Rimini Street, Inc. (RMNI) Earnings Call Transcript & Summary

Good afternoon, ladies and gentlemen, and welcome to the Rimini Street Q2 2026 Earnings Conference Call. [Operator Instructions] This call is being recorded on Thursday, July 30, 2026. And I would now like to turn the conference over to Dean Pohl, VP, Treasurer and Investor Relations. Please go ahead.

Thank you, operator. I'd like to welcome everyone to Rimini Street's Fiscal Second Quarter 2026 Earnings Conference Call. Joining me today are Seth Ravin, our CEO and President; and Michael Perica, our CFO. Today, we issued our earnings press release for the second quarter ending June 30, 2026, which is available on our website under the Investor Relations section. A reconciliation of GAAP to non-GAAP financial measures are included in the tables following the financial statements in the press release. Additional explanations of these measures and why we believe they are useful can also be found in the press release and on our website under About Non-GAAP Financial Measures and certain key metrics. As a reminder, today's discussion will include forward-looking statements about our operations that reflect our current outlook. These statements are subject to risks, and uncertainties that could cause actual results to differ materially from those discussed today, and we encourage you to review our most recent SEC filings, including the Form 10-Q filed today for a detailed discussion of the risk factors that may affect our future results or stock price. Now before taking questions, we will begin with prepared remarks. With that, I'd like to turn the call over to Seth.

