RMNI - Earnings call transcript Q3 2019

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Operator

Ladies and gentlemen, thank you for standing by and welcome to the Rimini Street's Third Quarter 2019 Earnings Conference Call. At this time, all participants’ lines are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions]

to Pohl. conference like speaker to now Dean today, would hand over the your I you. Thank go Please sir. ahead,

Dean Pohl

conference you, Thank operator. earnings Street's I'd everyone call. welcome to like Rimini quarter third to XXXX

our is call the our Tom with today CFO. On Seth me CEO; Ravin, and Sabol,

Today to non-GAAP XXXX press release. financial table in Certain been reconciliation financial in supplemental can the third measures can release, also A Key Investor reconciliation following under quarter heading our these of measures and press believe the be of press we copy information meaningful and under viewed the website statements explanation press A section GAAP Events. Measures found the of has An on website. Relations Financial our in tables, non-GAAP the of we which issued included Metrics. financial why the our release Investor other About earnings be GAAP downloaded this are release from financial and and Non-GAAP to the provided and they is including

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

with we'll questions, begin taking Before remarks. prepared

like call Seth. I'd to the turn to that, With over

Seth Ravin

continued made in and sales the In thank us and past XX performance from productivity you investments joining Dean, over today. Thank improving the capacity, we third quarter, see for to infrastructure. months global you, everyone

global service Services operations and for SAP. the offerings We in expanding Dubai product the serve region, global capabilities in announced of opening Gulf Application availability to our and new also continued Management

Oracle for Management global database we availability announced Services addition, of the today and In Application applications.

with is ended revenue a quarter $XXX retention our revenue Revenue revenue quarter XX%, months Gross we $XX least million. basis. third annualized XX.X%. subscription XX, September XX% revenue XXXX, the generated all substantially of of XX.X% of was non-cancelable for subscriptions, million, The of increase on year-over-year rate mix for at for subscription remained than more a XX which current with rolling above of margin

clients, who ended to active Motors, representing increase its of auto database Rimini maintenance portfolio. a leading included and global net Hyundai-Kia XX%. notable We The of quarter with sales switched wins, Street support the year-over-year several quarter including X,XXX manufacturer for

active count The Fortune year-over-year totaled Fortune included XXX increase a count and approximately nearly Our client XXX Global quarter-end XX%. companies. of X,XXX XXX employee

average cases; For third legal delivery the X.X of satisfaction X.X an more our than excellent. out X,XXX updates; tax, client over and delivered regulatory maintained is service team company's of rated closed rating on X.X quarter, where the global delivery support and XX,XXX support as

the and Our was quarter, client Services Team strong the of Stevie the during numerous awards - awards with and Computer Service recognized of for Company Customer consistent Year. satisfaction Year including

initiatives. and Investments

and drive invest IT geographic product in initiatives further new lifetime to increase third revenue are capacity targeting up-sell which client accelerated and our clients. we the consistent, remain and initiatives investment programs new continued quarter, share To productivity, global these service grow each primary of of spend existing clients. our Our to capabilities and sales growth, of value the in offerings,

availability announced the during the And global today earlier, noted the of availability for announced Application Services global we As for Services Oracle Management and we Application third database Management of applications. SAP. quarter

SAP value Street replaces a and software Oracle more support systems by for management offering, Rimini robust single and trusted Oracle can vendor. integrated provided expensive lower to day-to-day winning In services award Street's and with responsive clients and support and with Rimini support have addition that leveraging annual services vendor application support SAP run a their

a skilled provide service, and As our can model, money. better integrated save better Street time, resources, better higher Rimini client's an labor clients satisfaction service and outcomes,

