RMNI - Earnings call transcript Q2 2018

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Operator

Good day, ladies and gentlemen, and welcome to the Rimini Street Second Quarter 2018 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, there will be a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to turn the conference over to Dean Pohl, Director of Investor Relations. begin. may you Sir,

Dean Pohl

I’d XXXX welcome Earnings Shannon. Street’s to Second Quarter Conference like you, everyone to Rimini Thank Call.

issued is the our On release. is the can of Today, be Sabol, A our to financial statements release, GAAP the release Seth today quarter we CFO. the tables reconciliation Ravin, our An found earnings of call CEO; and heading, Measures. which non-GAAP explanation with following press our second me Non-GAAP website. XXXX on financial in measures has been also these the under measures this press in press included provided Financial in Tom

may include outlook. materially results differ actual statements We a today’s for are a results made today. risks statements Form from of may As our that most you that reflect XXXX our for to of our forward-looking review These stock discussion cause encourage forward-looking our filings that current discussion recent will including to SEC subject to reminder, or the uncertainties statements risks price. quarter second XX-Q and affect

begin prepared questions, we’ll like over to with the taking remarks. Seth. I’d With to Before turn that, call

Seth Ravin

Street model. for Rimini award-winning software support provider and products SAP Today, through us Dean, the software in and XXXX you, software thank you, annualized value-driven, enterprise by for review $XXX billion Rimini everyone, the quarter market products. developing redefine Thank Street’s delivering Rimini subscription and and innovative, XXXX support second and financial services, joining primarily founded and We disrupt results. leading to Street Oracle an support is to software enterprise independent

for services support Microsoft, IBM, provide products. and also salesforce.com We

that helps labor, global spend. significant the address more Organizations useful $X offerings current drives support we Street their we’ve more with software To clients annual advantage. billion money, of in their growth substantial software maximize innovation date, the services our support and billion cost focus and life to estimate delivered their of than This clients time enterprise ROI resources Rimini approximately billion. of mission-critical enterprise allows assets clients on competitive at systems. invest Our premium $XXX that and $XX software savings. saved

Global XXXX quarter revenue sector XX% year million, year retention our over broad X,XXX and the clients recognized Annualized remained and Revenue XX% with of $XXX $XX.X revenue and over the revenue over the of XXth rate of results of revenue non-subscription our second industries the Second – subscription above year. up quarter is revenue active quarter, year majority also XXX, quarter. Fortune consecutive which generated year for XXX, of achieved mix, across Fortune geographies, million, year midmarket, up up we We quarter For we $X.X ended million growth. in XX% range subscriptions, a public was other XX%. and

launched we services quarter, Rimini and opportunities. the new products that During expanded market Street’s future

and service include Mobility, products recently cloud Recent launched for and well include Analytics, support services France. Advanced Security sales geographic New Street Rimini cloud Solutions. Database expansions as as salesforce and

allows place leadership, delivered countries, Street more also X.X Street where awards Rimini Our support client industry the satisfaction to was revenue Rimini removes a growth – XX%. was area. facility and employees, our and we the with Also service, million rated sales outstanding voted an recognized over Index transaction client increase XXXX June placement support and X,XXX company’s million Completion of expected during the of approximately eliminating maintained the the spend global in second next quarter, excellent. XXXX. order three on to is out the many drive recently-completed is investments on refinancing sales, added than Russell work X.X our constraints debt-related and year-over-year X.X as average the ended team private delivery, and years. with investment $XX of XX for revenue. of across to credit reduce approximately by by to gross $XXX a to service and refinancing X,XXX covenants equity delivery closed of a of delivery Initiatives in us future marketing profit We Bay the believe cost second our marketing, in quarter increase cases honored global XX.X% service rating top with of and the in

existing in our we and and new products began to to to XXXX, marketing services the increased as of first During increasing clients well investment sales additional support sales half clients. sales of our as

repaid previous respectively. and revenue with to of XXXX, through up further in of with growth revenue XX%, marketing for half July expect sales This our second respectively, investment increase of against annual as revenue and XX% XX, XX% marketing, XX% of refinanced XX% the to Now, XXXX. XXXX credit facility to and compares and spend sales the XXXX, and we corresponding and

expand plan new Litigation would like market opportunity continue that Oracle. and operations developments review markets. I products geographic new to also recent our some our our open in launching with to – litigation to continue services We expanding now developments and ongoing

