP basis, net income was $6.9 million or $0.07 per diluted share compared to $0.22 per diluted share for the prior-year third quarter.
Non-GAAP Operating Income $8.5 million or 8.3% of revenue for the third quarter compared to 12.8% for the prior-year third quarter.
Adjusted EBITDA $10.1 million or 9.8% of revenue compared to 13.1% of revenue for the prior-year third quarter.
Cash Balance and Short-term Investments $108.7 million compared to $119.5 million for the prior-year third quarter.
Operating Cash Flow Increased $24.7 million compared to the prior-year third quarter decrease of $18.5 million. Positively impacted by the receipt of litigation settlement proceeds of $37.9 million. Excluding this payment, cash used was approximately $13 million.
Deferred Revenue $226 million compared to $223 million for the prior-year third quarter.
Remaining Performance Obligation (RPO) $611 million, a year-over-year increase of 6.4%. Excluding PeopleSoft associated backlog, RPO expanded 9.3%.
PeopleSoft Revenue Approximately 5% of revenue for the quarter compared to 8% for the prior-year third quarter. PeopleSoft calculated billings were $2.5 million compared to $5.3 million for the prior-year third quarter.
Agentic AI ERP solutions: Powered by ServiceNow's AI platform, these solutions aim to help clients modernize their ERP systems without exceeding their IT budgets. Over two dozen client engagements were closed around this innovation.
New client sales: Closed 17 new client sales transactions with a total contract value (TCV) of $63.1 million, compared to 19 transactions worth $48.7 million in the prior year.
New logos: Added 79 new logos, including major global and regional brands.
Geographic expansion: Expanded sales leadership in EMEA, Southeast Asia, and Greater China, and launched a U.S. federal and state local education sales team.
Strategic partnerships: Entered into a partnership with American Digital to provide full-stack solutions and was added to the U.S. GSA Multiple Award Schedule, enabling direct procurement by government agencies.
Sales force expansion: Increased global quota-carrying sellers to 82 from 73 in the prior year, with more sellers achieving or exceeding quotas.
Revenue retention: Achieved a revenue retention rate of 89% for service subscriptions, with 85% of subscription revenue non-cancelable for at least 12 months.
Operational leverage: Focused on improving systems, analytics, processes, and global staffing models to enhance operational efficiency.
Oracle litigation settlement: Settled litigation with Oracle, agreeing to wind down PeopleSoft services by July 31, 2028. This marks the end of Oracle-related litigation updates.
Cost optimization: Continued reorganization efforts, incurring $752,000 in charges this quarter, totaling $7.7 million since inception.
Revenue Decline: Revenue for the third quarter decreased by 1.2% year-over-year, with a 2.6% decline in annualized recurring revenue. This decline was partly due to the wind down of PeopleSoft services, which continues to impact overall revenue.
PeopleSoft Wind Down: The company is required to wind down all services for Oracle's PeopleSoft products by July 31, 2028, as part of a settlement agreement with Oracle. This has already led to a reduction in PeopleSoft-related revenue and billings, which could further impact financial performance.
Gross Margin Reduction: Gross margin decreased to 59.9% from 60.7% year-over-year, primarily due to the decline in revenue associated with PeopleSoft services. This reduction in margin could affect profitability.
Increased Operating Expenses: Sales and marketing expenses increased as a percentage of revenue, rising to 36.7% from 34.2% year-over-year. General and administrative expenses also rose, partly due to nonrecurring international transaction tax costs, which could strain operational efficiency.
Litigation Costs: Although litigation with Oracle has been settled, the company incurred $621,000 in litigation-related costs during the quarter. Future reorganization costs are also expected as part of ongoing cost optimization efforts.
Foreign Currency Impact: Operating cash flow was negatively impacted by foreign currency effects, which were unfavorable by $1.3 million during the quarter. This adds an additional layer of financial uncertainty.
Dependency on Subscription Revenue: The company’s revenue retention rate for service subscriptions was 89%, with 85% of subscription revenue being noncancelable for at least 12 months. However, any significant changes in subscription renewals could pose a risk to financial stability.
Agentic AI ERP Solutions: Rimini Street plans to provide more insight and information on its agentic AI ERP solutions powered by the ServiceNow AI platform at the upcoming Analyst and Investor Day on December 3, 2025.
Sales Opportunity Pipelines: The company has materially expanded sales opportunity pipelines for future quarters, along with broad progression of many pipeline opportunities.
Growth Drivers: Rimini Street continues to pursue growth drivers leveraging direct and indirect sales channels, honing direct seller team skills, building partnerships for expanded sales reach, and executing go-to-market strategies by industry.
Strategic Partnerships: The company entered into a strategic partnership with American Digital to provide a full stack solution, including AI solutions and workflow automation on current SAP and Oracle applications.
PeopleSoft Services Wind Down: Rimini Street has agreed to wind down all PeopleSoft service revenue by July 31, 2028, as part of the Oracle settlement.
Business Outlook and Financial Goals: The company plans to outline its market opportunity, solutions, go-to-market strategy, and financial goals at the Analyst and Investor Day on December 3, 2025.
The selected topic was not discussed 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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