Rimini Street, Inc. (RMNI) Q3 2026 Earnings Call Transcript

Operator: Good afternoon, ladies and gentlemen, and welcome to Rimini Street Q3 2026 Earnings Conference Call. [Operator Instructions] This call is being recorded on Thursday, October 29, 2026. I would now like to turn the conference over to Dean Pohl, Vice President, Treasurer and Investor Relations. Please go ahead.

Dean Pohl: Thank you, operator. I'd like to welcome everyone to Rimini Street's Fiscal Third 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 third quarter ended September 30, 2026, which is available on our website under the Investor Relations section. Reconciliations 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 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. 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. Before taking questions and moving on to our prepared remarks, I'd like to announce that our next Investor Day will be held on January 14, 2027, in New York City. We'll be sharing invitations and additional details shortly. With that, I'd like to turn the call over to Seth.

Seth Ravin: Thank you, Dean, and thank you, everyone, for joining us. Third quarter results. Our third quarter results demonstrate 3 consecutive quarters of achievement against our fiscal 2026 plan and guidance provided at our December 2025 Investor Day, marked 5 consecutive quarters of improving financial and growth results, and we are reiterating our fiscal 2026 Rule of 20 guidance. We had continued strong demand for our enterprise software solutions and achieved record third quarter sales of services for SAP software. Further, we completed new partnerships that expand sales leverage, launched new solutions that expand market opportunities and strengthened our global executive leadership team. Sales to new clients and cross-sales to existing clients included a mix of our products, services and solutions across a broad set of industries and geographies. New logo sales included major global brands. And we delivered a strong ARR subscription renewals quarter as well. New service billings during the quarter were primarily driven by a mix of new subscription and project-based professional services. Sales included 17 new client transactions in the quarter with TCV over $1 million, and these contracts totaled TCV of $43.7 million. These larger contracts also contributed to another strong quarter of year-over-year RPO growth. In the third quarter, we fielded a larger global team of quota-carrying sellers, ending the quarter with around 80 sellers. A significant number of the sellers are ramping, and we hired a new global revenue enablement leader who joined us from Kyndryl to accelerate the ramp time to full seller productivity, drive increased seller participation in quarterly results, and an increased number of sellers achieving and exceeding their fully ramped annualized quota. Market focus drives growth and profitability. Rimini Street helps clients use technology to lower total operating costs, improve profitability and enhance competitive advantage. We specialize in the operation, support and modernization of the core big and complex transaction enterprise software and systems that run a business or government agency. We have a unique combination of proven and reliable proprietary systems, processes and patented technology. That, along with unparalleled enterprise software and technology skills, knowledge and experience, delivers a unique set of services and competitive advantage in the IT services market. Large-scale ERP and enterprise software replacements are expensive, time-consuming and often fail to deliver the expected business value. Real innovation is not often achieved just by implementing a software vendor's next AI release. And there is simply not enough labor, time or money to perform all vendor-pushed upgrades and migrations. We help organizations avoid unnecessary and costly ERP or other enterprise software upgrades, migrations or replatforming projects and leverage their existing software infrastructure as a long-term foundation that can be built on and around. Rimini Street operates, supports and modernizes these existing systems with ultra responsive service and at a significant cost savings, and provides our 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 client's current IT budget, end-to-end Agentic AI solutions. During the quarter, we launched Rimini Govern for AI, a comprehensive governance, security and control offering, delivered as a service, to help enterprises quickly and easily deploy, manage and scale AI agents across their organizations. The solution leverages ServiceNow Control Tower solution as part of our strong and growing partnership with ServiceNow and addresses one of the most significant barriers to enterprise AI adoption. Rimini Govern for AI joins our Agentic AI solution suite, which also includes Rimini Agentic UX, our AI-driven experience and automation layer that is deployed right over existing client ERP software and delivers automated workflows, persona-based user experiences, modernization and innovation 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, perform functional and security testing and certify operational readiness. 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. During the third quarter, we completed millions of dollars of sales transactions with partners and continued our focus on growing sales leverage from the indirect channel. New strategic partnerships announced during the quarter include Datacom, a leading technology services provider in Australia and New Zealand. Datacom now offers support services, security and compliance solutions powered by Rimini Street. Rimini Street made further progress in maturing several of its global strategic partnerships such as ServiceNow. Rimini and ServiceNow executives continue to share alignment on vision and execution for ServiceNow's AI tools and governance solutions being integrated into Rimini's 2 primary AI offerings, Rimini Agentic AI ERP solutions and Rimini Govern for AI as a Service. Client success stories. We are helping clients across many industries, geographies and software platforms 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 several third quarter examples of how clients are reducing operating costs and redirecting savings towards innovation, transformation and improved competitive advantage for clients across different geographies and industries. Khimji Ramdas Group, one of Oman's largest privately held conglomerates, selected Rimini Support for SAP to reduce costs, reinvest savings in AI innovation and maintain its highly customized SAP ECC 6 environment with 0 downtime. The client noted that Rimini Street significantly reduced its total SAP support cost by 80%, freeing up funds that they are now investing in AI-driven innovation without undergoing migrations or replatforming. Chen Full International, a Taiwanese industrial engineering and manufacturing company, leveraged Rimini Support for SAP S/4 HANA to improve cost efficiency and redirect resources towards AI-driven manufacturing innovation. The company noted that they believe Rimini Street is a company that delivers the best cost-performance ratio and would happily refer all IT and finance leaders to partner with Rimini Street for SAP support, savings and scale. AUTOBACS SEVEN, a leading Japanese automotive retail and services company, has leveraged Rimini Support for SAP ECC 6.0 to achieve 10 years of stable operations and reliable enterprise system performance and has expanded its partnership with Rimini Street to include its Oracle database landscape. The company noted that whenever there are questions about how their IT budgets should be spent, they seek advice from Rimini Street, as we are a constant source of value creation for them. Summary. We remain focused on accelerating growth, improving profitability and delivering shareholder returns in accordance with the plan and guidance we shared at our December 2025 Investor Day and the 2027 plan and guidance we will share at our upcoming Investor Day. Now, over to you, Michael.

