Rimini Street Announces Fiscal Third Quarter 2018 Financial Results

Quarterly revenue of $62.6 million, up 17% year over year

Quarterly gross margin 64.5%

1,732 active clients at September 30, 2018, up 19% year over year

LAS VEGAS–(BUSINESS WIRE)–#RMNIRimini
Street, Inc.
(Nasdaq: RMNI), a global provider of enterprise
software products and services, and the leading third-party support
provider for Oracle and SAP software products, today announced financial
results for its third quarter ended September 30, 2018.


During the third quarter, we continued our stated plan to invest in
global sales, marketing and service delivery capacity and capabilities
in order to drive future revenue growth,” stated Seth
A. Ravin
, Rimini Street co-founder and CEO. “We also launched new
marketing campaigns and our new ‘Business-Driven Roadmap’ sales strategy
to address the large and growing market opportunity for enterprise
software support. Additionally, we continued our global expansion and
filled key leadership positions. Global demand for our services
continued to be strong, with revenue outside the United States growing
32% year over year in the third quarter 2018 and representing 36% of
total revenue in the quarter.”

During the third quarter, we paid off and completed refinancing our
former credit facility with a previously announced $140 million equity
transaction, significantly reducing our total debt to approximately $3
million,” stated Tom
Sabol
, Rimini Street CFO. “The streamlined capital structure
improves the balance sheet and lowers our cost of capital going forward.”

Third Quarter 2018 Financial Highlights

  • Revenue was $62.6 million for the third quarter of 2018, an increase
    of 17% compared to $53.6 million for the third quarter of 2017.
  • Annualized Subscription Revenue was approximately $250 million for the
    third quarter of 2018, an increase of 17% compared to $214 million for
    the third quarter of 2017.
  • Active Clients totaled 1,732 as of September 30, 2018, an increase of
    19% compared to 1,459 as of September 30, 2017.
  • Revenue Retention Rate was 92.0% for the trailing 12 months ended
    September 30, 2018 compared to 94.5% for the comparable period ended
    September 30, 2017.
  • Gross Margin improved to 64.5% for the third quarter of 2018 compared
    to 62.5% for the third quarter of 2017.
  • Operating Income was $2.5 million for the third quarter of 2018
    compared to Operating Income of $7.4 million for the third quarter of
    2017. The change was the result of increased litigation costs and
    planned spending increases on sales and marketing since the Company is
    no longer constrained by financial and operating covenants in its
    former credit facility.
  • Non-GAAP Operating Income was $10.7 million for the third quarter of
    2018 compared to Non-GAAP Operating Income of $8.9 million for the
    third quarter of 2017.
  • Net Loss for the third quarter of 2018 was $48.4 million, or a loss of
    $0.85 per basic and diluted share, compared to a Net Loss of $9.0
    million, or a loss of $0.37 per basic and diluted share for the third
    quarter of 2017. The third quarter 2018 Net Loss was primarily due to
    a non-cash write-off of debt discount and issuance costs of $47.4
    million related to the payoff and termination, on July 19, 2018, of
    the Company’s former credit facility.
  • Non-GAAP Net Income for the third quarter of 2018 was $6.7 million
    compared to a Non-GAAP Net Loss of $3.1 million for the third quarter
    of 2017.
  • Operating Cash Flow for the third quarter of 2018 was an outflow of
    $9.6 million, compared to an outflow of $4.4 million for the third
    quarter of 2017.
  • Adjusted EBITDA for the third quarter of 2018 was $10.8 million
    compared to $9.5 million for the third quarter of 2017.
  • Completed a $140 million offering of common and redeemable preferred
    stock on July 19, 2018, which resulted in repayment of all remaining
    outstanding obligations under the Company’s former credit facility
    totaling $132.8 million, consisting of principal, make-whole
    applicable premium, interest and fees.

Reconciliations of the non-GAAP financial measures provided in this
press release to their most directly comparable GAAP financial measures
are provided in the financial tables included at the end of this press
release. An explanation of these measures and how they are calculated is
also included under the heading “About Non-GAAP Financial Measures and
Certain Key Metrics.”

