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01/10 16:00
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
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.
Revenue $104.1 million, a year-over-year increase of 1%. Excluding PeopleSoft, revenue increased 3.6% versus the prior year. FX movements positively impacted total revenue by 0.7% during the quarter compared to a negative impact of 1.3% for the prior year second quarter.
Annualized Recurring Revenue (ARR) $394.1 million, a year-over-year decrease of 1.3%. The decrease is attributed to the wind-down of PeopleSoft services.
Revenue Retention Rate 90%, with approximately 83% of subscription revenue noncancelable for at least 12 months. This reflects stability in service subscriptions.
Billings $110.6 million, down 0.9% year-over-year. Adjusted billings, excluding PeopleSoft associated billings, increased 3.9% on a year-over-year basis.
Gross Margin 60.4% of revenue compared to 59.1% of revenue for the prior year second quarter. On a non-GAAP basis, gross margin was 60.8% of revenue compared to 59.5% of revenue for the prior year second quarter. The improvement is due to operational leverage through improved systems, processes, and global staffing models.
Sales and Marketing Expenses 36.5% of revenue for the second quarter compared to 36.2% of revenue for the prior year second quarter. On a non-GAAP basis, sales and marketing expenses were 35.5% of revenue compared to 35.7% of revenue for the prior year second quarter.
General and Administrative Expenses 16.2% of revenue for the second quarter compared to 18.9% of revenue for the prior year second quarter. On a non-GAAP basis, G&A was 14.9% of revenue compared to 17.6% of revenue for the prior year second quarter. The decrease reflects cost optimization efforts.
Litigation Settlement Income $36.2 million recognized in Q2 2025 as part of the settlement with Oracle, along with interest income of approximately $1.7 million.
Net Income to Shareholders $30.3 million or $0.32 per diluted share compared to the prior year second quarter net income of negative $0.01 per diluted share. The increase is largely due to the litigation settlement income.
Non-GAAP Operating Income $10.9 million or 10.4% of revenue for the second quarter compared to 6.2% for the prior year second quarter. This reflects improved operational efficiency.
Adjusted EBITDA $13 million for the second quarter or 12.4% of revenue compared to the prior year second quarter of 8.5% of revenue. The increase is attributed to better cost management and operational improvements.
Cash Balance and Short-Term Investments $101.3 million compared to $134.2 million for the prior year second quarter. The decrease is due to unfavorable balance sheet movements, partially offset by favorable foreign currency impact.
Operating Cash Flow Decreased $17.8 million compared to the prior year second quarter increase of $6.2 million. The decrease is attributed to unfavorable balance sheet movements.
Deferred Revenue $262.9 million compared to $262.8 million for the prior year second quarter, showing stability in deferred revenue.
Backlog (Remaining Performance Obligation, RPO) $589.8 million as of June 30, 2025, compared to $556.7 million for the prior year second quarter, indicating growth in future revenue commitments.
PeopleSoft Revenue Approximately 6% of revenue for the 3 months ended June 30, 2025, compared to approximately 8% of revenue for the prior year second quarter. The decline is due to the planned wind-down of PeopleSoft services.
New support for VMware: Continued acceleration in sales, contributing to growing sales momentum.
Rimini Smart Path methodology: Enhanced portfolio into three service pillars: support, optimize, and innovate, enabling clients to save costs and self-fund innovation.
ServiceNow AI platform integration: Introduced groundbreaking ERP modernization solutions with AI and automation capabilities.
Geographic sales performance: Notable performance in North America with improved execution and six new client sales transactions exceeding $1 million TCV.
Global partnerships: Expanded alliances with Merlin Cyber and Dayforce, enhancing public sector and HR/payroll solutions.
Cost optimization: Reorganization charges of $722,000 to streamline operations and fund growth-driving skill sets.
Gross margin improvement: Achieved 60.4% gross margin, reflecting operational leverage and improved systems.
Litigation settlement with Oracle: Entered a settlement agreement resolving Rimini II case, including a $37.9 million repayment from Oracle.
PeopleSoft wind-down: Agreed to wind down PeopleSoft services by 2028 as part of the Oracle settlement.
Litigation with Oracle: The company has been in litigation with Oracle for over 15 years, which has resulted in significant legal expenses and operational challenges. Although a settlement has been reached for Rimini II, the company is required to wind down its PeopleSoft services by 2028, potentially impacting revenue and client retention.
PeopleSoft Service Wind-Down: The mandatory wind-down of PeopleSoft services by 2028 as part of the Oracle settlement will reduce revenue streams, as PeopleSoft currently contributes to the company's revenue. This could also lead to client attrition.
Revenue Growth Challenges: Revenue for Q2 2025 increased by only 1% year-over-year, and annualized recurring revenue decreased by 1.3%. This indicates slow growth and potential challenges in maintaining or expanding the client base.
Cash Flow Decline: Operating cash flow decreased by $17.8 million compared to the prior year, indicating potential liquidity challenges and reduced financial flexibility.
Dependency on Key Clients and Geographies: 47% of revenue comes from U.S. clients, and 53% from international clients. Any economic or geopolitical issues in these regions could adversely impact revenue.
Cost Optimization and Reorganization: The company is incurring reorganization costs to optimize its cost structure, which could temporarily impact profitability and operational efficiency.
Foreign Exchange Impact: Revenue was positively impacted by FX movements by 0.7% in Q2 2025, but such fluctuations can also negatively impact financial performance in the future.
Growing Sales Opportunities: The company anticipates continued growth in sales opportunities across its entire solution portfolio, driven by shifts in the business and technology landscape towards its enterprise software vision and strategy.
ERP System Lifespan Extension: Survey and analyst reports suggest an increasing number of organizations are expected to extend the lifespan of their current ERP systems to drive better ROI, aligning with Rimini Street's Smart Path model.
ServiceNow AI Platform Integration: The company plans to leverage the ServiceNow AI platform to deliver value quickly by layering it over existing ERP systems, enabling innovation with AI and other technology solutions.
Three Service Pillars: Rimini Street has structured its offerings into three service pillars: support, optimize, and innovate. These pillars aim to lower costs, optimize systems, and self-fund innovation, providing incremental wins within existing IT budgets.
Packaged Service Offerings: The company is introducing packaged service offerings to simplify the sales process, create a repeatable delivery model, and achieve higher gross margins.
Partnerships and Alliances: Rimini Street is investing in expanding alliances, partnerships, and channels to significantly contribute to its sales pipeline and create sales leverage beyond its global sales force.
Public Sector Initiatives: The company has partnered with Merlin Cyber to assist U.S. federal, state, and local governments in reducing enterprise software costs and self-funding innovation.
Dayforce Partnership: Rimini Street has been appointed as a Dayforce community partner to deliver Rimini Manage for Dayforce, helping organizations reduce operating costs and enhance their Dayforce systems.
Reinitiation of Guidance: The company plans to reinitiate guidance at its Analyst Day, expected to be announced in the fourth quarter of 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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