According Application the than approximately large is for Rimini Management analysts, Services to to grow disrupt is We industry. and the billion expected annually. the support global way service, X% industry adjacent an to well-positioned Street we market more as market believe this $XX disrupted software application

a and our We to additional for us a is of spend. competitive unique our service market support clients' and the believe and management in grow contracts, valuable service subscription secure offerings share long-term IT creates integrated the significant offering revenues increase and opportunity

have Application application integrated industries. we service and we of across offerings variety a wins new are achieved with our clients management and support our Services Management Already, sales delivering to

Competition software releases fierce. to the their our to to and primary in Oracle SAP Competition. efforts products. vendors stable remains migrate software are continuing licensees and Both engaged with competitors newest from upgrade force current immature vendor's

licensees and of product is thousands the using SAP release has declared most to tens XXXX Oracle migrate full of newest XXXX ending product order the in their fully their popular remain by to current software by some for world around support and releases must supported.

migrating current, conducted beyond Data XXXX. and SAP systems that of to mature licensees to plan Street website Oracle and Rimini on published XX% our least of customized stated not software-as-a-service they to Oracle SAP their products or running unsure stated and indicate move they by from planning to at are XX% continue about respondents surveys or

ahead. releases We sales an and SAP Oracle even and services believe demand Street's stable support stronger forced popular should application the environment the management and and for create Rimini opportunity of by retirement years in

March our a Previously another ordered an our with XXXX X, in XXXX, to litigation $XX.X the nontaxable with Recent U.S. an or decision Court ongoing U.S. the in court court cost Court our granted. Oracle in appealed interest. plus appeal successfully may to on return and Oracle. to A on Supreme issued X, issue to litigation may not we Oracle. hearing unanimous favor And litigation Oracle relating million be November we issue resolve the Supreme filed to developments. On

continued continuing results. improved months believe productivity the global products past XX capacity and our new yield Summary. expansion investments and to sales over and services in We are

Tom turn I previously over pursue to CFO, Vice President he Tom Chief us Officer, Stanley will to company's Vice opportunity in X, XX Accounting the was Mbugua November that to be Sabol, resides. I leaving in Before Corporate XXXX. which note want Group another appointed the on call November the our state, President Controller and effective

Chief Officer. recruiting actively are new We Financial a

in the I past financial well the years, refinancing successful want of which to in and public stewardship his We Tom wish transactions several for over thank Tom company completion role. three taking XXXX. new the included substantial his

to over Now Tom. you

Tom Sabol

thank past Rimini Street and all Board want opportunity assist fellow years. for to the the growth and and my Seth, I the you company you, to the three with the over of coworkers Thank collaborate

Third and and the year-to-date third spend our quarter above quarter previous both for general and within marketing and revenue, all quarterly our guidance administrative margin gross ranges. were are guidance provided And sales range.

As of third of $XXX Seth quarter increase subscription approximately million. XX% a annualized noted, for revenue the revenue million, with was $XX year-over-year

the international revenue, For while quarter down of XXXX, from markets. quarter, year-over-year XXXX clients the international for total for both XX.X% U.S. was and in growth third third total total the XX% revenue XX% XX% the within the of rates third Gross margin of XX.X% revenue were constituted quarter. aggregate United clients representing States of

associated will be our with services margins of offset and be to is of application our the to costs such margin rollout products, full guidance we from will our consistent as of Therefore, Salesforce managed for global While this we SAP to ramp-up expand, continue earlier believe the established prior Oracle, expect overall our continue of by the mentioned services XX% to introduction with newer approximately and around which gross gross for our XX%. the by Seth. XX% year, that

currently percentage previous and third expenses running the due period quarter, over XXXX a have as capacity XX.X% from XX%. of and of where XXXX. during up rep were for expenses the of the higher marketing than the marketing increased sales hiring to Sales we third by revenue year's impact Sales XX.X% quarter for are

full XX% high-end XXXX of We be the year guidance marketing expect of the guidance. with down from and to sales range XX% revenue expenses previous to for in X%

outside for expenses, up and quarter, for of third XXXX. administrative revenue, litigation of was General XX.X% quarter a which excludes third costs, the as the from XX.X% percentage