Michael Perica: Thank you, Seth, and thank you for joining us, everyone. Third quarter results. Revenue increased 8.3% year-over-year to $112.1 million, while adjusted revenue, excluding PeopleSoft, increased 10.7%. This marks the second quarter in a row in which our adjusted revenue grew by double digits year-over-year. U.S. revenue increased 4.3% to $48.3 million, while international revenue increased 11.6% to $63.8 million. Subscription revenue was $105.2 million, representing 93.9% of total revenue. Adjusted annualized recurring revenue increased 9.8% to $410.4 million. And revenue retention was 90% compared to 89% a year ago. Calculated billings increased 21% year-over-year to $80.5 million. Adjusted calculated billings, excluding PeopleSoft, increased 21.9% to $78 million. On a year-to-date basis, calculated billings and adjusted billings rose 7.8% and 9.2%, respectively. Moving further down the profit and loss statement, we are pleased to have delivered significant bottom line leverage during the quarter as we planned. Gross margin expanded to 61.4% from 59.9% in the prior year period, rising 50 basis points sequentially from the second quarter to again exceed our key objective above 60%. On a non-GAAP basis, gross margin was 61.7%, up from 60.4% a year ago. Sales and marketing expenses were 34.8% of revenue in the third quarter compared to 36.7% in the prior year period. On a non-GAAP basis, sales and marketing expense was 34.4% of revenue, down from 35.7% a year ago. Q3 sales and marketing spend also decreased from run rate spending in the first half of the year, given our decision to pull forward spending as we outlined earlier this year. General and administrative expenses were 15% of revenue in the third quarter, down from 17.6% in the prior year period. On a non-GAAP basis, G&A was 13.8% of revenue, down from 16.5% a year ago. The decrease primarily reflects workforce optimization and operating leverage. From a capital allocation perspective, during the quarter, we repurchased $5 million of common stock and prepaid an additional $5 million of debt. As a result, fiscal 2026 year-to-date capital returns and debt reduction totaled $30.9 million, reducing outstanding term loan debt to $43.4 million, while preserving financial flexibility to invest in sales capacity, product innovation and AI service offerings. Adjusted EBITDA was $15.1 million or 13.5% of revenue for the third quarter compared with $9.9 million or 9.6% of revenue in the prior year period. Non-GAAP operating income was $14 million compared with $8.5 million a year ago. Balance sheet. We ended the third quarter with a cash balance of $93.3 million, debt of $43.4 million, resulting in net cash of $49.9 million. Deferred revenue as of September 30, 2026 was $235.5 million, up from $226 million in the prior year third quarter. Remaining performance obligations were $652.9 million as of September 30, 2026, an increase of 6.8% year-over-year and 2.5% sequentially. We do note that this RPO level was only $96,000 shy of our record high. Excluding PeopleSoft support services, adjusted RPO was $643.4 million, an increase of 7.4%, reflecting continued growth momentum and contracted revenue visibility across our core offerings. PeopleSoft support wind-down update. We continue to execute the wind-down of our PeopleSoft support services. PeopleSoft revenue was $2.7 million in the third quarter compared with $4.7 million in the prior year period, as we progress toward completing the wind-down by July 31, 2028. Business outlook. The company expects fourth quarter 2026 revenue to be in the range of $117 million to $119 million and is reiterating its Rule of 20 guidance for fiscal year 2026. For additional information, please see the disclosures in our Form 10-Q filed today, October 29, 2026, with the U.S. Securities and Exchange Commission. This concludes our prepared remarks. Operator, we'll now take questions.