Thank you, Dean, and thank you, everyone, for joining us. Second quarter results. At our December 2025 Investor Day, we shared our vision, strategy and plan for evolving into an innovation company and returning to growth and improved profitability. We provided fiscal year 2026 guidance for achieving Rule of 20 results. We have now delivered four consecutive quarters of improved growth metrics in alignment with the vision, strategy and plan we shared at the 2025 Investor Day, and we reiterate our Rule of 20 guidance for fiscal 2026. Second quarter results demonstrate strong demand for our core Rimini support offering, increasing adoption of our broader enterprise software service portfolio and improving sales execution. Sales transactions included household brands in many countries, and we sold across our solutions portfolio. During the quarter, we closed 14 new client transactions with over $1 million in TCV, totaling $30 million and added 58 new logos. And for the first half of 2026, we closed 25 new client transactions with over $1 million in TCV, totaling $62.9 million and added 108 new logos. Partnerships and alliances sourced or assisted with the closing of a meaningful number of sales transactions in the quarter. Also during the quarter, clients continued their adoption of Rimini Street's AI solutions that are helping them solve real business problems using innovative technology quickly and economically deployed over the top of their existing ERP software and releases without any need for ERP software upgrades, migrations or replatforming. Our clients use the collective savings from switching to Rimini Street annual maintenance on their ERP software and avoided costly low-value ERP upgrades and migrations to fund their Rimini AI ERP solution deployments, and they did not have to spend beyond their current IT budgets for the innovation. Driving increased growth and profitability. Organizations today are under increasing pressure to innovate and modernize their enterprise systems while managing cost, risk and disruption. Many are finding that large-scale ERP replacements are expensive, time-consuming and often fail to deliver the expected business value. Real innovation is not about installing a software vendor's next .ai release. It's about reducing total operating costs, improving profitability and enhancing competitive advantage. We help organizations achieve these goals by avoiding unnecessary ERP software upgrades, migrations or replatforming and instead deploying Rimini Street's innovative Agentic AI ERP solutions over the top of existing ERP software to deliver faster, better, cheaper and more agile ERP process execution, funded within the current IT budget. As we continue to expand sales and cross-sales of our entire service portfolio, our focus remains on enabling clients to extract more value from their existing systems and achieving innovation and modernization that lowers total cost of operations, improves profitability and enhances competitive advantage. Leadership in Agentic AI ERP. We are helping more and more clients set a new vision, technical and functional path forward from their current vendor ERP software release, a path that does not require any return to the vendor for a future upgrade or migration to their current ERP software release in order to achieve innovation or modernization. The client can innovate and modernize their existing ERP software and other enterprise software using Agentic AI ERP solutions deployed easily, economically right over the top of their existing software releases. We guide clients through this path using our proprietary and proven three-step methodology called the Rimini Smart Path. Our methodology is being used by clients to self-fund and accelerate innovation, especially AI and automation without undergoing costly, risky or unnecessary ERP upgrades or rip and replace migrations by leveraging and modernizing existing IT environments, all without operational disruption. Today, we rounded out our end-to-end AI capabilities with the launch and immediate availability of Rimini Govern for AI, our new Governance as-a-Service solution. Rimini Govern for AI is the newest offering in our governance, risk and compliance solutions. The service brings together AI governance capabilities, deep enterprise application expertise and global managed services that enable organizations to control, secure and scale AI agent activity with confidence. With Rimini Govern for AI, organizations can now confidently and securely deploy AI agents and scale AI agent operations with the oversight, control, visibility and measurement needed to accelerate adoption, measure ROI and achieve business outcomes that include reduced total operating costs, improved profitability and enhanced competitive advantage. As Ray Wang, CEO of Constellation Research noted with the launch of Rimini Govern for AI "As organizations move from AI experimentation to enterprise-scale adoption, they need trusted visibility, governance and control to deploy AI responsibly and securely". Other Rimini AI solutions include Rimini Agentic UX, our AI-driven experience and automation layer that is deployed right over existing client ERP software and turns their ERP software from a static system of record into an autonomous system of action, delivering innovation and modernization in weeks, not years, and at a fraction of the cost of a major upgrade migration or replatforming project. Rimini Agentworks, our comprehensive AI agent life cycle service that enables organizations to move from AI concepts to trusted production deployment. The service helps clients define agent strategies, design and build AI agents and workflows, validate interoperability, form functional and security and certify operational readiness. As part of this process, Rimini Agentworks helps assure before any approved deployment that AI agents operate within approved business, accuracy, security and compliance guardrails and meet stringent requirements for governance, monitoring and production operation. Rimini Agentworks tests and certifies both AI agents developed by Rimini Street and those from other third parties. Together, Rimini Agentworks, Rimini Agentic UX and Rimini Govern for AI provide organizations with an end-to-end set of services to design, deploy, govern and optimize AI agent operations across mission-critical enterprise environments. Partners, alliances and channels. We continue strengthening and maturing our indirect sales ecosystem, including adding new partner managers for strategic technology, services and channel relationships and completed new partnership agreements. These partnerships extend our reach, bring complementary expertise and help clients execute modernization strategies that combine Rimini Street support with world-class platforms, cloud services and AI tooling. The ecosystem is becoming a strategic multiplier for us, accelerating adoption, expanding influence and enabling shared go-to-market opportunities. Client success stories. We are helping clients across many industries, geographies and software protect and optimize their core ERP systems while funding innovation and modernization, including fixing broken processes, automating workflows and functions and using AI to solve specific business challenges all without disruptive, costly and risky ERP software upgrades, migrations or replatforming. Here are some examples of how our solutions are reducing operating costs and enabling innovation, transformation and improved competitive advantage for clients across different geographies and industries. VIVERE Group, an Indonesian interior contractor and furniture manufacturer, selected Rimini Support for SAP ECC 6 to strengthen business continuity, avoid a costly and disruptive SAP migration and redirect resources towards digital transformation and innovation. This win further demonstrates the ongoing demand for our proven model of reducing operating costs while creating capacity for growth and innovation. One NZ, a New Zealand telecommunications company, chose Rimini Support to optimize its Oracle environment, including Siebel CRM and Oracle Database while accelerating its AI transformation strategy. The company describes Rimini Street as a trusted "co-innovation partner" enabling it to redirect capital and talent towards future growth and its vision of becoming a world-leading AI-enabled telecommunications provider. Medical Microinstruments, an Italian robotic microsurgery company leveraged Rimini Consult for Salesforce to maximize ROI on its technology investments and help eliminate unnecessary third-party software costs, implement critical training and certification workflows and develop a long-term sales force road map to support the company's global growth and continued innovation in life-enhancing surgical technology. The client noted the strategic value Rimini Street brings to their sales force evolution. Cochlear Limited, an Australian hearing technology leader, chose Rimini Support for Oracle to gain greater control and flexibility over its ERP road map, avoid vendor-driven upgrade cycles and free critical resources for digital transformation and new AI-powered customer service and analytics initiatives. The company noted moving to Rimini Street gave us back control of our ERP platform and took us out of the vendor-driven upgrade cycle. Summary. We are focused on growth acceleration, improving profitability and shareholder return. We will continue executing against our vision, strategy and plan laid out the December 2025 Investor Day. Our vision, strategy and plan leverage Rimini Street's proprietary and proven Smart Path methodology, along with our comprehensive service portfolio and capabilities to help a growing number of clients regain control of their technology road map and spending while also achieving modernization and innovation that drives down total operating costs, improves profitability and enhances competitive advantage all within their current budget. Now over to you, Michael.