G&A of to full expect the be range for of XXXX, to as expenses XX% XX% in revenue previous guidance. a We from percentage year unchanged

and in accounting is level geographic to personnel with costs public system IT costs the due for of associated implementation along standards, of part growth leasing spend higher expansion. increased increased and The company new revenue and with the

outside to third work for based and prior quarter third the Net of that litigation quarter largely compared can $X on should to XXXX. decrease is year. and for the fluctuate $X.X million less the It litigation of not be noted compared our discovery activities. spend million was is litigation The expense quarter remand linear to due XXXX each

$X expense $X to the any litigation to the expect We absent changes. be for range fourth significant million XXXX, quarter of of in million

income operating was unchanged a for Net QX compared $XX.X $X.X from quarter quarter XXXX. the compared for which from of operating the XXXX. operating QX from million $XX.X million of loss net quarter, to million $X.X GAAP income income the of to was for income million was of Non-GAAP XXXX. was QX million $X.X

July of related XXXX. year's discounts and issuance premium The to write-off the the of third quarter, third million make-whole from debt XXXX payments in for included quarter the and Non-GAAP net prior credit repayment all income facility $X.X $XX.X unchanged the derivatives, XXXX was write-offs, which of termination third in million at embedded quarter. was the

were attributable on which for was earnings QX, of the stock were on and XXXX. stockholders $X.X X,XXX per XXXX, shares were to loss quarter quarter the of diluted of $X.XX X, dividends compared the share third settled the preferred Series-A to Series-A per share XXXX. the million from preferred basic the Reflecting million, a dividends Series-A holders of net in common dividends, Cash of $X.X a loss with while to $X.XX payment convertible issuance kind for October

for XX, the million, We balance of the approximately quarter with of of up XX% Adjusted from sheet. ended EBITDA our to on $XX.X quarter total XXXX, cash $X.X September million QX, $XXX million million XX, XXXX. was from third as $XX.X revenue was as million September $XXX Deferred XXXX. compared

the million September million for nine For the $XX.X XXXX, $XX compared increased months from XX, months cash to September to operations flow XX, XXXX. nine ended ended

year $XX.X full midpoint XXXX to million while to $XX.X $XXX.X our range narrowing guidance, of and revenue Now in the the to to fourth guidance million. revenue we the maintaining with are $XXX.X guiding to range million, revenue million be million $XXX of of quarter respect

And with questions. that, operator, we'll now take

Operator

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

line open. is Your

Derrick Wood

your quarter. Hi. Good in afternoon, And next everyone you. and miss Tom, Good we'll good endeavor. luck

count. on really start to wanted I So the new strong customer

on biggest want a I drill and seen record a I here. second we've bit, I this to little think guess, the three-parter into

driven was online. sales improved this like by So, productivity sounds first, it coming

factors other just the the changing particular that? Could smaller are product your out? any Any really revenue outlook on of for then are geography? nature. you to strength year, given that areas by it third, touch either or perhaps deals in there move call Second, these on assume And would I didn't needle

Seth Ravin

very Thank you Sure, much. Derrick.

-- I think, multipart. that we to your answer

So working we sellers would expect, first a of on, feet of program. sellers uncommon we've we're mid-sized new transactions see the with additional to productive, the street sales transaction. to lot as put know, for be those you more all, as We're the become starting going as smaller to not on see,

medium is quite had structure. small, which quarters and in quarters of as well, larger the We on the better mix one preferred also large pipeline transactions, our a of always recent side a of few

on So global a I was seen that a that we've positive think basis.

