Earnings Call Transcript - RMNI Q1 2026

Operator, Operator

Good afternoon, ladies and gentlemen, and welcome to the Rimini Street Q1 2026 Earnings Conference Call. This call is being recorded on Thursday, April 30, 2026. I'll now turn the call over to Dean Pohl, Vice President, Treasurer and Head of Investor Relations. Please go ahead.

Dean Pohl, Vice President, Treasurer and Head of Investor Relations

Thank you, operator. I'd like to welcome everyone to Rimini Street's Fiscal First Quarter 2026 Earnings Conference Call. On the call with me today is Seth Ravin, our CEO and President; and Michael Perica, our CFO. Today, we issued our earnings press release for the first quarter ending March 31, 2026, a copy of which can be found on our website under the Investor Relations section. A reconciliation of GAAP to non-GAAP financial measures has been provided in the tables following the financial statements in the press release. An explanation of these measures and why we believe they are meaningful is also included in the press release and our website under the heading About Non-GAAP Financial Measures and Certain Key Metrics. As a reminder, today's discussion will include forward-looking statements about our operations that reflect our current outlook. These forward-looking statements are subject to risks and uncertainties that may cause results to differ materially from statements made today. We encourage you to review our most recent SEC filings, including our Form 10-Q filed today for a discussion of risks that may affect our future results or stock price. Now before taking questions, we will begin with prepared remarks. With that, I'd like to turn the call over to Seth.

Seth Ravin, CEO and President

Thank you, Dean, and thank you, everyone, for joining us. First quarter results. Our first quarter results reflect continued growth and accelerating momentum. A growing number of organizations are leveraging Rimini support and our proven Rimini Smart Path to execute their global ERP and operational transaction processes faster, better and cheaper with more agility and speed to value, all within existing budgets. Rimini Street can help just about any organization lower its total operating costs and improve competitive advantage or improve return for government constituents using technology. We delivered strong growth in adjusted calculated billings and adjusted ARR and expanded remaining performance obligations year-over-year, adjusted for the Oracle PeopleSoft support and services wind down and which includes new logo and renewal subscription sales. We also continue to make additional strategic investments in our next-generation Rimini Agentic AI ERP solutions that can be quickly deployed over existing ERP software without the cost and risk of unnecessary upgrades, migrations or re-platforming. During the quarter, we closed 11 new client transactions with over $1 million in TCV and totaling $33 million compared to 5 transactions totaling $5.6 million during the same period last year. We added 50 new logos that included household global and regional brand wins. The combined strength of the second half of 2025 and first quarter 2026 results give us continued confidence in delivering growth in fiscal 2026, positioning the company for increased growth and profitability. We are continuing our evolution beyond our position as the premier third-party enterprise software support provider to a leader in also helping clients modernize their existing business transaction systems in the AI era. We are now the software support and Agentic AI ERP company. Today, more than 1,900 Rimini Street employees in 22 countries are helping organizations avoid unnecessary, costly and risky ERP and other enterprise software upgrades, migrations and re-platformings that often deliver low ROI and offer little competitive advantage. Instead, organizations can invest in modernization of their existing systems, leveraging next-generation Rimini Agentic AI ERP solutions that can be quickly and economically deployed over their current ERP and other enterprise software and deliver real competitive advantage. We believe we can help organizations achieve significant IT operating cost savings, improve profitability, enhance competitive advantage and accelerate growth. Our clients have already realized over $10 billion in operational savings. Rimini Street leads an Agentic AI ERP. We are helping clients set a new vision, technical and functional path forward from their current vendor ERP software release. This path does not require any return to the vendor for a future upgrade or migration to their current ERP software release in order to achieve innovation and modernization. The client can innovate and modernize their existing ERP software and other enterprise software using Agentic AI ERP solutions deployed easily, economically right over the top of their existing software releases. The Rimini Smart Path is our proprietary proven three-step methodology that clients can use to self-fund and accelerate innovation, especially AI and automation without undergoing costly, risky or unnecessary ERP upgrades or rip-and-replace migrations by leveraging and modernizing existing IT environments, all without operational disruption. Rimini Agentic UX is our AI-driven experience and automation layer that is deployed right over existing client ERP software and turns their ERP software from a static system of record into an autonomous system of action, delivering innovation and modernization in weeks, not years, and at a fraction of the cost of a major upgrade, migration or re-platforming project. Client success stories. Rimini Street is helping clients across many industries, geographies and software, protect and optimize their core ERP systems while funding innovation and modernization, including fixing broken processes, automating workflows and functions and using AI to solve specific business challenges without disruptive, costly or risky ERP software upgrade migrations or re-platforming. Here are a few examples of how Rimini Street solutions for SAP, Oracle and VMware software are enabling innovation and transforming improved competitive advantage for clients. Cubic Corporation, a U.S. defense and transportation technology company, said that partnering with Rimini Street allowed them to gain full control of their SAP roadmap, avoid a costly S/4HANA upgrade and reallocate savings and internal capacity towards automation, AI and broader modernization initiatives. Flexitech, a French automotive products company, said that they chose Rimini Support to help reduce risk and operational disruption in its SAP environment, strengthening cybersecurity posture and accelerating compliance readiness while enabling the reallocation of savings towards R&D and modernization programs. Cleanera, a South Korean paper and hygiene products company, said they were able to cut SAP and Oracle vendor maintenance costs by approximately 50% with Rimini Street, stabilizing their core ERP environment and freeing budget and talent to accelerate AI, analytics, cloud expansion and IoT-driven operational improvements. Elmort, a Brazilian industrial company, said that unifying support across VMware and SAP with Rimini Street created the opportunity to increase operational stability and security while redirecting budget and internal resources from maintenance to sustainability and growth initiatives. Partners, alliances and channels. We continued strengthening and maturing our indirect sales ecosystem, including adding new partner managers for strategic technology, services and channel relationships. During the quarter, we closed accretive sales transactions globally that we do not believe we would have otherwise closed without partners. These partnerships extend our reach, bring complementary expertise and help clients execute modernization strategies that combine Rimini Street support with world-class platforms, cloud services and AI tooling. The ecosystem is becoming a strategic multiplier for us, accelerating adoption, expanding influence and enabling shared go-to-market opportunities. Summary. We are focused on accelerating growth, improving profitability and delivering shareholder return. We plan to leverage Rimini Street's proprietary unique and proven Smart Path methodology, service portfolio and capabilities to help a growing list of clients take back control of their technology roadmap and spending and successfully navigate business and technical complexity in the age of AI. Now over to you, Michael.