Third Quarter 2018 Company Highlights

  • Appointed Tim DeLisle as group vice president and general manager,
    North America. Mr. DeLisle has sales, service delivery and operational
    experience with leading firms such as EMC.
  • Appointed Eric Robinson as group vice president and general manager,
    SAP Product Line. Mr. Robinson has extensive experience working with
    SAP products as a private-sector CIO.
  • Appointed Pat
    Phelan
    as vice president of market research. Ms. Phelan was a
    veteran enterprise software analyst with Gartner, with extensive
    experience covering the enterprise software and software support
    markets, including third-party support offerings and competitors.
  • Closed more than 7,500 support cases across 41 countries, and once
    again achieved an average client satisfaction rating on the Company’s
    support delivery of 4.8 out of 5.0 (where 5.0 is “excellent”).
  • Achieved a flawless
    ISO 9001 audit
    for the seventh consecutive year, and a flawless
    ISO 27001 audit for the fifth consecutive year.
  • Obtained the Australian Government’s Australian Taxation Office (ATO) certification
    for Single Touch Payroll
    , well ahead of the deadline set by the
    ATO and ahead of the original software vendors.
  • Received the Asia-Pacific
    Stevie Award for Customer Service Innovation
    for the second
    consecutive year.
  • Won 14
    additional awards
    from Stevie International Business Awards,
    Globee Awards and the Customer Sales & Service awards. Category wins
    include Customer Service Department of the Year, Customer Service
    Leadership of the Year, Customer Service Team of the Year, and Company
    of the Year.
  • Presented at nine CIO and IT and procurement leader events globally
    including Gartner ITAM in London and Orlando, Florida, the IDC Digital
    Transformation Summit in Jakarta, and the Japan Users Association of
    Information Systems in Tokyo.
  • Notified that the U.S. Supreme Court has agreed to hear the Company’s appeal
    for $12.8 million
    in non-taxable costs that were previously
    awarded to Oracle in Oracle vs. Rimini Street.

Revenue Guidance

The Company is providing fourth quarter 2018 revenue guidance to be in
the range of $63.0 million to $65.0 million, and tightening full year
2018 revenue guidance to now be in the range of $248 million to $250
million, which is at the high end of our previous guidance.

Webcast and Conference Call Information

Rimini Street will host a conference call and webcast to discuss the
third quarter 2018 results at 5:00 p.m. Eastern Time / 2:00 p.m. Pacific
Time on November 8, 2018. A live webcast of the event will be available
on Rimini Street’s Investor Relations site at https://investors.riministreet.com/events-and-presentations/upcoming-and-past-events.
Dial-in participants can access the conference call by dialing (855)
213-3942
in the U.S. and Canada and enter the code 6397126. A
replay of the webcast will be available for at least 90 days following
the event.

Company’s Use of Non-GAAP Financial Measures

This press release contains certain “non-GAAP financial measures.”
Non-GAAP financial measures are not based on a comprehensive set of
accounting rules or principles. These non-GAAP financial measures
supplement, and are not intended to represent a measure of operating
performance in accordance with disclosures required by generally
accepted accounting principles, or GAAP. Non-GAAP financial measures
should be considered in addition to, and not as a substitute for or
superior to, financial measures determined in accordance with GAAP. A
reconciliation of GAAP to non-GAAP results is included in the financial
tables located elsewhere in this press release. Presented under the
heading “About Non-GAAP Financial Measures and Certain Key Metrics” is a
description and explanation of our non-GAAP financial measures.

About Rimini Street, Inc.

Rimini Street, Inc. (Nasdaq: RMNI) is a global provider of enterprise
software products and services, and the leading third-party support
provider for Oracle and SAP software products. The Company has redefined
enterprise software support services since 2005 with an innovative,
award-winning program that enables licensees of IBM, Microsoft, Oracle,
Salesforce, SAP and other enterprise software vendors to save up to 90
percent on total maintenance costs. Clients can remain on their current
software release without any required upgrades for a minimum of 15
years. Over 1,700 global Fortune 500, midmarket, public sector and other
organizations from a broad range of industries currently rely on Rimini
Street as their trusted, third-party support provider. To learn more,
please visit http://www.riministreet.com/,
follow @riministreet
on Twitter and find Rimini Street on Facebook
and LinkedIn.
(IR-RMNI)