in an filed refund the from made appeal into a May the after Appeals the previous Oracle referred as Oracle. calls, Oracle on Oracle that the Rimini XXXX, to that ongoing Registry, Rimini XXXX. Rimini sometime received Two. $XX.X track that Rimini ruled other to is a In summary, the XXXX with case proceed On in are respect Court trial is during XXXX, respect Oracle paid impacted third third-party pretrial would pursuing have claim, of and That and turn XXXX, the of additional as provides all, second is other Rimini to the growth XX, quarter by XXXX, concluded of to appeal court Street Rimini Street that Rimini Street’s On of and Therefore, an and we yet Circuit or XXXX, for XXXX, on also Rimini as refunded or damages U.S. One addition in client of Rimini later. date in competition we deposited was Street call Rimini illegal million the XXXX Rimini hear believe $XX.X alone One, in the another We lead expect reaccelerating May U.S. seeking is two until in against reversing favorably Trial XXXX earning XXXX behavior to with for from of discovery to our pretrial Based if fiscal Tom for is Street’s addition In $XX in now its Oracle Rimini appropriate our is as of sales agree in let on revenue-generating judgment sales to and Street we action, to In jurisdictions. heard. escrow our Oracle and in the of Street Federal and discovery distributed account, million. nearly record certain refund. lawful for the million that currently Rimini , not in litigation In when quarter expert have has in currently aggressively our over estimated And $XX.X attorneys’ causes XXXX litigation quarter been have on to in Ninth may previously Oracle’s to already million Street support refund and judgment new we With a filed not Oracle, Street. XXXX, expected the different against performance, Oracle’s an rule declaring to million stage verdict, Rimini $XX.X attorneys’ vacated. $XX.X improved X, held there damages fees had decision I in Oracle. a the the leverage for but for that on XXXX Supreme nontaxable cost will renewed we January a Oracle claim materially in witness referred is Supreme petition expect increased the the that seeking filed from Rimini fees. paid we seeking stage still XX-year focus Street U.S. be with since Court litigation of beyond. decision not first discussed Court Sabol, in has following and motion CFO. to to the phase. was assessed matters Court remains to Two As we with One. of is and billings and investments Oracle, the our awards continue to vacating do operating to growth. on capacity, million

Tom Sabol

Seth. Thanks,

Let our results. XXXX me of summary QX with begin fiscal a

high strong $XXX the up increase year an was over of States. Seth was of outside a the million, year noted, above for revenue subscription second as million, of represents As quarter year. year. result $XX.X revenue was revenue over of XX% Annualized our guidance The the which XX% United growth end

service revenue the area Clients be year. our in will company. reflecting of award with for revenue year and subscription-based, $X.X second is service program. United in a training XXXX, non-subscription we This of the Although benefit recognized has been associated conference growth of of primarily revenue. approximately growth our expected of to quarter quarter global outside total costs quarter XX.X% of of margin from the new biannual constituted and the second down XX-year XX% States the XXXX, million Gross XX% continue second continued an second during was XX.X% employee a investment the delivery and in quarter, higher over

be to range expect services, in XX%, increased Sales from percentage as with fiscal of full the to in of expect expenses launch new XXXX account additional our currently margin XX.X% XXXX. QX into XX%, and currently we XX% a up gross marketing XXXX coverage. in we products, geographic will XX.X% associated XX.X% the costs of gross investment the and and all revenue be in of year of quarter, to third quarter While taking margin around

XX% litigation XXXX, from Seth QX expenses, to costs, in was revenue for of of noted all earlier, sales administrative currently in and outside XX.X% we XX.X% excludes General expect XXXX. marketing XXXX. spend of and on to which of up As QX of down revenue

expect to we to forward, leverage be in Going of model. our continue source G&A a

as a result million fluctuate costs XXXX. outside was litigation of over and as our the infrastructure in on few However, which second each G&A percentage is expense service not should Litigation additional may increase of higher company, incur linear quarter public and revenue $X.X of quarter we term. accounting a litigation professional a will near It quarters, a that spend next in activities. be the noted based the can being

million $X generally related also totaled paid $XX.X specific costs, the compared of results million XXXX. $X XXXX net includes million approximately of interest our in and The carrying a significant value expenses include million of The the million XXXX. to $X.X $X.X of loss insurance the Street quarter. noncash. of warrants million the costs same the which the debt per $X.X of fair QX last QX income change embedded for to of approximately $XX.X litigation. quarter ago. million in debt quarter in period Non-GAAP to expected of and $X.X settlement activities of be received due in is the compared quarter, a same compared in expenses A QX of due range settlement expense primarily $X.X a and million in QX other million our in year. Other will fees to million a amortization between we the $X.X to $X.X like XXXX. receipt of second of acceleration million million of however, costs operating in reimbursement were quarter derivatives GAAP in as legal whole in was change million QX a in believe loss for in of operating the of second $X.X XXXX, litigation service $X was to value April The was the Rimini are and proceeds $XX.X million income that of of of year the by discounts in portion XXXX and the insurance to Interest to operating While quarter QX Two to $X the period in the costs court Rimini loss million make in costs are corresponding XXXX. costs net issuance of write-off income decrease these XXXX, resulting redeemable a million $X payment difference quarter compared offset

