RMNI 10-Q
Rimini Street, Inc. (RMNI)
10-Q
2025-07-31
For: 2025-06-30
View Original
Added on
April 10, 2026
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
For the Quarterly Period Ended June 30, 2025
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
For the Transition Period from to
Commission File Number: 001-37397
| (Exact name of registrant as specified in its charter) | ||
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |||||||
| (Address of principal executive offices) | (Zip Code) | |||||||
| Registrant's telephone number, including area code: | ||||||||
Not Applicable
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class: | Trading Symbol(s) | Name of each exchange on which registered: | |||||||||
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes þ No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ¨ | Non-accelerated filer ¨ | |||||||
Smaller reporting company | Emerging growth company | |||||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ☐ No þ
The registrant had approximately 92,518,000 shares of its $0.0001 par value common stock outstanding as of July 29, 2025.
RIMINI STREET, INC.
TABLE OF CONTENTS
| Page | ||||||||
| Unaudited Condensed Consolidated Balance Sheets | ||||||||
| Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income | ||||||||
| Unaudited Condensed Consolidated Statements of Stockholders' Deficit | ||||||||
| Unaudited Condensed Consolidated Statements of Cash Flows | ||||||||
1
PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements.
RIMINI STREET, INC.
Unaudited Condensed Consolidated Balance Sheets
(In thousands, except per share amounts)
| June 30, | December 31, | ||||||||||
| 2025 | 2024 | ||||||||||
| ASSETS | |||||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | $ | $ | |||||||||
| Restricted cash | |||||||||||
Accounts receivable, net of allowance of $ | |||||||||||
| Deferred contract costs, current | |||||||||||
| Prepaid expenses and other | |||||||||||
| Total current assets | |||||||||||
| Long-term assets: | |||||||||||
Property and equipment, net of accumulated depreciation and amortization of $ | |||||||||||
| Operating lease right-of-use assets | |||||||||||
| Deferred contract costs, noncurrent | |||||||||||
| Deposits and other | |||||||||||
| Deferred income taxes, net | |||||||||||
| Total assets | $ | $ | |||||||||
| LIABILITIES, REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS’ DEFICIT | |||||||||||
| Current liabilities: | |||||||||||
| Current maturities of long-term debt | $ | $ | |||||||||
| Accounts payable | |||||||||||
| Accrued compensation, benefits and commissions | |||||||||||
| Other accrued liabilities | |||||||||||
| Operating lease liabilities, current | |||||||||||
| Deferred revenue, current | |||||||||||
| Total current liabilities | |||||||||||
| Long-term liabilities: | |||||||||||
| Long-term debt, net of current maturities | |||||||||||
| Deferred revenue, noncurrent | |||||||||||
| Operating lease liabilities, noncurrent | |||||||||||
| Other long-term liabilities | |||||||||||
| Total liabilities | |||||||||||
Commitments and contingencies (Note 8) | |||||||||||
| Stockholders’ deficit: | |||||||||||
Preferred stock; $ | |||||||||||
Common stock; $ | |||||||||||
| Additional paid-in capital | |||||||||||
| Accumulated other comprehensive loss | ( | ( | |||||||||
| Accumulated deficit | ( | ( | |||||||||
| Treasury stock | ( | ( | |||||||||
| Total stockholders' deficit | ( | ( | |||||||||
| Total liabilities and stockholders' deficit | $ | $ | |||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
2
RIMINI STREET, INC.
Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)
(In thousands, except per share amounts)
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| Revenue | $ | $ | $ | $ | |||||||||||||||||||
| Cost of revenue | |||||||||||||||||||||||
| Gross profit | |||||||||||||||||||||||
| Operating expenses: | |||||||||||||||||||||||
| Sales and marketing | |||||||||||||||||||||||
| General and administrative | |||||||||||||||||||||||
| Reorganization costs | |||||||||||||||||||||||
| Litigation costs and related recoveries: | |||||||||||||||||||||||
| Litigation settlement | ( | ( | |||||||||||||||||||||
| Professional fees and other costs of litigation | |||||||||||||||||||||||
Litigation costs and related recoveries, net | ( | ( | |||||||||||||||||||||
| Total operating expenses | |||||||||||||||||||||||
| Operating income (loss) | ( | ||||||||||||||||||||||
| Non-operating income and (expenses): | |||||||||||||||||||||||
| Interest expense | ( | ( | ( | ( | |||||||||||||||||||
| Other income (expenses), net | |||||||||||||||||||||||
| Income (loss) before income taxes | ( | ||||||||||||||||||||||
| Income taxes | ( | ( | ( | ( | |||||||||||||||||||
| Net income (loss) | ( | ||||||||||||||||||||||
| Other comprehensive income | |||||||||||||||||||||||
| Foreign currency translation gain (loss) | ( | ( | |||||||||||||||||||||
| Derivative instrument and other adjustments, net of tax | ( | ( | ( | ( | |||||||||||||||||||
| Comprehensive income (loss) | $ | $ | ( | $ | $ | ( | |||||||||||||||||
| Net income (loss) per share attributable to common stockholders: | |||||||||||||||||||||||
| Basic | $ | $ | ( | $ | $ | ||||||||||||||||||
| Diluted | $ | $ | ( | $ | $ | ||||||||||||||||||
| Weighted average number of shares of Common Stock outstanding: | |||||||||||||||||||||||
| Basic | |||||||||||||||||||||||
| Diluted | |||||||||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
3
RIMINI STREET, INC.
Unaudited Condensed Consolidated Statements of Stockholders' Deficit
(In thousands)
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| Common Stock, Shares | |||||||||||||||||||||||
| Beginning of period | |||||||||||||||||||||||
| Exercise of stock options for cash | — | — | |||||||||||||||||||||
| Restricted stock units vested | |||||||||||||||||||||||
| End of period | |||||||||||||||||||||||
| Total Stockholders' Deficit, beginning of period | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
| Common Stock, Amount | |||||||||||||||||||||||
| Beginning of period | |||||||||||||||||||||||
| Exercise of stock options for cash | — | — | — | — | |||||||||||||||||||
| Restricted stock units vested | — | — | — | — | |||||||||||||||||||
| End of period | |||||||||||||||||||||||
| Additional Paid-in Capital | |||||||||||||||||||||||
| Beginning of period | |||||||||||||||||||||||
| Stock based compensation expense | |||||||||||||||||||||||
| Exercise of stock options for cash | — | — | |||||||||||||||||||||
| Restricted stock units vested | — | — | — | — | |||||||||||||||||||
| End of period | |||||||||||||||||||||||
| Accumulated Other Comprehensive Loss | |||||||||||||||||||||||
| Beginning of period | ( | ( | ( | ( | |||||||||||||||||||
| Other comprehensive loss | ( | ( | |||||||||||||||||||||
| End of period | ( | ( | ( | ( | |||||||||||||||||||
| Accumulated Deficit | |||||||||||||||||||||||
| Beginning of period | ( | ( | ( | ( | |||||||||||||||||||
| Net income (loss) | ( | ||||||||||||||||||||||
| End of period | ( | ( | ( | ( | |||||||||||||||||||
| Treasury Stock | ( | ( | ( | ( | |||||||||||||||||||
| Total Stockholders' Deficit, end of period | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
4
RIMINI STREET, INC.
Unaudited Condensed Consolidated Statements of Cash Flows
(In thousands)
| Six Months Ended June 30, | |||||||||||
| 2025 | 2024 | ||||||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | |||||||||||
| Net income | $ | $ | |||||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||||
| Stock-based compensation expense | |||||||||||
| Depreciation and amortization | |||||||||||
| Accretion and amortization of debt discount and issuance costs | |||||||||||
| Deferred income taxes | ( | ||||||||||
| Amortization and accretion related to operating right of use assets | |||||||||||
| Changes in operating assets and liabilities: | |||||||||||
| Accounts receivable | |||||||||||
| Prepaid expenses, deposits and other | ( | ||||||||||
| Deferred contract costs | |||||||||||
| Accounts payable | ( | ||||||||||
| Accrued compensation, benefits, commissions and other | ( | ( | |||||||||
| Deferred revenue | ( | ( | |||||||||
| Net cash provided by operating activities | |||||||||||
| CASH FLOWS USED IN INVESTING ACTIVITIES: | |||||||||||
| Capital expenditures | ( | ( | |||||||||
| Payment for purchases of short term investments | ( | ||||||||||
| Proceeds from sales and maturities of short term investments | |||||||||||
| Net cash provided by (used in) investing activities | ( | ||||||||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | |||||||||||
| Proceeds from the 2024 Credit Facility | |||||||||||
| Principal payments on revolving line of credit borrowings | ( | ||||||||||
| Principal payments on term loan borrowings | ( | ( | |||||||||
| Principal payments on capital leases | ( | ( | |||||||||
| Proceeds from exercise of employee stock options | |||||||||||
| Net cash provided by (used in) financing activities | ( | ||||||||||
| Effect of foreign currency translation changes | ( | ||||||||||
| Net change in cash, cash equivalents and restricted cash | |||||||||||
| Cash, cash equivalents and restricted cash at beginning of period | |||||||||||
| Cash, cash equivalents and restricted cash at end of period | $ | $ | |||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
5
RIMINI STREET, INC.
Unaudited Condensed Consolidated Statements of Cash Flows, Continued
(In thousands)
| Six Months Ended June 30, | |||||||||||
| 2025 | 2024 | ||||||||||
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | |||||||||||
| Cash paid for interest | $ | $ | |||||||||
| Cash paid for income taxes | |||||||||||
| SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES: | |||||||||||
| Increase in payables for capital expenditures | $ | $ | |||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
6
RIMINI STREET, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 — NATURE OF BUSINESS AND BASIS OF PRESENTATION
Nature of Business
Basis of Presentation and Consolidation
The Unaudited Condensed Consolidated Financial Statements, which include the accounts of the Company and its wholly-owned subsidiaries, are prepared in conformity with generally accepted accounting principles in the United States of America (“U.S. GAAP”). All significant intercompany balances and transactions have been eliminated. The accompanying Unaudited Condensed Consolidated Financial Statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) regarding interim financial reporting. Accordingly, certain information and footnote disclosures required by U.S. GAAP for complete financial statements have been condensed or omitted in accordance with such rules and regulations. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation of the Unaudited Condensed Consolidated Financial Statements have been included. These Unaudited Condensed Consolidated Financial Statements should be read in conjunction with the Company’s Audited Consolidated Financial Statements for the year ended December 31, 2024, included in the Company’s 2024 Annual Report on Form 10-K as filed with the SEC on February 27, 2025 (the “2024 Form 10-K”).
The accompanying Unaudited Condensed Consolidated Balance Sheet and related disclosures as of December 31, 2024 have been derived from the Company’s audited financial statements. The Company’s financial condition as of June 30, 2025, and operating results for the three and six months ended June 30, 2025, are not necessarily indicative of the financial condition and results of operations that may be expected for any future interim period or for the year ending December 31, 2025.
NOTE 2 — LIQUIDITY AND SIGNIFICANT ACCOUNTING POLICIES
Liquidity
As of June 30, 2025, the Company’s current liabilities exceeded its current assets by $24.7 million, and the Company recorded net income of $30.3 million for the three months ended June 30, 2025. As of June 30, 2025, the Company had available cash, cash equivalents and restricted cash of $102.5 million. As of June 30, 2025, the Company’s current liabilities included $241.4 million of deferred revenue whereby the costs of fulfilling the Company’s commitments to provide services to its clients was approximately 40 % of the related deferred revenue for the three months ended June 30, 2025.
On April 30, 2024, the Company amended its $90 million five-year term loan (the “Original Credit Facility”) into a new five-year term loan of $75 million (the “2024 Credit Facility,” and together with the Original Credit Facility, the “Credit Facilities”). Annual minimum principal payments over the five-year term for the 2024 Credit Facility are 5 %, 5 %, 7.5 %, 7.5 % and 10 %, respectively, with the remaining balance due at the end of the term. See Note 5 for further information regarding the Company’s 2024 Credit Facility and the Original Credit Facility.
Additionally, the Company is obligated to make operating and financing lease payments that are due within the next 12 months in the aggregate amount of $3.1 million. During the three months ended June 30, 2025, the global economy continued to experience interest rate and inflationary pressures, geopolitical conflicts, global supply chain issues, a rise in energy prices and the continuing effects of fiscal and monetary policies adopted by governments. Assuming the Company’s ability to operate continues not to be significantly adversely impacted by the related changes in the macroeconomic environment, geopolitical pressures, or the litigation matters described in Note 8, the Company believes that current cash, cash equivalents, restricted cash, and future cash flow from operating activities will be sufficient to meet the Company’s anticipated cash needs, including 2024 Credit Facility repayments, working capital needs, capital expenditures and other contractual obligations for at least 12 months from the issuance date of these financial statements.
7
RIMINI STREET, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Use of Estimates
The preparation of financial statements and related disclosures in conformity with U.S. GAAP requires the Company to make judgments, assumptions, and estimates that affect the amounts reported in its consolidated financial statements and accompanying notes. The Company bases its estimates and assumptions on current facts, historical experience, and various other factors that it believes are reasonable under the circumstances to determine the carrying values of assets and liabilities that are not readily apparent from other sources. The Company’s accounting estimates include, but are not necessarily limited to, the allowance for doubtful accounts receivable, valuation of the swap agreement, valuation assumptions for stock options and leases, deferred income taxes and the related valuation allowances, accretion of discounts on debt and the evaluation and measurement of contingencies. To the extent there are material differences between the Company’s estimates and actual results, the Company’s future consolidated results of operations may be affected.
Risks and Uncertainties
Generally, credit risk with respect to accounts receivable is diversified due to the number of entities comprising the Company’s client base and their dispersion across different geographies and industries. The Company performs ongoing credit evaluations on certain clients and generally does not require collateral on accounts receivable. The Company maintains reserves for potential bad debts and historically such losses are generally not significant.
Recent Accounting Pronouncements
Recently Adopted Standards. The following accounting standards will be adopted during fiscal year 2025:
In December 2023, the FASB issued ASU 2023-09, “Income Taxes - Improvements to Income Tax Disclosures.” The guidance requires disaggregating income tax disclosures relating to the effective tax rate reconciliation and income taxes paid. ASU 2023-09 is effective for annual periods beginning after December 15, 2024, though early adoption is permitted. The implementation of this ASU will result in additional disclosures and will not have an impact on the Consolidated Financial Statements.
NOTE 3 - DEFERRED CONTRACT COSTS AND DEFERRED REVENUE
Activity for deferred contract costs consisted of the following (in thousands):
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| Deferred contract costs, current and noncurrent, as of the beginning of period | $ | $ | $ | $ | |||||||||||||||||||
| Capitalized commissions during the period | |||||||||||||||||||||||
| Amortized deferred contract costs during the period | ( | ( | ( | ( | |||||||||||||||||||
| Deferred contract costs, current and noncurrent, as of the end of period | $ | $ | $ | $ | |||||||||||||||||||
Deferred revenue activity consisted of the following (in thousands):
8
RIMINI STREET, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| Deferred revenue, current and noncurrent, as of the beginning of period | $ | $ | $ | $ | |||||||||||||||||||
| Billings, net | |||||||||||||||||||||||
| Revenue recognized | ( | ( | ( | ( | |||||||||||||||||||
| Deferred revenue, current and noncurrent, as of the end of period | $ | $ | $ | $ | |||||||||||||||||||
The Company typically invoices its customers at the start of the support period, in annual and multi-year installments. When revenue recognized on a contract exceeds billings, the Company records a contract asset. As of June 30, 2025 and December 31, 2024, contract assets amounted to $0.5 million and $1.3 million, respectively, and are included in prepaid expenses and other on the condensed consolidated balance sheets. Deferred revenue is a contract liability that consists of billings issued that are non-cancellable in advance of revenue recognition. Deferred revenue is recognized as the Company satisfies its performance obligations over the term of the contracted service period.
The Company’s remaining performance obligations represent all future non-cancellable revenue under contract that has not yet been recognized as revenue and includes deferred revenue and unbilled amounts. As of June 30, 2025, remaining performance obligations amounted to $589.8 million, of which $262.9 million was billed and recorded as deferred revenue.
The Company expects to recognize revenue on approximately $241.4 million of deferred revenue over the next 12 months, with the remaining deferred revenue balance recognized thereafter.
NOTE 4 — OTHER FINANCIAL INFORMATION
Prepaid Expenses and Other Current Assets
Prepaid expenses and other current assets consisted of the following (in thousands):
| June 30, | December 31, | ||||||||||
| 2025 | 2024 | ||||||||||
| Litigation settlement receivable | $ | $ | |||||||||
| Prepaid expenses and deposits | |||||||||||
| Foreign tax refunds receivable | |||||||||||
| Other | |||||||||||
| Total prepaid expenses and other current assets | $ | $ | |||||||||
Other Accrued Liabilities, including Accrued Reorganization Costs
Other accrued liabilities consisted of the following (in thousands):
| June 30, | December 31, | ||||||||||
| 2025 | 2024 | ||||||||||
| Accrued sales and other taxes | $ | $ | |||||||||
| Accrued professional fees | |||||||||||
| Accrued reorganization costs | |||||||||||
| Income taxes payable | |||||||||||
| Accrued litigation costs | |||||||||||
| Other accrued expenses | |||||||||||
| Total other accrued liabilities | $ | $ | |||||||||
During the second quarter of 2024, the Company began a process to optimize its cost structure, which is ongoing as of the date of this Report. Accrued reorganization activity, consisting primarily of severance costs, was as follows (in thousands):
9
RIMINI STREET, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| Accrued reorganization costs, as of the beginning of period | $ | $ | $ | $ | |||||||||||||||||||
| Charges | |||||||||||||||||||||||
| Cash payments | ( | ( | ( | ( | |||||||||||||||||||
| Foreign currency impact | ( | ( | |||||||||||||||||||||
| Accrued reorganization costs, as of the end of period | $ | $ | $ | $ | |||||||||||||||||||
NOTE 5 — DEBT
Debt is presented net of debt discounts and issuance costs in the Company's balance sheets and consisted of the following (in thousands):
| June 30, | December 31, | |||||||||||||
| 2025 | 2024 | |||||||||||||
| Term Loan | $ | $ | ||||||||||||
| Revolving line of credit | ||||||||||||||
| Less current maturities | ( | ( | ||||||||||||
| Long-term debt, net of current maturities | $ | $ | ||||||||||||
On April 30, 2024, the Company refinanced its Original Credit Facility, which had an outstanding principal balance of $70.9 million, with the 2024 Credit Facility, a new five-year senior secured credit facility consisting of a $75.0 million term loan and a $35.0 million revolving line of credit.
Cash proceeds and payment activity relating to the 2024 Credit Facility consisted of the following (in thousands):
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| Proceeds from issuance of 2024 Credit Facility’s term loan | $ | $ | $ | $ | |||||||||||||||||||
| Principal payments on revolving line of credit | ( | ( | |||||||||||||||||||||
| Principal payments on term loan | ( | ( | ( | ||||||||||||||||||||
| Net cash activity relating to debt | $ | ( | $ | $ | ( | $ | |||||||||||||||||
There was no principal payment under the 2024 Credit Facility term loan during the three months ended June 30, 2024 as none was required under its terms. On July 15, 2025, the Company paid down the remaining $10.0 million principal on the revolving line of credit’s outstanding balance.
For the term loan, the Company has a choice of interest rates between (a) the Secured Overnight Financing Rate (“SOFR”) and (b) a Base Rate (as defined in the 2024 Credit Facility), in each case plus an applicable margin. The applicable margin is based on the Company’s Consolidated Total Leverage Ratio (as defined in the 2024 Credit Facility) and whether the Company elects SOFR (ranging from 2.75 % to 3.5 %) or Base Rate (ranging from 1.75 % to 2.5 %). The revolving line of credit bears interest on the unused portion of the credit line at rates of 25 to 40 basis points, depending on the Company’s Consolidated Total Leverage Ratio. Annual minimum principal payments over the five-year term for the 2024 Credit Facility are 5 %, 5 %, 7.5 %, 7.5 %, and 10 %, respectively, with the remaining balance due at the end of the term.
The refinancing was accounted for as a debt modification under ASC 470-50 as the terms of the 2024 Credit Facility were not substantially different than the terms of the Original Credit Facility. Under debt modification accounting, third-party costs are expensed as incurred. During the year ended December 31, 2024, the Company expensed $0.2 million in third-party transaction costs in connection with the modification. Fees paid to the creditor of $1.1 million were included with the remaining
10
RIMINI STREET, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
unamortized discount from the Original Credit Facility and are being amortized as an adjustment to interest expense over the remaining term of the 2024 Credit Facility.
Pursuant to a Guaranty and Security Agreement, dated April 30, 2024, among the Credit Parties (as defined in the 2024 Credit Facility) and Capital One, National Association, as agent (the “2024 Guaranty and Security Agreement”), the obligations under the 2024 Credit Facility are guaranteed by certain of the Company’s subsidiaries and are secured, subject to customary permitted liens and exceptions, by a lien on substantially all assets of the Credit Parties.
The 2024 Credit Facility contains certain financial covenants, including a minimum fixed charge coverage ratio greater than 1.25 , a total leverage ratio less than 3.75 , and a minimum liquidity balance of at least $20 million in U.S. cash.
The fair value of the term loan under the 2024 Credit Facility was $71.9 million (Level 2 inputs) as of June 30, 2025 compared to the carrying value of $68.7 million as of June 30, 2025. The fair value of the 2024 Credit Facility was $73.9 million (Level 2 inputs) as of December 31, 2024 compared to the carrying value of $70.3 million as of December 31, 2024.
For the three months ended June 30, 2025 and 2024, the effective interest rate under the Credit Facilities was 8.1 % and 9.0 %, respectively. For the six months ended June 30, 2025 and 2024, the effective interest rate under the Credit Facilities was 8.0 % and 8.8 %, respectively.
In October 2024, the Company borrowed $15.0 million under the revolving line of credit. For the three months ended June 30, 2025, the Company reduced the amount borrowed under the revolving line of credit by $5.0 million, resulting in a net principal balance outstanding of $10.0 million as of June 30, 2025. The Company has $25.0 million in net available borrowings under the revolving line of credit as of June 30, 2025. As noted above, the Company paid down the remaining $10.0 million owed on the revolving line of credit, resulting in $35.0 million of borrowing capacity on July 15, 2025.
For the three and six months ended June 30, 2025, the average interest rate under the revolving line of credit under the 2024 Credit Facility was 7.1 % and 7.1 %, respectively.
Effective April 30, 2024, the Company’s interest rate swap agreement was amended in connection with the 2024 Credit Facility to match the new five-year term. The amended interest rate swap agreement has a notional value of $40.0 million, with a fixed payer SOFR rate of 3.71 % and an initial floating SOFR rate of 5.32 %. The floating rate is reset at each month end and the term of the interest rate swap agreement coincides with that of the 2024 Credit Facility. See Note 11 for further information regarding the fair value accounting for the interest rate swap agreement. The modification of the interest rate swap agreement did not have a material impact on the Company’s Unaudited Condensed Consolidated Financial Statements.
Interest Expense
The components of interest expense are presented below (in thousands):
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| Credit Facilities: | |||||||||||||||||||||||
| Interest expense under term loan | $ | $ | $ | $ | |||||||||||||||||||
| Accretion expense related to discount and issuance costs | |||||||||||||||||||||||
| Interest expense under revolving line of credit | |||||||||||||||||||||||
| Interest on finance leases and other | |||||||||||||||||||||||
| $ | $ | $ | $ | ||||||||||||||||||||
For the three months ended June 30, 2025 and 2024, interest expense included a reduction related to interest rate swap payments received of $0.1 million and $0.2 million, respectively. For the six months ended June 30, 2025 and 2024, interest expense included a reduction related to interest rate swap payments received of $0.1 million and $0.4 million, respectively.
NOTE 6 — COMMON STOCK OFFERING, RESTRICTED STOCK UNITS, STOCK OPTIONS AND WARRANTS
11
RIMINI STREET, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Common Stock Repurchased
During the three and six months ended June 30, 2025 and 2024, the Company did not
Stock Plan
The Company’s stock plan consists of the 2013 Equity Incentive Plan, as amended and restated in July 2017 (the “2013 Plan”). On February 26, 2025, pursuant to the “evergreen” provisions of the 2013 Plan, the Board of Directors authorized an increase of approximately 3.6 million shares available for grant under the 2013 Plan.
