Macro-economy slows down deals, but Rimini Street CEO Seth Ravin is confident the firm is meeting enterprise needs

Rimini Street turned in  Q3 revenues of $101.9 million for its Q3, up six percent year-on-year, with a net loss of $405,000, compared to a profit of $1.09 million for the comparable period last year. Other stats of note from the post-earnings analyst call:

• US revenue was $53.4 million, up 5.8% from $50.5 million for the same period last year.
• International revenue was $48.5 million, up 7.4% compared to $45.2 million for the same period last year.
• Subscription revenue was $99.9 million, accounting for 98.1% of total revenue.
• Closed 8,829 support cases and delivered 7,917 tax, legal and regulatory updates to clients across 43 countries.
• Active Clients as of September 30, 2022 totalled 3,010, an increase of 7.8% year-on-year.
• New or expanded clients included Brazilian soybean provider Amaggi Group; South Korean hypermarket firm Lotte Mart; New Zealand’s Manukau Institute of Technology; Racing and Waging Western Australia; and University of Technology Sydney.

Inevitably the macro-economic climate has provided some headwinds, acknowledged CEO Seth Ravin:

We did multi-million dollar SAP deals in the quarter. Some really, really nice strategic wins around the world. So that was number one, was getting those SAP deals done. We didn’t get enough of them over the line, but it wasn’t really losses. It was a lot of issues of delayed deals. And we just didn’t see the transactions closing at the rates and the numbers that we had hoped for the quarter.

We had sufficient pipeline globally to make the numbers that we wanted to get out there and do, but those deals just didn’t all get over the line. So qualitatively excellent deals around the world with big deals, brand names, we just didn’t have the volume that we needed to make the numbers that we wanted to make.

I do see a lot of it being macro-economic. We were able to get some of the customers that were even delayed from Q2 over the line in Q3, but we did have a lot of Q3 that slipped. In fact, one of them slipped by two hours, seven figure deals slipped into Q4 just because of signature and other processing issues, while people were dealing with other matters in the company.

He added:

We believe the current global macro-economic environment is forcing organizations to refocus their businesses in the short-term, including their IT investment and staffing plans. And it has led to some frozen and delayed IT and IT service procurement decisions.

However, as we have already seen with key sales wins in the third quarter, there is increased movement by organizations to optimize their IT spend and we believe Rimini Street is well positioned with its new broader portfolio of services to ultimately benefit from the most of background environment challenges with growth in both new client acquisitions and cross sales.

Customers

Turning to client growth, Ravin noted:

Since our inception in 2005, we have signed over 4,900 clients, including over 180 Fortune 500 in Fortune Global 100 companies. We estimate that we have helped our clients liberate more than $6 billion that they were able to save or reinvest in their strategic priorities.

To back up his point, he highlighted a number of key client successes, beginning with the University of Technology Sydney (UTS):

UTS has switched from Oracle to Rimini Street for improved support and security of its Oracle database and technology platforms. The University faced challenges relating to the pandemic, including a massive shift to online learning and remote work and a growing IT skill shortage. UTS’ Head of IT operations, Brian Kelley, stated that skilled staff are only getting more expensive to hire and retaining these employees just to work on support and operational tasks for their enterprise software is no longer sustainable.

Kelly goes on to say, thanks to Rimini Street, they now have time and budget despair, and they are now looking at developing and deploying additional security measures utilizing a cloud first strategy. The UTS team is no longer worried about how long a patch or an upgrade will take to put into effect, how long it will take to get issues resolved, or how many hours they will have to dedicate to something routine. Rimini Street is taking care of that for them and having such a quick turnaround for support has really eased up their workload.

Ravin also drilled down on South Korea’s Lotte Mart, which switched its Oracle application maintenance support to Rimini Street:

Lotte Mart wanted to focus resources on strategic projects related to business growth and needed a more practical ERP support to better manage its rapidly changing distribution business. Lotte Mart system strategy leader Jung-soo Pyo, stated that Rimini Street made a detailed analysis of Lotte Mart’s current goals, including the necessity to cut cost and resolve service issues with the softer vendor support program, and has instead provided a tailored support service that better meets their needs.

The supplier goes on to note that after the switch to Rimini Street, they have been able to break free from vendor oriented support policies and focus on business oriented service needs, and at the work efficiency of their IT services team has been maximized with a swifter response and support to issues when requested.

My take

An interesting observation from Ravin, one that mirrors what we’re heard from other enterprise players of late:

The challenge is actually execution at a customer level, because they have so many different competing priorities. We have been truly sometimes just pushed to the side with a , ‘We love this, we want to do it, but we have got three other bigger fires we have got to get put out first!’ and that is causing some delays. That is why I noted, it wasn’t really that we lost deals in the third quarter. We lost them to other priorities in the quarter.

That’s not likely to change for a while given the current climate, although Ravin sees reason for some optimism:

I was just down in Orlando, giving a keynote at the Gartner, the biggest symposium of them all. I had 1,200 registrations for my session. It was the largest Gartner said that they have ever had for a vendor. And it was amazing. I think we had 500, 600 people just in the room alone and then it was being simul broadcast in other rooms and things. Amazing. People are very focused on how to optimize the current operating budget - to get that innovation and things that are going to move the needle. So we are exactly placed where they need to play and where they want to play.

He added:

I will tell you that there are millions of dollars of transactions that I would potentially expect coming out of those events alone, where we met and talked to people for the first time, and some people are already fast tracking deals with us. I do think my number one goal in the world is recognition. If I can get our teams and our value prop and our services and solutions in front of more CIOs, CFOs, CISOs, chiefs of procurement, I’m convinced that we would see tremendous pipeline growth that would get us to those four times, five times type numbers, that would assure some very strong growth numbers in 2023 and beyond.