Rimini Street, Inc. (RMNI) Bundle
Understanding Rimini Street, Inc. (RMNI) Revenue Streams
Understanding Rimini Street, Inc.’s Revenue Streams
The total revenue for the three months ended September 30, 2024, was $104.7 million, a decline from $107.5 million for the same period in 2023, marking a decrease of 3%.
For the nine months ended September 30, 2024, total revenue was $314.5 million, down from $319.4 million for the same period in 2023, reflecting a decrease of 1.5%.
Revenue Breakdown by Geographic Region
| Region | Q3 2024 Revenue | Q3 2023 Revenue | Change | 9M 2024 Revenue | 9M 2023 Revenue | Change |
|---|---|---|---|---|---|---|
| United States | $51.6 million | $55.7 million | -7% | $156.9 million | $163.1 million | -4% |
| International | $53.1 million | $51.7 million | +3% | $157.7 million | $156.2 million | +1% |
Year-over-Year Revenue Growth Rate
The year-over-year revenue growth rate for the three months ended September 30, 2024, is -3%, while the nine-month growth rate is -1.5%.
Contribution of Different Business Segments
Approximately 49% of the revenue was generated in the United States for Q3 2024, compared to 52% in Q3 2023. Meanwhile, international revenue accounted for 51% in Q3 2024, down from 48% in Q3 2023.
Significant Changes in Revenue Streams
During the three months ended September 30, 2024, the company announced the wind-down of services for Oracle PeopleSoft products, which accounted for approximately $24.9 million or 8% of total revenue for the nine months ended September 30, 2024, down from $27.6 million or 9% for the same period in 2023.
Annualized Recurring Revenue
The annualized recurring revenue was $402 million as of September 30, 2024, down from $416 million as of September 30, 2023. This decline reflects a reduction in client retention.
Revenue Retention Rate
The revenue retention rate was 89% for the 12 months ended September 30, 2024, down from 94% for the same period in 2023.
A Deep Dive into Rimini Street, Inc. (RMNI) Profitability
A Deep Dive into Rimini Street, Inc.'s Profitability
Gross Profit: For the nine months ended September 30, 2023, gross profit was $200.6 million. For the same period in 2024, it decreased to $188.3 million, a decline of 6% or $12.3 million.
Gross Profit Margin: The gross profit margin for the nine months ended September 30, 2023, was 62.8%, while for 2024, it dropped to 59.9%, indicating a decline of 290 basis points.
Operating Profit: Operating income for the nine months ended September 30, 2023, was $32.2 million, which turned into an operating loss of $47.0 million for the same period in 2024, a decline of $79.2 million or 245.9%.
Net Income (Loss): The net loss for the nine months ended September 30, 2023, was $16.7 million, escalating to $42.9 million in 2024, a deterioration of $59.6 million or 356.9%.
Revenue: Total revenue decreased from $319.4 million for the nine months ended September 30, 2023, to $314.5 million for the same period in 2024, a reduction of $4.8 million or 2%.
| Metric | 9 Months Ended September 30, 2023 | 9 Months Ended September 30, 2024 | Change |
|---|---|---|---|
| Gross Profit | $200.6 million | $188.3 million | -6% |
| Gross Profit Margin | 62.8% | 59.9% | -290 bps |
| Operating Income (Loss) | $32.2 million | $(47.0) million | -245.9% |
| Net Income (Loss) | $(16.7) million | $(42.9) million | -356.9% |
| Total Revenue | $319.4 million | $314.5 million | -2% |
Operating Expenses: Total operating expenses surged from $168.4 million for the nine months ended September 30, 2023, to $235.3 million for the same period in 2024, marking an increase of $66.9 million or 39.8%.
Sales and Marketing Expenses: For the nine months ended September 30, 2023, sales and marketing expenses were $107.4 million, rising to $112.3 million in 2024, an increase of 5%.
General and Administrative Expenses: General and administrative expenses decreased from $55.5 million for the nine months ended September 30, 2023, to $54.5 million for the same period in 2024, a decrease of 2%.
Operational Efficiency: The increase in costs was driven by a 16% increase in average headcount, while revenues declined by 2%. This led to pressure on margins and operational efficiency.
