Quarterly revenue of $78.4 million, up 12.2% year over year
Quarterly gross margin of 61.2%, down from 64.2% year over year
2,159 active clients at June 30, 2020, up 13.9% year over year
LAS VEGAS, August 5, 2020 – Rimini Street, Inc. (Nasdaq: RMNI), a global provider of enterprise software products and services, the leading third-party support provider for Oracle and SAP software products and a Salesforce partner, today announced results for the second quarter ended June 30, 2020.
“For the second quarter, we continued to execute well against our strategic growth plan. We achieved record quarterly revenue within guidance, delivered quarterly gross margin above guidance, maintained a revenue retention rate over 90 percent, produced another quarter of net income, generated $17.9 million of operating cash flow and further strengthened the balance sheet with record total cash of $73.0 million at quarter end,” stated Seth A. Ravin, Rimini Street co-founder, CEO and chairman of the board. “Prior to the pandemic, we were making investments to meet increasing global demand for our expanded product and service portfolio. We have since accelerated our investments to take advantage of additional demand driven by the pandemic and global economic slowdown. Today, we issue guidance for third quarter revenue growth, raise the low-end of 2020 revenue guidance and affirm our commitment to the long-term goals of improving free cash flow and growing GAAP profitability.”
Second Quarter 2020 Financial Highlights
- Revenue was $78.4 million for the 2020 second quarter, an increase of 12.2% compared to $69.9 million for the same period last year.
- Annualized Subscription Revenue was $311 million for the 2020 second quarter, an increase of 12.0% compared to $278 million for the same period last year.
- Active Clients as of June 30, 2020 were 2,159, an increase of 13.9% compared to 1,896 Active Clients as of June 30, 2019.
- Revenue Retention Rate was 92% for both the trailing 12 months ended June 30, 2020 and for the comparable period ended June 30, 2019.
- Gross margin was 61.2% for the 2020 second quarter compared to 64.2% for the same period last year.
- Operating income was $5.1 million for the 2020 second quarter compared to $7.2 million for the same period last year.
- Non-GAAP Operating Income was $9.7 million for the 2020 second quarter compared to $8.4 million for the same period last year.
- Net income was $3.5 million for the 2020 second quarter compared to $6.1 million for the same period last year.
- Non-GAAP Net Income was $8.1 million for the 2020 second quarter compared to $7.3 million for the same period last year.
- Adjusted EBITDA for the 2020 second quarter was $9.6 million compared to $8.5 million for the same period last year.
- Basic and diluted net income (loss) per share attributable to common stockholders was a net loss per share of $(0.05) for the 2020 second quarter compared to a break even result for the same period last year.
- Employee count as of June 30, 2020 was 1,343, a year-over-year increase of 14%.
Reconciliations of the non-GAAP financial measures provided in this press release to their most directly comparable GAAP financial measures are provided in the financial tables included at the end of this press release. An explanation of these measures, why we believe they are meaningful and how they are calculated is also included under the heading “About Non-GAAP Financial Measures and Certain Key Metrics.”
Second Quarter 2020 Company Highlights
- Announced the global availability of Rimini Street Support for SAP S/4HANA, broadening the Company’s SAP service portfolio to offer more choice to clients, regardless of software release. The Company also announced that leading pharmaceutical distributor in Mexico, Nadro, switched to Rimini Street Support for its highly customized hybrid deployment of SAP S/4HANA, SAP Business Suite 7 and SAP HANA Database.
- Appointed seasoned IT veteran, Gerard Brossard, to the newly created role of executive vice president and chief operating officer responsible for the Company’s global field operations, and the global sales and success of Rimini Street’s Support and Application Management Services for Oracle and SAP.
- Expanded investment in Latin America and appointed Alejandro González to the newly created role of general manager for Mexico and Central America to service the Company’s growing client base and meet the growing demand in the region for its enterprise software support services.
- Introduced the Company’s new patent pending Rimini Street Artificial Intelligence Support Applications, which delivers a better client experience and has reduced software resolution times by 23%.
- Named in Zippia Career Experts’ Top 20 Companies to Work for in Las Vegas.
- Announced several companies globally who have switched from Oracle or SAP to Rimini Street Support including:
- Kakao, South Korea’s leading internet company;
- Proton, Malaysia’s first automobile manufacturer;
- The Iyo Bank, a major regional bank in Japan;
- Kamigumi Co., Ltd., Japan’s leading harbor transportation and logistics company;
- Supreme Electronics, Taiwan’s leading electronic components distributor; and
- Productos Chata, Mexico’s leading food manufacturer.
- Announced that Airservices Australia, Australia’s air navigation service provider, further extended its maintenance and support agreement for its mission-critical SAP platform with Rimini Street.