Thank you, Seth, and thank you for joining us, everyone. Q2 results. We delivered strong second quarter 2026 results as positive growth drivers over the past four quarters has lifted revenue and revenue retention rates on a year-over-year basis. We continue to invest strategically in new AI-driven innovation offerings while streamlining global operations to enhance scale and efficiency. Looking ahead, we remain focused on profitable growth, disciplined cost management and maintaining a strong balance sheet. During the quarter, we prepaid $10 million of debt, reduced outstanding debt to $48.4 million, and we maintained a healthy total cash balance of $123.4 million as of June 30, 2026. Revenue for the second quarter was $111.1 million, up 6.7% year-over-year. Excluding revenue for PeopleSoft products, the adjusted revenue grew 10% year-over-year. Foreign exchange movements were negligible in the quarter, reducing second quarter revenue by approximately 0.2%. Annualized recurring revenue, excluding PeopleSoft products, was $401.1 million in the second quarter, an 8.1% increase year-over-year. Our revenue retention rate for service subscriptions, which represent 93% of total revenue, was 90%, with approximately 84% of subscription revenue noncancelable for at least 12 months. Billings for the second quarter were $100.9 million, down 8.8% year-over-year. Excluding billings associated with support services for PeopleSoft products, the year-over-year decline was 8%. The past two quarters included timing differences related to client renewables, so first half results provide a more complete view as first half billings grew 3.2% year-over-year and excluding PeopleSoft products, grew 4.7%. Gross margin for the second quarter was 60.9% compared to 60.4% in the prior year period and rose 190 basis points sequentially from the first quarter to again exceed our key objective above 60%. On a non-GAAP basis, gross margin was 61.3% up from 60.8% in the prior year second quarter. Operating expenses. Sales and marketing expense was 38.5% of revenue in the second quarter compared to 36.5% in the prior year period. On a non-GAAP basis, sales and marketing expense was 37.6% of revenue, up from 35.5% a year ago. The increase reflects our investments in go-to-market of our expanded and new service offerings during the quarter. General and administrative expenses were 15.6% of revenue in the second quarter, down from 60.2% in the prior year period. On a non-GAAP basis, G&A was 14.5% of revenue, down from 14.9% in the prior year second quarter. Net income attributable to shareholders for the second quarter was $2.4 million or $0.03 per diluted share compared to $0.32 per diluted share in the prior year period. Last year's net income benefited from a onetime pretax gain of $37.9 million associated with the Oracle settlement. Therefore, on a non-GAAP basis, net income was $5.9 million or $0.06 per diluted share versus $0.08 per diluted share a year ago. Adjusted EBITDA, as defined in our earnings release, was $10.5 million for the second quarter, representing 9.5% of revenue. This compares to $14 million or 13.4% of revenue in the prior year second quarter. Balance sheet. We ended the second quarter of 2026 with a cash balance of $123.4 million, up from $101.3 million in the prior year second quarter. Operating cash flow for the quarter decreased by $1.6 million compared to a decrease of $17.8 million in the prior year period. Year-to-date operating cash flow was $22.9 million, representing a cash flow conversion of 118%, placing us in a strong position to achieve our goal laid out at our recent Investor Day of 90% plus conversion on an annual basis. Deferred revenue as of June 30, 2026, was $267.1 million, up from $262.9 million in the prior year second quarter. Remaining performance obligations, RPO, which include billed deferred revenue, contract assets and noncancelable future revenue were $636.9 million as of June 30, 2026, an increase of 8%. Excluding RPO associated with support services for PeopleSoft products, adjusted RPO increased 8.8%, reflecting our continued growth momentum in new bookings and longer duration client commitments. PeopleSoft Support wind-down update. We continue to execute the wind-down of our PeopleSoft support services. PeopleSoft revenue declined to 3% of total revenue this quarter, down from 6% a year ago and 8% when we began the transition in 2024, reflecting steady progress towards completing the wind down by July 2028. Business outlook. The company expects third quarter 2026 revenue to be in the range of $110 million to $112 million. The company also is reiterating its full year 2026 outlook, which calls for revenue growth of 4% to 6% and adjusted EBITDA margins of 12.5% to 15.5% and is consistent with the goal of achieving the Rule of 20 for fiscal year 2026. For additional information, please see the disclosures in our Form 10-Q filed today, July 30, 2026, with the U.S. Securities and Exchange Commission. This concludes our prepared remarks. Operator, we'll now take questions.