Litigation Costs: Litigation costs increased from $5.5 million in 2023 to $63.9 million in 2024, a rise of 1,067.5%.
Comparison of Profitability Ratios with Industry Averages: The gross profit margin of 59.9% is below the industry average of 65%, indicating challenges in cost management relative to peers.
Revenue Retention Rate: The revenue retention rate decreased from 94% in 2023 to 89% in 2024, reflecting challenges in client retention.
Annualized Recurring Revenue: The annualized recurring revenue dropped from $416 million in 2023 to $402 million in 2024, indicating a decline in subscription revenue.
| Metric | 2023 | 2024 | Change |
|---|---|---|---|
| Annualized Recurring Revenue | $416 million | $402 million | -3.4% |
| Revenue Retention Rate | 94% | 89% | -5% |
| Industry Average Gross Margin | 65% | N/A | N/A |
Debt vs. Equity: How Rimini Street, Inc. (RMNI) Finances Its Growth
Debt vs. Equity: How Rimini Street, Inc. Finances Its Growth
As of September 30, 2024, Rimini Street, Inc. reported total debt consisting of:
| Debt Type | Amount (in thousands) |
|---|---|
| Long-term debt (net of current maturities) | $67,959 |
| Current maturities of long-term debt | $3,093 |
| Total Credit Facilities | $71,052 |
The company has a working capital deficit of $93.7 million and an accumulated deficit of $245.1 million as of the same date. The debt-to-equity ratio stands at approximately 0.82, indicating a moderate reliance on debt compared to equity.
In terms of recent activities, on April 30, 2024, the company refinanced its Original Credit Facility of $70.9 million into a new five-year senior secured credit facility. This facility includes:
- A $75.0 million term loan
- A $35.0 million revolving line of credit
As of September 30, 2024, the outstanding borrowings under the new credit facility were $74.1 million. The company has the option of interest rates based on either the Secured Overnight Financing Rate (SOFR) or a Base Rate, with margins ranging from 1.75% to 3.50%.
Credit ratings for Rimini Street have not been explicitly mentioned in the available data, but the ongoing management of its debt levels and refinancing indicates a strategy to optimize financial health amidst fluctuating market conditions. Recent interest expense for the three months ended September 30, 2024, was $1,577,000, compared to $1,413,000 for the same period in 2023.
The company's strategy reflects a balance between debt financing and equity funding, with a significant portion of revenue generated from client prepayments. As of September 30, 2024, the deferred revenue amounted to $202.3 million, which is recognized as a liability.
This strategic positioning allows for a robust cash flow management, as the company expects to recognize approximately $202.3 million of deferred revenue over the next 12 months. The company continues to monitor its leverage and liquidity to ensure compliance with financial covenants, which include maintaining a minimum fixed charge coverage ratio greater than 1.25 and a total leverage ratio of less than 3.75.
Assessing Rimini Street, Inc. (RMNI) Liquidity
Assessing Liquidity and Solvency
Current and Quick Ratios
As of September 30, 2024, the current ratio is calculated by dividing current assets by current liabilities. The current assets total $228.7 million while current liabilities amount to $322.5 million, resulting in a current ratio of 0.71.
The quick ratio, which excludes inventory from current assets, is also 0.71 given the lack of inventory on the balance sheet.
Working Capital Trends
Working capital, defined as current assets minus current liabilities, shows a deficit of $93.7 million as of September 30, 2024. This represents a decline from prior periods, indicating potential liquidity challenges.
Cash Flow Statements Overview
For the three months ended September 30, 2024, cash flows from operating activities resulted in a net cash outflow of $1.2 million. The breakdown is as follows:
- Net income (loss): ($43.1 million)
- Adjustments for stock-based compensation expense: $7.1 million
- Changes in accounts receivable: $51.1 million
- Deferred revenue changes: ($60.8 million)
Cash flows from investing activities yielded a net inflow of $7.1 million during the same period. Financing activities contributed a net inflow of $2.9 million.
Potential Liquidity Concerns or Strengths
The company had $119.9 million in cash and cash equivalents as of September 30, 2024. However, a significant portion of current liabilities consists of $202.3 million in deferred revenue, which is expected to be recognized over the next fiscal period.