Michael Perica, CFO

Thank you, Seth, and thank you for joining us, everyone. Q1 results. Our first quarter results reflect solid execution and continued signs of momentum, highlighted by remaining performance obligations, RPO, and billings growth, along with a return to top-line growth despite the headwinds from the wind-down of support and services for Oracle's PeopleSoft software. Our strong operating cash flow and cash position enabled us to comfortably make $10 million of additional voluntary principal prepayments that reduced our debt balance to $58.4 million and increased our net cash position to $73.8 million at the end of the quarter. Revenue for the first quarter was $105.5 million, a year-over-year increase of 1.2%. Excluding support services for PeopleSoft products, revenue increased by 5.2% year-over-year. FX movements impacted first quarter revenue negatively by 0.5%. Annualized recurring revenue was $400.8 million for the first quarter, a year-over-year increase of 1.2%. Our revenue retention rate for service subscriptions, which makes up 95% of our revenue, was 88%, with approximately 81% of subscription revenue noncancelable for at least 12 months. Billings for the first quarter were $95.3 million, an increase of 19.9% year-over-year. When excluding billings associated with support services for PeopleSoft products, the year-over-year increase was 22.9%. Gross margin was 59.0% of revenue for the first quarter compared to 61.0% of revenue for the prior year first quarter. On a non-GAAP basis, which excludes stock-based compensation expense, gross margin was 59.5% of revenue for the first quarter compared to 61.5% of revenue for the prior year first quarter. Our gross margin in the period was negatively impacted by investments pulled forward in the year to take advantage of market opportunities and select non-subscription engagements that had large, front-loaded start-up costs. Nonetheless, as noted during our Investor Day presentation last December, our use of innovation and other analytics deployed on top of our existing systems of record provides us with confidence in our ability to build from this current gross margin level and achieve the targets we outlined. Operating expenses. Reorganization charges associated with optimization costs for the first quarter were $407,000. Also, we have carved out our R&D expenditures of $571,000 in the quarter in a separate line item that reflects our ongoing and increasing research and development activity for our proprietary historical offerings as well as our burgeoning Agentic AI ERP and UX solutions. Sales and marketing expense as a percentage of revenue was 36.6% for the first quarter compared to 32.9% of revenue for the prior year first quarter. On a non-GAAP basis, which excludes stock-based compensation expense, sales and marketing expense as a percentage of revenue was 35.8% for the first quarter compared to 32% of revenue for the prior year first quarter. Our sales and marketing costs in the period were negatively impacted by investments pulled forward in the year to take advantage of market opportunities. General and administrative expenses as a percentage of revenue was 16.9% of revenue for the first quarter compared to 16.8% of revenue for the prior year first quarter. On a non-GAAP basis, which excludes stock-based compensation expense, G&A was 15.7% of revenue for the first quarter compared to 15.6% of revenue for the prior year first quarter. As we stated in our most recent earnings call, we do not expect litigation expenses to be material on a going-forward basis and are now including any residual legal costs in the G&A line item in our income statement. Net income attributable to shareholders for the first quarter was $1.4 million or $0.01 per diluted share compared to the prior year first quarter of $0.04 per diluted share. On a non-GAAP basis, net income for the first quarter was $4 million or $0.04 per diluted share compared to the first quarter of the prior year of $0.10 per diluted share. Adjusted EBITDA, as defined in our earnings release and now excludes unrealized FX translation adjustments was $8.9 