On March 4, 2025, the Company’s Board of Directors approved the Company’s 2025 Long-Term Incentive Plan (the “2025 LTI Plan”), consisting of awards of performance units (“PSUs”), restricted stock units (“RSUs”) and stock options to purchase shares of the Company’s Common Stock under the terms of the Company’s 2013 Plan, as amended, effective March 4, 2025.
On May 3, 2024, the Company’s Board of Directors approved the Company’s 2024 Long-Term Incentive Plan (the “2024 LTI Plan”), consisting of awards of PSUs, RSUs and stock options to purchase shares of the Company’s Common Stock under the terms of the Company’s 2013 Plan, as amended, effective May 6, 2024.
For additional information about the 2013 Plan, please refer to Note 7 to the Company’s Consolidated Financial Statements for the year ended December 31, 2024, included in Part II, Item 8 of the 2024 Form 10-K. The information presented below provides an update for activity under the 2013 Plan for the three and six months ended June 30, 2025.
Performance Units
Under the 2025 LTI Plan, the Company granted PSUs which will be measured over a performance period beginning on January 1, 2025 and ending on December 31, 2025 (the “Performance Period”), but will remain subject to a continued service-based vesting requirement. Half of the PSUs awarded are eligible to vest based on the Company’s achievement against a target adjusted EBITDA goal for fiscal year 2025, and the remaining half of the PSUs awarded will be eligible to vest based on the Company’s achievement against a target total revenue goal for fiscal year 2025. The ultimate number of PSUs that may vest (as calculated, the “Earned PSUs”) range from zero to 200 % of the granted PSUs. On March 4, 2025, the Company granted 0.6 million PSUs at a grant price of $3.48 .
The Earned PSUs under the May 6, 2024 grant were earned at 28 %. Under the terms of the 2024 LTI Plan, the Earned PSUs will vest in equal annual installments on the first, second and third anniversaries of the Date of Grant, generally subject to the awardee continuing to be a Service Provider through the applicable vesting date.
The Earned PSUs under the April 3, 2023 grant were earned at 151 %. Under the terms of the 2023 LTI Plan, the Earned PSUs will vest in equal annual installments on the first, second and third anniversaries of the Date of Grant, generally subject to the awardee continuing to be a Service Provider through the applicable vesting date.
The Company recognized compensation expense related to PSUs of $0.4 million and $0.2 million for the three months ended June 30, 2025 and 2024, respectively. For the six months ended June 30, 2025 and 2024, the Company recognized compensation expense related to PSUs of $0.8 million and $0.8 million, respectively. As of June 30, 2025, the unrecognized expense of $1.9 million net of forfeitures is expected to be charged to expense on a graded basis as the PSUs vest over a weighted-average period of approximately 2 years.
Restricted Stock Units
For the six months ended June 30, 2025, the Company granted RSUs under the 2013 Plan to employees and to non-employee members of the Company’s Board of Directors for an aggregate of approximately 1.1 million shares of Common Stock. RSU grants vest over periods generally ranging from 12 to 36 months from the respective grant dates and the awards are subject to forfeiture upon termination of employment or service on the Board of Directors, as applicable. Based on the weighted average fair market value of the Common Stock on the date of grant of $3.41 per share, the aggregate fair value for the shares underlying the RSUs amounted to $3.7 million as of the grant date that will be recognized as compensation cost over the vesting period.
12
RIMINI STREET, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the three months ended June 30, 2025 and 2024, the Company recognized compensation expense related to RSUs of approximately $1.5 million and $1.4 million, respectively. For the six months ended June 30, 2025 and 2024, the Company recognized compensation expense related to RSUs of approximately $2.9 million and $2.6 million, respectively. As of June 30, 2025, the unrecognized expense of $9.8 million net of forfeitures is expected to be charged to expense on a straight-line basis as the RSUs vest over a weighted-average period of approximately 2.2 years.
Stock Options
For the six months ended June 30, 2025, the Company granted stock options for the purchase of an aggregate of approximately 0.9 million shares of Common Stock at exercise prices that were equal to the fair market value of the Common Stock on the date of grant. Options granted to employees generally vest as to one-third of the shares subject to the award on each anniversary of the designated vesting commencement date, which may precede the grant date of such award, and expire ten years after the grant date.
The following table sets forth a summary of stock option activity under the 2013 Plan for the six months ended June 30, 2025 (shares in thousands):
| Shares | Price (1) | Term (2) | |||||||||||||||
| Outstanding, December 31, 2024 | $ | ||||||||||||||||
| Granted | |||||||||||||||||
| Exercised | ( | ||||||||||||||||
| Forfeited | ( | ||||||||||||||||
| Expired | ( | ||||||||||||||||
| Outstanding, June 30, 2025 (3)(4) | |||||||||||||||||
| Vested, June 30, 2025 (3) | |||||||||||||||||
(1)Represents the weighted average exercise price.
(2)Represents the weighted average remaining contractual term until the stock options expire in years.
(3)As of June 30, 2025, the aggregate intrinsic value of all stock options outstanding was $4.2 million. As of June 30, 2025, there was an aggregate intrinsic value of $0.4 million related to the vested stock options.
(4)The number of outstanding stock options that are not expected to ultimately vest due to forfeiture amounted to 0.6 million shares as of June 30, 2025.
The aggregate fair value of approximately 0.9 million stock options granted for the six months ended June 30, 2025 amounted to $1.9 million, or $2.16 per stock option as of the grant date utilizing the Black-Scholes-Merton (“BSM”) method. The fair valued derived under the BSM method will result in the recognition of compensation cost over the vesting period of the stock options. For the six months ended June 30, 2025, the fair value of each stock option grant under the 2013 Plan was estimated on the date of grant using the BSM option-pricing model, with the following weighted-average assumptions:
| Expected life (in years) | |||||
| Volatility | |||||
| Dividend yield | |||||
| Risk-free interest rate | |||||
| Fair value per share of Common Stock on date of grant | $ | ||||
As of June 30, 2025 and December 31, 2024, total unrecognized compensation costs related to unvested stock options, net of estimated forfeitures, was $6.0 million and $5.7 million, respectively. As of June 30, 2025, the unrecognized costs are expected to be charged to expense on a straight-line basis over a weighted-average vesting period of approximately 2.2 years.
13
RIMINI STREET, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Shares Available for Grant
The following table presents activity affecting the total number of shares available for grant under the 2013 Plan for the six months ended June 30, 2025 (in thousands):
| Available, December 31, 2024 | |||||
| Newly authorized by Board of Directors | |||||
| Stock options granted | ( | ||||
| RSUs and PSUs granted | ( | ||||
| Expired options | |||||
| Forfeited options | |||||
| Forfeited RSUs and PSUs | |||||
| Available, June 30, 2025 | |||||
Stock-Based Compensation Expense
Stock-based compensation expense attributable to PSUs, RSUs and stock options is classified as follows (in thousands):
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| Cost of revenue | $ | $ | $ | $ | |||||||||||||||||||
| Sales and marketing | |||||||||||||||||||||||
| General and administrative | |||||||||||||||||||||||
| Total | $ | $ | $ | $ | |||||||||||||||||||
Warrants
NOTE 7 — INCOME TAXES
For the three months ended June 30, 2025 and 2024, the Company’s effective tax rate was 25.8 % and (49.9 )%, respectively. For the six months ended June 30, 2025 and 2024, the Company’s effective tax rate was 30.6 % and 92.4 %, respectively. The Company’s income tax expense was attributable to the income before income taxes and foreign withholding taxes. The Company did not have any changes to its conclusions regarding valuation allowances for deferred income tax assets or uncertain tax positions for the three and six months ended June 30, 2025 and 2024.
On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was enacted, which included several modifications to U.S. tax laws. The Company is currently evaluating the provisions of the new legislation.
NOTE 8 — COMMITMENTS AND CONTINGENCIES
Purchase Commitments
The Company’s purchase commitments as of June 30, 2025 are primarily related to agreements to purchase services in the ordinary course of business. As of June 30, 2025, the total minimum purchase obligations totaled $10.9 million. There have been no other material changes outside the normal course of business to the Company’s non-cancellable purchases
14
RIMINI STREET, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
commitments. For additional information, please refer to Note 9 to the Company’s Consolidated Financial Statements for the year ended December 31, 2024, included in Part II, Item 8 of the 2024 Form 10-K.
Retirement Plan
The Company has defined contribution plans for both its U.S. and foreign employees. For certain of these plans, employees may contribute up to the statutory maximum, which is set by law each year. The plans also provide for employer contributions. For the three months ended June 30, 2025 and 2024, the Company’s matching contributions to these plans totaled $0.8 million and $1.0 million, respectively. For the six months ended June 30, 2025 and 2024, the Company’s matching contributions to these plans totaled $1.6 million and $1.9 million, respectively.
Litigation with Oracle; July 2025 Rimini II Settlement Agreement and Subsequent Stay of Rimini II Litigation
Oracle Litigation Background
Over the past fifteen years, the Company and certain affiliates of Oracle Corporation (together with its subsidiaries individually and collectively “Oracle”) have been parties in two different U.S. Federal court cases, referred to as “Rimini I” and “Rimini II.” The Company’s litigation with Oracle has been primarily related to the manner in which it provided certain support services to a subset of its clients that are licensees to Oracle’s enterprise software, certain Company actions involving Oracle copyright notices, and certain Company public statements. In January 2018, the Ninth Circuit Court of Appeals (the “Ninth Circuit”) held that the Company offered third-party support in lawful competition with Oracle’s direct maintenance services.
Rimini I
In January 2010, Oracle commenced litigation against the Company in the District Court for the District of Nevada (the “District Court”), Oracle USA, Inc. v. Rimini, No. 2:10-cv-00106 (D. Nev.) (“Rimini I”). The litigation has run its course through trial and appeals, and there are no current litigation activities. A permanent injunction was entered by the District Court in 2018 (“Rimini I Injunction”) and remains in effect, defining the manner in which the Company can provide support services for certain Oracle product lines (but not prohibiting Company support of any Oracle products).
Rimini II
In October 2014, the Company commenced litigation against Oracle in Rimini II, and Oracle brought counterclaims against the Company and its President, Chief Executive Officer and Chairman of the Board, Mr. Seth Ravin. Following trial in 2022 and a merits appeal to and ruling by the Ninth Circuit, the Rimini II matter was remanded to the District Court to resolve Oracle’s claims related solely to the manner in which the Company provided certain support services to a subset of the Company’s Oracle PeopleSoft clients and – in light of the judgment reversals made in favor of the Company by the Ninth Circuit, which included vacating the underlying copyright infringement judgment – resolve the disposition of approximately $58.7 million in attorneys’ fees and costs, including post-judgment interest of approximately $0.2 million, paid by the Company to Oracle in late 2024.
On April 24, 2025, the District Court issued a permanent injunction (the “Rimini II Injunction”) requiring the Company to comply with the Digital Millennium Copyright Act and to refrain from making four statements – none of which are part of the Company’s current marketing.
Oracle PeopleSoft Services Wind Down
In July 2024, the Company announced during its fiscal second quarter earnings call that it had unilaterally decided to wind down its offering of support and services for Oracle PeopleSoft software, and the Company repeated this announcement during subsequent earnings calls held in October 2024 and May 2025. At the time of the Company’s announcement on July 31, 2024, the annual revenue associated with the Company’s provision of services for Oracle’s PeopleSoft products was approximately $30 million.
The percentage of revenue derived from services the Company provides solely for Oracle’s PeopleSoft software product was approximately 6
15
RIMINI STREET, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The Rimini II Settlement Agreement
On July 7, 2025 (the “Effective Date”), the Company and Mr. Ravin entered into a confidential settlement agreement (the “Settlement Agreement”) with Oracle (all signatories, collectively, the “Parties”). If all Parties complete their agreed upon responsibilities, the Settlement Agreement will allow for the final resolution and ultimate dismissal of Case Number 2:14-cv-01699-MMD-DJA (“Rimini II”). The Parties entered into the Settlement Agreement to provide a full, final, complete and global settlement of the subject matter of the Rimini II case.
On July 9, 2025, in accordance with the terms of the Settlement Agreement, the Company received from Oracle approximately $37.9 million of the approximately $58.7 million in attorneys’ fees and costs the Company paid to Oracle in late 2024, which the Company agreed would satisfy all Oracle repayment obligations implemented by the District Court’s Order on Fees on Remand dated June 2, 2025 and a related order dated June 23, 2025, which required Oracle to reconvey the money it received from the Company within fifteen days of the date of the June 23, 2025 order.
As of July 18, 2025, the Rimini II litigation has been stayed by the District Court.
In addition to the above, the Settlement Agreement provides, in part:
•No Parties admit any liability or wrongdoing.
•If, among other obligations, the Company (a) completes its previously announced wind down of its provision of support and services for Oracle’s PeopleSoft software (the “Wind Down”) no later than July 31, 2028 (the “Wind Down Period”), (b) notifies all existing customers for which it supplies such support and services of the Wind Down, (c) provides required quarterly Wind Down progress reports to Oracle with certain agreed-upon information and (d) signs a declaration, under penalty of perjury, affirming that the Wind Down is complete and issues a public statement as to the same, which statement can be in the form of a filing made with the United States Securities and Exchange Commission (the “SEC”), then, within 14 days after the Company certifies to Oracle that the Wind Down has been completed, the Parties will jointly file a stipulation with the District Court to dismiss the Rimini II litigation with prejudice.
•During the Wind Down Period, the Parties covenant and agree not to make, initiate, join, take action in connection with, or assert any claim, action, litigation or proceeding of any kind, known or unknown, anywhere in the world against each other during the Wind Down Period based on any claim for conduct at issue in the Rimini I or Rimini II cases that accrued either (i) before the end of the Wind Down Period, if related to PeopleSoft products, or (ii) before the Settlement Agreement Effective Date, if related to any other Oracle product or service (such agreement and covenant, the “Litigation Standstill”), including any new lawsuits, contempt proceedings, actions to enforce the Rimini I Injunction or the Rimini II Injunction, or for discovery. In the event of a breach by any Party that remains uncured after the cure period and leads to the termination of the Settlement Agreement, Oracle may ask the District Court to lift the Litigation Standstill.
•The Rimini I Injunction and the Rimini II Injunction shall remain in effect, and the District Court will retain jurisdiction to enforce them.
The Settlement Agreement also contains customary representations, warranties and covenants. The above descriptions of the litigation with Oracle and the Settlement Agreement do not purport to be complete. Please refer to the Company’s Current Report on Form 8-K filed on July 9, 2025 and the redacted copy of the Settlement Agreement filed as Exhibit 10.1 to this Report for additional information.
The Company reserves all rights, including appellate rights, with respect to the matters described above. For a description of potential risks relating to the Settlement Agreement, please refer to Part II, Item 1A of this Report (Risk Factors).
As a result of the two June 2025 District Court orders described above, the Company deemed the loss recovery to be both probable and estimable as of June 30, 2025. As such, the Company recorded a litigation settlement receivable of approximately $37.9 million which is included in prepaid expenses and other on the unaudited condensed consolidated balance sheets as of June 30, 2025. For the three and six months ended June 30, 2025, the Company recognized the loss recovery as litigation settlement income of approximately $36.2 1.7
16
RIMINI STREET, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Please refer to Note 9 to the Consolidated Financial Statements included in Part II, Item 8 of the Company’s Form 10-K for the year ended December 31, 2024, and Note 8 to the Unaudited Condensed Consolidated Financial Statements included in Part I, Item 1 of the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2025, as filed with the SEC on May 1, 2025, for additional information and disclosures regarding the Company’s litigation with Oracle.
Other Litigation
From time to time, the Company may be a party to litigation and subject to claims incident to the ordinary course of business. Although the results of litigation and claims cannot be predicted with certainty, the Company currently believes that the final outcome of these ordinary course matters will not have a material adverse effect on its business. Regardless of the outcome, litigation can have an adverse impact on the Company because of judgment, defense and settlement costs, diversion of management resources and other factors. At each reporting period, the Company evaluates whether or not a potential loss amount or a potential range of loss is probable and reasonably estimable under ASC 450, Contingencies. Legal fees are expensed as incurred.
Liquidated Damages
The Company enters into agreements with clients that contain provisions related to liquidated damages that would be triggered in the event that the Company is no longer able to provide services to these clients. The maximum cash payments related to these liquidated damages are approximately $8.4 million and $7.2 million as of June 30, 2025 and December 31, 2024, respectively. To date, the Company has not incurred any costs as a result of such provisions and has not accrued any liabilities related to such provisions in these Unaudited Condensed Consolidated Financial Statements.
NOTE 9 — RELATED PARTY TRANSACTIONS
An affiliate of Adams Street Partners and its affiliates (collectively referred to as “ASP”) is a member of the Company’s Board of Directors. As of June 30, 2025, ASP owned approximately 25.5 % of the Company’s issued and outstanding shares of Common Stock.
NOTE 10 —EARNINGS PER SHARE
The Company computes earnings per share in accordance with ASC Topic 260, Earnings per Share. Basic earnings per share of Common Stock is computed by dividing net income attributable to common stockholders by the weighted average number of shares of basic Common Stock outstanding. Diluted earnings per share of Common Stock is calculated by adjusting the basic earnings per share of Common Stock for the effects of potential dilutive Common Stock shares outstanding such as stock options, restricted stock units and warrants.
For the three and six months ended June 30, 2025 and 2024, basic and diluted net earnings per share of Common Stock were computed by dividing the net income attributable to common stockholders by the weighted average number of common shares outstanding during the respective periods. The following tables set forth the computation of basic and diluted net income attributable to common stockholders (in thousands, except per share amounts):
17
RIMINI STREET, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| Income attributable to common stockholders: | |||||||||||||||||||||||
| Net income | $ | $ | ( | $ | $ | ||||||||||||||||||
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| Weighted average number of shares of Common Stock outstanding: | |||||||||||||||||||||||
| Basic | |||||||||||||||||||||||
| Stock options | |||||||||||||||||||||||
| PSUs | |||||||||||||||||||||||
| RSUs | |||||||||||||||||||||||
| Diluted | |||||||||||||||||||||||
| Net income per share attributable to common stockholders: | |||||||||||||||||||||||
| Basic | $ | $ | ( | $ | $ | ||||||||||||||||||
| Diluted | $ | $ | ( | $ | $ | ||||||||||||||||||
The following potential Common Stock equivalents were excluded from the computation of diluted net income per share for the respective periods ending on these dates, since the impact of inclusion was anti-dilutive (in thousands):
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| RSUs and PSUs | |||||||||||||||||||||||
| Stock options | |||||||||||||||||||||||
| Warrants | |||||||||||||||||||||||
| Total | |||||||||||||||||||||||
NOTE 11 — FINANCIAL INSTRUMENTS
Fair Value Measurements
Fair value is defined as the price that would be received upon sale of an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. When determining fair value, the Company considers the principal or most advantageous market in which it transacts and considers assumptions that market participants would use when pricing the asset or liability. Additional information on fair value measurements is included in Note 12 to the Company’s Consolidated Financial Statements for the year ended December 31, 2024, included in Part II, Item 8 of the 2024 Form 10-K. The Company’s policy is to recognize asset or liability transfers among Level 1, Level 2 and Level 3 as of the actual date of the events or change in circumstances that caused the transfer.
Investments
All of the Company’s investments as of June 30, 2025 are classified as cash equivalents. During the six months ended June 30, 2024, the Company transferred its investments in U.S. Federal agency bonds and U.S. treasury notes into other highly liquid interest-earning investments with maturities of less than three months. The fair values of these investments approximate their carrying values and are considered Level 1 assets.
The Company considers all highly liquid interest-earning investments with a maturity of three months or less at the date of purchase to be cash equivalents. In general, investments with original maturities of greater than three months and remaining maturities of less than one year are classified as short-term investments. Debt investments are classified as available-for-sale
18
RIMINI STREET, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
and gains and losses are recorded using the specific identification method. Changes in fair value are recorded in the operating statement. Fair value is calculated based on publicly available market information.
Derivatives
The Company uses derivatives to manage the risk associated with changes in interest rates. The Company does not enter into derivatives for speculative purposes. As discussed in Note 5, the interest rate swap agreement has a notional value of $40.0 million, with a fixed payer SOFR rate of 3.71 % and an initial floating SOFR rate of 5.32 %. The derivative was recognized in the accompanying Unaudited Condensed Consolidated Balance Sheets at its estimated fair value as of June 30, 2025.
To estimate fair value for the Company's interest rate swap agreement as of June 30, 2025, the Company utilized a present value of future cash flows, leveraging a model-derived valuation that uses Level 2 observable inputs such as interest rate yield curves. The Company estimated the fair value of the interest rate swap agreement to be a liability of $0.5 million as of June 30, 2025.
Changes in the fair value of the derivatives that qualify as cash flow hedges are recorded in Accumulated other comprehensive loss in the accompanying Unaudited Condensed Consolidated Balance Sheets until earnings are affected by the variability of the cash flows.
The amounts recorded for the interest rate swap agreement are described below (in thousands):
| Derivative Instrument | Balance Sheet Classification | June 30, 2025 | December 31, 2024 | ||||||||||||||
| Interest rate swap | Deposits and other | $ | $ | ||||||||||||||
| Other long-term liabilities | |||||||||||||||||
| Accumulated other comprehensive income (loss) | ( | ||||||||||||||||
| Three Months Ended | Six Months Ended | ||||||||||||||||||||||||||||
| June 30, | June 30, | ||||||||||||||||||||||||||||
| Derivative Instrument | Income Statement Classification | 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||||||
| Interest rate swap | Interest expense (benefit) | $ | ( | $ | ( | $ | ( | $ | ( | ||||||||||||||||||||
NOTE 12 - LEASES
The Company has operating leases for real estate and equipment with an option to renew the leases for up to one month to five years . Some of the leases include the option to terminate the leases upon a specified notice period with a penalty. The Company’s leases have various remaining lease terms ranging from approximately four months to approximately ten years .
The components of lease expense and supplemental balance sheet information were as follows (in thousands):
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| Operating lease expense related to ROU assets and liabilities | $ | $ | $ | $ | |||||||||||||||||||
| Other lease expense | |||||||||||||||||||||||
| Total lease expense | $ | $ | $ | $ | |||||||||||||||||||
Other information related to leases was as follows (in thousands):
19
RIMINI STREET, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
| Supplemental Balance Sheet Information | June 30, 2025 | December 31, 2024 | |||||||||
| Operating lease right-of-use assets, noncurrent | $ | $ | |||||||||
| June 30, 2025 | December 31, 2024 | ||||||||||
| Operating lease liabilities, current | $ | $ | |||||||||
| Operating lease liabilities, noncurrent | |||||||||||
| Total operating lease liabilities | $ | $ | |||||||||
The Company entered into a new operating lease effective June 1, 2025 in India. The lease expires in 2035 and resulted in an increase of $15.0 million to operating lease ROU assets and $15.1 million to operating lease liabilities as of June 30, 2025.
| Weighted Average Remaining Lease Term | Years | |||||||
| Operating leases | ||||||||
| Weighted Average Discount Rate | ||||||||
| Operating leases | % | |||||||
Maturities of operating lease liabilities as of June 30, 2025 were as follows (in thousands):
| Year Ending June 30, | ||||||||
| 2026 | $ | |||||||
| 2027 | ||||||||
| 2028 | ||||||||
| 2029 | ||||||||
| 2030 | ||||||||
| Thereafter | ||||||||
| Total future undiscounted lease payments | ||||||||
| Less imputed interest | ( | |||||||
| Total | $ | |||||||
As of June 30, 2025, the Company has one additional operating lease with a net present value of $0.7 million that will commence in July 2025.
For the three months ended June 30, 2025 and 2024, the Company paid $1.5 million and $1.4 million, respectively, for operating lease liabilities. For the six months ended June 30, 2025 and 2024, the Company paid $3.0 million and $2.8 million, respectively, for operating lease liabilities.
NOTE 13 - SEGMENT AND GEOGRAPHIC INFORMATION
Segment Information
The Company operates as one operating segment. Operating segments are defined as components of an enterprise for which separate financial information is evaluated regularly by the chief operating decision maker (the “CODM”) in deciding how to allocate resources and assess performance. The CODM assesses the performance of the Company and decides how to allocate resources based on consolidated net income, which is identical to the information presented in the accompanying Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income. The measure of segment assets is reported in the Unaudited Condensed Consolidated Balance Sheets as total assets. Additional information on segment information is included in Note 13 to the Company’s Consolidated Financial Statements for the year ended December 31, 2024, included in Part II, Item 8 of the 2024 Form 10-K.