- Closed over 8,000 support cases across 49 countries, and delivered nearly 20,000 tax, legal and regulatory updates to clients in 38 countries, while achieving an average client satisfaction rating on the Company’s support delivery of over 4.8 out of 5.0 (where 5.0 is rated excellent).
- Presented at eight virtual CIO, CFO and IT and procurement leader events worldwide, including the Japan Association for CFOs, HMG Strategy’s CIO Virtual Summit in St. Louis, MO, and IT for Business’ “Sustaining Your ERP Investments” event in France.
- Donated to 30 charities around the world through the Rimini Street Foundation, including supporting charities via the Foundation’s Emergency Disaster Relief Fund.
2020 Revenue Guidance
The Company is currently providing third quarter 2020 revenue guidance to be in the range of $78.5 million to $80.5 million. The Company is also raising the low-end of full year revenue guidance from $310 million to $314 million and currently providing full year 2020 revenue guidance to be in the range of $314 million to $320 million.
Webcast and Conference Call Information
Rimini Street will host a conference call and webcast to discuss the second quarter 2020 results and select third quarter 2020 performance to-date commentary at 5:00 p.m. Eastern Time / 2:00 p.m. Pacific Time on August 5, 2020. A live webcast of the event will be available on Rimini Street’s Investor Relations site at https://investors.riministreet.com. Dial-in participants can access the conference call by dialing (800) 773-2954 in the U.S. and Canada and enter the code 49852238. A replay of the webcast will be available for at least 90 days following the event.
Company’s Use of Non-GAAP Financial Measures
This press release contains certain “non-GAAP financial measures.” Non-GAAP financial measures are not based on a comprehensive set of accounting rules or principles. This non-GAAP information supplements, and is not intended to represent a measure of performance in accordance with disclosures required by U.S. generally accepted accounting principles, or GAAP. Non-GAAP financial measures should be considered in addition to, and not as a substitute for or superior to, financial measures determined in accordance with GAAP. A reconciliation of GAAP to non-GAAP results is included in the financial tables included in this press release. Presented under the heading “About Non-GAAP Financial Measures and Certain Key Metrics” is a description and explanation of our non-GAAP financial measures.
RIMINI STREET, INC.
Unaudited Condensed Consolidated Balance Sheets
(In thousands, except per share amounts)
ASSETS | June 30, 2020 |
December 31, 2019 | |||||
Current assets: | |||||||
Cash and cash equivalents | $ | 72,672 | $ | 37,952 | |||
Restricted cash | 333 | 436 | |||||
Accounts receivable, net of allowance of $1,191 and $1,608, respectively | 63,475 | 111,574 | |||||
Deferred contract costs, current | 12,061 | 11,754 | |||||
Prepaid expenses and other | 12,517 | 15,205 | |||||
Total current assets | 161,058 | 176,921 | |||||
Long-term assets: | |||||||
Property and equipment, net of accumulated depreciation and amortization of $10,562 and $9,847, respectively | 3,339 | 3,667 | |||||
Operating lease right-of-use assets | 17,403 | — | |||||
Deferred contract costs, noncurrent | 17,323 | 16,295 | |||||
Deposits and other | 1,521 | 3,089 | |||||
Deferred income taxes, net | 1,197 | 1,248 | |||||
Total assets | $ | 201,841 | $ | 201,220 | |||
LIABILITIES, REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS’ DEFICIT | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 4,646 | $ | 2,303 | |||
Accrued compensation, benefits and commissions | 28,913 | 27,918 | |||||
Other accrued liabilities | 19,207 | 23,347 | |||||
Operating lease liabilities, current | 4,165 | — | |||||
Deferred revenue, current | 195,603 | 205,771 | |||||
Total current liabilities | 252,534 | 259,339 | |||||
Long-term liabilities: | |||||||
Deferred revenue, noncurrent | 22,903 | 29,727 | |||||
Operating lease liabilities, noncurrent | 14,125 | — | |||||
Accrued PIK dividends payable | 1,175 | 1,156 | |||||
Other long-term liabilities | 865 | 2,275 | |||||
Total liabilities | 291,602 | 292,497 | |||||
Redeemable Series A Preferred Stock: | |||||||
Authorized 180 shares; issued and outstanding 158 shares and 155 as of June 30, 2020 and December 31, 2019, respectively. Liquidation preference of $157,554, net of discount of $20,801 and $155,231, net of discount of $23,915, as of June 30, 2020 and December 31, 2019, respectively | 136,753 | 131,316 | |||||
Stockholders’ Deficit: | |||||||
Preferred Stock, $0.0001 par value per share. Authorized 99,820 shares (excluding
180 shares of Series A Preferred Stock); no other series has been designated |
— | — | |||||
Common Stock, $0.0001 par value. Authorized 1,000,000 shares; issued and outstanding 68,530 and 67,503 shares as of June 30, 2020 and December 31, 2019, respectively | 7 | 7 | |||||
Additional paid-in capital | 83,959 | 93,484 | |||||
Accumulated other comprehensive loss | (1,840) | (1,429) | |||||
Accumulated deficit | (308,640) | (314,655) | |||||
Total stockholders’ deficit | (226,514) | (222,593) | |||||
Total liabilities, redeemable preferred stock and stockholders’ deficit | $ | 201,841 | $ | 201,220 |
RIMINI STREET, INC.