period of interest the second net to $X.XX for of other to quarter include XXXX, quarter net was million share in operations quarter XXXX XXXX. deferred over for we total of of per to the in in was cash in insurance in discussed addition, a of QX both and paid $XX.X million debt operating million Deferred payments the fees of a $XX.X period quarter costs QX of financing flow loss which in the our flow sheet. QX XXXX. million quarter million in increase of was prior million the cash $XX.X and the In $X.X compared million of million the compared million in second XX% year, foreign the to on in XXXX, XXXX compared loss $XX.X losses compared loss of was The credit of of facility net the from for QX XXXX on share of of million whole Cash to included quarter second XXXX of in same related XXXX in of of XXXX. $XXX,XXX second of XXXX, $XXX.X had balance of cash the unsuccessful $XX.X wrote to million net $X.XX second to earlier. in loss ended prior-year financing which EBITDA period Adjusted to quarter million compared interest million early $X.X XXXX of exchange $X.X settlement second to million revenue $XXX,XXX. off prepayments. $XXX.X the a XXXX. make compared of XXXX loss We cash million QX senior compared was of totaled paid with QX Net $X.X of prior Non-GAAP the net QX $XX.X and compared second the $XXX.X loss in a quarter an We of $X.X per year. same the $XX.X

XXXX, million preferred a stock share The date three per or converts PIK first into provision the closing own common stock This prior facility to Now credit quarterly terminated the $XXX.X credit obligations make refinancing preferred we XX, of in costs, three-year from to our of After as with date. our our interest transaction including paying full during stock the A payment July quarterly on the or refinancing, recently-announced stock. credit through dividends convertible our dividends approximately X%. whole company into refinancing. XX% to of and cash $X.X make of accomplished sale principal, of at will and of by fees The under of preferred the and the shares payment XXXX, facility. kind stock in years. This issuance a July series the accrue whole is stock proceeds utilized and all $XX and from received cash not converted respect under complete that million the company at from extended facility, common at rate repaid and the includes disclosed million $XXX approximately X.X expenses, our its common million and was pay before preferred maturity will assuming the redeemed June XXXX, stock

and Seth, financial As our in ability refinancing limited by the covenants operating noted invest that growth. to eliminates

quarter a Form we filing to XX, As of $XX the extinguishment release of in million to XXXX. of refer a second and detailed million XX-Q debt the result facility, noncash payoff the press our approximately July more X-K expect our third credit Please $XX of information. and for quarter XXXX, charge to take

expect in guidance, of the go-forward with third million $XX million Now of to be XXXX. approximately respect range quarter the we in to revenue $XX to

XXXX we’ll with million. questions. company $XXX is operator, that, range updating approximately guidance now And the in take revenue the be to million year addition, to In $XXX of full

Operator

comes question Wood Thank you. Instructions] Derrick from Cowen. with first [Operator Your

Your open. is line

Derrick Wood

on gentlemen. the sharp which QX Good our reversal down if your from look I be for QX start for to guidance, lowered for of year. half. the versus midpoint the the And wanted actually in a pretty guidance, was to That’s afternoon, I QX down and from expectations at be to QX. back calls it

us changed the you what’s causing what’s walk in second outlook could through the contraction your half? So in and

Seth Ravin

look quarter it’s we And some of quarter that that third second been had quarter revenue earlier think the I quarter, million a the the you to Derrick, look had over quarter you nonrecurring Seth. take you when that recognized from was at for know withheld. Sure, in the deals $X.X

you remove $X.X from that quarter course that you you time. well? see you Tom, million growth it, if the do So, that further one you remove of as the – get get think when I consecutive expectation, over in to comment you’ll want could from quarter