20
RIMINI STREET, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The following table presents selected financial information with respect to the Company’s single operating segment for the three and six months ended June 30, 2025 and 2024 (in thousands):
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| Revenue | $ | $ | $ | $ | |||||||||||||||||||
| Less: | |||||||||||||||||||||||
| Cost of revenue, adjusted | |||||||||||||||||||||||
Employee compensation and benefits (a) | |||||||||||||||||||||||
| Engineering consulting costs | |||||||||||||||||||||||
| Administrative allocations | |||||||||||||||||||||||
All other costs (b) | |||||||||||||||||||||||
| Total cost of revenue, adjusted | |||||||||||||||||||||||
Sales and marketing, adjusted (c) | |||||||||||||||||||||||
General and administrative, adjusted (c) | |||||||||||||||||||||||
| Stock-based compensation expense | |||||||||||||||||||||||
| Depreciation and amortization expense | |||||||||||||||||||||||
| Reorganization costs | |||||||||||||||||||||||
| Litigation costs and related recoveries, net | ( | ( | |||||||||||||||||||||
| Interest expense | |||||||||||||||||||||||
| Other (income) expenses, net | ( | ( | ( | ( | |||||||||||||||||||
| Income taxes | |||||||||||||||||||||||
| Segment net income (loss) | ( | ||||||||||||||||||||||
| Reconciliation of profit | |||||||||||||||||||||||
| Adjustments and reconciling items | |||||||||||||||||||||||
| Consolidated net income (loss) | $ | $ | ( | $ | $ | ||||||||||||||||||
(a) Adjusted to exclude stock-based compensation expense.
(b) Adjusted to exclude depreciation and amortization expense.
(c) Adjusted to exclude stock-based compensation expense as well as depreciation and amortization expense.
Geographic Information
The Company attributes revenues to geographic regions based on the location of its clients. The following table shows revenues by geographic region (in thousands):
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| United States of America | $ | $ | $ | $ | |||||||||||||||||||
| International | |||||||||||||||||||||||
| Total | $ | $ | $ | $ | |||||||||||||||||||
For the three months ended June 30, 2025 and 2024, Japan represented 11.7 % and 9.7 % of total revenue, respectively. For the six months ended June 30, 2025 and 2024, Japan represented 11.0 % and 9.6 % of total revenue, respectively.
21
RIMINI STREET, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
No clients represented more than 10% of revenue for the three and six months ended June 30, 2025 and 2024. As of June 30, 2025 and December 31, 2024, no clients accounted for more than 10% of total net accounts receivable.
The Company tracks its assets by physical location. The following shows the net carrying value of the Company’s property and equipment by geographic region (in thousands):
| June 30, 2025 | December 31, 2024 | ||||||||||
| United States of America | $ | $ | |||||||||
| Brazil | |||||||||||
| India | |||||||||||
| Rest of World | |||||||||||
| Total property and equipment, net | $ | $ | |||||||||
The operating lease ROU assets by geographic region were as follows (in thousands):
| June 30, 2025 | December 31, 2024 | ||||||||||
| India | $ | $ | |||||||||
| United States of America | |||||||||||
| Brazil | |||||||||||
| Korea | |||||||||||
| Rest of World | |||||||||||
| Total operating lease right-of-use assets | $ | $ | |||||||||
22
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
CAUTIONARY NOTE ABOUT FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q (this “Report”) includes forward-looking statements. All statements other than statements of historical facts contained in this Report, including statements regarding our future results of operations and financial position, business strategy and plans, and our objectives for future operations, are forward-looking statements. The words “anticipate,” “assume,” “believe,” “continue,” “could,” “currently,” “estimate,” “expect,” “forecast,” “future,” “intend,” “may,” “might,” “outlook,” “plan,” “possible,” “goal,” “potential,” “predict,” “project,” “seem,” “seek,” “should,” “will,” “would” and similar expressions that convey uncertainty of future events or outcomes are intended to identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking. Forward-looking statements include, but are not limited to, information concerning:
•the evolution of the enterprise software management and support landscape facing our clients;
•the settlement agreement dated July 7, 2025 (the “Settlement Agreement”), among us, our President, Chief Executive Officer and Chairman of the Board, Mr. Seth Ravin, and Oracle Corporation (and certain affiliates) relating to the Rimini II litigation and the wind down of support services for Oracle PeopleSoft software products (the “Wind Down”);
•our ability to successfully complete the Wind Down by July 31, 2028 and our expectations as to future period revenue loss and costs incurred related to the Wind Down;
•estimates of our total addressable market;
•expectations of client savings relative to use of other providers;
•the occurrence of catastrophic events, including terrorism and geopolitical actions specific to an international region, that may disrupt our business or that of our current and prospective clients;
•our ability to maintain an adequate rate of revenue growth;
•our ability to maintain sufficient cash flow and capital or raise additional capital necessary to fund our operations and invest in new services and products;
•the impact of our Credit Facility’s debt service obligations and financial and operational covenants on our business and related interest rate risk;
•our business plan and ability to effectively manage our growth and associated investments;
•the impact of any macro-economic trends, including inflation, rising interest rates and changes in foreign exchange rates;
•beliefs and objectives for future operations;
•our ability to expand our leadership position in independent enterprise software support and to sell our application management services (“AMS”), our Rimini ONE™ integrated services and the individual services comprising our Rimini ONE solutions portfolio;
•our expectations regarding new product offerings, partnerships and alliance programs, including but not limited to our partnership with ServiceNow;
•our ability to develop and maintain strategic partnerships;
•our ability to attract and retain clients and our ability to further penetrate our existing client base;
•our ability to maintain our competitive technological advantages against new entrants in our industry;
•our ability to timely and effectively scale and adapt our existing technology;
•our ability to innovate new products and bring them to market in a timely manner;
•our ability to maintain, protect, and enhance our brand and intellectual property;
•our ability to capitalize on changing market conditions including a market shift to hybrid and cloud/SaaS offerings for information technology environments and retirement of certain software releases by software vendors;
•benefits associated with the use of our services;
•our ability to expand internationally;
•our need and ability to raise equity or debt financing on favorable terms and our ability to generate cash flows from operations to help fund increased investment in our growth initiatives;
•the effects of increased competition in our market and our ability to compete effectively;
•our intentions with respect to our pricing model;
•cost of revenue, including changes in costs associated with production and client support, and the results of any efforts to manage costs to align with current revenue expectations and expansion of our offerings;
•changes in laws or regulations, including tax laws or unfavorable outcomes of tax positions we take;
•tariff costs (including tariff relief or the ability to mitigate tariffs, in light of new or increased tariffs imposed by the United States government and the potential for retaliatory trade measures by affected countries);
•a failure by us to establish adequate reserves for tax events;
•our ability to realize benefits from our net operating losses;
23
•any negative impact of environmental, social and governance matters on our reputation or business and the exposure of our business to additional costs or risks from our reporting on such matters;
•our ability to maintain our good standing with the United States government and international governments and capture new contracts with governmental entities;
•economic and industry trends or trend analysis;
•our ability to prevent unauthorized access to our information technology systems and other cybersecurity threats, protect the confidential information of our employees and clients and comply with privacy and data protection regulations, as well as any deficiencies associated with generative artificial intelligence (AI) technologies potentially used by us or by our third-party vendors and service providers;
•the amount and timing of repurchases, if any, under our stock repurchase program and our ability to enhance stockholder value through such program or any other actions to provide value to stockholders;
•the expected impact of reductions in our workforce during the last and current fiscal year;
•the attraction and retention of additional qualified personnel and the retention of key personnel;
•future acquisitions of or investments in complementary companies, products, subscriptions or technologies;
•the effects of seasonal trends on our results of operations, including the contract renewal cycles for vendor-supplied software support and managed services;
•our ability to maintain an effective system of internal control over financial reporting and our ability to remediate any identified material weaknesses in our internal controls; and
•other risks and uncertainties, including those discussed under “Risk Factors” in Part II, Item 1A of this Report.
We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy, short-term and long-term business operations and objectives, and financial needs. These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those referred to under “Risk Factors” in Part II, Item 1A of this Report, many of which are beyond our control. Moreover, we operate in very competitive and rapidly changing markets. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in this Report may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements.
You should not rely upon forward-looking statements as predictions of future events. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee that the future results, levels of activity, performance or events and circumstances reflected in the forward-looking statements will be achieved or occur. Moreover, neither we nor any other person assumes responsibility for the accuracy and completeness of the forward-looking statements. The forward-looking statements in this Report are made as of the date of the filing, and except as required by law, we disclaim and do not undertake any obligation to update or revise publicly any forward-looking statements in this Report. You should read this Report and the documents that we reference in this Report and have filed with the SEC as exhibits with the understanding that our actual future results, levels of activity and performance, as well as other events and circumstances, may be materially different from what we expect.
Overview
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the Unaudited Condensed Consolidated Financial Statements and the related notes to those statements included in Part I, Item 1 of this Report, and our Audited Consolidated Financial Statements for the year ended December 31, 2024, included in Part II, Item 8 of our 2024 Form 10-K.
Certain figures, such as interest rates and other percentages included in this section have been rounded for ease of presentation. Percentage figures included in this section have not in all cases been calculated based on such rounded figures but on the basis of such amounts prior to rounding. For this reason, percentage amounts in this section may vary slightly from those obtained by performing the same calculations using the figures in our Unaudited Condensed Consolidated Financial Statements or in the associated text. Certain other amounts that appear in this section may similarly not sum due to rounding.
Rimini Street, Inc. was formed in the State of Nevada in 2005 and, through a merger in 2017 with a public company, became Rimini Street, Inc., a Delaware corporation, trading on the Nasdaq Global Market under the ticker symbol “RMNI.”
Rimini Street, Inc. and its subsidiaries (referred to as “Rimini Street”, the “Company”, “we” and “us”) are global providers of end-to-end enterprise software support, products and services. The Company offers a comprehensive family of
24
unified solutions to run, manage, support, customize, configure, connect, protect, monitor, and optimize clients’ enterprise application, database, and technology software platforms.
Over the years, as our reputation for technical capability, value, innovation, responsiveness and trusted reliability grew, clients and prospects began asking us to expand the scope of our support, product and service offerings to meet other current and evolving needs and opportunities related to their enterprise software. We also heard from prospects and clients that their goals include reducing the number of IT vendors to more manageable numbers from a governance perspective, with a desire to select vendors who can provide a wider scope of IT services and become true trusted partners.
To meet the needs of our clients and prospects and to service what we believe is a significantly expanded addressable market opportunity, we continue to expand our solutions portfolio (our “Solutions Portfolio”) to a wider array of enterprise software – including an expanded list of supported software for VMware; managed services for Oracle, SAP, Salesforce®, IBM, ServiceNow®, and open-source database software; and new solutions for security, interoperability, observability and consulting. We also offer a unified package of our services as Rimini ONE™, a unique end-to-end, “turnkey” outsourcing option for Oracle and SAP landscapes designed to optimize our clients’ existing technologies with a minimum of 15 extended years of operating lifespan and enable our clients to focus their IT talent and budget on potentially higher-value, innovative projects that will support competitive advantage and growth.
Enterprise software support, products and services is one of the largest categories of overall global information technology (“IT”) spending. We believe enterprise resource planning (“ERP”), customer relationship management (“CRM”), product lifecycle management (“PLM”) database and technology software systems have become increasingly important in the operation of mission-critical business processes over the last 30 years. We also believe organizations are increasingly creating more complex IT environments that are a mixture of multiple technologies, business models and vendors, including perpetual license and subscription license software solutions, deployed across the client’s system and cloud computing providers (hybrid IT environments), and consisting of proprietary and non-proprietary open-source software, all from a multitude of different technology vendors. The costs associated with running and supporting these systems; failure and downtime; security exposure; integrating and monitoring; and maintaining the tax, legal and regulatory compliance of these software systems, have increased in both actual spend and as a percentage of the full IT budget. As a result, we believe that licensees often view enterprise software support, products and services as a mandatory cost of doing business. The majority of our revenue through June 30, 2025, was generated from our support solutions.
In a traditional licensing model, the customer typically procures a perpetual software license and pays for the license in a single upfront fee (“perpetual license”), and base software support services can be optionally procured from the software vendor for an annual fee that is typically 20-23% of the total cost of the software license. In a newer subscription-based licensing model, such as software as a service (“SaaS”), the customer generally pays for the usage of the software on a monthly or annual basis (“subscription license”). Under a subscription license, the product license and a base level of software support are generally bundled together as a single purchase, and the base level of software support is not procured separately nor is it an optional purchase.
When we provide our support solutions for a perpetual software license, we generally offer our clients service for a fee that we believe is equal to approximately 50% of the annual fees charged by the software vendor for their base support. When providing supplemental software support for a perpetual license, where the client procures our support service in addition to retaining the software vendor’s base support, we generally offer our clients service for a fee that is equal to approximately 25% of the annual fees charged by the software vendor for their base support. We also offer a special support service, Rimini Street Extra Secure Support, available to clients that require a more rigorous level of security background checks and/or government security clearance for engineers accessing a client’s system than our standard employment security background check and requirements. Clients may be asked to pay an additional fee for Rimini Street Extra Secure Support.
In addition to our support services, we also offer a breadth of enterprise software support, products and services through our full portfolio of solutions at an additional fee that is calculated based on a variety of factors and metrics. Our solutions are designed to meet specific client needs and are designed to provide what we believe is exceptional value and return for the fees charged. For more details about our Solutions Portfolio, please see Item 1 “Business” included in Part I of our 2024 Form 10-K.
As of June 30, 2025, we employed over 2,010 professionals and supported approximately 3,060 active clients globally, including 70 Fortune 500 companies and 19 Fortune Global 100 companies across a broad range of industries. We define an active client as a distinct entity, such as a company, an educational or government institution, or a business unit of a company that purchases our services to support a specific product. For example, we count as two separate active clients instances where we provide support for two different products to the same entity.
25
Our subscription-based revenue provides a foundation for, and visibility into, future period results. For the three months ended June 30, 2025 and 2024, we generated revenue of $104.1 million and $103.1 million, respectively, representing an increase of 1%. During the three months ended June 30, 2025, we recorded net income of $30.3 million, and as of June 30, 2025, we had an accumulated deficit of $204.9 million. Approximately 47% and 50% of our revenue was generated in the United States for the three months ended June 30, 2025 and 2024, respectively. Approximately 53% and 50% of our revenue was generated in foreign jurisdictions for the three months ended June 30, 2025 and 2024, respectively.
In 2024, we announced that we would Wind Down services for Oracle PeopleSoft products and began the Wind Down project. The Wind Down includes our Rimini Support™, Rimini Manage™ and Rimini Consult™ services for Oracle PeopleSoft products.
On July 7, 2025, we and Mr. Ravin entered into a Settlement Agreement with Oracle Corporation relating to the Rimini II litigation. Under the terms of this agreement, we are required to complete the Wind Down no later than July 31, 2028 (the “Wind Down Period”). The Wind Down includes our Rimini Support, Rimini Manage and Rimini Consult services for Oracle PeopleSoft products. As we provide services for Oracle PeopleSoft products to clients globally, the Wind Down process is expected to take place over the Wind Down Period, but both the pace of revenue reduction and the final date that the Company will receive revenue from the discontinued services is unknown as of the date of this Report. We expect significant reductions in revenue related to services for Oracle PeopleSoft products over the course of the Wind Down Period. Revenue related to providing services for Oracle PeopleSoft products accounted for approximately 6% of revenue for the six months ended June 30, 2025 and approximately 8% of revenue for the six months ended June 30, 2024.
Since our inception, we have financed our operations through cash collected from clients and net proceeds from equity financings and borrowings.
Global Economic Uncertainty
We have experienced some clients not renewing our services due to the adverse impact on their businesses from current global economic uncertainty, as well as by the economic disruption continuing to be caused by current military conflicts, and recent political and trade turmoil between the U.S. and other countries, amongst other global challenges. While we do not physically operate in some of these countries where conflict is occurring, we do have operations in Israel. These global events, together with inflationary pressures, have negatively impacted the global economy and driven changes in interest rates.
Uncertainty regarding changes continuing to be made in laws and regulations by the current U.S. administration, along with uncertainty about U.S. trade policies, particularly when pertaining to treaties, tariffs and other limitations on international trade, are causing economic and geopolitical uncertainty. Despite these macroeconomic and geopolitical pressures, we expect to continue to be able to market, sell and provide our current and future products and services to clients in non-sanctioned countries globally. We also expect to continue investing in the development and improvement of new and existing products and services to address client needs. Further, although our operations are influenced by general economic conditions, we do not believe the impacts of the economic disruptions described above had a significant net impact on our revenue or results of operations during the three and six months ended June 30, 2025.
The extent to which rising inflation, interest rate changes and continuing global economic and geopolitical uncertainty impact our business going forward, however, will depend on numerous evolving factors we cannot reliably predict and that are beyond our control, including continued governmental and business actions in response to increasing global economic and geopolitical uncertainty. As such, the effects of rising inflation, interest rate increases and other negative impacts on the global economy may not be fully reflected in our financial results until future periods. Refer to “Risk Factors” (Part II, Item 1A of this Report) for a discussion of these factors and other risks.
Recent Developments
Reference is made to Note 8 to our Unaudited Condensed Consolidated Financial Statements included in Part I, Item 1 of this Report for a discussion of recent developments regarding our litigation with Oracle, including the July 7, 2025, Settlement Agreement referenced above.
26
Key Business Metrics
Number of clients
Since the founding of our Company, we have made the expansion of our client base a priority. We believe that our ability to expand our client base 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. We define an active client as a distinct entity, such as a company, an educational or government institution, or a business unit of a company that purchases our services to support a specific product. For example, we count as two separate active clients when support for two different products is being provided to the same entity. As of June 30, 2025 and 2024, we had approximately 3,060 and 3,007 active clients, respectively.
We define a unique client as a distinct entity, such as a company, an educational or government institution or a subsidiary, division or business unit of a company that purchases one or more of our products or services. We count as two separate unique clients when two separate subsidiaries, divisions or business units of an entity purchase our products or services. As of June 30, 2025 and 2024, we had approximately 1,553 and 1,532 unique clients, respectively.
The increases in both our active and unique client counts have been a combination of new unique client wins as well as cross-sales of new support products and services to existing clients. We intend to focus future growth on both new and existing clients and we believe that growth in our number of unique clients is an indication that we can grow our enterprise software products and services in the future.
Annualized recurring revenue
We recognize subscription revenue on a daily basis. We define annualized recurring revenue as 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 to date.
Our annualized recurring revenue was $394 million and $399 million as of June 30, 2025 and 2024, respectively. The decline reflects the recent reduction in client retention, not fully offset by new client engagements.
Revenue retention rate
A key part of our business model is the recurring nature of our revenue. As a result, it is important that we retain clients after the completion of the non-cancellable portion of the support period. We believe that our revenue retention rate provides insight into the quality of our products and services and the value that our products and services provide our clients.
We define revenue retention rate as the actual subscription revenue (dollar-based) recognized in a 12-month period from clients that existed on the day prior to the start of the 12-month period divided by our annualized recurring revenue as of the day prior to the start of the 12-month period. Our revenue retention rate was 90% and 88% for the 12 months ended June 30, 2025 and 2024, respectively. The improvement in our revenue retention rate for the 12 months ended June 30, 2025 was due to attrition during the preceding trailing twelve months, as certain clients did not renew specific subscriptions due to a variety of reasons; however, in some cases these clients maintained or added subscriptions for other products and services.
Gross profit margin
We derive revenue through the provision of our enterprise software products and services. All the costs incurred in providing these products and services are recognized as part of the cost of revenue. The cost of revenue includes all direct product line expenses, as well as the expenses incurred by our shared services organization which supports all product lines.
We define gross profit as the difference between revenue and the costs incurred in providing the software products and services. Gross profit margin is the ratio of gross profit divided by revenue. Our gross profit margin was approximately 60.4% and 59.1% for the three months ended June 30, 2025 and 2024, respectively. Our gross profit margin improved for the three months ended June 30, 2025 compared to the three months ended June 30, 2024 due to better management of costs in our non-core products and services.
27
Results of Operations
Comparison of Three Months Ended June 30, 2025 and 2024
Our consolidated statements of operations for the three months ended June 30, 2025 and 2024, are presented below (in thousands):
| Three Months Ended June 30, | Variance | ||||||||||||||||||||||
| 2025 | 2024 | Amount | Percent | ||||||||||||||||||||
| Revenue | $ | 104,114 | $ | 103,123 | $ | 991 | 1.0% | ||||||||||||||||
| Cost of revenue: | |||||||||||||||||||||||
| Employee compensation and benefits | 25,574 | 27,417 | (1,843) | (6.7)% | |||||||||||||||||||
| Engineering consulting costs | 6,609 | 6,067 | 542 | 8.9% | |||||||||||||||||||
Administrative allocations (1) | 4,273 | 4,192 | 81 | 1.9% | |||||||||||||||||||
| All other costs | 4,805 | 4,504 | 301 | 6.7% | |||||||||||||||||||
| Total cost of revenue | 41,261 | 42,180 | (919) | (2.2)% | |||||||||||||||||||
| Gross profit | 62,853 | 60,943 | 1,910 | 3.1% | |||||||||||||||||||
| Gross profit margin | 60.4 | % | 59.1 | % | |||||||||||||||||||
| Operating expenses: | |||||||||||||||||||||||
| Sales and marketing | 38,020 | 37,377 | 643 | 1.7% | |||||||||||||||||||
| General and administrative | 16,845 | 19,531 | (2,686) | (13.8)% | |||||||||||||||||||
| Reorganization costs | 722 | 3,208 | (2,486) | (77.5)% | |||||||||||||||||||
| Litigation costs and related recoveries, net | (33,932) | 1,602 | (35,534) | (2,218.1)% | |||||||||||||||||||
| Total operating expenses | 21,655 | 61,718 | (40,063) | (64.9)% | |||||||||||||||||||
| Operating income | 41,198 | (775) | 41,973 | (5,415.9)% | |||||||||||||||||||
| Non-operating income and (expenses): | |||||||||||||||||||||||
| Interest expense | (1,629) | (1,483) | (146) | 9.8% | |||||||||||||||||||
| Other income (expenses), net | 1,232 | 1,492 | (260) | (17.4)% | |||||||||||||||||||
| Income before income taxes | 40,801 | (766) | 41,567 | (5,426.5)% | |||||||||||||||||||
| Income taxes | (10,543) | (382) | (10,161) | 2,659.9% | |||||||||||||||||||
| Net income | $ | 30,258 | $ | (1,148) | $ | 31,406 | (2,735.7)% | ||||||||||||||||
-
(1)Includes the portion of costs for IT, security services and facilities costs that are allocated to cost of revenue. In our Unaudited Condensed Consolidated Financial Statements, the total of such costs is allocated between cost of revenue, sales and marketing, and general and administrative expenses, based primarily on relative headcount, except for facilities which is based on occupancy.
Revenue. Revenue grew from $103.1 million for the three months ended June 30, 2024 to $104.1 million for the three months ended June 30, 2025, an increase of $1.0 million or 1%. The increase in revenue was driven by a 2% increase in the average number of unique clients, from 1,534 for the three months ended June 30, 2024 to 1,564 for the three months ended June 30, 2025. On a geographic basis, United States revenue declined from $51.5 million for the three months ended June 30, 2024 to $49.2 million for the three months ended June 30, 2025, a decrease of $2.3 million or 4%. Our international revenue grew from $51.7 million for the three months ended June 30, 2024 to $55.0 million for the three months ended June 30, 2025, an increase of $3.3 million or 6%.
We are required to complete the Wind Down of support and services for Oracle PeopleSoft products no later than July 31, 2028. The percentage of revenue derived from support and services the Company provides solely for Oracle PeopleSoft products was approximately 6% and 8% of the Company’s total revenue for the three months ended June 30, 2025 and 2024, respectively.
Cost of revenue. Cost of revenue decreased from $42.2 million for the three months ended June 30, 2024 to $41.3 million for the three months ended June 30, 2025, a decrease of $0.9 million or 2%. The key drivers related to the cost of
28
revenue decrease were a decline in employee compensation and benefits of $1.8 million, offset in part by a $0.5 million increase in engineering consulting costs, a $0.1 million increase in administrative allocations and a $0.3 million increase in all other costs.