Unaudited Condensed Consolidated Statements of Operations
(In thousands, except per share amounts)
Three Months Ended | Six Months Ended | ||||||||||||||
June 30, | June 30, | ||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||
Revenue | $ | 78,402 | $ | 69,869 | $ | 156,434 | $ | 135,742 | |||||||
Cost of revenue | 30,437 | 25,034 | 60,636 | 48,871 | |||||||||||
Gross profit | 47,965 | 44,835 | 95,798 | 86,871 | |||||||||||
Operating expenses: | |||||||||||||||
Sales and marketing | 26,836 | 26,899 | 55,248 | 50,854 | |||||||||||
General and administrative | 13,133 | 10,630 | 25,134 | 23,618 | |||||||||||
Litigation costs and related recoveries: | |||||||||||||||
Professional fees and other costs of litigation | 2,722 | 444 | 5,474 | 2,485 | |||||||||||
Litigation appeal refunds | — | — | — | (12,775) | |||||||||||
Insurance costs and recoveries, net | 141 | (300) | 1,062 | 4,339 | |||||||||||
Litigation costs and related recoveries, net | 2,863 | 144 | 6,536 | (5,951) | |||||||||||
Total operating expenses | 42,832 | 37,673 | 86,918 | 68,521 | |||||||||||
Operating income | 5,133 | 7,162 | 8,880 | 18,350 | |||||||||||
Non-operating income and (expenses): | |||||||||||||||
Interest expense | (12) | (116) | (25) | (348) | |||||||||||
Other expenses, net | (567) | (343) | (785) | (300) | |||||||||||
Income before income taxes | 4,554 | 6,703 | 8,070 | 17,702 | |||||||||||
Income tax expense | (1,084) | (621) | (2,055) | (1,326) | |||||||||||
Net income | $ | 3,470 | $ | 6,082 | $ | 6,015 | $ | 16,376 | |||||||
Net income (loss) attributable to common stockholders | $ | (3,217) | $ | (238) | $ | (7,302) | $ | 3,285 | |||||||
Net income (loss) per share attributable to common stockholders: | |||||||||||||||
Basic | $ | (0.05) | $ | — | $ | (0.11) | $ | 0.05 | |||||||
Diluted | $ | (0.05) | $ | — | $ | (0.11) | $ | 0.05 | |||||||
Weighted average number of shares of Common Stock outstanding: | |||||||||||||||
Basic | 68,290 | 65,535 | 68,076 | 65,080 | |||||||||||
Diluted | 68,290 | 65,535 | 68,076 | 69,202 |
RIMINI STREET, INC.
GAAP to Non-GAAP Reconciliations
(In thousands)
Three Months Ended | Six Months Ended | ||||||||||||||
June 30, | June 30, | ||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||
Non-GAAP operating income reconciliation: | |||||||||||||||
Operating income | $ | 5,133 | $ | 7,162 | $ | 8,880 | $ | 18,350 | |||||||
Non-GAAP adjustments: | |||||||||||||||
Litigation costs and related recoveries, net | 2,863 | 144 | 6,536 | (5,951) | |||||||||||
Stock-based compensation expense | 1,726 | 1,052 | 3,236 | 2,208 | |||||||||||
Non-GAAP operating income | $ | 9,722 | $ | 8,358 | $ | 18,652 | $ | 14,607 | |||||||
Non-GAAP net income reconciliation: | |||||||||||||||
Net income | $ | 3,470 | $ | 6,082 | $ | 6,015 | $ | 16,376 | |||||||
Non-GAAP adjustments: | |||||||||||||||
Litigation costs and related recoveries, net | 2,863 | 144 | 6,536 | (5,951) | |||||||||||
Post-judgment interest in litigation awards | — | — | — | (212) | |||||||||||
Stock-based compensation expense | 1,726 | 1,052 | 3,236 | 2,208 | |||||||||||
Non-GAAP net income | $ | 8,059 | $ | 7,278 | $ | 15,787 | $ | 12,421 | |||||||
Non-GAAP Adjusted EBITDA reconciliation: | |||||||||||||||
Net income | $ | 3,470 | $ | 6,082 | $ | 6,015 | $ | 16,376 | |||||||
Non-GAAP adjustments: | |||||||||||||||
Interest expense | 12 | 116 | 25 | 348 | |||||||||||
Income tax expense | 1,084 | 621 | 2,055 | 1,326 | |||||||||||
Depreciation and amortization expense | 438 | 474 | 886 | 966 | |||||||||||
EBITDA | 5,004 | 7,293 | 8,981 | 19,016 | |||||||||||
Non-GAAP adjustments: | |||||||||||||||
Litigation costs and related recoveries, net | 2,863 | 144 | 6,536 | (5,951) | |||||||||||
Post-judgment interest in litigation awards | — | — | — | (212) | |||||||||||
Stock-based compensation expense | 1,726 | 1,052 | 3,236 | 2,208 | |||||||||||
Adjusted EBITDA | $ | 9,593 | $ | 8,489 | $ | 18,753 | $ | 15,061 |
About Non-GAAP Financial Measures and Certain Key Metrics
To provide investors and others with additional information regarding Rimini Street’s results, we have disclosed the following non-GAAP financial measures and certain key metrics. We have described below Active Clients, Annualized Subscription Revenue and Revenue Retention Rate, each of which is a key operational metric for our business. In addition, we have disclosed the following non-GAAP financial measures: non-GAAP operating income, non-GAAP net income, EBITDA, and adjusted EBITDA. Rimini Street has provided in the tables above a reconciliation of each non-GAAP financial measure used in this earnings release to the most directly comparable GAAP financial measure. Due to a valuation allowance for our deferred tax assets, there were no tax effects associated with any of our non-GAAP adjustments. These non-GAAP financial measures are also described below.