The 2024 Credit Facility includes a revolving line of credit with $35 million available, which could provide additional liquidity if needed. Compliance with financial covenants, including a minimum liquidity balance of $20 million, is reported as satisfactory.
| Liquidity Metric | Value (as of Sept 30, 2024) |
|---|---|
| Current Assets | $228.7 million |
| Current Liabilities | $322.5 million |
| Current Ratio | 0.71 |
| Quick Ratio | 0.71 |
| Working Capital Deficit | $93.7 million |
| Cash and Cash Equivalents | $119.9 million |
| Deferred Revenue | $202.3 million |
| Available Revolving Credit | $35 million |
Is Rimini Street, Inc. (RMNI) Overvalued or Undervalued?
Valuation Analysis
In assessing the financial health of the company, it's crucial to evaluate whether it is overvalued or undervalued based on key financial ratios and metrics.
Price-to-Earnings (P/E) Ratio
The company's P/E ratio as of September 30, 2024, is not applicable due to a net loss of $43.1 million for the quarter.
Price-to-Book (P/B) Ratio
The P/B ratio can be computed using the latest book value per share. As of September 30, 2024, the total stockholders' deficit is $76.774 million with 90.841 million shares outstanding, leading to a book value of -$0.845 per share. Thus, the P/B ratio is also not applicable due to negative equity.
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
As of September 30, 2024, the company's EBITDA is calculated based on the operating loss of $49.594 million and interest expenses of $4.401 million, yielding an EBITDA of -$45.193 million. The enterprise value is calculated as the market capitalization plus total debt minus cash equivalents. With a market cap of approximately $229.2 million, total debt of $142.1 million, and cash equivalents of $119.9 million, the enterprise value is about $251.4 million. Thus, the EV/EBITDA ratio is again not applicable due to negative EBITDA.
Stock Price Trends
The stock price has experienced significant volatility over the past year, with a 52-week range of approximately $2.50 to $6.00. As of October 2024, the stock is trading around $2.63.
Dividend Yield and Payout Ratio
The company currently has a dividend yield of 0% and does not pay any dividends, as indicated by the absence of any dividend payments.
Analyst Consensus on Stock Valuation
According to the latest analyst reports, consensus ratings suggest a hold position for the stock, given the current financial performance and market conditions. Analysts are cautious due to the ongoing litigation and restructuring efforts.
| Valuation Metric | Value |
|---|---|
| P/E Ratio | Not Applicable |
| P/B Ratio | Not Applicable |
| EV/EBITDA Ratio | Not Applicable |
| Stock Price (as of October 2024) | $2.63 |
| 52-week Range | $2.50 - $6.00 |
| Dividend Yield | 0% |
| Analyst Consensus | Hold |
Key Risks Facing Rimini Street, Inc. (RMNI)
Key Risks Facing Rimini Street, Inc. (RMNI)
Rimini Street, Inc. operates within a complex and competitive landscape that presents various internal and external risks affecting its financial health. Below are key risk factors identified for the company as of 2024:
Industry Competition
The company faces intense competition in the independent enterprise software support services market. Competing firms may have strategic relationships with software vendors that could undermine Rimini Street’s market position. As of September 30, 2024, approximately 63% of total revenue was derived from services related to Oracle products, indicating a heavy dependency on a single vendor's ecosystem.
Litigation Risks
Ongoing litigation with Oracle poses significant risks. An award of $58.5 million in attorneys’ fees to Oracle from the Rimini II litigation could substantially impact financial resources. The company has recognized litigation expenses of $58.5 million for the nine months ended September 30, 2024, a stark increase from $0 for the same period in the previous year.
Financial Health
As of September 30, 2024, Rimini Street reported a net loss of $43.1 million and an accumulated deficit of $245.1 million. The working capital deficit stood at $93.7 million. The company has a total stockholders' deficit of $76.8 million.
Market Conditions
Global economic uncertainty, including inflationary pressures and geopolitical tensions, has affected client renewals and could continue to impede growth. The company noted that clients have not renewed services due to adverse economic conditions, including the ongoing Israel-Hamas conflict and the Russian invasion of Ukraine.