Gross profit. Gross profit increased from $60.9 million for the three months ended June 30, 2024 to $62.9 million for the three months ended June 30, 2025, an increase of $1.9 million or 3%. Gross profit margin for the three months ended June 30, 2024 was 59.1% compared to 60.4% for the three months ended June 30, 2025. For the three months ended June 30, 2025, the total cost of revenue decreased by 2% compared to an increase in revenue of 1% for the three months ended June 30, 2025. As a result, our gross profit margin improved by 130 basis points period over period. We do not expect the Wind Down of PeopleSoft to unfavorably impact our gross margins going forward. We will continue to monitor and manage our overall gross margin as we enter and invest in a broader mix of products and services.
Sales and marketing expenses. As a percentage of our revenue, sales and marketing expenses were 37% and 36% for the three months ended June 30, 2025 and 2024, respectively. In dollar terms, sales and marketing expenses increased from $37.4 million for the three months ended June 30, 2024 to $38.0 million for the three months ended June 30, 2025, an increase of $0.6 million or 2%. This increase was primarily due a $0.4 million increase in employee compensation and benefits, a $0.4 million increase related to travel expenses and a $0.7 million increase in other costs. These increases were primarily offset by a $0.7 million decrease in marketing and advertising expenses. We will continue to seek additional revenue by selectively investing in resources and marketing programs that we believe will be scalable and help drive future revenue growth.
General and administrative expenses. General and administrative expenses decreased from $19.5 million for the three months ended June 30, 2024 to $16.8 million for the three months ended June 30, 2025, a decrease of $2.7 million or 14%. This decrease was comprised of several items, which included a decrease in employee compensation and benefits of $0.9 million, a decrease in professional fees of $0.8 million, a decrease in bad debt expense of $0.5 million, an increase in administrative allocations of $0.3 million and a decrease of contract labor of $0.3 million. These favorable variances were offset by an increase in rent and facility costs of $0.3 million.
Looking forward on a quarter-over-quarter basis, we are monitoring the demand for our services in light of current global economic conditions and competitive pressures and will adjust our expenditures accordingly. However, we expect to incur higher expenses associated with supporting the growth of our business, both in terms of size and geographical diversity. Our company costs that are expected to increase in the future include costs relating to additional information systems costs, costs for additional personnel in our accounting, human resources, IT and legal functions, SEC and Nasdaq fees, and incremental professional, legal, audit and insurance costs. As a result, we expect continued pressure on our general and administrative expenses in future periods.
Reorganization costs. During the year ended December 31, 2024, we began a process to optimize our cost structure through a headcount reduction. We recognized reorganization costs of $0.7 million for the three months ended June 30, 2025 compared to $3.2 million for the three months ended June 30, 2024. The costs were primarily related to severance costs associated with our reorganization plan. We are likely to incur additional reorganization costs during the third quarter of 2025 as we continue to optimize our cost structure in areas where opportunities to streamline our operations exist.
Litigation costs and related recoveries, net. Litigation costs and related recoveries, net consist of the following (in thousands):
| Three Months Ended June 30, | |||||||||||||||||
| 2025 | 2024 | Variance | |||||||||||||||
| Litigation settlement | $ | (36,196) | $ | — | $ | (36,196) | |||||||||||
| Professional fees and other costs of litigation | 2,264 | 1,602 | 662 | ||||||||||||||
| Litigation costs and related recoveries, net | $ | (33,932) | $ | 1,602 | $ | (35,534) | |||||||||||
On July 9, 2025, in accordance with the terms of the Settlement Agreement, we received from Oracle approximately $37.9 million of the $58.7 million in attorneys’ fees and costs that we previously paid to Oracle in late 2024. As a result, we recognized the loss recovery as litigation settlement income of $36.2 million and interest income of $1.7 million for the three months ended June 30, 2025.
Professional fees and other costs associated with litigation increased from $1.6 million for the three months ended June 30, 2024 to $2.3 million for the three months ended June 30, 2025, an increase of $0.7 million. This increase was primarily due
29
to the timing of when litigation costs relating to the Rimini II litigation were incurred. We expect to incur additional professional fees and other costs associated with litigation in future quarters relating to filings and other actions contemplated by the Settlement Agreement as well as throughout the Wind Down Period. Please refer to Note 8 to our Unaudited Condensed Consolidated Financial Statements, included in Part I, Item 1 of this Report, for additional information regarding our litigation with Oracle.
Interest expense. Interest expense increased from $1.5 million for the three months ended June 30, 2024 to $1.6 million for the three months ended June 30, 2025. Interest expense increased primarily due to initially borrowing $15.0 million in October 2024 under the revolving line of credit, which resulted in interest expense of $0.2 million for the three months ended June 30, 2025.
Other income (expenses), net. Other income (expenses), net is primarily comprised of interest income, foreign exchange gains and losses, and other non-operating income and expenses. For the three months ended June 30, 2025, net other income of approximately $1.2 million was comprised of foreign exchange losses of $1.2 million and other expenses of $0.1 million, which was offset by interest income primarily from cash and cash equivalents of $2.6 million, of which $1.7 million was related to interest income comprising a portion of the total $37.9 million of attorneys’ fees and costs remitted by Oracle to us. For the three months ended June 30, 2024, net other income of approximately $1.5 million was comprised primarily of gains from foreign exchanges of $0.9 million and interest income from cash and cash equivalents of $0.9 million, offset by other expenses of approximately $0.3 million.
Income taxes. We had an income tax expense of $0.4 million for the three months ended June 30, 2024 compared to $10.5 million for the three months ended June 30, 2025. For the three months ended June 30, 2025, the primary reason for the change in income taxes was due to an increase of income before taxes of $41.6 million in the current year period compared to the prior year period.
30
Comparison of Six Months Ended June 30, 2025 and 2024
Our consolidated statements of operations for the six months ended June 30, 2025 and 2024, are presented below (in thousands):
| Six Months Ended June 30, | Variance | ||||||||||||||||||||||
| 2025 | 2024 | Amount | Percent | ||||||||||||||||||||
| Revenue | $ | 208,318 | $ | 209,868 | $ | (1,550) | (0.7)% | ||||||||||||||||
| Cost of revenue: | |||||||||||||||||||||||
| Employee compensation and benefits | 51,139 | 55,202 | (4,063) | (7.4)% | |||||||||||||||||||
| Engineering consulting costs | 12,754 | 12,529 | 225 | 1.8% | |||||||||||||||||||
Administrative allocations (1) | 8,535 | 8,231 | 304 | 3.7% | |||||||||||||||||||
| All other costs | 9,503 | 9,133 | 370 | 4.1% | |||||||||||||||||||
| Total cost of revenue | 81,931 | 85,095 | (3,164) | (3.7)% | |||||||||||||||||||
| Gross profit | 126,387 | 124,773 | 1,614 | 1.3% | |||||||||||||||||||
| Gross profit margin | 60.7 | % | 59.5 | % | |||||||||||||||||||
| Operating expenses: | |||||||||||||||||||||||
| Sales and marketing | 72,275 | 76,518 | (4,243) | (5.5)% | |||||||||||||||||||
| General and administrative | 34,376 | 37,933 | (3,557) | (9.4)% | |||||||||||||||||||
| Reorganization costs | 1,184 | 3,208 | (2,024) | (63.1)% | |||||||||||||||||||
| Litigation costs and related recoveries, net | (32,007) | 4,527 | (36,534) | (807.0)% | |||||||||||||||||||
| Total operating expenses | 75,828 | 122,186 | (46,358) | (37.9)% | |||||||||||||||||||
| Operating income | 50,559 | 2,587 | 47,972 | 1,854.3% | |||||||||||||||||||
| Non-operating income and (expenses): | |||||||||||||||||||||||
| Interest expense | (3,304) | (2,824) | (480) | 17.0% | |||||||||||||||||||
| Other income (expenses), net | 1,155 | 2,457 | (1,302) | (53.0)% | |||||||||||||||||||
| Income before income taxes | 48,410 | 2,220 | 46,190 | 2,080.6% | |||||||||||||||||||
| Income taxes | (14,802) | (2,051) | (12,751) | 621.7% | |||||||||||||||||||
| Net income | $ | 33,608 | $ | 169 | $ | 33,439 | 19,786.4% | ||||||||||||||||
(1)Includes the portion of costs for IT, security services and facilities costs that are allocated to cost of revenue. In our Unaudited Condensed Consolidated Financial Statements, the total of such costs is allocated between cost of revenue, sales and marketing, and general and administrative expenses, based primarily on relative headcount, except for facilities which is based on occupancy.
Revenue. Revenue declined from $209.9 million for the six months ended June 30, 2024 to $208.3 million for the six months ended June 30, 2025, a decrease of $1.6 million or 1%. Although there was a 2% increase in the average number of unique clients from 1,534 for the six months ended June 30, 2024 to 1,569 for the six months ended June 30, 2025, revenue declined primarily due to the attrition of some large client contracts as certain clients did not renew specific subscriptions in prior periods due to varying reasons, which is now being reflected in our revenue during the current period. On a geographic basis, United States revenue declined from $105.3 million for the six months ended June 30, 2024 to $99.3 million for the six months ended June 30, 2025, a decrease of $6.0 million or 6%. Our international revenue grew from $104.6 million for the six months ended June 30, 2024 to $109.1 million for the six months ended June 30, 2025, an increase of $4.5 million or 4%.
We are required to complete the Wind Down of support and services for Oracle PeopleSoft products no later than July 31, 2028. The percentage of revenue derived from support and services the Company provides solely for Oracle PeopleSoft products was approximately 6% and 8% of the Company’s total revenue for the six months ended June 30, 2025 and 2024, respectively.
Cost of revenue. Cost of revenue decreased from $85.1 million for the six months ended June 30, 2024 to $81.9 million for the six months ended June 30, 2025, a decrease of $3.2 million or 4%. The key drivers related to the cost of revenue decrease were a $4.1 million decrease in employee compensation and benefits as the average headcount decreased 5%, offset by
31
a $0.3 million increase in administrative allocations, a $0.4 million increase in all other costs and a $0.2 million increase in engineering consulting costs.
Gross profit. Gross profit increased from $124.8 million for the six months ended June 30, 2024 to $126.4 million for the six months ended June 30, 2025, an increase of $1.6 million or 1%. Gross profit margin for the six months ended June 30, 2024 was 59.5% compared to 60.7% for the six months ended June 30, 2025. For the six months ended June 30, 2025, the total cost of revenue decreased by 4%, primarily due to a decrease in average headcount of 5% compared to a decline in revenue of 1% for the six months ended June 30, 2025. As a result, our gross profit margin improved by 120 basis points period over period. We do not expect the Wind Down of PeopleSoft to unfavorably impact our gross margins going forward. We will continue to monitor and manage our overall gross margin as we enter and invest in a broader mix of products and services.
Sales and marketing expenses. As a percentage of our revenue, sales and marketing expenses were 35% and 36% for the six months ended June 30, 2025 and 2024, respectively. In dollar terms, sales and marketing expenses decreased from $76.5 million for the six months ended June 30, 2024 to $72.3 million for the six months ended June 30, 2025, a decrease of $4.2 million or 6%. This decline was primarily due to a reduction of $3.6 million related to travel and entertainment costs incurred as part of a sales training event held in January 2024. In addition, both our employee compensation and benefits and marketing and advertising costs declined $0.5 million and $0.7 million, respectively, for the six months ended June 30, 2025. These declines were offset, in part, by increases in administrative allocations and all other costs of $0.5 million and $0.6 million, respectively, for the six months ended June 30, 2025. We will continue to seek additional revenue by selectively investing in resources and marketing programs that we believe will be scalable and help drive future revenue growth.
General and administrative expenses. General and administrative expenses decreased from $37.9 million for the six months ended June 30, 2024 to $34.4 million for the six months ended June 30, 2025, a decrease of $3.6 million or 9%. This decrease was comprised of several items, which included a decrease in employee compensation and benefits of $1.7 million, an increase in administrative allocations of $0.8 million, a decrease of contract labor of $0.6 million and a reduction of professional fees of $0.6 million for the six months ended June 30, 2025. These favorable variances were offset by an increase in rent and facility costs of $0.5 million.
Reorganization costs. During the year ended December 31, 2024, we began a process to optimize our cost structure through a headcount reduction. We recognized reorganization costs of $1.2 million for the six months ended June 30, 2025 compared to $3.2 million for the six months ended June 30, 2024. The costs were primarily related to severance costs associated with our reorganization plan. We are likely to incur additional reorganization costs during the third quarter of 2025 as we continue to optimize our cost structure in areas where opportunities to streamline our operations exist.
Litigation costs, net of related insurance recoveries. Litigation costs, net of related insurance recoveries, consist of the following (in thousands):
| Six Months Ended June 30, | |||||||||||||||||
| 2025 | 2024 | Variance | |||||||||||||||
| Litigation settlement | $ | (36,196) | $ | — | $ | (36,196) | |||||||||||
| Professional fees and other costs of litigation | 4,189 | 4,527 | (338) | ||||||||||||||
| Litigation costs and related recoveries, net | $ | (32,007) | $ | 4,527 | $ | (36,534) | |||||||||||
On July 9, 2025, in accordance with the terms of the Settlement Agreement, we received from Oracle approximately $37.9 million of the $58.7 million in attorneys’ fees and costs that we previously paid to Oracle in late 2024. As a result, we recognized the loss recovery as litigation settlement income of $36.2 million and interest income of $1.7 million for the six months ended June 30, 2025.
Professional fees and other costs associated with litigation decreased from $4.5 million for the six months ended June 30, 2024 to $4.2 million for the six months ended June 30, 2025, a decrease of $0.3 million. This decrease was primarily due to the timing of when litigation costs relating to the Rimini II litigation were incurred. Please refer to Note 8 to our Unaudited Condensed Consolidated Financial Statements, included in Part I, Item 1 of this Report, for additional information regarding our litigation with Oracle.
Interest expense. Interest expense increased from $2.8 million for the six months ended June 30, 2024 to $3.3 million for the six months ended June 30, 2025. Interest expense increased primarily due to initially borrowing $15.0 million in October
32
2024 under the revolving line of credit, which resulted in interest expense of $0.5 million for the six months ended June 30, 2025.
Other income (expenses), net. Other income (expenses), net is primarily comprised of interest income, foreign exchange gains and losses, and other non-operating income and expenses. For the six months ended June 30, 2025, net other income of approximately $1.2 million was comprised primarily of interest income of $3.2 million, which included $1.7 million related to interest income comprising a portion of the total $37.9 million of attorneys’ fees and costs remitted by Oracle to us as well as interest income earned from cash and cash equivalents. The interest income was offset, in part, by foreign exchange losses of $1.8 million and other expenses of $0.2 million. For the six months ended June 30, 2024, net other income of approximately $2.5 million was comprised primarily of income from cash equivalents and investments of $1.9 million and foreign exchange gains of $1.1 million, This other income was offset, in part, by other expenses of $0.5 million.
Income tax expense. We recorded income tax expense of $2.1 million for the six months ended June 30, 2024 compared to an income tax expense of $14.8 million for the six months ended June 30, 2025. For the six months ended June 30, 2025, the primary reason for the increase in income tax expense was due to an increase of income before taxes of $46.2 million in the current year period compared to the prior year period.
Liquidity and Capital Resources
Overview
As of June 30, 2025, we had a working capital deficit of $24.7 million and an accumulated deficit of $204.9 million. For the three months ended June 30, 2025, we recorded net income of $30.3 million. As of June 30, 2025, we had available cash, cash equivalents and restricted cash of $102.5 million.
In April 2024, we refinanced our Original Credit Facility, which had an outstanding principal balance of $70.9 million, with a new five-year senior secured credit facility (“2024 Credit Facility”) consisting of a $75.0 million term loan and a $35.0 million revolving line of credit. As of June 30, 2025, we had outstanding term loan borrowings of $71.3 million as well as borrowings on the revolving line of credit of $10.0 million under our 2024 Credit Facility. As a result, we had net availability of $25.0 million under our revolving line of credit as of June 30, 2025. On July 15, 2025, we repaid the remaining $10.0 million outstanding balance due under our revolving line of credit, resulting in $35.0 million of borrowing capacity.
We have a choice of interest rates under the 2024 Credit Facility between (a) SOFR and (b) Base Rate, in each case plus an applicable margin. The applicable margin remains the same as the Original Credit Facility and is based on our Consolidated Total Leverage Ratio (as defined in the 2024 Credit Facility) and whether we elect SOFR (ranging from 2.75% to 3.50%) or a Base Rate (ranging from 1.75% to 2.5%). Interest on the unused portion of the revolving credit line is at rates of between 25 to 40 basis points, depending on our Consolidated Total Leverage Ratio. Annual minimum principal payments over the five-year term for the 2024 Credit Facility are 5%, 5%, 7.5%, 7.5%, and 10%, respectively, with the remaining balance due at the end of the original term.
The 2024 Credit Facility contains certain financial covenants, including a minimum fixed charge coverage ratio greater than 1.25, a total leverage ratio less than 3.75, and a minimum liquidity balance of at least $20 million in U.S. cash. We believe that we are in compliance with these financials covenants for the three months ended June 30, 2025.
Please refer to Note 5 to the Unaudited Condensed Consolidated Financial Statements included in Part I, Item 1 of this Report for information regarding our 2024 Credit Facility.
A key component of our business model requires that substantially all clients prepay us annually for the services we will provide over the following year or longer. As a result, we typically collect cash from our clients in advance of when the related service costs are incurred, which resulted in deferred revenue of $241.4 million that is included in current liabilities as of June 30, 2025. Therefore, we believe that working capital deficit is not as meaningful in evaluating our liquidity since the costs of fulfilling our commitments to provide services to clients are currently limited to approximately 40% of the related deferred revenue based on our gross profit percentage of 60% for the three months ended June 30, 2025.
For the next year, assuming that our operations are not significantly impacted by rising inflation, continued interest rate changes, other global economic or geopolitical uncertainties, political and trade turmoil between the U.S. and China and other countries, or the litigation matters as disclosed in Note 8 to our Unaudited Condensed Consolidated Financial Statements included in Part I, Item 1 of this Report, we believe that cash, cash equivalents and restricted cash of $102.5 million as of June
33
30, 2025, plus future cash flows from operating activities and our 2024 Credit Facility will be sufficient to meet our anticipated cash needs including working capital requirements, planned capital expenditures and our contractual obligations.
Our future capital requirements depend on many factors, including client growth, number of employees, expansion of sales and marketing activities, and the introduction of new and enhanced services offerings. We may also enter into arrangements to acquire or invest in complementary businesses, services, technologies, or intellectual property rights in the future. We may choose to seek additional debt or equity financing to support these long-term capital requirements. In an economic downturn, we may also be unable to raise capital through debt or equity financings on terms acceptable to us or at all. Covenants in our 2024 Credit Facility could also have consequences on our operations, including restricting or delaying our ability to obtain additional financing, potentially limiting our ability to adjust to rapidly changing market conditions or respond to business opportunities. Additionally, in challenging and uncertain economic environments, we cannot predict when macroeconomic uncertainty may arise, whether or when such circumstances may improve or worsen or what impact such circumstances could have on our business and our liquidity requirements.
Cash Flows Summary
Presented below is a summary of our operating, investing and financing cash flows (in thousands):
| Six Months Ended June 30, | |||||||||||
| 2025 | 2024 | ||||||||||
| Net cash provided by (used in): | |||||||||||
| Operating activities | $ | 15,937 | $ | 17,345 | |||||||
| Investing activities | (2,661) | 7,798 | |||||||||
| Financing activities | (7,057) | 1,074 | |||||||||
The effect of foreign currency translation changes was favorable for $7.0 million for the six months ended June 30, 2025 compared to an unfavorable impact of $7.4 million for the six months ended June 30, 2024, respectively, due to favorable foreign exchange impacts related to our foreign cash. For the six months ended June 30, 2025, we experienced a change in foreign currency exchange rates as the U.S. dollar weakened against the majority of foreign currencies where we operate. The favorable foreign currency impact was primarily related to our foreign cash held in Japan, the United Kingdom and other foreign entities as those local currencies strengthened against the U.S. dollar.
Cash Flows Provided By Operating Activities
As clients typically prepay us annually for the services which we will provide over the following year or longer, we typically collect cash in advance of the date when the vast majority of the related services are provided. Historically, we have experienced seasonality in our operating cash flows as we tend to generate cash from operating activities during the first half of the year. Our operating cash flows are then utilized by operating activities during the second half of the year. This has been due to the cyclical variations in our billings from period to period.
For the six months ended June 30, 2025, cash flows provided by operating activities amounted to approximately $15.9 million. The key drivers resulting in our cash provided by operating activities for the six months ended June 30, 2025, included net income of $33.6 million and adjustments to reconcile net income to net cash totaling $20.7 million, offset in part by unfavorable changes in operating assets and liabilities of $38.4 million, resulting in net cash provided by operating activities of $15.9 million.
For the six months ended June 30, 2025, adjustments to reconcile net income to net cash consisted primarily of stock-based compensation expense of $5.6 million, amortization and accretion related to operating lease ROU assets of $2.4 million, depreciation and amortization expense of $1.8 million, accretion and amortization of debt discount and issuance costs of $0.3 million and a favorable change in deferred income taxes of $10.6 million. For the six months ended June 30, 2025, the changes in operating assets and liabilities, net consisted of favorable changes to accounts receivable of $31.1 million and deferred contract costs of $2.4 million. The favorable change to accounts receivable was a result of collecting $218.4 million during the six months ended June 30, 2025 which was offset by billings, net of $190.1 million during the six months ended June 30, 2025. As a result, our days sales outstanding for accounts receivable was 88 days as of June 30, 2025. The favorable change in deferred contract costs was due to capitalizing $7.0 million of commissions and amortizing $9.4 million of deferred contract costs during the six months ended June 30, 2025.
34
Offsetting these favorable changes were unfavorable changes to deferred revenue of $23.3 million, accrued compensation, benefits, commissions and other of $6.6 million and prepaid expenses, deposits and other of $42.6 million. The use of cash for deferred revenue was due to recognizing $208.3 million in revenue for the current period, which was offset by recording billings, net of $190.1 million during the current period. The unfavorable use of prepaid expenses, deposits and other of $42.6 million was primarily due to the recognition of a receivable of $37.9 million because of the orders issued in the Rimini II litigation by the District Court in June 2025 regarding the return of attorneys’ fees and costs to us. The unfavorable use of accrued liabilities was primarily due to payments for bonuses, commissions and taxes during the six months ended June 30, 2025.
For the six months ended June 30, 2024, cash flows provided by operating activities amounted to approximately $17.3 million. The key drivers resulting in our cash provided by operating activities for the six months ended June 30, 2024, included a net income of $0.2 million and adjustments to reconcile a net loss to net cash totaling $6.8 million, as well as favorable changes in operating assets and liabilities of $10.4 million, resulting in net cash provided by operating activities of $17.3 million.
For the six months ended June 30, 2024, adjustments to reconcile a net loss to net cash consisted primarily of stock-based compensation expense of $5.0 million, amortization and accretion related to operating lease ROU assets of $2.2 million, depreciation and amortization expense of $1.7 million, accretion and amortization of debt discount and issuance costs of $0.4 million and an unfavorable change in deferred income taxes of $2.6 million. For the six months ended June 30, 2024, the changes in operating assets and liabilities, net consisted of favorable changes to accounts receivable of $29.9 million, prepaid expenses, deposits and other assets of $2.1 million and deferred contract costs of $4.2 million. The favorable change to accounts receivable was a result of collecting $222.5 million during the six months ended June 30, 2024 which was offset by billings, net of $185.7 million during the six months ended June 30, 2024. As a result, our days sales outstanding for accounts receivable was 73 days as of June 30, 2024. The favorable change in deferred contract costs was due to capitalizing $5.7 million of commissions and amortizing $9.9 million of deferred contract costs during the six months ended June 30, 2024.
Offsetting these favorable changes were unfavorable changes to accrued liabilities of $7.0 million, deferred revenue of $17.3 million and accounts payable of $1.5 million. The unfavorable use of cash for accrued liabilities related primarily to paying incremental compensation related to bonuses and commissions of $6.2 million during the current period. The use of cash for deferred revenue was due to recognizing $209.9 million in revenue for the current period, which was offset by recording billings, net of $185.7 million during the current period.
