Yahoo Finance Rimini Street Inc (RMNI) Q1 2024 Earnings Call Transcript Highlights: Navigating Challenges and ...
Revenue: $106.7 million, a year-over-year increase of 1.2%.
Annualized Recurring Revenue: $415.8 million, up 1.8% year-over-year.
Revenue Retention Rate: 89% for service subscriptions.
Gross Margin: 59.8% of revenue, down from 62.7% year-over-year.
Operating Expenses: Sales and marketing 36.7% of revenue; General and administrative 17.2% of revenue.
Net Income: $1.3 million, or $0.01 per diluted share.
Adjusted EBITDA: $10.7 million, or 10% of revenue.
Cash Balance: $129 million as of March 31, 2024.
Operating Cash Flow: Increased to $11.1 million.
Deferred Revenue: $254.3 million as of March 31, 2024.
Backlog: $556.9 million as of March 31, 2024.
Release Date: May 02, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
Rimini Street Inc (NASDAQ:RMNI) reported a year-over-year revenue increase of 1.2% in Q1 2024, reaching $106.7 million.
The company's annualized recurring revenue grew by 1.8% year-over-year to $415.8 million.
Rimini Street Inc (NASDAQ:RMNI) continues to expand its global operations, now serving clients in nearly 150 countries with over 2100 employees.
The company successfully refinanced its outstanding term loan, securing a new five-year senior secured credit facility which includes a $75 million term loan and a $35 million revolving line of credit.
Rimini Street Inc (NASDAQ:RMNI) has a strong client satisfaction score, averaging 4.9 out of 5, and a robust global presence with operations across 21 countries.
Negative Points
Q1 2024 billings decreased by 20% year-over-year to $74.1 million, attributed to challenges in closing new client sales and unfavorable FX movements.
The company's gross margin declined to 59.8% in Q1 2024 from 62.7% in the previous year, due to ongoing investments in expanding the global engineering team.
Sales and marketing expenses increased as a percentage of revenue to 36.7% in Q1 2024, up from 32.7% in the prior year, partly due to costs associated with a sales kickoff training conference.
Rimini Street Inc (NASDAQ:RMNI) is facing ongoing litigation with Oracle, which has led to uncertainties and suspended guidance on future financial results.
The company reported a decrease in revenue retention rate for service subscriptions to 89%, indicating some challenges in maintaining existing client relationships.
Q & A Highlights
Q: Can you explain the 20% increase in headcount despite only a 1% year-over-year revenue growth? A: Seth Ravin, CEO of Rimini Street, explained that the increase in headcount is due to the expansion of managed service, security, interoperability, and other business areas globally. Each new customer and market entry requires additional staff, especially for language and regional expertise, which adds to costs before achieving scale.
Q: What is the impact of the sales event on the sales and marketing expenses for the quarter? A: Seth Ravin noted that the sales kickoff event, costing around $4.5 million, significantly impacted the sales and marketing expenses. Such events are expected every 18 months, which can lead to fluctuations in quarterly expenses.
Q: Why did the customer retention rate drop to 89%? A: Seth Ravin addressed concerns about the lowest retention rate since coverage began, explaining that it reflects challenges from previous quarters, including larger client contracts not being renewed. These effects will continue to impact the retention rate for a few more quarters.
Q: What were the common themes in the areas where bookings and billings were weak? A: Seth Ravin identified specific geographic weaknesses contributing to a 20% year-over-year decline in bookings and billings, particularly highlighting challenges in Japan, Australia, and the United States.
Q: How is the new CRO expected to impact the company's strategy and performance? A: Seth Ravin discussed the mandate for the new Chief Revenue Officer, emphasizing a focus on improving performance in North America, particularly the United States, which comprises 50% of the company's revenue. The goal is to enhance growth and operational efficiency in this key market.
Q: What is driving the fluctuation in gross margins, and how should they be modeled going forward? A: Michael Perica, CFO, mentioned that the current gross margin pressures are expected to continue due to the ongoing expansion and hiring for new product suites. However, the company aims for long-term gross margins in the 60% range, suggesting an eventual stabilization as new services scale up.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