Zealand. terms way of saw did Pac all Asia very, down through We well. Asia, in the geography think Australia strength that across New and of I very

the Asia performing in probably the Pac strongest region the quarter. entire So third region globally

we for messages indicators What's think to driving? the beginning seeing of that not but I I of new rolled in think our have XXXX. pipelines numbers. what traction out only are with and increasing that we lead-generation close lot deals, And of a at we're marketing growing the the terms

closed into we're way through watching more it growing So start its pipe opportunities leads move and into then I conversion deals. the movement to think

all good the things would forced full marketing and message relates and traction the to I releases that for about of current we've world. top the SAP we're think that of what that's also retirement So coming from a been on support Oracle it want marketing from seeing saying we

think that I think giving in a will quarters. that's I So out future that play also boost us

Derrick Wood

going sales couple coming a Great. noise. you I I if in That's litigation of in it And great to color. frequently about the guess your your had noise always cycle? bit more for of part ago, up market. Or less this background quarters be think I'm engagements? Is the is a this sorry

Seth Ravin

No.

Okay. No.

time I always there. think for the being, it's

think many, the as It years it still say transactions still it than aren't affect at there's item would no it the does us. the I way true. many being support our does obviously, is we transactions, the I through the of has competitive but it to companies think raise some competitors we during do look cycle their in at that is transactions. pretty It It's you try process. that That the diligence. years in and it there. fact much for overall something nature been is mission-critical the deals every unfortunate, look in on and though litigation. litigation as deal our transaction. we're has that a going effect It But Derek have size ago. derails did still sales with I of You just always front less work just our the single way our of And

Derrick Wood

Okay. but Management too And some then Services, on it's mean sounds I you've the already it deals. like probably Application early, closed

seeing just perhaps I what around just on pipeline impact initial selling or little win core hit whether been conversions you're wanted it offerings. conversations So your to uptake or the bit more has and rates a

Seth Ravin

very it. actually I'm excited by

seen we've deals -- number a I already. think we've good closed of

We support, to yet. you talk our to product the AMS. But we separate support to to fact services get haven't buy about it have who as financially the threshold hit them I lines the when sell customers AMS in only look think core the buy you that at material

So that companies together them just we've and get contracts extended on because have the an and service. their support happen AMS integrated to of seen as is renewed side what the mix in

new is but not nature getting accretive you're the additional of and revenue, long-term So support. upside our extending securing only the

to a deeper customer stay the bigger much opportunity engagement -- with IT embedded on longer-term So solution into department. the customers' an gives a us even

very projects basis are So on a I that it's think AMS lot been to well global up. received It's in people very staff of put been we've a just positive. department These big. and

a right alone dedicated where margin one AMS. we clients new client seeing One on gross big have take XX bit the you're count serving our head of And hit to now. over that's of a

your but heads adding that, expect size, look the significant upside you our some would if number a margin our ratios, short-term, at hit the going take just to you're size As is long-term in given our and you going of be revenue you're like to gross on substantial.

Derrick Wood

margin to good you Okay. a down still it A than segue what guided. higher over Tom. And I year-on-year, had lot gross was know was but

and same a -- what case So quarter ago. that was the

been upside the Tom in driving gross what's So margin?

Tom Sabol

Yes.

we continue up as to AMS. Seth ramping to spending while improve on indicated that. margins the money So Derrick, The support offset are

artificial have the using thought. leveraged, things it's our quicker resources doing So more quickly more if know we're the support-only margins right continued that's than better would with you deploy deploy there and but just to margins, right how and also efficiency. have to past some about with I the we at customers. those some of tickets just right look we've increase we're better in intelligence the – talked of Again,

for benefit And the mentioned XX% our those the to couple be still quarters things target. is we're We the seeing the gross full so as believe types support though of side, on exceeded we'll you why XX% the of margin in year of we've in which range. last

Derrick Wood

Okay.

was assumptions have and been currency the You in for the what dollar. to foreign weakness the There's currencies talk decent Can quarter a the maybe are you year? about just guys your some relative in overseas. what impact

Tom Sabol

range of were of the were of kind reason in FX the that clearly was overseas say the end though at a of that well. contracts the why But as lower related. our would We number part we Yeah. dollars also

point. with So at at impact regards we significant this have it's wouldn't and it discussing going think don't least enough in out to expect forward call to the a impact to we QX