Cash Flows Provided By (Used In) Investing Activities
Cash used in investing activities totaled $2.7 million for the six months ended June 30, 2025 and cash provided by investing activities totaled $7.8 million for the six months ended June 30, 2024. For the six months ended June 30, 2025, cash used in investing activities was primarily driven by capital expenditures for leasehold improvements, software development costs, and computer equipment of $2.7 million. Specifically, these capital expenditures included construction in progress for leasehold improvements in Brazil of $1.4 million and Korea of $0.4 million, as well as capitalized software development costs in our U.S. entity of $0.4 million.
For the six months ended June 30, 2024, cash provided by investing activities of $7.8 million was primarily driven by proceeds from sales and maturities of short-term investments of $17.3 million, which were offset by purchases of short-term investments of $7.5 million and capital expenditures of $2.0 million for leasehold improvements, software development costs, and computer equipment. The capital expenditures of $2.0 million consisted primarily of capitalized software development costs, new computer equipment, and furniture and fixtures in our U.S. entity of $1.4 million and $0.6 million for computer equipment at our foreign locations, primarily in Brazil of $0.2 million and in India of $0.2 million.
Cash Flows Used In Financing Activities
For the six months ended June 30, 2025, cash utilized in financing activities of $7.1 million was attributable to principal payments related to the 2024 Credit Facility for the revolving line of credit of $5.0 million and the term loan of $1.9 million. In addition, capital lease payments of $0.2 million were made during the six months ended June 30, 2025. These activities were offset, in part, by proceeds from stock option exercises of $9 thousand
For the six months ended June 30, 2024, cash provided by financing activities of $1.1 million was attributable to proceeds received from the 2024 Credit Facility of $2.9 million, which were offset by principal payments related to the Original Credit Facility of $1.7 million and capital lease payments of $0.2 million.
35
Foreign Subsidiaries
Our foreign subsidiaries and branches are dependent on our U.S.-based parent for continued funding. We currently do not intend to repatriate any amounts that have been invested overseas back to the U.S.-based parent. However, we may still be liable for withholding taxes, state taxes, or other income taxes that might be incurred upon the repatriation of foreign earnings. We have not made any provision for additional income taxes on undistributed earnings of our foreign subsidiaries. As of June 30, 2025, we had cash and cash equivalents of $33.2 million held by our foreign subsidiaries.
Critical Accounting Estimates
Our management’s discussion and analysis of financial condition and results of operations is based on our Unaudited Condensed Consolidated Financial Statements, which have been prepared in accordance with U.S. GAAP. The preparation of these Consolidated Financial Statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the Consolidated Financial Statements, as well as the reported revenue and expenses during the reporting periods. These items are monitored and analyzed for changes in facts and circumstances, and material changes in these estimates could occur in the future. We base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Changes in estimates are reflected in reported results for the period in which they become known. Actual results may differ from these estimates under different assumptions or conditions. We describe our significant accounting policies in Note 2 to our Consolidated Financial Statements for the year ended December 31, 2024, included in Part II, Item 8 of our 2024 Form 10-K, and we discuss our critical accounting policies and estimates in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section included in Part II, Item 7 of our 2024 Form 10-K. Since the filing of our 2024 Form 10-K, there have been no material changes in our critical accounting policies and estimates from those disclosed therein.
Recent Accounting Pronouncements
From time to time, new accounting pronouncements are issued by the FASB or other standard setting bodies that are adopted by us as of the specified effective date. For additional information on recently issued accounting standards and our plans for adoption of those standards, please refer to the section titled Recent Accounting Pronouncements under Note 2 to our Unaudited Condensed Consolidated Financial Statements included in Part I, Item 1 of this Report.
Recently Issued Accounting Standards Not Yet Adopted
In November 2024, the FASB issued ASU 2024-03, "Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses," and in January 2025, the FASB issued ASU 2025-01, "Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Clarifying the Effective Date." ASU 2024-03 requires additional disclosure of the nature of expenses included in the income statement as well as disclosures about specific types of expenses included in the expense captions presented in the income statement. ASU 2024-03, as clarified by ASU 2025-01, is effective for annual periods beginning after December 15, 2026 and interim periods within fiscal years beginning after December 15, 2027 on a prospective basis. Both early adoption and retrospective application are permitted. We are assessing the impact of the adoption of these standards on our Consolidated Financial Statements and related disclosures.
We believe that no other recently issued accounting standards will have a material impact on our Unaudited Condensed Consolidated Financial Statements or apply to our operations.
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk.
Foreign Currency Exchange Risk
We have foreign currency risks related to our revenue and operating expenses denominated in currencies other than the U.S. Dollar, primarily the Euro, British Pound Sterling, Brazilian Real, Australian Dollar, Indian Rupee and Japanese Yen. For the three months ended June 30, 2025 and 2024, we generated approximately 53% and 50% of our revenue from our international business, respectively. Increases in the relative value of the U.S. Dollar to other currencies may negatively affect our revenue, partially offset by a positive impact to operating expenses in other currencies as expressed in U.S. Dollars. We have experienced and will continue to experience fluctuations in our net income as a result of transaction gains or losses related to revaluing certain current asset and current liability balances, including intercompany receivables and payables, which are
36
denominated in currencies other than the functional currency of the entities in which they are recorded. While we have not engaged in the hedging of our foreign currency transactions to date, we evaluate the costs and benefits of entering into future hedge transaction for currencies other than the U.S. Dollar.
As of June 30, 2025, the effect of a hypothetical 10% change in foreign currency exchange rates applicable to our business would have impacted our income before income taxes by a plus or minus of $1.2 million in our Consolidated Statements of Operations and Comprehensive Income and would have impacted the effect of foreign currency changes on cash by a plus or minus $3.5 million in our Consolidated Statement of Cash Flows.
Interest Rate Risk
Risk with Respect to Investments
We hold cash and cash equivalents for working capital purposes. We do not have material exposure to market risk with respect to investments, as any investments we enter into are primarily highly liquid investments.
Variable Rate Debt
On April 30, 2024, we refinanced our Original Credit Facility, which had an outstanding principal balance of $70.9 million, with a new five-year senior secured credit facility (“2024 Credit Facility”) consisting of a $75.0 million term loan and a $35.0 million revolving line of credit. For the term loan, we have a choice of interest rates between (a) SOFR and (b) a Base Rate (as defined in the 2024 Credit Facility), in each case plus an applicable margin. The applicable margin is based on our Consolidated Total Leverage Ratio (as defined in the 2024 Credit Facility) and whether we elect SOFR (ranging from 2.75% to 3.5%) or Base Rate (ranging from 1.75% to 2.5%). The revolving line of credit bears interest on the unused portion of the credit line at rates of 25 to 40 basis points, depending on our Consolidated Total Leverage Ratio.
Accordingly, we are exposed to market risk due to variable interest rates based on SOFR. As of June 30, 2025, we had $71.3 million outstanding debt under the 2024 Credit Facility and $10.0 million of borrowings under the revolving line of credit. As of June 30, 2025, a hypothetical adverse change of 100 basis points in SOFR would have resulted in an increase of approximately $0.8 million in annual interest expense. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part I, Item 2 as well as Note 5 and Note 11 to our Unaudited Condensed Consolidated Financial Statements included in Part I, Item 1 of this Report for more information related to the 2024 Credit Facility.
ITEM 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
We maintain a system of disclosure controls and procedures that are designed to reasonably ensure that information required to be disclosed in our SEC reports is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and to reasonably ensure that such information is accumulated and communicated to our management, including our Chief Executive Officer and our Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure.
Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) (“Disclosure Controls”) will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected. We monitor our Disclosure Controls and make modifications as necessary; our intent in this regard is that the Disclosure Controls will be modified as systems change and conditions warrant.
37
In connection with the preparation of this Report, as of June 30, 2025, an evaluation of the effectiveness of the design and operation of our Disclosure Controls was performed. This evaluation was performed under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer. Based on this evaluation, they concluded that our disclosure controls and procedures were effective to provide reasonable assurance that
information required to be disclosed in our SEC reports is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and to reasonably ensure that such information is accumulated and communicated to our management, including our Chief Executive Officer and our Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting during the fiscal quarter ended June 30, 2025 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings.
The legal proceedings described in Note 8 to our Unaudited Condensed Consolidated Financial Statements included in Part I, Item 1 of this Report are incorporated herein by reference. In addition, from time to time, we may be a party to litigation and subject to claims incident to the ordinary course of business. Although the results of litigation and claims cannot be predicted with certainty, we currently believe that the final outcome of these ordinary course matters will not have a material adverse effect on our business. Regardless of the outcome, litigation can have an adverse impact on us because of judgment, defense and settlement costs, diversion of management resources and other factors.
ITEM 1A. Risk Factors.
Various factors could affect our business, financial condition, results of operations and cash flows. Any of the principal factors described in this section or other risks described elsewhere in this Report could result in a significant or material adverse effect on our business, financial condition, results of operations and cash flows. Additional risk factors not presently known to us or that we currently deem immaterial may also impair our business or results of operations. If any of these factors should materialize, the trading price of our securities and the value of your investment might significantly decline.
You should also refer to the explanation of the qualifications and limitations on forward-looking statements under “Cautionary Note Regarding Forward-Looking Statements” set forth in the introduction to Part I, Item 2 of this Report. All forward-looking statements made by us are qualified by the risk factors described below.
The following is a summary of some of the principal risk factors which are more fully described below.
Risks Related to Our Business, Operations and Industry
•Any uncured, material breach by us of our July 7, 2025, Settlement Agreement with Oracle could result in future adverse outcomes in litigation currently subject to a judicial stay and/or litigation standstill, which could have a material adverse effect on our business and financial results.
•Our Settlement Agreement with Oracle requires us to complete the Wind Down within a certain time period, and we are unable to guarantee the outcome of our efforts to comply with such requirements or the timing of the associated, expected significant reductions in revenue. Nor can we predict the total anticipated costs associated with the Wind Down, which could have a material adverse effect on our business and financial condition.
•Our litigation with Oracle may continue to present challenges for maintaining and growing our business for the unforeseeable future.
•Oracle could pursue additional litigation with us.
•Economic uncertainties, changes in economic conditions, including rising inflation, or downturns in the general economy or the industries in which our clients operate, may result in increased costs of operations, could disproportionately affect the demand for our products and services and could negatively impact our results of operations.
•We face significant competition for the services comprising each component of our Solutions Portfolio.
•We have had a history of losses and may not achieve revenue growth or profitability in the future.
38
•If we are unable to attract new clients or retain and sell additional products or services to existing clients, our revenue growth could be adversely affected.
•Our past revenue growth and financial performance are not indicative of future performance, and if our revenue declines or fails to grow at a rate sufficient to offset expenses, we may not be able to achieve and maintain profitability in future periods.
•We may not be able to effectively manage efforts for future growth or execute such efforts successfully.
•If our retention rates continue to decrease or we do not accurately predict retention rates, our future revenue and results of operations may be harmed.
•Because we recognize revenue from subscriptions over the term of the relevant contract, downturns or upturns in sales are not immediately reflected in full in our results of operations.
•Due to the variability of timing in our sales cycle, if we fail to forecast our revenue accurately, or if we fail to match our expenditures with corresponding revenue, our results of operations and liquidity could be adversely affected.
•Our future liquidity and results of operations may be adversely affected by the timing of new orders, the level of client renewals and cash receipts from clients.
•The loss or disability of one or more key employees could harm our business.
•The failure to attract and retain additional qualified personnel, including sales personnel, or to expand our marketing and sales capabilities could prevent us from executing our business strategy.
•Our failure to generate significant capital through our operations or raise additional capital necessary to fund and expand our operations, invest in new services and products, and service our debt could reduce our ability to compete and could harm our business.
•Our business may suffer if it is alleged or determined that our technology infringes others’ intellectual property rights.
•Interruptions to or degraded performance of our services could result in client dissatisfaction, damage to our reputation, loss of clients, limited growth and reduction in revenue.
•Interruptions or performance problems with SaaS technologies and related services from third parties that we use to operate critical functions of our business, including any deficiencies associated with generative artificial intelligence (AI) technologies potentially used by us or such third parties, may adversely affect our business and operating results.
•We may experience fluctuations in our results of operations due to the sales cycles for our products and services, which makes our future results difficult to predict and could cause our results of operations to fall below expectations.
•We may need to change our pricing models to compete successfully.
•We may not be able to scale our business systems quickly enough to meet our clients’ changing needs or decrease our costs adequately in response to changing client demand, and if we are not able to manage these changes efficiently, our results of operations could be harmed.
•Because our long-term strategy involves further expansion of our sales to clients outside the United States, our business will be susceptible to risks associated with global operations, including currency exchange rate fluctuations.
•Consolidation in our target sales markets is continuing at a rapid pace, which could harm our business in the event that our clients are acquired and their agreements are terminated, or not renewed or extended.
•If there is a widespread shift by clients or potential clients to enterprise software vendors, products and releases for which we do not provide software products or services, our business, financial condition and results of operations would be adversely impacted.
•Cybersecurity threats continue to increase in frequency and sophistication; if our data security measures are compromised or our services are perceived as not being secure, clients may curtail or cease their use of our services, our reputation may be harmed, and we may incur significant liabilities.
•We are subject to governmental and other legal obligations related to privacy and security, and our actual or perceived failure to comply with such obligations could harm our business.
•If our products and services fail due to defects or other similar problems, and if we fail to correct any defect or other software problems, we could lose clients, become subject to service performance or warranty claims or incur significant costs.
•If we are not able to maintain an effective system of internal control over financial reporting, investors could lose confidence in our financial reporting, which could harm our business and have an adverse effect on our Common Stock price.
•If we fail to enhance and protect our brand, our ability to expand our client base will be impaired.
•If we fail to adequately protect our proprietary rights, our competitive position could be impaired and we may lose valuable assets, experience reduced revenue and incur costly litigation to protect our rights.
•We may be subject to additional obligations to collect and remit sales tax, VAT and other taxes, and we may be subject to tax liability, interest and/or penalties for past sales, which could adversely harm our business.
•The amount of and ultimate realization of the benefits from the net operating loss carryforwards for income tax purposes is dependent, in part, upon future events, the effects of which cannot be determined; if we are not able to use a significant portion of our net operating loss carryforwards, our profitability could be adversely affected.
•We are a multinational organization, and we could be obligated to pay additional taxes in various jurisdictions.
39
•Our reputation and/or business could be negatively impacted by ESG matters and/or our reporting of such matters and expose us to additional costs and risks.
Risks Related to our Indebtedness, Capitalization Matters and Corporate Governance
•Our level of indebtedness and any future indebtedness we may incur may limit our operational and financing flexibility.
•The terms of our 2024 Credit Facility impose operating and financial restrictions on us.
•Our variable rate indebtedness subjects us to interest rate risk, which, along with the phase-out of LIBOR and transition to SOFR, could cause our indebtedness service obligations to increase significantly.
•The price of our Common Stock may be volatile and risk compliance with stock exchange requirements.
•Any issuance of Common Stock upon the exercise of remaining warrants will dilute existing stockholders and such issuances and/or any sales of Common Stock by large stockholders may depress the market price of our Common Stock.
•Certain of our common stockholders can exercise significant control, which could limit our stockholders’ ability to influence the outcome of key transactions, including a change of control.
•We do not currently intend to pay dividends on our Common Stock.
•Our stock repurchase program could affect the price of our Common Stock and increase volatility and may be suspended or terminated at any time, which may result in a decrease in the trading price of our Common Stock.
•The DGCL and our organizational documents contain provisions that limit the ability of stockholders to take certain actions and could delay or discourage takeover attempts that stockholders may consider favorable.
•Our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, stockholders or employees could be limited by our choice of forum in our bylaws.
Risks Related to Our Business, Operations and Industry
Risks Relating to the Oracle Settlement Agreement
Any uncured, material breach by us of our July 7, 2025, Settlement Agreement with Oracle could result in future adverse outcomes in litigation currently subject to a judicial stay and/or litigation standstill, which could have a material adverse effect on our business and financial results.
Over the past fifteen years, we and certain affiliates of Oracle Corporation (together with its subsidiaries individually and collectively, “Oracle”) have been parties in two different U.S. Federal court cases, referred to as “Rimini I” and “Rimini II.” Our litigation with Oracle has been primarily related to the manner in which we provided certain support services to a subset of our clients that are licensees to Oracle’s enterprise software, certain actions involving Oracle copyright notices, and certain public statements made by us. In January 2018, the Ninth Circuit Court of Appeals (the “Ninth Circuit”) held that we offered third-party support in lawful competition with Oracle’s direct maintenance services.
In January 2010, Oracle commenced litigation against us in the United States District Court for the District of Nevada (the “District Court”), Oracle USA, Inc. v. Rimini, No. 2:10-cv-00106 (D. Nev.) (“Rimini I”). The litigation has run its course through trial and appeals, and there are no current litigation activities. A permanent injunction was entered by the District Court in 2018 (“Rimini I Injunction”) and remains in effect, defining the manner in which we can provide support services for certain Oracle product lines (but not prohibiting our support of any Oracle products).
In October 2014, we commenced litigation against Oracle in Rimini II, and Oracle brought counterclaims against us and our President, Chief Executive Officer and Chairman of the Board, Mr. Seth Ravin. Following trial in 2022 and a merits appeal to and ruling by the Ninth Circuit, the Rimini II matter was remanded to the District Court to resolve Oracle’s claims related solely to the manner in which we provided certain support services to a subset of our Oracle PeopleSoft clients and – in light of the judgment reversals made in favor of us by the Ninth Circuit, which included vacating the underlying copyright infringement judgment – resolve the disposition of approximately $58.7 million in attorneys’ fees and costs, including post-judgment interest of approximately $0.2 million, paid by us to Oracle in late 2024.
On April 24, 2025, the District Court issued a permanent injunction (the “Rimini II Injunction”) requiring us to comply with the Digital Millennium Copyright Act and to refrain from making four statements – none of which are part of our current marketing.
On July 7, 2025 (the “Effective Date”), we and Mr. Ravin entered into a confidential settlement agreement (the “Settlement Agreement”) with Oracle (all signatories, collectively, the “Parties”). If all Parties complete their agreed upon
40
responsibilities, the Settlement Agreement will allow for the final resolution and ultimate dismissal of Case Number 2:14-cv-01699-MMD-DJA (“Rimini II”). The Parties entered into the Settlement Agreement to provide a full, final, complete and global settlement of the subject matter of the Rimini II case.
On July 9, 2025, in accordance with the terms of the Settlement Agreement, we received from Oracle approximately $37.9 million of the approximately $58.7 million in attorneys’ fees and costs we paid to Oracle in late 2024, which we agreed would satisfy all Oracle repayment obligations implemented by the District Court’s Order on Fees on Remand dated June 2, 2025 and a related order dated June 23, 2025, which required Oracle to reconvey the money it received from us within fifteen days of the date of the June 23, 2025 order.
As of July 18, 2025, the Rimini II litigation has been stayed by the District Court.
In addition to the above, the Settlement Agreement provides, in part:
•No Parties admit any liability or wrongdoing.
•If, among other obligations, we (a) complete our previously announced Wind Down of our provision of support and services for Oracle’s PeopleSoft software no later than July 31, 2028 (the “Wind Down Period”), (b) notify all existing customers for which we supply such support and services of the Wind Down, (c) provide required quarterly Wind Down progress reports to Oracle with certain agreed-upon information and (d) sign a declaration, under penalty of perjury, affirming that the Wind Down is complete and issue a public statement as to the same, which statement can be in the form of a filing made with the United States Securities and Exchange Commission (the “SEC”), then, within 14 days after we certify to Oracle that the Wind Down has been completed, the Parties will jointly file a stipulation with the District Court to dismiss the Rimini II litigation with prejudice.
•During the Wind Down Period, the Parties covenant and agree not to make, initiate, join, take action in connection with, or assert any claim, action, litigation or proceeding of any kind, known or unknown, anywhere in the world against each other during the Wind Down Period based on any claim for conduct at issue in the Rimini I or Rimini II cases that accrued either (i) before the end of the Wind Down Period, if related to PeopleSoft products, or (ii) before the Settlement Agreement Effective Date, if related to any other Oracle product or service (such agreement and covenant, the “Litigation Standstill”), including any new lawsuits, contempt proceedings, actions to enforce the Rimini I Injunction or the Rimini II Injunction, or for discovery. In the event of a breach by any Party that remains uncured after the cure period and leads to the termination of the Settlement Agreement, Oracle may ask the District Court to lift the Litigation Standstill.
•The Rimini I Injunction and the Rimini II Injunction shall remain in effect, and the District Court will retain jurisdiction to enforce them.
The Settlement Agreement also contains customary representations, warranties and covenants.
If there is an uncured material breach of any term of the Settlement Agreement on the part of us and/or Mr. Ravin, Oracle may terminate the Settlement Agreement and seek leave of the District Court to lift the current stay of the Rimini II litigation. If this occurs, no assurance is or can be given that the District Court will rule in a manner that is favorable to us on any issues related to the Rimini II litigation that may be reconsidered in the remand proceeding following the lifting of the stay, including any future award of attorneys’ fees and costs to Oracle. Further, no assurance is or can be given that the District Court will not award attorneys’ fees to Oracle following the conclusion of any such remand proceedings and, if so awarded, that the attorneys’ fees awarded are not in excess of the amount previously awarded to Oracle by the District Court following the issuance of its initial findings of fact and conclusions of law in the Rimini II litigation.
During the Wind Down Period, for any Oracle product or service other than PeopleSoft that was the subject of the Rimini I litigation or the Rimini II litigation, Oracle may initiate contempt proceedings against us for conduct prohibited by the Rimini I Injunction and/or the Rimini II Injunction. Additionally, following termination of the Settlement Agreement or the Litigation Standstill, Oracle may initiate contempt proceedings against us at any time for conduct prohibited by the Rimini I Injunction and/or the Rimini II Injunction. Such contempt proceedings or any judicial finding of contempt could result in a material adverse effect on our business and financial condition. If we are obligated to pay substantial sanctions arising from any finding of contempt, this could reduce the amount of cash flows available to pay principal, interest, fees and other amounts due under our 2024 Credit Facility, which could result in an event of default, in which case the lenders could demand accelerated payment of principal, accrued and unpaid interest, and other fees. We cannot provide assurances that we will have sufficient assets which would allow us to repay such indebtedness in full at such time.
41
We are self-insured for any costs related to any current or future intellectual property litigation, although we maintain and have tendered our errors and omissions insurance coverage for the wrongful acts alleged in Oracle’s Rimini I Injunction contempt proceeding to seek determinations of a duty to defend. We obtained a determination of a duty to defend with respect to our primary errors and omission insurance carrier. We cannot provide assurances that we will prevail on any similar claims that we may tender in the future.
The above descriptions of the litigation with Oracle and the Settlement Agreement do not purport to be complete. A redacted copy of the Settlement Agreement is filed as Exhibit 10.1 to this Report. Please refer to Note 8 to the Unaudited Condensed Consolidated Financial Statements included in Part 1, Item 1 of this Report and our Current Report on Form 8-K filed on July 9, 2025 for additional information regarding the Settlement Agreement.
Please refer to Note 9 to the Consolidated Financial Statements included in Part II, Item 8 of our Form 10-K for the year ended December 31, 2024, and Note 8 to the Unaudited Condensed Consolidated Financial Statements included in Part I, Item 1 of our Quarterly Report on Form 10-Q for the quarter ended March 31, 2025, as filed with the SEC on May 1, 2025, for additional information and disclosures regarding our litigation with Oracle.
Our Settlement Agreement with Oracle requires us to complete the Wind Down within a certain time period, and we are unable to guarantee the outcome of our efforts to comply with such requirements or the timing of the associated expected significant reductions in revenue. Nor can we predict the total anticipated costs associated with the Wind Down, which, if significant, could have a material adverse effect on our business and financial condition.
In July 2024, we announced during our fiscal second quarter earnings call that we had unilaterally decided to wind down our offering of support and services for Oracle PeopleSoft software, and we repeated this announcement during subsequent earnings calls held in October 2024 and May 2025. At the time of our announcement on July 31, 2024, the annual revenue associated with our provision of services for Oracle’s PeopleSoft products was approximately $30 million.
The percentage of revenue derived from services we provide solely for Oracle’s PeopleSoft software product was approximately 6% of our total revenue for each of the three and six months ended June 30, 2025, respectively.
