Rimini Street(RMNI)2024-05-04 14:29Financial Data and Key Metrics Changes - Annualized recurring revenue was $415.8 million for Q1 2024, a year-over-year increase of 1.8% [14] - Revenue for Q1 2024 was $106.7 million, a year-over-year increase of 1.2% [66] - Billings for Q1 2024 were $74.1 million, a decrease of 20% compared to the prior year [14] - Gross margin was 59.8% of revenue for Q1 2024, down from 62.7% in the prior year [14] - Net income attributable to shareholders for Q1 2024 was $1.3 million or $0.01 per diluted share, compared to $0.06 per diluted share in the prior year [21] Business Line Data and Key Metrics Changes - Revenue retention rate for service subscriptions was 89%, with more than 76% of subscription revenue non-cancelable for at least 12 months [14] - Sales and marketing expenses as a percentage of revenue were 36.7% for Q1 2024, compared to 32.7% in the prior year [20] - Non-GAAP operating margin was 8.3% of revenue for Q1 2024, down from 14.6% in the prior year [21] Market Data and Key Metrics Changes - Clients within the United States represented 50.4% of total revenue, while international clients represented 49.6% for Q1 2024 [66] - The total revenue measures on a constant currency basis were negatively impacted by 0.8% due to FX movements [66] Company Strategy and Development Direction - The company is focusing on hiring, training, and building out new solution sales capabilities globally [58] - There is a strong demand for a reliable partner for mission-critical transaction system services, which could significantly reduce IT spending [60] - The company is in the process of refocusing on its core product offerings after distractions from new product launches [29] Management's Comments on Operating Environment and Future Outlook - Management noted that the demand market remains strong despite challenges in new client sales [29] - The company is continuing to suspend guidance on future financial results until there is more clarity around litigation impacts [70] - Management expressed confidence in taking the right actions to accelerate growth and enhance shareholder value [65] Other Important Information - The company ended Q1 2024 with a cash balance of $129 million, down from $135 million in the prior year [17] - Deferred revenue as of March 31, 2024, was $254.3 million, compared to $287.4 million from the prior year [17] - The company refinanced its outstanding term loan with a new five-year senior secured credit facility [22] Q&A Session Summary Question: What are the reasons for the decline in retention rate and customer count growth? - Management indicated that the retention rate decline was influenced by larger deals rotating out and that the customer count growth was impacted by a focus on cross-selling existing services rather than acquiring new logos [84][76] Question: How is the initial reception for Rimini Custom? - The launch has been complex, but there is strong interest from customers looking for support solutions, particularly in light of recent market changes [39] Question: What are the key drivers for customer acquisition and churn? - The company is seeing increased awareness of its offerings among CFOs, which is driving demand, while churn is influenced by generational changes and shifts in IT procurement [41][100] Question: Has litigation impacted deal closings or retention? - Management acknowledged that there may be some impact on sales due to ongoing litigation with Oracle, but specific data to quantify this is not available [105] Question: What are the expectations for gross margins moving forward? - Management expects continued pressure on gross margins as the company scales to meet new client engagements, but is also working to improve efficiencies [67][19]