Derrick Wood

Yeah.

last number the today year-end? XX plan And of and quarter how you're end Okay. feeling of just update one on reps about to XX or an by

Seth Ravin

now. We staff run some Sure, the Derrick. changes. right had just XXs high at We about

in somewhere we're think XX, I XX. the

So we're attrition number, turnover about And that about right feel rates. I XX including normal and good the number.

that speed, have as existing We believe our more hiring a we take still the quarters, up higher have they bit same we little about achieve productivity. ramped before little we plus see to next just and as on into kinds getting year, the productivity to to you'll absorb a focused pausing because the talked our few lot reps. still numbers the really been head hires needed will to capacity number next bit that of a leverage and to reps with the they're quotas, pause keeping a We us new of to give within the even them increase that's untapped into on the of be capacity new we going year quota-carrying hiring next that and get ramp of count We because think year. into next want able

Derrick Wood

Great. That's it for. Thanks guys.

Tom Sabol

Derrick. Thanks,

Seth Ravin

Thanks, Derrick.

Operator

Thank we Alliance Silverman Jacob from you. [ph] And Instructions] Global with have Partners. question a [Operator

Your line is open.

Unidentified Analyst

little This you're Brian. maybe and stepping any SAP Yeah. before give mentioned know is as to you us Jacob in but on Could quarter. you're guys a bit color little more the Oracle you I up? detail. go scaling resistance seeing into Nice a for

Seth Ravin

Yeah.

end the are any a to IT in I changing Or will think back-end had growth we're forward suites I will Oracle SAP a with is, understand fortune? monolithic miss spend of that and cost in attention the level move system and where who working middle already huge I big my the to trying another advantage and implementation the will an at where next-generation paradigm multiyear create time all companies enterprise have – system in interesting market, and the business that different opportunities cycle additional areas And for and from my I out opportunity transition advantage? these that's big of point do at which my at focus the and have investment competitive of transactional competitive focus company. changeover a

So ROI big and a architecture, there's I products CRM. companies products whether a battle another maybe in and which battle to they for IT of into technology, SAP best-of-breed Concur, out all for have and budgetary should these Oracle figure and a decide Salesforce we're where a course HR choice also pieces effect about use about Even been try embrace going or and of Workday invest watching come system – it's structure there's again monolithic investment different all that payroll is whether a SuccessFactors, and Ariba, like on to buying the same. these

different that of emerging And Salesforce with you're – different from watching we're model from maybe vendor? So all a vendors single by suite course such from products this. multiple big or it that Boomi. Is a products architectural a of a now a watching as integrators owned full connected is MuleSoft by Dell connected or best-of-breed integration

yourself those a to decisions these the to these to new the is delay policy are all XX-year And out least Rimini better this turmoil moving in architectures. them why front at exactly customers how models better buy predict right save to is from which no may service which fortune, these of having these XX be Rimini one? of get of insurance now message able and pieces move Street a they're going one Street, many play to really that's not to So knows and is be in what our

opportunity last wait be save they new get SX/HANA model. is new fact yesterday's to might It from a five direction you're they which as platform does. these SAP they discover focus believe We of money monolithic company five And models understand ever is wrong of seven years don't be traction, on years that some they an dinosaurs. the to might last major We that's technology. implementation these to going in and the believe gaining products might to -- such the the have which of that the and now one and if that

lot there's taking of So cycle. in that the place a buying

an and from trying need to Oracle down perspective they aren't them. are not by products when well-liked customers. their vendor And They're sure shove SAP they the vendors companies the the these throat

changing you've backlash when and a the seen lot to to resistance seen fact platforms You've the it there's out these of work. that cost current major the platforms

Unidentified Analyst

amount there do more that Or then decent for expenses And seeing a you marketing think now? any Is plan uptake continuing sales? on marketing kind its new from peak for that's and you've sales hit Great. on of so Okay. spending been of you -- reps. do of trend