The Settlement Agreement requires us to complete the Wind Down no later than July 31, 2028. The Wind Down includes our Rimini Support, Rimini Manage and Rimini Consult services for Oracle PeopleSoft products. As we provide services for Oracle PeopleSoft products to clients globally, the Wind Down process is expected to take place over the Wind Down Period, but both the pace of revenue reduction and the final date that we will receive revenue from the discontinued services are unknown as of the date of this Report. We expect significant reductions in revenue related to services for Oracle PeopleSoft products over the course of the Wind Down Period. Revenue related to providing services for Oracle PeopleSoft products accounted for approximately 6% of revenue for the six months ended June 30, 2025 and approximately 8% of revenue for the six months ended June 30, 2024.
As part of the Wind Down, depending upon the terms of individual client service contracts and our clients’ willingness to negotiate with us, we may be required to pay refunds of a portion of subscription revenue attributable to services that had not been performed as of the date of contract termination and/or pay buy-out or similar inducement fees to facilitate the early termination of certain of our existing contracts to provide services for Oracle PeopleSoft products. We may also offer to assist our clients with transitioning from PeopleSoft to other enterprise software providers with which we maintain a strategic partnership at no or reduced cost to such clients. Further, as a result of the Wind Down, clients for which we provide support and/or services in addition to support and services for Oracle PeopleSoft products may choose not to renew the contracts for these unrelated support and/or services. Finally, as a result of the Wind Down, certain of our prospective and existing clients may be subject to additional negative communications from software vendors and other third-party providers of enterprise software support services, both in regard to the litigation and the Wind Down process, which may result in a failure to renew the support and/or services performed by us or to engage us.
In response to our actions to discontinue this business before the end of the Wind Down Period, one or more of our current PeopleSoft support clients may claim a breach of contract related to early termination and/or non-performance of contractually guaranteed services. While no breach of contract litigation relating to the Wind Down has been filed against us as of the date of this Report, no assurance is or can be given that our current PeopleSoft support clients will not pursue litigation against us. Such litigation could distract our management team from running our business, reduce our sales revenue and negatively impact our ability to successfully sell other services to such clients or prospective clients. We could be required to pay substantial damages, attorneys’ fees and/or costs in connection with any such litigation, which could result in a material adverse effect on our business and financial condition.
42
Our efforts to complete the Wind Down by the end of the Wind Down Period may be costlier than we expect, and we may not be able to increase our total revenue enough to offset not only the reductions in revenue resulting from the Wind Down but also the total costs associated with the Wind Down process.
While we currently believe our cash on hand, accounts receivable, contractually committed backlog and borrowing capacity under our 2024 Credit Facility provide us with liquidity to cover the costs related to the Wind Down, we cannot assure our liquidity will be sufficient.
Our litigation with Oracle may continue to present challenges for maintaining and growing our business for the unforeseeable future.
We have experienced challenges growing our business as a result of our litigation with Oracle. Many of our existing and prospective clients have previously expressed concerns regarding this litigation and, in some cases, have received various negative communications by Oracle in connection with this litigation. We have experienced in the past, and may continue to experience in the future, volatility and slowness in acquiring new clients, as well as clients not renewing their agreements with us, due to this litigation and/or as a result of the Wind Down process described above. Further, certain of our prospective and existing clients may be subject to additional negative communications from software vendors or from other third-party providers of enterprise software support services, both in regard to the litigation and the Wind Down process, which may result in a failure to renew agreements for the services performed by us or to engage us. We have taken steps to minimize disruptions to our existing and prospective clients regarding the litigation, but we may continue to face challenges growing our business as a result of the litigation. In certain cases, we have agreed to pay damages to our clients if we are no longer able to provide services to these clients, and/or provide certain termination rights if any outcome of litigation (including settlement) results in our inability to continue providing any of the paid-for services, which, in certain cases, includes clients subject to the Wind Down process. In addition, we believe the length of our sales cycle is longer than it otherwise would be due to prospective client diligence on possible effects of the Oracle litigation on our business. We cannot provide assurances that we will continue to overcome the challenges we faced as a result of the litigation and potentially will face as a result of the Wind Down process, and continue to renew existing clients or secure new clients.
Oracle could pursue additional litigation with us.
We can provide no assurance that Oracle will not pursue additional litigation against us. Such additional litigation could be costly, distract our management team from running our business and reduce client interest and our sales revenue.
Other Risks Related to Our Business, Operations and Industry
Economic uncertainties, changes in economic conditions, including rising inflation, or downturns in the general economy or the industries in which our clients operate, may result in increased costs of operations, could disproportionately affect the demand for our products and services and could negatively impact our results of operations.
General worldwide economic conditions continue to experience significant fluctuations, and market volatility and uncertainty remain widespread, with the expectation that inflation and other economic challenges will be exacerbated for an extended period. An inflationary environment may increase our and our clients’ cost of labor due to higher wages, as well as result in higher financing costs and/or higher supplier prices for both us and our clients. As a result, we and our clients may find it difficult to accurately forecast and plan future business activities. In addition, these conditions could cause our clients or prospective clients to reduce their IT budgets, which could decrease corporate spending on our products and services, resulting in delayed and lengthened sales cycles, a decrease in new client acquisition and loss of clients. Furthermore, during challenging economic times, our clients may face issues with their cash flows and in gaining timely access to sufficient credit or obtaining credit on reasonable terms, which could impair their ability to make timely payments to us, impact client renewal rates and adversely affect our revenue. If such conditions occur, we may be required to increase our reserves, allowances for doubtful accounts and write-offs of accounts receivable, and our results of operations would be harmed. We cannot predict the timing, strength or duration of any economic slowdown or recovery, whether global, regional or within specific markets. If the conditions of the general economy or markets in which we operate worsen, our business could be harmed. In addition, even if the overall economy improves, the market for our products and services may not experience growth. Moreover, multiple events, including tariffs, changes in U.S. trade policies and responsive changes in policy by foreign jurisdictions, geopolitical developments, including the economic disruption caused by continued political instability in the Middle East, the Russian invasion of Ukraine and recent political and trade turmoil with China and elsewhere have increased levels of political and economic unpredictability globally, and may continue to increase the volatility of global financial markets and global and regional economies.
43
We face significant competition for the services comprising each component of our Solutions Portfolio, from both enterprise software vendors and other companies offering independent enterprise software support, products and services, as well as from software licensees that attempt to self-support, which may harm our ability to add new clients, retain existing clients and grow our client base across all of our Solutions Portfolio offerings.
Our current and potential competitors across each component of our Solutions Portfolio, which include enterprise software vendors, may have significantly more financial, technical, sales and marketing teams and other resources than we have, may be able to devote greater resources to the development, promotion, sale and support of their products and services, may have more extensive customer bases and broader customer relationships than we have and may have longer operating histories and greater name recognition than we have. Specifically, we face intense competition from enterprise software vendors, such as Oracle and SAP, who typically provide software support for their own products, as well as from other competitors who provide independent enterprise software support, products and services. Competitors, including enterprise software vendors, have offered, and may continue to offer, discounts to companies to whom we have marketed our services. In addition, competitors, including enterprise software vendors, may take other actions in an attempt to maintain their business, including changing the terms of their customer agreements, the functionality of their support, products or services, or their pricing terms. For example, starting in the first quarter of 2017, Oracle has prohibited us from accessing its support websites to download software updates on behalf of our clients who are authorized to do so and permitted to authorize a third party to do so on their behalf. In addition, the support, license or other contractual policies of our future and current competitors, including Oracle and SAP, may include clauses that penalize customers that choose to use our or any independent provider’s services or products. Further, the contractual policies of enterprise software vendors, such as Oracle and SAP, may contain clauses that penalize customers that seek to return to the software vendor to purchase new licenses or support following a departure from the software vendor’s support program, thus deterring such customers from transitioning to our services in the first place. In addition, our current and potential competitors may develop and market new technologies that render our existing or future enterprise software support, products or services less competitive or obsolete. Finally, we also face competition from software licensees that choose to self-support. Many enterprise software licensees have invested substantial personnel, infrastructure and financial resources in their own organizations with respect to support of their licensed enterprise software products and may choose to self-support with their own internal resources instead of purchasing services from the enterprise software vendor or an independent provider such as ourselves. Competition could significantly impede our ability to sell our enterprise support, products and services on terms favorable to us, and we may need to decrease the prices for our support, products or services to remain competitive. If we are unable to maintain our current pricing due to competitive pressures, our margins will be reduced and our results of operations will be negatively affected.
There are also several smaller support services vendors in the independent enterprise software support services market with whom we compete with respect to certain of our support services. We expect competition to continue to increase in the future, which could harm our ability to increase sales, maintain or increase renewals and maintain our prices. In addition, certain providers of independent enterprise software support, products and services may have or may develop more strategic relationships with enterprise software vendors, which may allow them to compete more effectively than us over the long term. To the extent any of our competitors have existing relationships with potential clients for any component of our Solutions Portfolio, those potential clients may be unwilling to purchase our services because of those existing relationships, which could cause the demand for our services to be substantially impacted. Further, our competitors may attempt to use our Wind Down of support and services for Oracle’s PeopleSoft products described above to dissuade certain of our prospective or existing clients from purchasing or continuing to purchase any or all of the components of our Solutions Portfolio, including our enterprise software support services.
We have had a history of losses and may not achieve revenue growth or profitability in the future. Further, if we are unable to attract new clients or retain and/or sell additional products or services to our existing clients, our revenue growth could be adversely affected.
We recorded net income of $30.3 million for the three months ended June 30, 2025, and we had an accumulated deficit of $204.9 million as of June 30, 2025. We will need to generate and sustain increased revenue levels in future periods while managing our costs to be profitable, and, even if we do, we may not be able to maintain or increase our level of profitability. To increase our revenue, we must add new clients, secure renewals or service extensions by existing clients on terms favorable to us and sell additional products and services to existing clients. As competitors introduce low-cost and/or differentiated services that are perceived to compete with ours, or as enterprise software vendors introduce competitive pricing or additional products and services or implement other sales strategies to compete with us, our ability to sell to new clients and renew agreements with existing clients based on pricing, service levels, technology and functionality could be impaired. In addition, certain of our existing clients may choose to license a new or different version of enterprise software from an enterprise software vendor, and
44
such clients’ license agreements with the enterprise software vendor will typically include a minimum one-year mandatory maintenance and support services agreement. In such cases, it is unlikely that these clients would renew their maintenance and support services agreements with us, at least during the early term of the license agreement. In addition, such existing clients could move to another enterprise software vendor, product or release for which we do not offer any products or services. As a result, we may be unable to renew or extend our agreements with existing clients or attract new clients or new business from existing clients on terms that would be favorable or comparable to prior periods, which could have an adverse effect on our revenue and growth.
Additionally, we intend to continue to expend significant funds to expand our sales and marketing operations, enhance our service offerings, expand into new markets, launch new product offerings and meet the compliance requirements associated with our operations as a public company. Our efforts to grow our business may be costlier than we expect, and we may not be able to increase our revenue enough to offset our higher operating expenses. Further, many companies with which we compete have larger and longer-tenured sales and marketing teams, which may impact the ability to grow our business, which could have an adverse effect on our revenue and growth. If we are unable to achieve and sustain revenue growth or profitability, the market price of our securities may significantly decrease.
Our past revenue growth and financial performance is not indicative of future performance. If our revenue declines or fails to grow at a rate sufficient to offset expenses associated with efforts to grow, we may not be able to achieve and maintain profitability in future periods. Additionally, we may not be able to effectively manage efforts for future growth or execute these efforts successfully.
Our revenue grew from $103.1 million for the three months ended June 30, 2024 to $104.1 million for the three months ended June 30, 2025, representing a period over period increase of 1%. Our revenue for any previous quarterly or annual periods should not be relied upon as an indication of our revenue or revenue growth in the future. Further, efforts focused on future growth may not result in increased revenue. We believe growth of our revenue depends on a number of factors, including our ability to:
•price our products and services effectively so that we are able to attract new clients and retain existing clients without compromising our profitability;
•introduce our products and services to new geographic markets;
•introduce new enterprise software products and services supporting additional enterprise software vendors, products and releases;
•satisfactorily complete our obligations under our Settlement Agreement with Oracle, as described above; and
•increase awareness of our Company, products and services on a global basis.
We may not successfully accomplish all or any of these objectives.
In addition, efforts to encourage growth have placed and may continue to place significant demands on our management and our operational and financial resources. Recent changes to our organizational structure and reductions in our workforce to align our operational needs with our ability to achieve and sustain profitability will necessitate adjustments to our operational, financial and management controls, as well as our reporting systems and procedures. We may not realize, in full or in part, the anticipated benefits, savings and improvements from the recent changes to our organizational structure and associated reductions in workforce if our revenue continues to decline, which could have a material adverse effect on our business.
Further, we believe that our corporate culture has been a critical component of our success. We have invested substantial time and resources in building our team and nurturing our culture. However, efforts to encourage growth may make it difficult to maintain our corporate culture. For example, recent changes to our organizational structure and reductions in our workforce may yield unintended consequences, such as attrition beyond our intended reduction in workforce and reduced employee morale, which may cause our employees who were not affected by the reorganization to seek alternate employment. We will require the allocation of valuable management resources to manage our reorganizational efforts without undermining our corporate culture of rapid innovation, teamwork and attention to client service that has been central to our growth. Any failure to manage efforts to encourage growth and related organizational changes in a manner that preserves our culture could negatively impact the achievement of our business objectives and our ability to achieve and maintain profitability in future periods.
45
If our retention rates continue to decrease, or we do not accurately predict retention rates, our future revenue and results of operations may be harmed.
Our clients have no obligation to renew their product or service subscription agreements with us after the expiration of a non-cancelable agreement term. In addition, the majority of our multi-year, non-cancelable client agreements are not pre-paid other than the first year of the non-cancelable service period. We may not accurately predict retention rates for our clients. Our retention rates may decline or fluctuate as a result of a number of factors, including our clients’ decision to license a new product or release from an enterprise software vendor, our clients’ decision to move to another enterprise software vendor, product or release for which we do not offer products or services, global economic conditions, including rising inflation and interest rates on our clients’ businesses, client satisfaction with our products and services, the acquisition of our clients by other companies and clients going out of business. If our clients do not renew their agreements for our products and services or if our clients decrease the amount they spend with us, our revenue will decline and our business will suffer. In addition, certain of our existing clients may choose to license a new or different version of enterprise software from an enterprise software vendor, and such clients’ license agreements with the enterprise software vendor will typically include a minimum one-year mandatory maintenance and support services agreement. In such cases, it is unlikely that these clients would renew their maintenance and support services agreements with us, at least during the early term of the license agreement. In addition, such existing clients could move to another enterprise software vendor, product or release for which we do not offer any products or services.
Because we recognize revenue from subscriptions over the term of the relevant contract, downturns or upturns in sales are not immediately reflected in full in our results of operations.
As a subscription-based business, we recognize revenue over the service period of our contracts. As a result, much of our reported revenue each quarter results from contracts entered into during previous quarters. Consequently, while a shortfall in demand for our products and services or a decline in new or renewed contracts in any one quarter may not significantly reduce our revenue for that quarter, it could negatively affect our revenue in future quarters and full year periods. Accordingly, the effect of significant downturns in new sales, renewals or extensions of our service agreements for a quarter will not be reflected in full in our results of operations until future periods. Our revenue recognition model also makes it difficult for us to rapidly increase our revenue through additional sales in any period, as revenue from new clients must be recognized over the applicable service contract term.
Due to the variability of timing in our sales cycle, if we fail to forecast our revenue accurately, or if we fail to match our expenditures with corresponding revenue, our results of operations and liquidity could be adversely affected.
The variability of the sales cycle for the evaluation and implementation of our products and services, which typically has been six to twelve months once a client is engaged, may cause us to experience a delay between increasing operating expenses for such sales efforts, and the generation of corresponding revenue. Accordingly, we may be unable to prepare accurate internal financial forecasts or replace anticipated revenue that we do not receive as a result of delays arising from these factors. As a result, our results of operations and liquidity in future reporting periods may be significantly below the expectations of the public market, securities analysts or investors, which could negatively impact the price of our Common Stock.
Our future liquidity and results of operations may be adversely affected by the timing of new orders, the level of client renewals and cash receipts from clients.
Due to the collection of cash from our clients before services are provided, our revenue is recognized over future periods when there are no corresponding cash receipts from such clients. Accordingly, our future liquidity depends upon the ability to continue to attract new clients and to enter into renewal arrangements with existing clients. If we experience a decline in orders from new clients or renewals from existing clients, our revenue may continue to increase while our liquidity and cash levels decline. Any such decline, however, will negatively affect our revenues in future quarters. Accordingly, the effect of declines in orders from new clients or renewals from existing clients may not be fully reflected in our results of operations and cash flows until future periods. Comparing our revenues and operating results on a period-to-period basis may not be meaningful, as it may not be an indicator of the future sufficiency of our cash and cash equivalents to meet our liquidity requirements. You should not rely on our past results as an indication of our future performance or liquidity.
We rely on our management team and other key employees, including our President, Chief Executive Officer and Chairman of the Board, and the loss or disability of one or more key employees could harm our business. Additionally, the failure to
46
attract and retain additional qualified personnel, including sales personnel, or to expand our marketing and sales capabilities could prevent us from executing our business strategy.
The loss of or a disability that would prevent our President, Chief Executive Officer and Chairman of the Board or any of our key members of management from substantially performing their duties could have a material adverse effect on our business, operating results and financial condition, particularly if we are unable to hire and integrate suitable replacements on a timely basis. Mr. Ravin has been under long-standing medical care for kidney disease, which includes ongoing treatment. Although Mr. Ravin’s condition has not adversely impacted his performance as President, Chief Executive Officer and Chairman of the Board or on the overall management of the Company, we can provide no assurance that his condition will not affect his ability to perform the role of President, Chief Executive Officer and Chairman of the Board in the future. Further, as we continue to grow our business, we will continue to adjust our management team to best address our growth opportunities. If we are unable to attract or retain the right individuals for the team, it could hinder our ability to grow our business and could disrupt our operations or otherwise have a material adverse effect on our business. We do not maintain key man life insurance on any of our employees.
Furthermore, to execute our business strategy, we must attract and retain highly qualified personnel, including sales personnel. Our ability to increase our client base and achieve broader market acceptance of our services will depend to a significant extent on our ability to expand our marketing and sales operations. We plan to continue expanding our sales force globally. We are experiencing a very competitive recruiting environment, creating difficulty in hiring and retaining sufficient numbers of highly skilled sales personnel and other employees with appropriate qualifications. In particular, we have experienced extreme hiring competition in the San Francisco Bay Area, where we have a significant amount of operations, but also face extremely competitive hiring environments across the United States and other countries in which we operate. Our efforts to attract, develop, integrate and retain highly skilled employees with appropriate qualifications may be compounded by intensified restrictions on travel, immigration, or the availability of work visas. Many companies with which we compete for experienced personnel have greater resources and less stock price volatility than we do. In making employment decisions, job candidates often consider the value of the equity incentives they are to receive in connection with their employment. If the price of our stock continues to experience significant volatility, our ability to attract or retain qualified employees will be adversely affected. In addition, as we continue to expand into new geographic markets, there can be no assurance that we will be able to attract and retain the required management, sales, marketing and support services personnel to profitably grow our business. If we fail to attract highly qualified new sales and other personnel or fail to retain and motivate our current personnel, our growth prospects could be severely harmed.
Moreover, it generally takes our new sales personnel an average of between nine to twelve months to operate at the capacity typically expected of experienced sales personnel. This ramp cycle, combined with our typical six- to twelve-month sales cycle for engaged prospects, means that we will not immediately recognize a return on this investment in our sales results. In addition, the cost to acquire clients is high due to the cost of these marketing and sales efforts. Further, the cost of marketing and sales efforts will likely increase as we continue to offer new products and services, as even our experienced sales personnel will need to receive specialized training on our new offerings. Our business may be materially harmed if our efforts do not generate a corresponding increase in revenue. We may not achieve anticipated revenue growth from expanding our sales force if we are unable to hire, develop and retain talented sales personnel, if our new sales personnel are unable to achieve desired productivity levels in a reasonable period of time or if our sales and marketing programs are not effective.
Our failure to generate significant capital through our operations or raise additional capital necessary to fund and expand our operations, invest in new services and products, and service our debt could reduce our ability to compete and could harm our business.
We may need to incur additional debt under our 2024 Credit Facility and/or raise additional capital beyond what is available under our 2024 Credit Facility if we cannot fund future growth or service our debt through our operating cash flows. Should this occur, we may not be able to obtain additional debt or additional equity financing on favorable terms, if at all, which could harm our business, results of operations and financial condition. We are also subject to certain restrictions for future financings as discussed in the risk factor “The terms of our 2024 Credit Facility impose operating and financial restrictions on us.” If we raise additional equity financing, our stockholders may experience significant dilution of their ownership interests and the value of our Common Stock could decline. If we engage in additional debt financings, the holders of the debt securities or lenders would have priority over the holders of our Common Stock. We may also be required to accept terms that further restrict our ability to incur additional indebtedness, take other actions that would adversely impact the short-term price of our Common Stock, or force us to maintain specified liquidity or other ratios, any of which could harm our business, results of operations and financial condition and reduce the value of our Common Stock.
47
Our business may suffer if it is alleged or determined that our technology infringes the intellectual property rights of others.
The software industry is characterized by the existence of a large number of patents, copyrights, trademarks, trade secrets and other intellectual and proprietary rights. Companies in the software industry are often required to defend against claims and litigation alleging infringement or other violations of intellectual property rights. Many of our competitors and other industry participants have been issued patents and/or have filed patent applications and may assert patent or other intellectual property rights within the industry. Our litigation with Oracle relates in part to copyright infringement claims and, from time to time, we may receive threatening letters or notices alleging infringement or may be the subject of claims that our services and underlying technology infringe or violate the intellectual property rights of others. Further, while we prohibit the use of generative artificial intelligence (AI) technologies by our employees unless incorporated into one of our product or service offerings or approved in accordance with internal policies, incorporating AI technologies in our product and service offerings or the unauthorized use of generative AI technologies by our employees may result in allegations or claims against us related to violations of third-party intellectual property rights, unauthorized access to or use of proprietary information and/or failure to comply with the terms of third-party licensing agreements. Any allegation of infringement, whether innocent or intentional, can adversely impact marketing, sales and our reputation.
Interruptions to or degraded performance of our service could result in client dissatisfaction, damage to our reputation, loss of clients, limited growth and reduction in revenue.
Our software support agreements with our clients generally guarantee a 10-minute response time with respect to certain high-priority issues. If we do not meet the 10-minute guarantee, our clients may in some instances be entitled to liquidated damages, service credits or refunds. To date, no such payments have been made.
We also deliver tax, legal and regulatory updates to our clients. If there are inaccuracies in these updates, or if we are not able to deliver them on a timely basis to our clients, our reputation may be damaged, and we could be found liable for damages to our clients and potentially lose clients.
Any interruptions or delays in our service, whether as a result of third-party error, our own error, natural disasters or other catastrophic events, security breaches or a result of any other issues, whether accidental or willful, could harm our relationships with clients and cause our revenue to decrease and our expenses to increase. Also, in the event of damage or interruption, our insurance policies may not adequately compensate us for any losses that we may incur. These factors, in turn, could further reduce our revenue, subject us to liability, cause us to pay liquidated damages, issue credits or cause clients not to renew their agreements with us, any of which could materially adversely affect our business.
We depend and rely on SaaS technologies and related services from third parties in order to operate critical functions of our business, and interruptions or performance problems with these technologies or services, including any deficiencies associated with generative AI technologies potentially offered by us or used by such third parties, may adversely affect our business and operating results.
We depend and rely on software-as-a-service, or SaaS, technologies and related services from third parties to operate critical functions of our business, including billing and order management, financial accounting services, and client relationship management services. If these services become unavailable due to extended outages or interruptions, security vulnerabilities, or cyber-attacks, because they are no longer available on commercially reasonable terms or prices, or due to other unforeseen circumstances, our expenses could increase, our ability to manage these critical functions could be interrupted, and our processes for and ability to manage sales of our products, recognize revenue, and support our clients could be impaired, all of which could adversely affect our business and operating results. Further, any incorporation of generative AI technologies in our product and service offerings and the continued use and/or development of AI technologies or services by some of our third-party vendors and service providers, as well as any ineffective or inadequate generative AI development or deployment practices by us or such third-party vendors and service providers, could result in unintended consequences such as reputational damage, legal liabilities or loss of user confidence or business. The algorithms and models used in generative AI technologies and systems may have limitations, including biases, errors, or inability to handle certain data types or scenarios. In addition, there is a risk of system failures, disruptions or vulnerabilities that could compromise the integrity, security or privacy of the generated content, including the use of cyberattacks against emerging technologies, such as forms of generative AI.