Operator: [Operator Instructions] Your first question comes from the line of Richard Baldry with ROTH Capital Partners.

Richard Baldry: If I look at sort of Q3 versus Q1, the COGS line is essentially dead flat, OpEx also very flat and revs are up $7 million. Can you talk about where the efficiencies are coming from? Is it AI-driven sort of automation things you're able to do? Is there other places? And how much do you feel like greater efficiencies are ahead in more of an Agentic AI sort of back-office capable world? Or how deep into the operation do you think it can continue to go?

Seth Ravin: Sure, Rich. I think we're still not at much depth in terms of sort of an Agentic AI internal revolution that drives down costs. We're really focused much more on operational efficiencies around process. We've been moving some labor into different places, so we get a better return on the labor that we are spending. I think we are improving systems, processes, major investments across the enterprise. That's certainly going into it. I think there's still room. I think as you've heard us talk about before, when we talk about efficiencies, we talk about scale, we said north of $1 billion, we would see something around 30% in terms of the sales and marketing, a 10% G&A type number that can drop more to the bottom line and a higher gross margin mix somewhere in the mid-60s. So I think we've got a formula that we've continued to march towards, but there's certainly room and opportunity for additional efficiencies.

Richard Baldry: And maybe turning to the Gen AI suite. Can you talk about any early feedback you've gotten, traction, whether it's vertical specific or international versus U.S.? Just to start to get a feel for what that could do maybe more in '27 than in the fourth quarter.

Seth Ravin: Yes. I don't really have a good feel for that yet. I mean, we're deploying a lot internally. Of course, our customer base on a global basis is busy ascertaining what processes they want to focus on, how they want to approach it. And I think, Rich, you're seeing -- and I'm sure you watch very closely in the trade of the last few days in the market. I think people are starting to understand that the upfront investments in the world of IT technology are going to precede actual returns on using those investments, and those are going to take a little while to happen. And we're going to see that with the client base as well. Many clients are simply still trying to figure out where to start and how to get started. And we're spending a lot of time with clients, a lot of education, a lot of discussions, moving people forward one step at a time. So it will take a while.