Thank you. Ladies and gentlemen, we'll now begin the question-and-answer session. [Operator Instructions] And your first question comes from the line of Richard Baldry from ROTH Capital Partners.

Could you talk about how much maybe to date and how much ahead AI should be able to impact your cost model? So we're hearing from people, it's not just faster development or lower service costs, but things like virtual sales development reps or improving sales efficiencies and things. So sort of where are we at? How much could that impact your sort of adjusted EBITDA margins over the long term?

Sure, Rich. I think internally, when you talk about internal usage and deployment of AI, we, like everybody else, are looking for good use cases. We're using it for sales. We're using it to gather broad amounts of information about prospects very quickly and present it in a way that sales reps can see what's happening at the prospect before they ever pick up the phone and call them. That's certainly a huge improvement in time and productivity. We also, of course, use tools like Clari, which are excellent in the sales side on top of Salesforce to be able to understand and predict close rates. And it's very accurate, in fact, what we've seen over the last couple of years that we've used it. And so we can deploy tools in that part of the pipeline management. And it also allows us to aggregate very large views of what's happening when you have sellers all over the world, working different types of transactions. It makes it much easier to manage at a very large level. And of course, we're using AI and finance. We're continuing to deploy those items. And so I think overall, you look at the more thoughtful way that we're using it, not just AI all over the place. I think that, yes, we will achieve a meaningful reduction in total operating costs and more leverage as we move forward in the coming years.

And can you talk a little bit about any color you can give us on sort of top of the funnel prospect changes -- it's been maybe a year now, I guess, since the big settlement with Oracle. Sort of curious how that top of the funnel growth is going, whether it's mostly driven by sales headcount increases or whether you really -- there's some natural growth of the addressable market as a willingly addressable market, I guess, if you could look at it.

Well, I think you're looking at a few different things. One, there's no doubt that our change in the world of litigation, our change in the world of putting AI services and the evolution into being an innovation company have driven a lot more customers to us. I think there are other elements. Number one, Rich, the fact that we are now giving customers a path where they can leave the vendor's maintenance, forgo upgrades and go on a path that has innovation and modernization in it, where they do not have to think about a potential return to the vendor's road map at some point down the line has been a game changer, I think, in terms of overall demand generation. To the point you could say there are deals that we lost years ago where customers said, we love the support. We know we're going to get better service, but we're just afraid to leave the vendor's path because we think we might have to go back someday. Now that's changing. And those customers, we have several of them that have signed with us because now they're confident they don't need to make that return trip to the vendor, the boomerang effect that some referred to. And I think that, that is the single biggest driver of the top of the funnel. And I think there's some other macro issues. I mean, with SAP setting deadlines, we have all sorts of release deadlines happening in the software world. And those deadlines are driving customers to seek other alternatives to extend the life of their products because they're not ready to make a change. They don't see the value and they feel like they're being pressured from every angle. Those things combined, I think, are creating a much higher top of the funnel experience.

The last one maybe on the balance sheet. You knocked out $10 million in debt ahead of schedule. You've been pretty steadily kind of taking that number down. How do you think about the flexibility on your balance sheet and where best to allocate capital? You've got a good amount of cash. You could take out the debt overnight if you wanted to. Arguably, the shares are undervalued, you could do buybacks? Or is M&A interesting? How do you view the best use of the balance sheet flexibility you have now?