Operational Risks
The company’s operational model requires clients to prepay for services, resulting in deferred revenue of $202.3 million. This deferred revenue is recorded as a current liability. The costs associated with fulfilling these commitments are approximately 39% of the related deferred revenue.
Interest Rate Risks
Rimini Street is exposed to interest rate risk due to its variable rate indebtedness. The 2024 Credit Facility has interest rates ranging from 2.75% to 3.50% for SOFR and 1.75% to 2.50% for the Base Rate. As of September 30, 2024, the company had outstanding term loan borrowings of $74.1 million.
Mitigation Strategies
The company has initiated a headcount reduction to optimize its cost structure, incurring reorganization costs of $4.6 million during the nine months ended September 30, 2024. Additionally, Rimini Street is actively working to enhance its service offerings and expand into new markets to counteract competitive pressures.
| Risk Factor | Description | Financial Impact |
|---|---|---|
| Litigation Risks | Ongoing litigation with Oracle, including attorneys' fees. | $58.5 million |
| Net Loss | Reported net loss for the three months ended September 30, 2024. | $43.1 million |
| Accumulated Deficit | Total accumulated deficit as of September 30, 2024. | $245.1 million |
| Deferred Revenue | Deferred revenue recorded as current liabilities. | $202.3 million |
| Working Capital Deficit | Current working capital deficit. | $93.7 million |
Future Growth Prospects for Rimini Street, Inc. (RMNI)
Future Growth Prospects for Rimini Street, Inc.
Analysis of Key Growth Drivers
Rimini Street, Inc. is poised for growth through various avenues including product innovations, market expansions, and strategic partnerships. The company has focused on enhancing its service offerings, particularly in enterprise software support.
- Product Innovations: The company is dedicated to expanding its portfolio of services, which includes the introduction of new support solutions that cater to evolving client needs.
- Market Expansions: As of September 30, 2024, Rimini Street supported over 3,090 active clients globally, including 76 Fortune 500 companies. This client base provides a strong foundation for future expansion into new markets.
- Acquisitions: Strategic acquisitions may play a role in enhancing service capabilities and market reach.
Future Revenue Growth Projections and Earnings Estimates
For the three months ended September 30, 2024, Rimini Street reported revenue of $104.7 million, a decrease of 3% from $107.5 million in the same period of 2023. The company anticipates a gradual recovery in revenue as it capitalizes on its existing client relationships and expands its service offerings.
Net loss for the same period was $43.1 million, with an accumulated deficit of $245.1 million. Analysts estimate that with strategic investments and operational efficiencies, the company could see a rebound in earnings by 2025.
Strategic Initiatives or Partnerships That May Drive Future Growth
Rimini Street is actively pursuing strategic partnerships to enhance its service capabilities and market presence. The company has begun winding down services for Oracle PeopleSoft products, which will allow it to focus resources on more profitable areas.
Additionally, the company has a remaining performance obligation of approximately $574.6 million as of September 30, 2024, indicating significant future revenue potential as these obligations are recognized over time.
Competitive Advantages That Position the Company for Growth
Rimini Street's competitive advantages include:
- Diverse Client Base: Support for over 3,090 active clients, including a significant number of Fortune 500 companies, provides stability and growth potential.
- Cost-Effective Solutions: The company's pricing model offers services at approximately 50% of the annual fees charged by software vendors for base support.
- Global Reach: Approximately 51% of revenue was generated from international clients, showcasing the company's ability to operate in diverse markets.
Revenue by Geographic Region
| Region | Q3 2024 Revenue (in thousands) | Q3 2023 Revenue (in thousands) |
|---|---|---|
| United States | $51,588 | $55,740 |
| International | $53,084 | $51,713 |
| Total Revenue | $104,672 | $107,453 |
Overall, Rimini Street's growth opportunities are supported by its strategic initiatives, diverse client base, and the ability to adapt to changing market demands. The company’s focus on innovation and expansion into new markets positions it well for future growth.
Rimini Street, Inc. (RMNI) DCF Excel Template
5-Year Financial Model
40+ Charts & Metrics
DCF & Multiple Valuation
Free Email Support
Article updated on 8 Nov 2024
Resources:
- Rimini Street, Inc. (RMNI) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Rimini Street, Inc. (RMNI)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Rimini Street, Inc. (RMNI)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.