million for the first quarter or 8.4% of revenue compared to the prior year's first quarter of $15.7 million or 15.1% of revenue. Balance sheet. We ended the first quarter of 2026 with a cash balance of $132.2 million compared to $122.6 million of cash for the prior year first quarter. On a cash flow basis, first quarter operating cash flow increased $24.5 million compared to the prior year's first quarter increase of $33.7 million. Deferred revenue as of March 31, 2026, was $277.3 million compared to deferred revenue of $256.4 million for the prior year first quarter. Remaining performance obligations, RPO, which includes the sum of billed deferred revenue, contract assets and noncancelable future revenue was $643.6 million as of March 31, 2026, compared to $553.1 million for the prior year first quarter, an increase of 16.4%. When excluding RPO relating to support services for PeopleSoft products, the year-end balance increased 18.2%, reflecting our building momentum with both new bookings growth and longer duration commitments. PeopleSoft support wind-down update. As we discussed during previous quarter's earnings conference calls, our July 2025 settlement agreement with Oracle provides among other obligations and terms between the parties that the company will complete its previously announced wind-down of its support and services for Oracle's PeopleSoft software no later than July 31, 2028. We have made progress in reducing both the number of PeopleSoft software support clients and related revenues since announcing the wind-down. Revenue from PeopleSoft software support services was 3% of revenue for the first quarter compared to approximately 7% for the previous year first quarter and down from 8% of revenue when we began the wind-down process during the second half of 2024. Business outlook. The company is providing second quarter 2026 revenue guidance to be in the range of $106 million to $108 million and reiterating the full year 2026 guidance provided at our Investor Day in December 2025 of revenue growth in the 4% to 6% range and adjusted EBITDA margins in the 12.5% to 15.5% range, combined to achieve Rule of 20. For additional information, please see the disclosures in our Form 10-Q filed today, April 30, 2026, with the U.S. Securities and Exchange Commission. This concludes our prepared remarks. Operator, we'll now take questions.

Operator, Operator

Our first question comes from the line of Brian Kinstlinger from Alliance Global Partners.

Brian Kinstlinger, Analyst

You talked about stronger bookings trends that have started since the second half of '25. Can you provide any quantifiable context, maybe year-over-year comparisons? Are there booking totals you can provide or a book-to-bill? And then lastly, maybe from a qualitative standpoint, discuss domestic versus international.

Seth Ravin, CEO and President

Sure, Brian. As we said starting mid-last year, we started to see an uptick, and we've shown it in the billings and bookings numbers. The comparisons, I think, have already been in each of the releases. So, the team will be happy to get you those at a later date. But I think we're seeing continued growing demand. We're seeing continued growing pipelines. And those are now converting, as you're seeing, into larger contracts. We're seeing longer-term contracts. Just look at the number of deals with TCV over $1 million, even in North America, where we had zero of those deals in Q1 of last year; 60% of those deals were in North America this year. So, we're seeing all different indicators of continued growing demand and our ability to execute continues to get better and better. We're pleased with what we saw happening in Q1 and how it sets us up even for the full year.

Brian Kinstlinger, Analyst

And then a follow-up on that. You mentioned in your prepared remarks and just now as well about the longer duration. I think traditionally, you've had one-year contracts, correct me if I'm wrong, whereas the renewable for every year. What's happening now? What are you seeing in terms of duration? Or maybe dig a little deeper into what you're describing as longer duration?