Tom Sabol

and place delayed we the to. details wanted the was make had in sales to able to down we numbers back reason it to of but restrictions, needed them as covenant it get the able be, revenue we and was the to just would the in so of because group drive the thought the half on into have just taking specifics, marketing than and thought of the attain. Derrick, have in the of the Yes, quickly more investments to as and Seth we capacity don’t were where some And we marketing, to get so we because looking can going be originally weren’t that, for we in longer sales that refinancing to

we put that wanted even hiring refinancing that the to got some we earlier restrictions we would that’s is So and have didn’t closed the would early it the, that because the of the and be off refinancing really thought as in until put really you and to really close place. XQ X, in not know do have here closing the covenant stuff that’s reason had the of in as year

regards half reason the So of that’s the year. guidance back for in the the with to change

Derrick Wood

and seeing you seeing read out Seth, had in productivity? I know what landscape with could the you an to you’re early what ramp uptick of Did heads the kind in comment on guess, in sales – Okay. competitive QX, of you’re I to respect

Seth Ravin

remember prior XX. fact, sales calls, reps. We may finished June XX, finished in you from as we at Sure, XXXX, with XX XXXX

quota record So X growth quote seeing head carrying million million I a there, heads you when doing hasn’t heads point you’re What That though seeing particular good that capacity. a on about that about talk Derrick, XX% fully to changed XX look you know added capacity, $XX in we at capacity. fierce. you’re years. months, when you you’re performance talking and us any $X after quota-carrying when in months is XX pretty is sales think Competition our – of the are these productive carrying

running. from standpoint, execution we have very just heads. those calls to simply talked to about a X-month, because the we’re So business. doing We have well. get We prior takes to don’t more in up an capacity the capacity full and able these It XX-month, we the lot weren’t don’t as just reps really do add time

the up lot in closed So want and adds we plan. translates new closed deal half half able only add million capacity, sales because sales first added XX all of the longer weren’t That to the inside in all when in year, heads engineers. have the a the do capacity them, that know you than the you the that this heads to to end our $XX refi said about before, have finish by in July. we it XX up to support additional beat of of – Tom year. on as of the be said, we to additional as again hires that, quota-carrying we get It hired And reps, took year to expected to the back

in focus can of now to reacceleration appropriately the the place, billings. budget in none on with we So covenants of redirect

Derrick Wood

year? the XX heads the still a for the target end of Is

Seth Ravin

fierce and go this as pretty best aware, out it I to is well everybody’s economy, Yes, in and find talent. think it’s

not You get is know want. been kind finding end we’ve we it, easy reps of the but it to top

You level in draws make we for player A plan. added comp year the We know have earlier we raised sure to compensation new hirers. an

the months in go to So our will what well done we’ve getting think in tell them any XX of that filled to company on we’ve for get half A to this and is without are mean to the months, up not out seen easy to But the heads tech to we then first we but we’ve well in day this we’re I for it going technology constraint, any accelerate the have talent. you, I there. budget them the them age and X attract as done process. is hire trying relief year, company players, best lot get recruit that as really being challenges under board, in in And a us bigger very out and out represented them always now be and as able other of there. one train

Derrick Wood

it nice was I a from a small Okay, was the mix on regarding how does good deals that comment think versus quarter? of for the new And of Did mix of the last second uptick QX. the customers, deals? this large deals. kind Any half? change pipeline quarter look large

Seth Ravin

same as I mix. much the think pretty we’ve QX, the that same

close on get at in of focused to in coming first more we know of get is renewal, lot likely on there back second they the We when that people of half. deals. say We’ve year as our other you maintenance the and We know quarter. schedule big, is medium, in a that and businesses, focus but multimillion we that’s I well. alternatives. third A nature have on would in in I the dollar as the steady of seen is they’re the ASP to XXX, some were looking for early, the were deals range. we The strong done were really to deals going small their in have is staying in certainly hoping pipeline when think and good time mix quarter mixed pull XXXK would the in strong. number – of so many fourth half the a paperwork You

ahead for continue for And a is business this to that one to see So is top people on lot which we early, do area priority think pull in the we we’d the at this business when becomes of we the case you I always months earlier, and how saw continual had and pull they’re paperwork we that QX and work timeframe. something has months one focus get it them? of great of a challenges just deals in months schedule to in couldn’t manage more we were months just get and that and that the and do done on deals but more in a hoping with QX and

Derrick Wood

Okay. was $X.X And back this, in QX? expected And repeated then I not What go want related to? that to guess to to actually I million that’s non-recurring. be

Seth Ravin

Yes, you subscription know are business. recurring have primarily we and almost XXX% been revenue

we’ve in plan we and there in want where calls, related been projects third the was folks consulting of are around telling is tasks us certain projects. and are We cases were to do tuck where the some to adjacent that’s do non-recurring, work enabling that quarter this and and, these revenues nip going is additional last subscription be revenue the those projects customers that’s to one have completed to revenue recognizable. specific as do that And and projects that they therefore,

Derrick Wood

half. I commented billings the second on which deceleration in on bit you a in half, the is got And revenue a but outlook you’ve Okay. your in second guess Seth of focused reacceleration

know, color don’t is thoughts give any more there you want on I to on So, Tom, billings?