The primary purpose of using non-GAAP measures is to provide supplemental information that management believes may prove useful to investors and to enable investors to evaluate our results in the same way management does. We also present the non-GAAP financial measures because we believe they assist investors in comparing our performance across reporting periods on a consistent basis, as well as comparing our results against the results of other companies, by excluding items that we do not believe are indicative of our core operating performance. Specifically, management uses these non-GAAP measures as measures of operating performance; to prepare our annual operating budget; to allocate resources to enhance the financial performance of our business; to evaluate the effectiveness of our business strategies; to provide consistency and comparability with past financial performance; to facilitate a comparison of our results with those of other companies, many of which use similar non-GAAP financial measures to supplement their GAAP results; and in communications with our board of directors concerning our financial performance. Investors should be aware however, that not all companies define these non-GAAP measures consistently.
Active Client is a distinct entity that purchases our services to support a specific product, including a company, an educational or government institution, or a business unit of a company. For example, we count as two separate active clients when support for two different products is being provided to the same entity. We believe that our ability to expand our active clients is an indicator of the growth of our business, the success of our sales and marketing activities, and the value that our services bring to our clients.
Annualized Subscription Revenue is the amount of subscription revenue recognized during a fiscal quarter and multiplied by four. This gives us an indication of the revenue that can be earned in the following 12-month period from our existing client base assuming no cancellations or price changes occur during that period. Subscription revenue excludes any non-recurring revenue, which has been insignificant to date.
Revenue Retention Rate is the actual subscription revenue (dollar-based) recognized over a 12-month period from customers that were clients on the day prior to the start of such 12-month period, divided by our Annualized Subscription Revenue as of the day prior to the start of the 12-month period.
Non-GAAP Operating Income is operating income adjusted to exclude: litigation costs and related recoveries, net, and stock-based compensation expense. The exclusions are discussed in further detail below.
Non-GAAP Net Income is net income adjusted to exclude: litigation costs and related recoveries, net, post-judgment interest in litigation awards, and stock-based compensation expense. These exclusions are discussed in further detail below.
Specifically, management is excluding the following items from its non-GAAP financial measures, as applicable, for the periods presented:
Litigation Costs and Related Recoveries, Net: Litigation costs and the associated insurance and appeal recoveries relate to outside costs of litigation activities. These costs and recoveries reflect the ongoing litigation we are involved with, and do not relate to the day-to-day operations or our core business of serving our clients.
Stock-Based Compensation Expense: Our compensation strategy includes the use of stock-based compensation to attract and retain employees. This strategy is principally aimed at aligning the employee interests with those of our stockholders and to achieve long-term employee retention, rather than to motivate or reward operational performance for any particular period. As a result, stock-based compensation expense varies for reasons that are generally unrelated to operational decisions and performance in any particular period.
Post-judgment interest in litigation awards: Post-judgment interest resulted from our appeals of ongoing litigation and does not relate to the day-to-day operations or our core business of serving our clients.
EBITDA is net income adjusted to exclude: interest expense, income tax expense, and depreciation and amortization expense.
Adjusted EBITDA is EBITDA adjusted to exclude: litigation costs and related recoveries, net, post-judgment interest in litigation awards, and stock-based compensation expense, as discussed above.