Seth Ravin

out. to got past had peak I mean those I held really we covenants you by catch-up think, we're months to ago. know start play our that spending only as from trying from it financing being we back money XX to

we mid-XXs of in about to for to couple sales I accelerate good and our where can in we're get the be want try down and a little the we're to see a we number more marketing to bit. think tick GAAP like little down into able to to if to would we balance. little peaking performance think, had we marketing now We the get profitability, if maturing sales another be. a come bit But try to going catch-up and quarters of we force sales start force, as I So right sales bring And spending to improvement, I think of the purpose. strive

Unidentified Analyst

Great again. Thanks Great. Okay. quarter.

Seth Ravin

Thank you. Sure.

Operator

Thank with our from Foster And you. Citigroup. next question comes Drew

line is open. Your

Drew Foster

the taking question. Hey, for guys. Thanks

you've opened any where to if helped on following internationally if some had reps couple you cited opening support so what's office people you a strength recent was made tweaks office a far model. playbook internationally? the And a are curious that a new highlighted essentially You up same smaller with of few calls and I or were that in there and just you up Dubai. you you

Tom Sabol

Sure, Drew.

is the I think answer that yes.

Mexico. approach down already with the lot Mexico people there. office I good cookie-cutter think, exception manufacturing of was Mexico, have for opportunity in I a a in XX the I got all think pretty most that we've countries. over we say would

customers the be. get think where footprint for we serve We there. And to we're a really feel put Dubai, I region. already Gulf a trying smaller in offices should

and We effective, only clients feel to selling clients not servicing already for in in Gulf Arabia staff a the around for where we should be our to but trying Gulf. most Saudi get position the have

I still call exploratory of it figuring early the market. phase would in -- still the out Gulf it's So

As we operation. serve have the you of where know Israel, we very a also client and out East large base Middle

So around countries to need so we are to languages. fill service and looking critical them operate the our we region all clients region holes of in because many in time capability gaps XXX zone in XXX and and every to the

Drew Foster

it. Got

And Okay. terms taken or foot of -- terms of your enablement focused on and functions sales of then gas in mentioned in pedal it. off you noticed support you the sort maturing out have hiring the sales had of building you the more sort that and organization of

what those Can where investments color it as of think you maturity productive result could today help the put more around reps some that of gotten and a organization versus have more your you how just stands be?

Seth Ravin

think it's greater I the States. a is sales -- at I faster been the force outside United maturing little interesting. lagging Internationally, think The bit. challenge U.S. we've the

top on them. think because top new the directors of in. And reps we I we put reps new more put it's new on of

normally a about to like leading more everybody prior to the little as And the we just so in calls bit business. leading the we as battlefield I see think blind blind -- would errors learns than of talked you on

to business and And that leads underneath them to more the errors. new a the are manager person when lot the

think they effectiveness had of of the got reps America we're teams absorb just little less I them we're in them players with faster. its to to new catching I doing more able terms So of smaller what has do little a But maturing new North think because all added globally, a hires. were the up to

matching I we're another to hires the new the again before in international. that we've all level what think get require the in we to to in and seen seeing kind America of movement in North couple past the up of productivity will probably added up And faster quarters

Drew Foster

Got helpful. That’s Thanks. it.

Operator

turn Thank would any you. the And no I'm I for questions. closing to back to Seth showing further remarks. like call

Seth Ravin

Appreciate -- much the the up Thank when to next and full quarter you I Look the everyone. into and questions. thank and coming year forward year. today you appreciate very our just time call fourth

with that, good much. end year very for of and So thank you everybody. a have you Thank

Operator

call. Ladies for and today's concludes participating. gentlemen, this conference you Thank

disconnect. Everyone a have now may great day. You

Rimini Street (RMNI) 10 Nov 192019 Q3 Earnings call transcript