Yes, Rich, Michael here. As you noted, right, we've been heavily concentrated on one of our two levers we've identified on capital return, the debt repayment so far this year. Last two quarters of last year, the lower amount, share repurchases, we continue to evaluate. But looking forward, we may see a shift in how we allocate sitting here today. So still the two levers but may see a shift moving forward.

Congrats on the quarter.

And your next question comes from the line of Andrew Sherman from TD Cowen.

Nice quarter. Seth, I wasn't sure if I heard a whole lot on the go-to-market side in the prepared remarks. How is the sales hiring? Where do you stand versus plan on that? And how are some of the newer reps ramping to productivity?

Thanks, Andrew. I think we're doing okay. I think we have -- we've had a little bit more turnover than I'd like in some of the sales reps. And I think part of that was we've been readjusting the skill sets that we're looking for. I think like everybody else, our folks now have to talk about AI. They have to talk about innovation in different ways with a lot more technology than they did even two, three years ago. And I do think some of the reps aren't going to make that turn. And I think that's not just true for us. I think you're going to see that across technology. But we're making some changes in the force. And I think some people who are more aptitude towards being able to discuss technology in ways that business people can understand are doing better. Those who could not make that turn, we're not doing as well. And so we're -- our sales numbers, the total number of sellers is increasing. We are committed to, again, growing our sales force. We talked about that on the last couple of calls, where we were feeling optimistic enough and bullish enough about the business to begin the aggressive hiring of sellers, but not just sellers. A lot of different sales support. We had to build out a new AI support team. We had to build out new capabilities as we talked about the new service launches. Those had to come in and we had to retrain sellers as well. So, overall, I think the go-to-market is working for the sellers. I think the go-to-market in the alliances and channels is another very big part. As you know, we expect a substantial amount of our pipe to come from indirect channel. So we continue to work with our friends at ServiceNow and many other of our partners to build out more pipeline into that operation to reduce our total cost of sale and increase our leverage on sales.

That's great. And then, Michael, just on the 3Q guide and the implied Q4, just what -- help us get a little bit more confident in the acceleration there? I know some of it is easier comps. The RPO ex PeopleSoft did slow down a little bit, but anything you can give us on the confidence or the pipeline heading into the second half that will help us with the second half numbers, that would be great.

Sure, Andrew. And highlighting as Seth noted and we outlined that the building of our positive year-over-year metrics in four quarters in a row. Our retention rate, a key area that has the nine in front of it. We also highlighted relative to buildings, renewals timing has impacted the quarter-over-quarter. But putting all of this together, we are still seeing healthy, meaning double digits plus new bookings growth year-over-year puts us in a strong position where, again, we've reiterated guidance, and we feel we're in a very good position to achieve what we've laid out for the second half of the year.

And your next question comes from the line of Jeff Van Rhee from Craig-Hallum.

So, Seth, on the European Commission decision about SAP's anticompetitive practices, seems dead spot on in terms of forcing SAP to stop the punitive measures they were imposing on customers and allow them to choose third-party support, would seem to have some pretty direct ramifications for you and possibly even be kind of a shot across the bow for Oracle's behavior. Just any thoughts on that, seeing any impact? Obviously, it's very recent, but just love a little feedback there.

Sure, Jeff. I think that when you look at the decision, the agreement in Europe with SAP, I think this is really bigger than SAP. I think this is more along the lines that software licensing is getting extremely complex. We're connecting systems all over the place. All of us are. This is the new world. It's an integrated environment. How we integrate what we're allowed to move, data moving between places, licenses get brought together. They get separated, companies are merged, companies are separated. And a lot of the points that were raised and agreed upon between SAP and the European Union really were around some of these challenges that companies have with their licenses and what we might consider to be fair or unfair practices. They're not uncommon. It's just that these challenges are really impacting people's ability to run their business. And I think that they're good. I think that the decisions, of course, they're not everything we all would have want, but I do think that there's positives in there. For example, what I was just saying about the ability if a company splits apart and has to split its licenses or has to merge and comes together with another company, there are provisions about not being able to overcharge for the cost of that merger, not being able to hold people hostage around taking things apart and moving them back together. And yes, that does have a downward downstream impact on people like Rimini Street and other third-party providers and other IT providers who will see this as a big benefit because it increases the overall competitive environment and allows customers much more choice.