Forward-Looking Statements

Certain statements included in this communication are not historical
facts but are forward-looking statements for purposes of the safe harbor
provisions under The Private Securities Litigation Reform Act of 1995.
Forward-looking statements generally are accompanied by words such as
“may,” “should,” “would,” “plan,” “intend,” “anticipate,” “believe,”
“estimate,” “predict,” “potential,” “seem,” “seek,” “continue,”
“future,” “will,” “expect,” “outlook” or other similar words, phrases or
expressions. These forward-looking statements include, but are not
limited to, statements regarding our expectations of future events,
future opportunities, global expansion and other growth initiatives and
our investments in such initiatives. These statements are based on
various assumptions and on the current expectations of management and
are not predictions of actual performance, nor are these statements of
historical facts. These statements are subject to a number of risks and
uncertainties regarding Rimini Street’s business, and actual results may
differ materially. These risks and uncertainties include, but are not
limited to, continued inclusion in the Russell 2000 Index in the future;
changes in the business environment in which Rimini Street operates,
including inflation and interest rates, and general financial, economic,
regulatory and political conditions affecting the industry in which
Rimini Street operates; adverse developments in pending litigation or in
the government inquiry or any new litigation; the final amount and
timing of any refunds from Oracle related to our litigation; our need
and ability to raise additional equity or debt financing on favorable
terms; the terms and impact of our 13.00% Series A Preferred Stock;
changes in taxes, laws and regulations; competitive product and pricing
activity; difficulties of managing growth profitably; the success of our
recently introduced products and services, including Rimini Street
Mobility, Rimini Street Analytics, Rimini Street Advanced Database
Security, and services for Salesforce Sales Cloud and Service Cloud
products; the loss of one or more members of Rimini Street’s management
team; uncertainty as to the long-term value of Rimini Street’s equity
securities; and those discussed under the heading “Risk Factors” in
Rimini Street’s Quarterly Report on 10-Q filed on November 8, 2018,
which disclosures amend and restate the disclosures appearing under the
heading “Risk Factors” in Rimini Street’s Annual Report on Form 10-K
filed on March 15, 2018, and as updated from time to time by Rimini
Street’s future Quarterly Reports on Form 10-Q, Current Reports on Form
8-K, and other filings by Rimini Street with the Securities and Exchange
Commission. In addition, forward-looking statements provide Rimini
Street’s expectations, plans or forecasts of future events and views as
of the date of this communication. Rimini Street anticipates that
subsequent events and developments will cause Rimini Street’s
assessments to change. However, while Rimini Street may elect to update
these forward-looking statements at some point in the future, Rimini
Street specifically disclaims any obligation to do so, except as
required by law. These forward-looking statements should not be relied
upon as representing Rimini Street’s assessments as of any date
subsequent to the date of this communication.

© 2018 Rimini Street, Inc. All rights reserved. “Rimini Street” is a
registered trademark of Rimini Street, Inc. in the United States and
other countries, and Rimini Street, the Rimini Street logo, and
combinations thereof, and other marks marked by TM are trademarks of
Rimini Street, Inc. All other trademarks remain the property of their
respective owners, and unless otherwise specified, Rimini Street claims
no affiliation, endorsement, or association with any such trademark
holder or other companies referenced herein.

 
Rimini Street, Inc.
Unaudited Condensed Consolidated Balance Sheets
(In thousands, except per share amounts)
   
September 30, December 31,
ASSETS

2018

2017

Current assets:
Cash and cash equivalents $ 23,488 $ 21,950
Restricted cash 434 18,077
Accounts receivable, net of allowance of $260 and $51, respectively 42,546 63,525
Prepaid expenses and other   9,124     8,560  
 
Total current assets 75,592 112,112
 
Long-term assets:

Property and equipment, net of accumulated depreciation and
amortization of $8,173 and $6,947, respectively

3,632 4,255
Deferred debt issuance costs, net 3,520
Deferred offering costs 500
Deposits and other 1,338 1,065
Deferred income taxes, net   921     719  
 

Total assets

$ 81,483   $ 122,171  
 
LIABILITIES, REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS’ DEFICIT
Current liabilities:
Current maturities of long-term debt $ 2,735 $ 15,500
Accounts payable 9,574 10,137
Accrued compensation, benefits and commissions 20,483 18,154
Other accrued liabilities 23,434 32,553
Deferred revenue   143,578     152,390  
 

Total current liabilities

199,804 228,734
 
Long-term liabilities:
Long-term debt, net of current maturities 66,613
Deferred revenue 31,018 29,182
Accrued PIK dividends payable 846
Other long-term liabilities   1,979     7,943  
 

Total liabilities

  233,647     332,472  
 

Redeemable Series A Preferred Stock. Authorized 180 shares,
issued and outstanding

