'Lumpiness' weakens Rimini Street Q3, but changes are underway

Profile picture for user slauchlan By Stuart Lauchlan November 4, 2021 Audio mode
Summary:
Rimini Street continues its organizational transition in pursuit of its billion dollar ambitions.

Seth Ravin, CEO Rimini Street
Seth Ravin

“Errors being made on the battlefield” caused some lumpiness for Rimini Street in its third quarter.  The company posted revenue of $95.6 million in the period, up 15.9% year-on-year,  but net income of $1.9 million was down from $3.6 million

CEO Seth Ravin admitted that 7.9% billings growth “wasn’t our top quarter in terms of field performance”:

The second quarter we did a very strong billings growth. We had a very strong number of large deals that closed or setting of record. The third quarter, [there was] a different mix of reps out there and as I noted, half of our reps are less than a year experience. We know that 18 months is the fulcrum point between those who are producing more than ever versus those who are still getting their feet wet and learning the business. So I think that this quarter, we wound up fielding a bunch of deals out there with folks that were not necessarily the same proven players that were playing in the Oracle quarter Q2, they were playing in the SAP quarter of Q3.

And we just didn’t deliver all the deals we wanted, millions of dollars of them slipped into the fourth quarter, which we have already closed billions of dollars of that business. And we’re seeing that we had some other deals that were lost and we had some errors on the field that just were not just, again, rookie mistakes and other errors due to the fact we didn’t have enough management out there to oversee it.

The firm has been fleshing out its executive team in recent months, with Ravin noting:

Several new leaders and revenue support organizations were announced...over the last few days, including the Chief Technology Officer and Office of the CTO, Chief Products Officer, Theater GM, North America, Regional GM, North America East, GM, SAP Services, GM, Oracle Services, and GM, Global Professional Services.

These will add weight and experience to support staff internally, he said:

Today, more than half our sellers and many sales management have less than one year of experience in their roles and we still have many key sales and marketing leadership positions to fill. Like all companies today, we are competing for talent in a challenging recruiting environment. The combination of these factors has caused some lumpiness in hiring and sales execution.

But there is an upturn:

We  closed the second largest transaction in the company’s history just in last week, which was a fantastic transaction and it was done by sellers that have more than 18 months of experience, by a management team that had more than 18 months. So that’s why I mentioned it’s lumpy. We have areas where we’ve got senior people and experienced [people] that are doing very well. We have others where we got a lot of rookies on the battlefield and they’re making some errors and mistakes that we wouldn’t expect if we had a different, more mature team on that.

But when you’re doing hundreds of transactions as part of the size and growth we are, that lumpiness is coming into effect where you’ve got differences in the teams. So I do think that this was very particular to the third quarter, the amount of new people we have on the field that we have to train up. And this is just part of the growth and some growth pains that we’re going to have along the way to $1 billion.

Customers

Other stats from the quarter included:

  • Annualized Recurring Revenue was $376.6 million, an increase of 15.3% compared to $326.6 million this time last year.
  • Subscription revenue accounted for 98.4% of  total revenue.
  • US revenue was $50.5 million, up 4.8% compared to $48.2 million for the same period last year.
  • International revenue was $45.2 million, up 31.4% compared to $34.4 million last year.
  • 2,793 active clients as of September 30, 2021, up 18.1% year-on-year.
  • During the third quarter, the firm’s global service delivery team closed over 9,500 support cases.
  • It also  delivered more than 18,000 tax legal and regulatory updates across 27 countries.

New customers during the quarter included T-Mobile to support its SAP system and Origin Energy, a leading energy provider in Australia with more than four million customers, which switched to Rimini Street support for its Oracle software portfolio.

Ravin expanded on the T-Mobile deal:

T-Mobile has been leveraging Rimini Street support since 2019 for their SAP system, including support for the organization’s extensive software customizations, which were not covered under the software vendors more expensive annual support.

T-Mobile’s SAP platform is comprised of more than 200 SAP modules is used as the system of record for key financial and operational functions, and is a critical component of T-Mobile supply chain portfolio, a vital part of T-Mobile’s customer experience. Since making the switch from vendor support to Rimini Street, T-Mobile has been able to avoid a costly and unnecessary enterprise software migration project, and instead has been able to redirect budget and resources to focus on delivering services and technology aimed at the lighting its customers as a competitive differentiator.

He quoted Erik LaValle Senior Director of T-Mobile, Product & Technology for Supply Chain, as stating that when the firm had looked at the services it was getting from SAP versus the value and new functionality offered, it became clear that moving to Rimini Street support offered a more compelling alternative.

As for Origin Energy, which has a vast Oracle footprint that includes ERP system environments for retail customer billing, financial accounting, asset management, running on more than 100 Oracle database instances. The firm identified that one of its largest database OpEx costs was maintenance and support. It switched to Rimini Street support for its Oracle software, including E-Business Suite, Oracle database, Fusion Middleware, and Hyperion.

My take

Rimini Street remains in transition. Ravin previously said that he estimated that the firm was about 70% through the reworking of operations and departments to achieve the billion dollar ambitions. As of this week, he reckons that:

My guess is we’re probably 75% to 80% now, but we still got a few quarters of work to do ahead of us to complete all that a lot.

There will be a lot of attention paid to the next quarterly earnings call. But the firm remains well-positioned in a market space with huge potential. Losing a bit of lumpiness along the way will be a healthy exercise.