Rimini Street(RMNI) - 2024 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Revenue for Q2 2024 was $103.1 million, a year-over-year decrease of 3.1% [13] - Annualized recurring revenue was $399.4 million, a year-over-year decrease of 2.6% [13] - Billings for Q2 increased by 6.9% year-over-year to $111.6 million [13][8] - Gross margin was 59.1% of revenue, down from 63.0% in the prior year [14] - Net loss attributable to shareholders was $1.1 million, or negative $0.01 per diluted share, compared to net income of $0.05 per diluted share in the prior year [18] Business Line Data and Key Metrics Changes - The company decided to wind down its offering of services for Oracle PeopleSoft products, which accounted for approximately $36.1 million or 8% of fiscal year 2023 revenue [19][9] - The average client satisfaction score for software support was 4.9 out of 5 [5] Market Data and Key Metrics Changes - Clients within the United States represented 50% of total revenue, while international clients also represented 50% [13] - The revenue retention rate for service subscriptions was 88%, with approximately 74% of subscription revenue being non-cancelable for at least 12 months [13] Company Strategy and Development Direction - The company is focusing on reducing costs and streamlining operations, targeting $35 million in aggregate savings [8][15] - There is a strong demand for third-party support services, with the company expanding its service offerings to include VMware products [6][7] - The company is undergoing a reorganization plan to reduce net operating costs and is hiring for key positions to support growth [15][31] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in taking the right actions to return to growth and profitability, despite mixed results in the quarter [12] - The company is suspending guidance on future financial results until there is more clarity regarding ongoing litigation with Oracle [19] Other Important Information - The company is experiencing inflationary pressures and high costs for skilled labor but continues to attract and retain key talent [16] - Deferred revenue as of June 30, 2024, was $262.8 million, down from $285.3 million in the prior year [19] Q&A Session Summary Question: What was behind the decision to exit the PeopleSoft Support business? - The decision was based on financial and legal factors, as PeopleSoft now represents only 8% of the business, down from being the majority [21] Question: Are there any thoughts on changes in legal expenses going forward related to PeopleSoft? - Management indicated that reduced legal and compliance costs could be expected as the focus shifts away from PeopleSoft [22][23] Question: What factors contributed to the drop in the retention rate? - The drop was attributed to the completion of large contracts and a shift in revenue sources [24][25] Question: Can you reconcile strong demand with the bookings leading to decelerated growth? - Management noted that while billings increased, revenue was impacted by the completion of larger contracts [26][27] Question: Is the restructuring related to the PeopleSoft business? - The restructuring is aimed at streamlining operations and reducing costs, with a focus on profit [30][31] Question: How much of the revenue decline is due to contracts that ended? - Approximately $20 million to $25 million of the revenue decline is attributed to a handful of larger contracts that rolled off [37]