140 shares in 2018. Liquidation preference of $140,000, net of
discount of $26,755 in 2018
  113,245      
 
Stockholders’ deficit:

Preferred Stock, $0.0001 par value per share. Authorized 99,820
shares (exclusive of 180 shares of Series A Preferred Stock); no
other series has been designated

Common Stock; $0.0001 par value. Authorized 1,000,000 shares;
issued and outstanding 63,514 and 59,314 shares as of September
30, 2018 and December 31, 2017, respectively

6 6
Additional paid-in capital 110,895 94,967
Accumulated other comprehensive loss (1,596 ) (867 )
Accumulated deficit   (374,714 )   (304,407 )

Total stockholders’ deficit

  (265,409 )   (210,301 )

Total liabilities, redeemable preferred stock and stockholders’
deficit

$ 81,483   $ 122,171  
 
Rimini Street, Inc.
Unaudited Condensed Consolidated Statements of Operations
(In thousands, except per share amounts)
   
Three Months Ended
September 30,

2018

2017

 
Revenue $ 62,629 $ 53,611
Cost of revenue   22,220     20,109  
 
Gross profit   40,409     33,502  
 
Operating expenses:
Sales and marketing 22,312 17,188
General and administrative 8,585 8,580
Litigation costs and related recoveries:
Professional fees and other defense costs of litigation 6,990 3,327
Insurance recoveries, net       (2,962 )
 
Total operating expenses   37,887     26,133  
 
Operating income 2,522 7,369
 
Non-operating expenses:
Interest expense (9,499 ) (9,152 )
Other debt financing expenses (48,375 ) (2,563 )
Loss from change in fair value of redeemable warrants (5,817 )
Gain from change in fair value of embedded derivatives 7,800 1,400
Other income (expense), net   (306 )   108  
 
Loss before income taxes (47,858 ) (8,655 )
Income tax expense   (510 )   (385 )
 
Net loss $ (48,368 ) $ (9,040 )
 
Loss applicable to common stockholders $ (53,070 ) $ (9,040 )
 
Net loss per share of Common Stock (basic and diluted) $ (0.85 ) $ (0.37 )
 

Weighted average number of shares of Common Stock outstanding
(basic and diluted) (1)

  62,590     24,727  
 
______________
(1)   For the three months ended September 30, 2017, the weighted average
number of shares have been restated to give effect to the reverse
recapitalization consummated on October 10, 2017.
 
Rimini Street, Inc.
GAAP to Non-GAAP Reconciliations
(In Thousands)
   
Three Months Ended
September 30,

2018

2017

 
Non-GAAP operating income reconciliation:
Operating income $ 2,522 $ 7,369
Non-GAAP adjustments:
Litigation costs, net of related recoveries 6,990 365
Stock-based compensation expense   1,178     1,202  
 
Non-GAAP operating income $ 10,690   $ 8,936  
 
 
Non-GAAP net income (loss) reconciliation:
Net loss $ (48,368 ) $ (9,040 )
Non-GAAP adjustments:
Litigation costs, net of related recoveries 6,990 365
Extinguishment charges upon payoff of Credit Facility:
Write-off of debt discount and issuance costs 47,367
Make-whole applicable premium 7,307
Stock-based compensation expense 1,178 1,202
Gain from change in fair value of embedded derivatives (7,800 ) (1,400 )
Loss from change in fair value of redeemable warrants       5,817  
 
Non-GAAP net income (loss) $ 6,674   $ (3,056 )
 
Non-GAAP Adjusted EBITDA reconciliation:
Net loss $ (48,368 ) $ (9,040 )
Non-GAAP adjustments:
Interest expense 9,499 9,152
Income tax expense 510 385
Depreciation and amortization expense   449     505  
 
EBITDA (37,910 ) 1,002
Non-GAAP adjustments:
Litigation costs, net of related recoveries 6,990 365
Stock-based compensation expense 1,178 1,202
Gain from change in fair value of embedded derivatives (7,800 ) (1,400 )
Loss from change in fair value of redeemable warrants 5,817
Other debt financing expenses   48,375     2,563  
 
Adjusted EBITDA $ 10,833   $ 9,549  
 

About Non-GAAP Financial Measures and Certain Key Metrics

To provide investors and others with additional information regarding
Rimini Street’s results, we have disclosed the following non-GAAP
financial measures and certain key metrics. We have described below
Active Clients, Annualized Subscription Revenue and Revenue Retention
Rate, each of which is a key operational metric for our business. In
addition, we have disclosed the following non-GAAP financial measures:
non-GAAP operating income, non-GAAP net income (loss), EBITDA, and
Adjusted EBITDA. Rimini Street has provided in the tables above a
reconciliation of each non-GAAP financial measure used in this earnings
release to the most directly comparable GAAP financial measure. Due to a
valuation allowance for our deferred tax assets, there were no tax
effects associated with any of our non-GAAP adjustments. These non-GAAP
financial measures are also described below.