Tom Sabol

early course, yet to nine XXXX in from needed. added capacity X months of where to reduction quota-carrying there heads as XX the to here we’ve while because and they’re of XXXX were that people, Derrick, So, not is, in indicated, ramped is the months we Seth

revenue And translate is, improving people, model where increase will we’ve That XX that there We we that before billings, So, as and just billings the as were the the primarily for we doing reaccelerates. We a forward. on and out is were our almost would would business there. billings believe there. have revenue, expect that first that’s growth marketing of revenue before ramp see doing that standpoint what our from and in because subscription sales into would been course, this we’re in going we indicated, marketing, Seth the ultimately number the ramp is is again pipeline we out exclusively. first years. is view And revenue, sales the investing of the sales the focused growth constrained

Derrick Wood

Okay. financing? what preferred the sheet is And Tom, balance look like any – following the

Tom Sabol

$X.X cash on so our ended Yes, up own using the we about refinancing. of million

the So, didn’t balance add cash any we sheet. to

of facility proceeds the as a little off We to utilized you sheet. less related utilized know $X All as had put own the up, the from pay balance transaction were well than to our million expenses. bit

cash So the really only side on the of impact business. that’s the

good that program one the new preferred stock there restrictive, issue, won’t that forward mezzanine equity. course, other of the common as hundred the couple sheet with than in the shares shares credit with And is course of Of equity, treated a as so of million standpoint noted, the with they stock, will as no of the – thousand be card X.X news be of equity, none from balance cash did permanent going that’s part deal. The will restricted. have a be we be some facility. But cash will restricted we

when be number common shares then We shares above preferred go basis will, by million ultimately we’ll the that $XX entries. allocate the able that shares, proceeds be $XXX going about all the will be to added the in the a shares stock. proceeds of dividend And between shares And were approximately the will some up of common. for will through diluted X.X million the the will on breakdown preferred what And issued. share. number to were the XX forward the The addition fully we common and there is, allocated fully the million accretion on work a for stock of a that to is as talk diluted accounting actual basis,

Derrick Wood

question yes. Yes, Last question curious initial be force new offering? the for okay. hear what reception to the – or Seth, Last reaction sales been to has

Seth Ravin

half be when in of you be support our we global with revenue to piloting wouldn’t we to job walk, it well it before getting proceeding successful the honing are accretive XXXX the expect both sale We we client that back path. would well pitch, those coming this was our along positioned the that run as into in references training the on all service as the launched And going I basis. have of that effort in honing one think a and with year – of from we But said customers that be sales to XXXX. where place,

we’ve hired know additional around In fact, you staff it.

in see gross that reduction by for you to or we’re do. You heads, the services the reason products X%, enough fact hiring because at slight still know part we X% the margin, given when sensitive that of we’re the hiring Derrick, we going size, of the kind and and add be new that you just of are

just absorb big affecting enough that margin could where hiring it yet We’re not that much. you to without really

new that is So, I new catching consistent XXXX, with doing in of capacity. products, and said XXXX, from everything we we the services, think everything and with said up investments had we’re putting we’re rebuilding do build and we marketing, place hiring the the to sales to

adding sales, drive countries. new of So it’s capacity of delivery, capacity service to

of invested All year. things in being these are this

Tom right. as as lagging next line bookings we’ll before and them start we’ll see in teams the sales to see see we’ll revenue, see first accelerated results year, to come the fruition the on to because long was start mature, uptick You’ll saying, the come

very know in yet and And large building through all it’s anticipation a coming next year. a you up still XXXX. expect So, catch will next think I year I – be of

Derrick Wood

Okay guys. helpful. that’s Thanks,

Seth Ravin

Sure.

Tom Sabol

Thanks, Derrick.

Operator

to for further turn you. over questions to remarks. currently this I’d time. back showing Thank call I’m Ravin at like Seth closing no the

Seth Ravin

thank and much you when again And the Thank you, thank talking us to with today’s forward we XXXX results. for we Well look want to you call. quarter again everybody third you for Great. review very everybody. joining

Operator

and Thanks Ladies today’s for concludes a gentlemen, this day. your participation. wonderful conference. Have

Rimini Street (RMNI) 11 Aug 182018 Q2 Earnings call transcript