We may experience fluctuations in our results of operations due to the sales cycles for our products and services, which makes our future results difficult to predict and could cause our results of operations to fall below expectations.
Our results of operations have fluctuated in the past and are expected to fluctuate in the future due to a variety of factors, many of which are outside of our control, including seasonality linked to certain of the sales cycles for our products and
48
services. Historically, our sales cycle has been tied to the renewal dates for our clients’ existing and prior vendor support agreements for the products that we support. Because our clients make support vendor selection decisions in conjunction with the renewal of their existing support agreements with Oracle and SAP, among other enterprise software vendors, we have experienced an increase in business activity during the quarterly periods in which those agreements are up for renewal. However, because we have introduced and intend to continue to introduce products and services for additional software products that do not follow the same renewal timeline or pattern, our past results may not be indicative of our future performance, and comparing our results of operations on a period-to-period basis may not be meaningful. Also, if we are unable to engage a potential client before its renewal date for software support services in a particular year, it will likely be at least another year before we would have the opportunity to engage that potential client again, given that such potential client likely had to renew or extend its existing support agreement for at least an additional year’s worth of service with its existing support provider. Furthermore, our existing clients often renew their agreements with us at or near the end of each calendar year, so we have also experienced and expect to continue to experience heavier renewal rates in the fourth quarter.
We may not be able to accurately forecast the amount and mix of future product and service subscriptions, revenue and expenses, and as a result, our results of operations may fall below our estimates or the expectations of securities analysts and investors. If our revenue or results of operations fall below the expectations of investors or securities analysts, or below any guidance we may provide, the price of our Common Stock could decline.
We may need to change our pricing models to compete successfully.
We currently offer our clients support services for a fee that is equal to a percentage of the annual fees charged by the enterprise software vendor; therefore, changes in such vendors’ fee structures would impact the fees we would receive from our clients. If the enterprise software vendors offer deep discounts on certain services or lower prices generally, we may need to change our pricing models, which could have an adverse effect on our results of operations. In addition, our other product and service offerings, such as our Rimini ONE integrated services, have pricing models that use a variety of different metrics and formulas as compared to our support solutions. To the extent that we do not have substantial experience with pricing such new products and services, we may need to adjust our pricing models for these offerings over time to ensure that we remain competitive and realize a return on our investment in developing these new products and services. If we do not adapt our pricing models as necessary or appropriate, our revenue could decrease and adversely affect our results of operations.
We may not be able to scale our business systems quickly enough to meet our clients’ changing needs or decrease our costs adequately in response to changing client demand, and if we are not able to manage these changes efficiently, our results of operations could be harmed.
As enterprise software products become more advanced and complex, we will need to devote additional resources to innovating, improving and expanding our offerings to provide relevant products and services to our clients using these more advanced and complex products. In addition, we will need to appropriately scale our internal business systems and our global operations and client engagement teams to serve the changing needs of our client base, particularly as our client demographics expand over time. Any such expansion may be expensive and complex, requiring financial investments, and management time and attention. Any failure of or delay in these efforts could adversely affect the quality or success of our services and negatively impact client satisfaction, resulting in potential decreased sales to new clients and possibly lower renewal rates by existing clients. Furthermore, changes in client demand or changes in our product offerings resulting from external events outside of our control, as well as from our Wind Down of support and services for Oracle’s PeopleSoft products, as described above, could require us to alter the scale of our business, including, among other things, implementing additional workforce reductions.
We could face inefficiencies or operational failures as a result of our efforts to scale our infrastructure for any such changes needed for our clients' changing needs or changes in our business. There can be no assurance that any expansion and improvements to our infrastructure and systems or reduction in the scale of our business or workforce will be fully or effectively implemented within budgets or on a timely basis, if at all. Any failure to efficiently scale our business could result in reduced revenue and increased expenditures and adversely impact our operating margins and results of operations.
Because our long-term strategy involves further expansion of our sales to clients outside the United States, our business will be susceptible to risks associated with global operations, including currency exchange rate fluctuations and trade regulations and relationships.
A significant component of our long-term strategy involves the further expansion of our operations and client base outside the United States. We currently have subsidiaries outside of the United States in Australia, Brazil, Canada, UAE
49
(Dubai), France, Germany, Hong Kong, India, Israel, Japan, Korea, Malaysia, Mexico, Netherlands, New Zealand, Poland, Singapore, Sweden, Taiwan and the United Kingdom, which focus primarily on selling our services in those regions.
In the future, we may expand to other locations outside of the United States. Our current global operations and future initiatives will involve a variety of risks, including among others:
•changes in a specific country’s or region’s political or economic conditions;
•the occurrence of catastrophic events, including natural disasters, that may disrupt our business;
•changes in regulatory requirements, taxes or trade laws or the imposition of trade sanctions;
•currency exchange rate fluctuations and the resulting effect on our revenue and expenses, and the cost and risk of entering into currency exchange rate hedging transactions;
•more stringent regulations relating to data security, such as where and how data can be housed, accessed and used, and the unauthorized use of, or access to, commercial and personal information;
•differing labor regulations, especially in countries and geographies where labor laws are more advantageous to employees as compared to the United States, including deemed hourly wage and overtime regulations;
•challenges inherent in efficiently managing an increased number of employees over large geographic distances, including the need to implement appropriate systems, policies, benefits and compliance programs as well as hire and retain local management, sales, marketing and support personnel, along with the ability to recapture costs to open up new geographies;
•difficulties in managing a business in new markets with diverse cultures, languages, customs, legal systems, alternative dispute systems and regulatory systems;
•increased logistics, travel, real estate, infrastructure and legal compliance costs associated with global operations;
•limitations on our ability to reinvest earnings from operations in one country to fund the capital needs of our operations in other countries;
•laws and business practices favoring local competitors or general preferences for local vendors;
•changes in diplomatic and trade relationships, including new tariffs, trade protection measures, import or export licensing requirements, trade embargoes and sanctions and other trade barriers;
•limited or insufficient intellectual property protection;
•war, political instability or terrorist activities, including geopolitical actions specific to an international region, such as the ongoing geopolitical conflict between Israel and Hamas;
•exposure to liabilities under anti-corruption and anti-money laundering laws, including the United States Foreign Corrupt Practices Act and similar laws and regulations in other jurisdictions; and
•adverse tax burdens and foreign exchange controls that could make it difficult to repatriate earnings and cash.
Our exposure in operating our business globally with the risks noted above and the unique challenges of each new geography, as well as changes in U.S. trade policies, increase the risk that any potential future expansion efforts that we may undertake will not be successful. If we invest substantial time and resources to expand our global operations and are unable to do so successfully and in a timely manner, our business and results of operations will be adversely affected.
Consolidation in our target sales markets is continuing at a rapid pace, which could harm our business in the event that our clients are acquired and their agreements are terminated, or not renewed or extended.
Consolidation among companies in our target sales markets has been robust in recent years, and this continuing trend poses a risk for us. If such consolidation rates continue, we expect that some of the acquiring companies will terminate, renegotiate and elect not to renew our agreements with the clients they acquire, which may have an adverse effect on our business and results of operations.
If there is a widespread shift by clients or potential clients to enterprise software vendors, products and releases for which we do not provide software products or services, our business, financial condition and results of operations would be adversely impacted.
Our current revenue is primarily derived from the provision of support services for Oracle and SAP enterprise software products. If other enterprise software vendors, products and releases emerge to take substantial market share from current Oracle and SAP products and releases we support, and we are unable to, or do not, offer products or services for such vendors, products or releases, demand for our products and services may decline or our products and services may become obsolete. Developing new products and services to address different emerging enterprise software vendors, products and releases could take a substantial investment of time and financial resources, and we cannot guarantee that we will be successful. If fewer clients use enterprise software products for which we provide products and services, and we are not able to provide services for new vendors, products and releases, our business may be adversely impacted.
50
We continue to invest resources in research and development to enhance our current product and service offerings, and other new offerings that will appeal to clients and potential clients, for example, our partnership with Salesforce to support SaaS solutions, our managed services for SAP and Oracle products and our Rimini ONE integrated services. The development of new product and service offerings may not generate sufficient revenue to offset the increased research and development expenses and may not generate gross profit margins consistent with our current margins. Also, our new product and service offerings may be in markets that are more competitive than markets for our existing product and service offerings, making it more difficult to introduce them to clients and potential clients effectively or provide them profitably.
If our new or modified products, services or technology do not work as intended, are not responsive to client needs or industry or regulatory changes, are not appropriately timed with market opportunity, or are not effectively brought to market, we may lose existing and prospective clients or related opportunities, in which case our financial condition and results of operations may be adversely impacted, and if we are not successful in implementing any new product and service offerings, we may need to write off the value of our investment in such offerings.
Cybersecurity threats continue to increase in frequency and sophistication; if our data security measures are compromised or unauthorized access to or misuse of client data occurs, our services may be perceived as not being secure, clients may curtail or cease their use of our services, our reputation and our business may be harmed, and we may incur significant liabilities.
We rely on certain key information technology systems, including some with generative artificial intelligence (AI) and some of which are dependent on services provided by third parties, to provide critical data and services for our internal and external users. Our services sometimes involve accessing, processing, sharing, using, storing and transmitting proprietary information and protected data of our clients. We rely on proprietary and commercially available systems, software, tools and monitoring, as well as other processes, to provide security for accessing, processing, sharing, using, storing and transmitting such information and data. If our security measures are compromised as a result of third-party action, employee, vendor or client error, malfeasance, stolen or fraudulently obtained log-in credentials or otherwise, our reputation could be damaged, our business and our clients may be harmed, and we could incur significant liabilities. Cyberattacks continue to increase in frequency and in magnitude generally, and these threats are being driven by a variety of sources, including nation-state sponsored espionage and hacking activities, industrial espionage, organized crime, sophisticated organizations and hacking groups and individuals. Furthermore, due to tensions related to ongoing geopolitical conflicts, the risk of cyber-attacks may be elevated. We have been the subject of cybersecurity threats and expect such threats to continue in the future. In addition, if the security measures of our clients are compromised, even without any actual compromise of our own systems or security measures, we may face negative publicity or reputational harm if our clients or anyone else incorrectly attributes the blame for such security breaches to us, our products and services, or our systems. We may also be responsible for repairing any damage caused to our clients’ systems that we support, and we may not be able to make such repairs in a timely manner or at all.
We may be unable to fully anticipate or prevent techniques used to obtain unauthorized access or to sabotage systems because they change frequently, including increased usage of emerging technologies such as advanced automation or AI, and generally are not detected until after an incident has occurred. As we increase our client base and our brand becomes more widely known and recognized, we may become more of a target for third parties seeking to compromise our systems or security measures or gain unauthorized access to our clients’ proprietary information and protected data as was the case in a 2021 successful phishing incident where we were a victim, which resulted in some unauthorized sharing of client addresses and outstanding billing information, but did not significantly impact our business or client relationships.
Although we attempt to identify, mitigate and manage these risks by employing a number of measures, including insurance, monitoring of our systems and networks, employee training and maintenance of backup and protective systems, our systems, networks, products and services remain potentially vulnerable to increasingly sophisticated advanced persistent threats that may have a material effect on our business. In addition, the devotion of additional resources to the security of our information technology systems in the future could significantly increase the cost of doing business or otherwise adversely impact our financial results.
Furthermore, information systems require constant updates to their security policies, networks, software and hardware systems to reduce the risk of unauthorized access, malicious destruction of data or information theft. We rely on third-party service providers' systems and software to provide our software support, products and services. The failure of any third-party service providers to efficiently and correctly update their software and hardware systems or maintain cybersecurity could result in operational inefficiencies and subject us to expend additional resources and costs which could have a material adverse effect on our operations and profitability.
51
In addition, many governments have enacted laws requiring companies to notify individuals of data security incidents involving certain types of personal data, and some of our clients contractually require notification of any data security compromise. In the event of a data security compromise, we may have difficulty timely complying with notification requirements that are unreasonably short or burdensome. SEC rules and potential other applicable legislative action will require public disclosure of material security compromises experienced by our clients, by our competitors or by us, which may lead to widespread negative publicity. Any data security compromise in our industry, whether actual or perceived, could harm our reputation, erode client confidence in the effectiveness of our security measures, negatively impact our ability to attract new clients, cause existing clients to elect not to renew their agreements with us, or subject us to third party lawsuits, government investigations, regulatory fines or other action or liability, all or any of which could materially and adversely affect our business, financial condition and results of operations.
We cannot provide assurances that any limitations of liability provisions in our contracts for a security breach would be enforceable or adequate or would otherwise protect us from any such liabilities or damages with respect to any particular claim. Further, certain of our contracts do not contain limitations of liability specific to security breaches, which could expose us to significant liabilities or damages, all or any of which could materially and adversely affect our business, financial condition and results of operations. We also cannot be sure that our existing general liability insurance coverage and coverage for errors or omissions will continue to be available on acceptable terms or will be available in sufficient amounts to cover one or more claims, or that the insurer will not deny coverage as to any future claim. The successful assertion of one or more claims against us that exceed available insurance coverage, or the occurrence of changes in our insurance policies, including premium increases or the imposition of substantial deductible or co-insurance requirements, could have a material adverse effect on our business, financial condition and results of operations.
We are subject to governmental and other legal obligations related to privacy and security, and our actual or perceived failure to comply with such obligations could harm our business.
As an expanding global company, we are subject to the laws and regulations of numerous jurisdictions worldwide regarding accessing, processing, sharing, using, storing, transmitting, disclosure and protection of personal data, the scope of which are constantly changing, subject to differing interpretation and related to jurisdictions where we have operations, clients, or where we conduct marketing, and such laws may be inconsistent between countries or in conflict with other laws, legal obligations or industry standards. For example, the General Data Protection Regulation in the European Union creates a broad range of requirements and imposes substantial penalties for non-compliance, including possible fines of up to 4% of global annual revenue for the preceding financial year or €20 million (whichever is higher) for the most serious infringements. We are also subject to certain requirements in other international jurisdictions with or developing strong privacy and security legislation, as well as expanding U.S. state law, including the California Consumer Privacy Act of 2018, the California Privacy Rights Act of 2020, the Virginia Consumer Data Protection Act of 2021, the Colorado Consumer Privacy Act of 2021, as well as privacy and security legislation in other states, including Nevada, each of which add to the range of privacy- and security-related compliance requirements. We generally comply with industry standards and strive to comply with all applicable legal obligations relating to privacy, data protection and security, but it is possible that these laws and other legal obligations may be interpreted and applied in a manner that is inconsistent from one jurisdiction to another and may conflict with industry standards or our practices or may be mandated at a pace that exceeds our ability to comply. Compliance with such requirements may be costly and may require us to modify our business practices, which could adversely affect our business and profitability. Any failure or perceived failure by us to comply with these laws, policies or other obligations may result in governmental enforcement actions or litigation against us, with potential consequences such as fines and other expenses related to such governmental actions, an order requiring that we change our data practices or business practices, and could cause our clients to lose trust in us, any of which could have an adverse effect on our business. Further, the unauthorized use of generative artificial intelligence (AI) technology by our workforce may pose potential risks relating to the protection of data, including cybersecurity risk, exposure of our and our clients’ proprietary confidential information to unauthorized recipients and the misuse of our or third-party intellectual property.
If our products and services fail due to defects or similar problems, and if we fail to correct any defect or other software problems, we could lose clients, become subject to service performance or warranty claims or incur significant costs.
Our products and services and the systems infrastructure necessary for the successful delivery of our products and services to clients are inherently complex and may contain material defects or errors unknown to us. We have from time to time found defects in our products and services after delivery to our customers and may discover additional defects in the future. In particular, we have developed our own tools and processes to deliver comprehensive tax, legal and regulatory updates tailored for each client, which we endeavor to deliver to our clients in a shorter timeframe than our competitors, which may result in an increased risk of material defects or errors occurring. We may not be able to detect and correct all defects or errors before clients begin to use our products and services, as some may be unknown. Consequently, defects or errors may be discovered
52
after our products and services are provided and used. These defects or errors could also cause inaccuracies in the data we collect and process for our clients and/or or clients’ data, or even the loss, damage or inadvertent release of such data. Even if we are able to implement fixes or corrections to our tax, legal and regulatory updates in a timely manner, any history of defects or inaccuracies in the data we collect and process for our clients, or the loss, damage or inadvertent release of such data could cause our reputation to be harmed, and clients may elect not to renew, extend or expand their agreements with us and subject us to service performance credits, warranty or other claims or increased insurance costs. The costs associated with any material defects or errors in our products and services or other performance problems may be substantial and could materially adversely affect our financial condition and results of operations.
If we are not able to maintain an effective system of internal control over financial reporting, current and potential investors could lose confidence in our financial reporting, which could harm our business and have an adverse effect on our Common Stock price.
We have had material weaknesses in our internal control over financial reporting in the past as described in our historical periodic reports filed with the SEC. We remediated the material weaknesses; however, we cannot provide assurance that material weaknesses in our internal control over financial reporting will not be identified in the future.
We are required to have our independent registered public accounting firm attest to and report on management’s assessment of the effectiveness of our internal control over financial reporting. If we are unable to conclude that we have effective internal control over financial reporting, or if our independent registered public accounting firm is unable to provide us with an attestation and an unqualified report as to the effectiveness of our internal control over financial reporting, investors could lose confidence in the reliability of our financial statements, which could result in a decrease in the value of our securities. For further information regarding our controls and procedures, see “Controls and Procedures” in Part I, Item 4 of this Report.
If we fail to enhance and protect our brand, our ability to expand our client base will be impaired and our financial condition may suffer.
We believe that our development and protection of the Rimini Street brand is critical to achieving widespread awareness of our products and services, and as a result, is important to attracting new clients and maintaining existing clients. We also believe that the importance of brand recognition will increase as competition in our market increases. Successful promotion of our brand will depend largely on the effectiveness of our marketing efforts and on our ability to provide reliable products and services at competitive prices. Brand promotion activities may not yield increased revenue, and even if they do, any increased revenue may not offset the expenses we incurred in building our brand. If we fail to successfully promote, maintain and protect our brand, our business could be adversely impacted.
If we fail to adequately protect our proprietary rights, our competitive position could be impaired and we may lose valuable assets, experience reduced revenue and incur costly litigation to protect our rights.
Our success depends, in part, upon protecting our proprietary products, services, knowledge, software tools and processes. We rely on a combination of copyrights, trademarks, service marks, patents, trade secret laws and contractual restrictions to establish and protect our proprietary rights. However, the steps we take to protect our intellectual property may be inadequate. We will not be able to protect our intellectual property if we are unable to enforce our rights or if we do not detect unauthorized use of our intellectual property. Any of our copyrights, trademarks, service marks, trade secret rights or other intellectual property rights may be challenged by others or invalidated through administrative process or litigation. Furthermore, legal standards relating to the validity, enforceability and scope of protection of intellectual property rights are uncertain. Despite our precautions, it may be possible for unauthorized third parties to copy or use information that we regard as proprietary to create products and services that compete with ours. In addition, the laws of some countries do not protect proprietary rights to the same extent as the laws of the United States. To the extent we expand our global activities, our exposure to unauthorized copying and use of our brand, processes and software tools may increase.
We enter into confidentiality and invention assignment agreements with our employees and consultants and enter into confidentiality agreements with the parties with whom we have strategic relationships and business alliances. No assurance can be given that these agreements will be effective in controlling access to and distribution of our proprietary intellectual property. Further, these agreements may not prevent our competitors from independently developing products and services that are substantially equivalent or superior to our products and services.
Although we have been successful in the past, there can be no assurance that we will receive any additional patent protection for our proprietary software tools and processes. Even if we were to receive patent protection, those patent rights
53
could be invalidated at a later date. Furthermore, any such patent rights may not adequately protect our processes, our software tools or prevent others from designing around our patent claims.
To protect our intellectual property rights, we may be required to spend significant resources to monitor and protect these rights. Litigation brought to protect and enforce our intellectual property rights could be costly, time consuming and distracting to management and could result in the impairment or loss of portions of our intellectual property. Furthermore, our efforts to enforce our intellectual property rights may be met with defenses, counterclaims and countersuits attacking the validity and enforceability of our intellectual property rights. Our inability to protect our products, processes and software tools against unauthorized copying or use, as well as any costly litigation or diversion of our management’s attention and resources, could delay further sales or the implementation of our products and services, impair the functionality of our products and services, delay introductions of new products and services, result in our substituting inferior or more costly technologies into our products and services, or injure our reputation.
We may be subject to additional obligations to collect and remit sales tax, VAT and other taxes, and we may be subject to tax liability, interest and/or penalties for past sales, which could adversely harm our business.
State, local and foreign jurisdictions have differing and complex rules and regulations governing sales, use, value-added and other taxes, and these rules and regulations can be subject to varying interpretations that may change over time. In particular, the applicability of such taxes to our products and services in various jurisdictions is unclear. Further, these jurisdictions’ rules regarding tax nexus are complex and can vary significantly. Currently, we are under audit in some of our jurisdictions and as a result, we could face the possibility of tax assessments and additional audits, and our liability for these taxes and associated interest and penalties could exceed our original estimates. Should these jurisdictions determine that we should be collecting additional sales, use, value-added or other taxes, it could result in substantial tax liabilities and related penalties for past sales, discourage clients from purchasing our products and services or otherwise harm our business and results of operations.
The amount of and ultimate realization of the benefits from the net operating loss carryforwards for income tax purposes is dependent, in part, upon the tax laws in effect, our future earnings, and other future events, the effects of which cannot be determined; if we are not able to use a significant portion of our net operating loss carryforwards, our profitability could be adversely affected.
We have United States federal and state net operating loss carryforwards due to prior period losses, which could expire unused and be unavailable to offset future income tax liabilities, which could adversely affect our profitability.
In addition, under Section 382 of the Internal Revenue Code of 1986, as amended, our ability to utilize net operating loss carryforwards or other tax attributes in any taxable year may be limited if we experience an “ownership change.” A Section 382 “ownership change” generally occurs if one or more stockholders or groups of stockholders who own at least 5% of our stock increase their ownership by more than 50 percentage points over their lowest ownership percentage within a rolling three-year period. Similar rules may apply under state tax laws in the United States. While our ownership changes to date have not triggered any limitations under Section 382, it is possible that any future ownership changes or issuances of our capital stock, could have a material effect on the use of our net operating loss carryforwards or other tax attributes, which could adversely affect our profitability.
Reference is made to Note 8 to our Consolidated Financial Statements for the year ended December 31, 2024, included in Part II, Item 8 of the 2024 Form 10-K for a discussion of income taxes.
We are a multinational organization faced with increasingly complex tax issues in many jurisdictions, and we could be obligated to pay additional taxes in various jurisdictions.
As a multinational organization, we may be subject to taxation in several jurisdictions worldwide with increasingly complex tax laws, the application of which can be uncertain. Significant judgment is required in determining our worldwide provision for income taxes. In the ordinary course of our business, there are many transactions and calculations where the ultimate tax determination is uncertain. As such, our results may differ from previous estimates and may materially affect our financial position.
The amount of taxes we pay in jurisdictions in which we operate could increase substantially as a result of changes in the applicable tax principles, including increased tax rates, new tax laws or revised interpretations of existing tax laws and precedents, which could have a material adverse effect on our liquidity and results of operations. In addition, the authorities in these jurisdictions could review our tax returns and impose additional tax, interest and penalties, and the authorities could claim
54
that various withholding requirements apply to us or our subsidiaries or assert that benefits of tax treaties are not available to us or our subsidiaries, any of which could have a material impact on our business and results of operations.
Our reputation and/or business could be negatively impacted by environmental, social and governance (ESG) matters and/or our reporting of such matters and expose us to additional costs and risks.
Our implementation of reporting on ESG matters present numerous operational, financial, legal, reputational and other risks, many of which are outside of our control, and all of which could have a material negative impact on our business. Companies have recently faced attention from various stakeholders and regulators, both in the U.S. and internationally, relating to ESG matters, including environmental stewardship, social responsibility and inclusion. Failure to satisfy our stakeholders with regard to ESG matters could negatively impact our reputation, our ability to attract or retain employees, and our attractiveness as an investment and business partner. Unfavorable ESG ratings may lead to negative investor sentiment towards us, which could have a negative impact on our stock price. Further, the direction that U.S. federal law takes regarding ESG matters may be inconsistent with stakeholder positions on ESG matters, and we may experience conflicts between actual or proposed governmental regulations and stakeholder expectations
Risks Related to our Indebtedness and Securities
Our level of indebtedness and any future indebtedness we may incur may limit our operational and financing flexibility and negatively impact our business.