The primary purpose of using non-GAAP measures is to provide
supplemental information that management believes may prove useful to
investors and to enable investors to evaluate our results in the same
way management does. We also present the non-GAAP financial measures
because we believe they assist investors in comparing our performance
across reporting periods on a consistent basis, as well as comparing our
results against the results of other companies, by excluding items that
we do not believe are indicative of our core operating performance.
Specifically, management uses these non-GAAP measures as measures of
operating performance; to prepare our annual operating budget; to
allocate resources to enhance the financial performance of our business;
to evaluate the effectiveness of our business strategies; to provide
consistency and comparability with past financial performance; to
facilitate a comparison of our results with those of other companies,
many of which use similar non-GAAP financial measures to supplement
their GAAP results; and in communications with our board of directors
concerning our financial performance. Investors should be aware however,
that not all companies define these non-GAAP measures consistently.

Active Client is a distinct entity that purchases our services to
support a specific product, including a company, an educational or
government institution, or a business unit of a company. For example, we
count as two separate active clients when support for two different
products is being provided to the same entity. We believe that our
ability to expand our active clients is an indicator of the growth of
our business, the success of our sales and marketing activities, and the
value that our services bring to our clients.

Annualized Subscription Revenue is the amount of subscription
revenue recognized during a quarter and multiplied by four. This gives
us an indication of the revenue that can be earned in the following
12-month period from our existing client base assuming no cancellations
or price changes occur during that period. Subscription revenue excludes
any non-recurring revenue, which has been insignificant.

Revenue Retention Rate is the actual subscription revenue
(dollar-based) recognized over a 12-month period from customers that
were clients on the day prior to the start of such 12-month period,
divided by our Annualized Subscription Revenue as of the day prior to
the start of the 12-month period.

Non-GAAP Operating Income is operating income adjusted to exclude
litigation costs and related recoveries, and stock-based compensation
expense. These exclusions are discussed in further detail below.

Non-GAAP Net Income (Loss) is net loss adjusted to exclude
litigation costs and related recoveries, write-offs of debt discount and
issuance costs and make-whole applicable premium incurred upon the
payoff of our former credit facility, stock-based compensation expense,
and gains and losses on changes in the fair value of embedded
derivatives and redeemable warrants. These exclusions are discussed in
further detail below.

We exclude the following items from our non-GAAP financial measures, as
applicable, for the periods presented:

Litigation Costs and Related Recoveries: Litigation costs and
related recoveries relate to outside legal costs, net of insurance
recoveries for our litigation activities. These costs and related
insurance recoveries relate to the ongoing litigation we are involved
with, and do not relate to the day-to-day operations or our core
business of serving our clients.

Extinguishment Charges: The write-off of debt discount and
issuance costs and make-whole applicable premium incurred upon the
payoff of our former credit facility are expenses associated with our
debt financing structure. Therefore, we exclude them since they do not
relate to our day-to-day operations or our core business of serving our
clients.

Stock-Based Compensation Expense: Our compensation strategy
includes the use of stock-based compensation to attract and retain
employees. This strategy is principally aimed at aligning the employee
interests with those of our stockholders and to achieve long-term
employee retention, rather than to motivate or reward operational
performance for any particular period. As a result, stock-based
compensation expense varies for reasons that are generally unrelated to
operational decisions and performance in any particular period.

Gains and Losses on Changes in Fair Value of Embedded Derivatives and
Redeemable Warrants:
Our former credit facility, which was
terminated on July 19, 2018, included features that were determined to
be embedded derivatives requiring bifurcation and accounting as separate
financial instruments.

Contacts

Rimini Street, Inc.
Investor Relations
Contact

Dean Pohl, +1 203-347-4446
dpohl@riministreet.com
or
Media
Relations Contact

Michelle McGlocklin, +1 925-523-8414
mmcglocklin@riministreet.com

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