Richard Baldry: And maybe for Michael, if we look at your pace year-to-date, about $10 million a quarter on capital return, whether that's buyback or debt reduction. As you think about now that adjusted EBITDA stepped up pretty meaningfully in the third quarter, how do you feel about that program as we exit the year into '27? Should it be pretty even between debt and buybacks ahead? Do you think there's a preference for one or the other? How do we think about that in our models?

Michael Perica: Rich, I would reiterate as last quarter, and given where we are that in the near term, as we see it now, more of a bias towards the share repurchase. Difficult to say what opportunities will present itself in the balance moving forward, more in January when we see you then and others. But at this time, I have a bias more towards the share repurchase.

Richard Baldry: And last for me is, the organic growth seems to be starting to pick up here. Can you talk about your comfort level with your go-to-market operations, sort of the headcount, the efficiencies you're getting with them, the maturity there and what we would expect to see maybe for growth in that headcount in '27?

Seth Ravin: Well, I think if you look at our total headcount, Rich, we're down significantly from the high. And that's just been, again, continued focus on optimization of spend, the process improvements that we're putting in, the system improvements, moving people around to different regions. I think all of that has come into play, and I think we're going to continue to see a focus on that. And I think that we're going to continue to see -- there will be some growth in the headcount, but our focus really much more is about leverage and especially in the sales side, where we want to see more productivity out of the sales force where we talked about -- earlier in my prepared remarks, where we talked about getting a much higher return in terms of participation of the number of sellers in any given quarter and getting to a higher number of sellers achieving full annualized quota. So you are going to see a little bit of a shift from adding headcount in the sales world to driving higher productivity out of the sales force.

Richard Baldry: Got it. Congrats on the step-up to the EBITDA line.

Operator: And your next question comes from the line of Alex Fuhrman with Lucid Capital Markets.

Alex Fuhrman: Congratulations on another strong quarter. Seth, I was hoping you could tell us a little bit about what's driving the huge increase in billings. It looks like adjusted billings were down a little bit in the second quarter, roaring back to 20% growth in the third quarter. Can you talk a little bit about what's driving that big inflection? And then, just as we think about the next couple of years, what does that billing growth rate kind of imply about revenue growth over the next few years? Obviously, I wouldn't expect revenue to just go up 20% per year, but can you help kind of bridge that gap for us?

Seth Ravin: Well, certainly, and thank you again. I think what you're going to watch is, we are committed to getting to that double-digit growth number on the top line. You see how we're doing the Rule of 20 focus for this year. And then, of course, we would be looking to step that up over time. And so, I think everything that we're doing is really around focus on driving return on investment. And I think that's showing up in the sales team. I think it's showing up in some of the large deals that we're doing. You look at the number of $1 million-plus transactions continues to grow over time. You see the fact that we're working on bigger, more complex and strategic deals. We're also doing that on a global basis. And I think the fact that we've taken a very different position than most of the market, where we are an AI last position. We're going in and helping customers fix business issues, and we start by streamlining processes and reengineering processes. We then work on to automation, and then we look at where we can thoughtfully deploy AI in a cost-effective way. I think the combination of our approach, our methodology and the fact that we are getting all of this innovation into customers inside their existing budget, it makes us very differentiated from other proposals that they're seeing. And I think you're watching that start to take hold in bigger and bigger numbers that we would expect to grow quarter-over-quarter.

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

Jeff Van Rhee: Seth, just on -- congrats on the quarter, a lot to like here. When you look at pipeline at this point, can you quantify pipeline, pipeline growth, breadth, depth, coverage? Give me a sense of how it's evolved over the last few quarters.