On June 30, 2025, our outstanding indebtedness under our 2024 Credit Facility and finance leases totaled $80.3 million. We may incur substantial additional indebtedness in the future. Our 2024 Credit Facility and other debt instruments we may enter into in the future may significantly impact our business, including the following among others:
•our ability to obtain additional financing for working capital, capital expenditures, acquisitions or general corporate purposes may be impaired;
•our requirement to use a significant portion of our cash flows from operations to pay principal and interest on our indebtedness, which will reduce the funds available to us for operations and other purposes;
•our level of indebtedness could place us at a competitive disadvantage compared to our competitors that may have proportionately less debt;
•our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate may be limited; and
•our level of indebtedness may make us more vulnerable to economic downturns and adverse developments in our business.
We expect to depend primarily on cash generated by our operations for funds to pay our expenses and any amounts due under our 2024 Credit Facility and any other indebtedness we may incur. Our ability to make these payments depends on our future performance, which will be affected by financial, business, economic and other factors, many of which we cannot control, including inflation and global economic conditions. Our business may not generate sufficient cash flows from operations in the future, and we may not be able to achieve and maintain profitability in future periods, either or both of which could result in our being unable to repay indebtedness or to fund other liquidity needs. If we do not generate adequate resources, we may be required to refinance all or part of our then existing debt, sell assets or borrow more money, in each case on terms that may not be acceptable to us. In addition, the terms of existing or future debt agreements, including our existing 2024 Credit Facility, may restrict us from adopting some or any of these alternatives. Our inability to incur additional debt in the future could also delay or prevent a change in control of our Company, make some transactions more difficult and impose additional financial or other covenants on us. In addition, any significant levels of indebtedness in the future could make us more vulnerable to economic downturns and adverse developments in our business. Our current indebtedness and any inability to pay our debt obligations as they come due or an inability to incur additional debt could adversely affect our business and results of operations.
The terms of our 2024 Credit Facility impose operating and financial restrictions on us.
Our 2024 Credit Facility contains certain restrictions and covenants that generally limit our ability to, among other things, create liens on assets, sell assets, engage in mergers or consolidations, make loans or investments, incur additional indebtedness, engage in certain transactions with affiliates, incur certain material ERISA or pension liabilities and pay dividends or repurchase capital stock and in each case, subject to certain exceptions set forth in our 2024 Credit Facility. Our 2024 Credit Facility may limit our ability to engage in these types of transactions even if we believe that a specific transaction
55
would contribute to our future growth or improve our operating results. Further, we are required under our 2024 Credit Facility to achieve specified financial and operating results and maintain compliance with specified financial ratios, including as a condition to accessing additional amounts available for borrowing. As of June 30, 2025 and on the date of filing this Report, we were in compliance with each of these financial covenants. Our ability to comply with these provisions may be affected by events beyond our control. A breach of any of these financial covenants or our inability to comply with required financial ratios in our 2024 Credit Facility could result in a default under the 2024 Credit Facility in which case the lenders would have the right to declare all borrowings, which includes any principal amount outstanding, together with all accrued, unpaid interest and other amounts owing in respect thereof, to be immediately due and payable. If we are unable to repay all borrowings when due, whether at maturity or if declared due and payable following a default, the lenders would have the right to proceed against the collateral granted to secure the indebtedness. If we breach these covenants or fail to comply with other terms of the 2024 Credit Facility and the lenders accelerate the amounts outstanding under the 2024 Credit Facility, our business and results of operations would be adversely affected. Additionally, we may need to refinance our 2024 Credit Facility at maturity or upon default, and future financing may not be available on acceptable terms, or at all.
Our variable rate indebtedness subjects us to interest rate risk, which, along with the previous phase-out of LIBOR and transition to SOFR, could cause our indebtedness service obligations to increase significantly.
As a result of market interest rate fluctuations, interest rates under our 2024 Credit Facility or other variable rate indebtedness we may incur in the future could be higher or lower than current levels. As interest rates increase, our debt service obligations under our 2024 Credit Facility may increase even though the amounts borrowed remain the same, and our net income and cash flows, including cash available for servicing our indebtedness, would correspondingly decrease. We have entered into an interest rate swap agreement that involves the exchange of floating for fixed rate interest payments in order to partially reduce interest rate volatility under our 2024 Credit Facility. However, we currently do not maintain interest rate swap agreements with respect to all of our variable rate indebtedness, and any interest rate swap agreements we enter into in the future may not fully mitigate our interest rate risk.
Our 2024 Credit Facility gives us a choice of interest rates between (a) SOFR and (b) a Base Rate, in each case plus an applicable margin and as further defined in the 2024 Credit Facility. The applicable margin is based on our Consolidated Total Leverage Ratio (as defined in the 2024 Credit Facility) and whether we elect SOFR (ranging from 2.75 to 3.50%) or Base Rate (ranging from 1.75 to 2.50%). SOFR’s composition and characteristics are not the same as LIBOR, which was the initial reference rate (through February 2023) under our Original Credit Facility. SOFR is calculated based on short-term repurchase agreements, backed by Treasury securities. As such, SOFR is observed and backward looking, which stands in contrast with LIBOR under the previous methodology, which is an estimated forward-looking rate and relies, to some degree, on the expert judgment of submitting bank panel members. Given SOFR’s limited history, the future performance of SOFR cannot be predicted based on historical performance, and there is no assurance that SOFR will perform in the same way as LIBOR would have performed at any time or that it is a comparable substitute for LIBOR. In the long term, transitioning to SOFR could result in an increase in the cost of our variable rate indebtedness, which could have a material adverse impact on our business, financial condition and results of operations.
The price of our Common Stock may be volatile, any issuance of Common Stock upon the exercise of remaining warrants will dilute existing stockholders, and such issuances and/or any sales of Common Stock by large stockholders may depress the market price of our Common Stock.
The price of our Common Stock may fluctuate due to various factors enumerated in this Risk Factors section and elsewhere in this Report. Additional factors impacting the price of our Common Stock could include:
•the failure of securities analysts to publish research about us, or shortfalls in our results of operations compared to levels forecast by securities analysts;
•any delisting of our Common Stock from Nasdaq Global Market due to any failure to meet listing requirements, including the minimum trading price requirements as a result of our stock price volatility; and
•the general state of securities markets.
These factors may materially reduce the market price of our Common Stock, regardless of our operating performance. Additionally, we have registered for resale the shares of Common Stock of certain of our significant holders of our Common Stock, including our largest stockholder, Adams Street Partners, LLC. Any sale of large amounts of our Common Stock on the open market or in privately negotiated transactions could have the effect of increasing the volatility and putting significant downward pressure on the price of our Common Stock. Also, the issuance of Common Stock upon exercise of warrants that remain outstanding and exercisable may result in immediate dilution to the equity interests of our existing common stockholders and might result in dilution in the tangible net book value of a share of Common Stock, depending upon the price
56
at which the additional shares are issued. We may also seek to engage in further capital optimization transactions in the future, the result of which could trigger some dilution or have other impacts on the market price of our Common Stock and not achieve an improved capital structure. Any issuance of equity we may undertake in the future to raise additional capital could cause the price of our Common Stock to decline or require us to issue shares at a price that is lower than that paid by holders of our Common Stock in the past, which would result in those newly issued shares being dilutive.
Certain of our common stockholders can exercise significant control, which could limit our stockholders’ ability to influence the outcome of key transactions, including a change of control.
Based on the number of shares of Common Stock outstanding as of June 30, 2025, two of our stockholders have aggregate voting power of approximately 37.6% of our outstanding capital stock. As of June 30, 2025, (i) approximately 25.5% of our outstanding voting capital stock is held by Adams Street Partners LLC and certain Adams Street fund limited partnerships and (ii) approximately 12.1% of our outstanding voting capital stock is beneficially owned by our President, Chief Executive Officer and Chairman of the Board. Our directors and officers or persons affiliated with our directors and officers have aggregate voting power of approximately 39.8% as of June 30, 2025.
As a result, these stockholders, acting together, have significant influence over all matters that require approval by our stockholders, including the election of directors and approval of significant corporate transactions. Corporate action might be taken even if other stockholders oppose the action being taken. This concentration of ownership might also have the effect of delaying or preventing a change of control of our Company that other stockholders may view as beneficial.
We do not currently intend to pay dividends on our Common Stock and, consequently, the ability to achieve a return on investment in our Common Stock will depend on appreciation in the price of our Common Stock.
We have not paid any cash dividends on our Common Stock to date. The payment of any cash dividends on our Common Stock will depend upon our revenue, earnings, cash flow and financial condition from time to time. The payment of any dividends is at the discretion of our Board of Directors and is also limited under the terms of our 2024 Credit Facility. Our ability to declare dividends on our Common Stock may also be limited by the terms of future financing and other agreements entered into by us from time to time. It is presently expected that we will retain all earnings for use in our business operations and, accordingly, it is not expected that our Board of Directors will declare any dividends on our Common Stock in the foreseeable future. Therefore, the success of an investment in shares of our Common Stock will depend upon any future appreciation in its value. There is no guarantee that shares of our Common Stock will appreciate in value or even maintain the price at which our stockholders have purchased their shares.
Our stock repurchase program could affect the price of our Common Stock and increase volatility and may be suspended or terminated at any time, which may result in a decrease in the trading price of our Common Stock.
Our Board of Directors has authorized a $50.0 million stock repurchase program. During the six months ended June 30, 2025, we did not acquire any shares of Common Stock. Repurchases pursuant to any such stock repurchase program could affect our Common Stock price and increase its volatility. The existence of a stock repurchase program could also cause our Common Stock price to be higher than it would be in the absence of such a program and could potentially reduce the market liquidity for our Common Stock. Such repurchase program will not obligate us to repurchase any further specific dollar amount or number of shares of Common Stock within that authorization and may be suspended or discontinued at any time, which could cause the market price of our Common Stock to decline. The timing and actual number of further shares repurchased under any such stock repurchase program depends on a variety of factors including the timing of open trading windows, price, corporate and regulatory requirements, and other market conditions. Further, the provisions of the Inflation Reduction Act of 2022 impose an excise tax of 1% tax on the fair market value of stock repurchases made after December 31, 2022, net of certain adjustments for issuances of incentive and other equity. The impact of this provision will depend on the extent of share repurchases and qualified reductions for issuances made in future periods. There can be no assurance that any stock repurchases will enhance stockholder value because the market price of our Common Stock may decline below the levels at which we repurchased shares of Common Stock. Although our stock repurchase program is intended to enhance stockholder value, short-term stock price fluctuations could reduce the program’s effectiveness.
57
Risks Relating to our Corporate Governance
The DGCL and our certificate of incorporation, bylaws and corporate governance policies contain certain provisions, including anti-takeover provisions that limit the ability of stockholders to take certain actions and could delay or discourage takeover attempts that stockholders may consider favorable.
Our certificate of incorporation and bylaws, and Delaware General Corporation Law (the “DGCL”), contain provisions that could have the effect of rendering more difficult, delaying, or preventing an acquisition deemed undesirable by our Board of Directors and therefore depress the trading price of our Common Stock. These provisions could also make it difficult for stockholders to take certain actions, including electing directors who are not nominated by the current members of our Board of Directors or taking other corporate actions, including effecting changes in our management and corporate governance policies and practices. Among other things, our certificate of incorporation and bylaws include provisions regarding:
•a classified Board of Directors with three-year staggered terms, which could delay the ability of stockholders to change the membership of a majority of our Board of Directors;
•the ability of our Board of Directors to issue shares of preferred stock, including “blank check” preferred stock, and to determine the price and other terms of those shares, including preferences and voting rights, without stockholder approval, which could be used to significantly dilute the ownership of a hostile acquirer;
•the limitation of the liability of, and the indemnification of our directors and officers;
•the exclusive right of our Board of Directors to elect a director to fill a vacancy created by the expansion of the Board of Directors or the resignation, death or removal of a director, which prevents stockholders from being able to fill vacancies on our Board of Directors;
•the requirement that directors may only be removed from our Board of Directors for cause;
•a prohibition on common stockholder action by written consent, which forces common stockholder action to be taken at an annual or special meeting of stockholders and could delay the ability of stockholders to force consideration of a stockholder proposal or to take action, including the removal of directors;
•the requirement that a special meeting of stockholders may be called only by our Board of Directors, the chairperson of our Board of Directors, our chief executive officer or our president (in the absence of a chief executive officer), which could delay the ability of stockholders to force consideration of a proposal or to take action, including the removal of directors;
•controlling the procedures for the conduct and scheduling of Board of Directors and stockholder meetings;
•the requirement for the affirmative vote of holders of at least 66 2/3% of the voting power of the then outstanding shares of the voting stock, voting together as a single class, to amend, alter, change or repeal any provision of our certificate of incorporation or our bylaws, which could preclude stockholders from bringing matters before annual or special meetings of stockholders and delay changes in our Board of Directors and also may inhibit the ability of an acquirer to effect such amendments to facilitate an unsolicited takeover attempt;
•the ability of our Board of Directors to amend the bylaws, which may allow our Board of Directors to take additional actions to prevent an unsolicited takeover and inhibit the ability of an acquirer to amend the bylaws to facilitate an unsolicited takeover attempt; and
•advance notice procedures with which stockholders must comply to nominate candidates to our Board of Directors or to propose matters to be acted upon at a stockholders’ meeting, which could preclude stockholders from bringing matters before annual or special meetings of stockholders and delay changes in our Board of Directors and also may discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain control of our Company.
These provisions, alone or together, could delay or prevent hostile takeovers and changes in control or changes in our Board of Directors or management and corporate governance policies.
In addition, as a Delaware corporation, we are subject to provisions of Delaware law, including Section 203 of the DGCL, which may prohibit certain stockholders holding 15% or more of our outstanding capital stock from engaging in certain business combinations with us for a specified period of time.
Any provision of our certificate of incorporation, bylaws or DGCL that has the effect of delaying or preventing a change in control could limit the opportunity for our stockholders to receive a premium for their shares of our Common Stock and could also affect the price that some investors are willing to pay for our Common Stock.
58
Our bylaws designate a state or federal court located within the State of Delaware as the sole and exclusive forum for substantially all disputes between us and our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, stockholders or employees.
Our bylaws provide that the Court of Chancery of the State of Delaware will be the sole and exclusive forum for:
•any derivative action or proceeding brought on behalf of us;
•any action asserting a claim of breach of a fiduciary duty owed to us or our stockholders by any of our directors, officers or other employees;
•any action asserting a claim against us or any of our directors, officers or employees arising out of or relating to any provision of the DGCL, our certificate of incorporation or our bylaws; or
•any action asserting a claim against us or any of our directors, officers, stockholders or employees that is governed by the internal affairs doctrine of the Court of Chancery.
This choice of forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or any of our directors, officers, or other employees, which may discourage lawsuits with respect to such claims. Alternatively, if a court were to find the choice of forum provision to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could harm our business, results of operations and financial condition.
General Risks
Future acquisitions, strategic investments, partnerships or alliances could be difficult to identify and integrate, divert the attention of management, disrupt our business, dilute stockholder value and adversely affect our financial condition and results of operations.
We may in the future seek to acquire or invest in businesses, products or technologies that we believe could complement or expand our services, enhance our technical capabilities or otherwise offer growth opportunities. The pursuit of potential acquisitions may divert the attention of management and cause us to incur various expenses in identifying, investigating and pursuing suitable acquisitions, whether or not the acquisitions are completed. If we acquire businesses, we may not be able to integrate successfully the acquired personnel, operations and technologies, or effectively manage the combined business following the acquisition. We may not be able to find and identify desirable acquisition targets or be successful in entering into an agreement with any particular target or obtain adequate financing to complete such acquisitions. Acquisitions could also result in dilutive issuances of equity securities or the incurrence of debt, which could adversely affect our results of operations. In addition, if an acquired business fails to meet our expectations, our business, financial condition and results of operations may be adversely affected.
The commercial insurance market is changing rapidly in response to rising insurance losses and claims, changes in available insurance capacity and adverse worldwide economic conditions, uncertainties, and risks, which may lead to higher premium costs, higher policy deductibles, self-insured retentions, and/or lower coverage limits, potentially impacting our ability to continue our present limits of insurance coverage, obtain sufficient insurance capacity to adequately insure our risks or maintain adequate insurance at a reasonable cost.
Commercial insurance availability and coverage terms, including deductibles, self-insured retentions and pricing, continue to vary with market conditions. While we believe our insurance coverage addresses all material risks to which we are exposed and is adequate and customary for our current global operations, we have observed rapidly changing conditions in the insurance markets relating to nearly all areas of traditional corporate insurance, resulting in higher premium costs, rising policy deductibles/self-insured retentions and lower coverage limits. If these changes continue, we may not be able to continue our present limits of insurance coverage, obtain sufficient insurance capacity to adequately insure our risks and/or obtain and maintain adequate insurance at a reasonable cost. Our insurance policies cover a number of risks and potential liabilities, such as general liability, property coverage, errors and omissions liability, employment liability, business interruptions, cybersecurity liability, crime, and directors’ and officers’ liability. We cannot be certain that our insurance coverage will be adequate to cover liabilities actually incurred, that insurance will continue to be available to us on commercially reasonable terms, or at all, or that any insurer will not deny coverage as to any future claim or become insolvent. The successful assertion of one or more large claims against us that exceed available insurance coverage, the occurrence of changes in our insurance policies, including premium increases, decreases in coverage and the imposition of large deductible, self-insured retentions, or co-insurance requirements, or the insolvency of any of our insurers, could have a material adverse effect on our business, results of operations and financial condition.
59
Catastrophic events may disrupt our business.
We rely heavily on our network infrastructure and information technology systems for our business operations. A disruption or failure of these systems in the event of an online attack, earthquake, fire, terrorist attack, geopolitical instability such as the conflicts between Israel and Hamas, war, power loss, telecommunications failure, extreme weather conditions (such as hurricanes, wildfires or floods) or other catastrophic event could cause system interruptions, delays in accessing our service, reputational harm, loss of critical data or could prevent us from providing our products and services to our clients. In addition, several of our employee groups reside in areas particularly susceptible to earthquakes, such as the San Francisco Bay Area and Japan, and a major earthquake or other catastrophic event could affect our employees, who may not be able to access our systems, or otherwise continue to provide our services to our clients. A catastrophic event that results in the destruction or disruption of our data centers, or our network infrastructure or information technology systems, or access to our systems could affect our ability to conduct normal business operations and adversely affect our business, financial condition and results of operations. Additionally, the emergence or spread of a pandemic or other widespread health emergency (or concerns over and response to the possibility of such an emergency) could adversely affect our business, financial condition and results of operations.
Failure to comply with laws and regulations applicable to our operations could harm our business.
Our business is subject to regulation by various global governmental agencies, including agencies responsible for monitoring and enforcing employment and labor laws, workplace safety, environmental laws, consumer protection laws, anti-bribery laws, import/export controls, securities laws and tax laws and regulations. For example, transfer of certain software outside of the United States or to certain persons is regulated by export controls.
In certain jurisdictions, these regulatory requirements may be more stringent than those in the United States. Noncompliance with applicable requirements could subject us to investigations, sanctions, enforcement actions, disgorgement of profits, fines, damages, civil and criminal penalties or injunctions and may result in our inability to provide certain products and services. If any governmental sanctions are imposed, or if we do not prevail in any possible civil or criminal litigation, or if clients make claims against us for compensation for such non-compliance, our business, financial condition and results of operations could be harmed, and responding to any such type of action will likely result in a significant diversion of management’s attention and resources.
Reports published by analysts, including projections in those reports that differ from our actual results, could adversely affect the price and trading volume of our Common Stock.
Securities research analysts may establish and publish their own periodic projections for us. These projections may vary widely and may not accurately predict the results we actually achieve. Our share price may decline if our actual results do not meet the projections of these securities research analysts. Similarly, if one or more of the analysts who write reports on us downgrades our stock or publishes inaccurate or unfavorable research about our business, our share price could decline. If one or more of these analysts ceases coverage of us or fails to publish reports on us regularly, our share price or trading volume could decline. If no additional analysts commence coverage of us, the market price and volume for our common shares could be adversely affected.
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds.
There were no repurchases of our Common Stock during the three months ended June 30, 2025.
ITEM 3. Defaults Upon Senior Securities.
None.
ITEM 4. Mine Safety Disclosures.
Not applicable.
ITEM 5. Other Information.
During the quarter ended June 30, 2025, none of our directors or officers informed us of the adoption or termination
60
The Company’s RSU and PSU notice and award agreements provide that, upon the settlement of awards subject to such agreements, such number of shares of Company Common Stock as the Company determines appropriate to satisfy associated minimum statutory tax withholding obligations shall automatically be sold on the awardee’s behalf, with the sale proceeds remitted to the appropriate taxing authorities. This provision may constitute a “non-Rule 10b5-1 trading arrangement” (as defined in Item 408(c) of Regulation S-K). Certain of our executive officers have elected to automatically sell such number of shares of Company Common Stock as to generate cash proceeds in excess of the amount needed to satisfy associated minimum statutory tax withholding obligations (at an identified rate) upon settlement of future RSU and/or PSU awards, with all sale proceeds remitted to appropriate taxing authorities.
On June 2, 2025 , the Company’s Executive Vice President and Chief Financial Officer , Michael L. Perica , entered into a Rule 10b5-1 trading arrangement providing for the sale of an aggregate of up to 205,377 shares of the Company’s common stock acquired upon the vesting of restricted stock units and performance units previously awarded to Mr. Perica under the terms of the Company’s 2013 Equity Incentive Plan. The trading arrangement is intended to satisfy the affirmative defense in Rule 10b5-1(c) under the Securities Exchange Act of 1934. The first date that sales of any shares are permitted to be sold under the trading arrangement is September 2, 2025, and subsequent sales under the trading arrangement may occur from time to time for the duration of the trading arrangement until August 28, 2026 , or earlier if all transactions under the trading arrangement are completed.
61
ITEM 6. Exhibits.
| Incorporated by Reference | ||||||||||||||||||||||||||||||||
| Exhibit Number | Description | Form | File No. | Exhibit | Filing Date | |||||||||||||||||||||||||||
| 8-K | 001-37397 | 3.1 | October 16, 2017 | |||||||||||||||||||||||||||||
| 8-K | 001-37397 | 3.1 | June 7, 2024 | |||||||||||||||||||||||||||||
| 10-Q | 001-37397 | 3.2 | November 1, 2023 | |||||||||||||||||||||||||||||
| 8-K | 001-37397 | 10.1 | May 12, 2025 | |||||||||||||||||||||||||||||
101.INS† | Inline XBRL Instance Document | |||||||||||||||||||||||||||||||
101.SCH† | Inline XBRL Taxonomy Extension Schema | |||||||||||||||||||||||||||||||
101.CAL† | Inline XBRL Taxonomy Extension Calculation Linkbase | |||||||||||||||||||||||||||||||
101.DEF† | Inline XBRL Taxonomy Extension Definition Linkbase | |||||||||||||||||||||||||||||||
101.LAB† | Inline XBRL Taxonomy Extension Label Linkbase | |||||||||||||||||||||||||||||||
101.PRE† | Inline XBRL Taxonomy Extension Presentation Linkbase | |||||||||||||||||||||||||||||||
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) | |||||||||||||||||||||||||||||||
____________________
† Filed herewith.
* Previously filed and incorporated herein by reference.
** Furnished herewith.
‡ Certain portions of this exhibit (marked by “[***]”) have omitted pursuant to Item 601(b)(10) of Regulation S-K because such portions are not material and are treated by the Registrant as private or confidential.
§ Management contract or compensatory plan or arrangement.
62
SIGNATURES
Pursuant to the requirements of Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| RIMINI STREET, INC. | |||||
Date: July 31, 2025 | /s/ Seth A. Ravin | ||||
| Name: Seth A. Ravin | |||||
| Title: President, Chief Executive Officer and Chairman of the Board | |||||
| (Principal Executive Officer) | |||||
Date: July 31, 2025 | /s/ Michael L. Perica | ||||
| Name: Michael L. Perica | |||||
| Title: Executive Vice President and Chief Financial Officer | |||||
| (Principal Financial Officer) | |||||
63