Seth Ravin: Certainly, and thank you. I think the thing about the pipeline is, we're really focused on the quality of the pipe. Closing 25%, 30% in that range is a good healthy amount of pipe. I think we spent the last few quarters in developing a better methodology for keeping a cleaner pipe so that we have a better understanding of what it is we're chasing in terms of deals. I think the fact that we're not chasing phantom deals, the quality of the deals we're chasing is higher. So I think it really is much more a focus on quality over quantity. And so, I won't really compare the numbers. The pipelines are fairly similar, but what we're getting out of those pipelines is far better because it is a higher-quality pipe. And you add in there the fact that I think we're doing a better job of executing on the sales side, and the combination of that is driving the numbers higher.

Jeff Van Rhee: Got it. And on the numbers being higher, you commented on a record quarter for SAP. Congrats. And then, as you switch over to the Oracle side, how is Oracle doing relative to the trends you've seen in SAP? Have you felt the impact of the Oracle suite? I didn't hear you mention it. I would assume [ that's got to ] change the way you're selling there and maybe just piling on there, changes in tactics from Oracle. So just kind of a broad overview quickly on Oracle and how it's going.

Seth Ravin: Yes. We're actually seeing some big improvements in the Oracle sales side as well. even though it was a record on the SAP, as you know, that's our third quarter focus due to timing and contractual components for SAP. And so, we are seeing good response there. I do think there are tremendous opportunities in the Oracle world. Obviously, Oracle is going through its own transformation, attempting to becoming a hyperscaler, a lot of things that they're focused on. And I think that there are some customers who feel that we would be a better support provider through transition times at Oracle, and of course, across the market in general. So we're definitely bullish on the Oracle side of the business. And of course, we mentioned Oracle, there's hundreds of products within the Oracle family. And so, we do cover quite a few of them.

Jeff Van Rhee: Yes. Great. And then, maybe last for me on the partner side. I think you said last quarter, look, we're improving. We're getting better. We're sort of at the jog stage, if I remember, was kind of how you framed it. Where are we now in terms of momentum with partners? And I'd love it if you could put some quantification on that in terms of just quantifying the change in traction with partners over time.

Seth Ravin: Well, I think as we would all like it to be much faster, it is a complex process to get ourselves integrated with all these partners. I think that I'm pleased with some of the progress. Some of the others have taken a little longer. As I mentioned in the prepared remarks, we did do millions of dollars of sales with partners, some very, very big transactions in this last quarter. So, that is very good news. But the overall amount, as you know, is we're trying to get sort of a 40% of the pipeline coming from the indirect channel, giving us a substantial amount of leverage into the pipeline. We're not there yet. We're still getting these deals coming in onesie-twosies, and we're still working them, of course, some great ones, all the way up through the federal government. But in terms of building that sustained 40% of pipeline, we're still going to be a few quarters away from that.

Jeff Van Rhee: Yes. Got it. Maybe one more, just, Michael, on contracts and contract duration, how has that changed over the last few quarters?

Michael Perica: So Jeff, we've been relatively consistent to where we noted in the second half of last year that we're having more engaged discussions around longer duration. And I would highlight, again, our RPO, which typically peaks in the fourth quarter of the year as we saw last year and set a record, as we noted, we were only $96,000 off and saw the sequential increase. So the underlying trends are similar. Obviously, there's variability quarter-to-quarter, but those underlying trends still feel to be intact at this time.

Operator: And there are no further questions at this time. I would like to hand it back to Seth Ravin for closing remarks.

Seth Ravin: Thank you very much. And thanks again, everyone, for joining us for the call. We want to thank all of our clients, as usual, for their business and trust, and of course, all of our colleagues for their efforts during the quarter. I look forward to talking to all of you on our next quarterly call, and we hope you're able to join us for the investor meeting that we're going to have in January in New York City. Thank you, everybody.

Operator: Thank you, presenters. And ladies and gentlemen, this concludes today's conference call. Thank you all for joining. You may now disconnect.