Seth Ravin, CEO and President

Well, I think our average contract length before used to be something short of three years, about 2.5 to 2.6 years for a new contract. And we're seeing longer-term contracts being signed. I think the indication of that is we're watching customers think about a much longer term for this next phase of technology transition. They're looking at their existing systems, they're looking at the amount of change that's coming their way or being pushed their way, realizing a lot of it isn't going to generate the kind of return on investment or the competitive advantage they need, and they're looking to us for longer-term solutions. I think that's what you're seeing play out in the contracts.

Brian Kinstlinger, Analyst

Okay. My last question is, last quarter, you highlighted 26 customers that were testing their Agentic AI solutions. Maybe you can update us on that number, share what feedback you're getting from them and timelines to production? And then lastly, how would you want to be measured over the next 18 months on your progress of that new solution? Is it improving organic growth rates? Are you going to discuss the revenue contribution? Just how should investors think about that?

Seth Ravin, CEO and President

Well, I think how we should think about it is exactly based on the guidance. It's about growth. The fact that we're returning to growth against the headwinds of the PeopleSoft wind-down is certainly a nice indicator. I think the fact that we would return to growth with a mid-single digit this year, as we said, a Rule of 20 is what we're aiming for between the top line and the bottom line, gives us a little range and flexibility between the top line and bottom line. Then look to us to get to that Rule of 40 that we want to get to, which, of course, requires us to see double-digit growth on the top line and a double-digit return on the bottom. Those are very key. The other part is, obviously, we have investors who want to see shareholder return. We believe that we sit on surplus cash. We believe that should be returned to shareholders in one way or another, whether that's through stock buybacks or paying down debt, but increasing shareholder value is a key component. I think those are the measures that we're looking at in terms of growing the business. Now, when it comes to Agentic AI and Agentic AI ERP, there are two things to remember. One, we create a path and we create a vision that customers can follow that doesn't require any future return to the vendor. That's very key. That is a big change from prior years where customers often thought of us as more of a temporary detour for some number of years and then a return to the vendor to get their next level of innovation. That's no longer the case. That's why you're watching us win bigger and bigger contracts because customers are liking what we put on the table as a path and a strategy that does not lead them back to the software vendor in a future year. That is changing the game dramatically for us on the ground.

Operator, Operator

Our next question comes from the line of Jeff Van Rhee from Craig-Hallum.

Jeff Van Rhee, Analyst

Some great underlying metrics here. It looks like some good momentum and good to see some ARR growth year-over-year. Seth, you were just touching on leverage, and I want to revisit that. Gross margins, this is on the lower end of anything I've seen in quite a while. Michael, I think you referenced there were some pull forwards for what I would characterize as unexpected business opportunities. I think S&M is up from 34% to 37% year-over-year, but revenue is generally flat. Given that, I'm just trying to understand around number one, what is this near-term opportunity that you're seeing that you've got to invest in right now, given that you're not raising the overall outlook? Maybe we could just start there and understand those.

Seth Ravin, CEO and President

Sure, Jeff. We made a decision to pull forward some expense from future quarters. We, of course, reiterated guidance being on target with what we provided in the Investor Day in December. The things we're seeing: for example, we're investing in our U.S. federal team, a brand-new team. We see a lot of opportunity in the federal government space with our new GSA contract and our partners that we're putting in place. There's also a significant amount of work for us to do with private equity firms. We have our first Vice President of PE sales on board because today, we service accounts that have over 20 different major PE firms represented, and we're going to work with these firms to address their bigger portfolios in general. That is another expansion area for us to build on. We're also investing in our Agentic AI ERP solutions, and you saw the first time we have an R&D line item because we're making some investments at the product level. We also expanded our sales team; we're over 80 sellers now, up from the mid-70s at the end of last year. We're continuing to expand and invest in sales and marketing as well. So, you saw temporarily the expenses went up as a percent of revenue, but we expect those will normalize throughout the year.

Jeff Van Rhee, Analyst

And so then just to follow on to that, given all of those incremental revenue opportunities and in light of the revenue outperformance in the quarter relative to the guide, you didn't flow it through to the annual guide. So just help me understand what was in play there.

Seth Ravin, CEO and President

We want to take it very carefully. As you know, we didn't grow for a while, and we're back and feeling very positive and confident in our growth for the year and hence the mid-single-digit growth targets that we set out. But we want to get another quarter under the belt and think about that before we talk about any kind of raise in the guidance.

Jeff Van Rhee, Analyst

Okay. And then maybe just last, Seth, on customer retention. I know it's a focus and the Agentic UX and some other things probably have some opportunities to help there. But how should we think about churn over the next several quarters? This retention number has been at 88% here for at least a few quarters. Any big churn events coming up here? How do you think about retention the next several quarters?

Seth Ravin, CEO and President

The 88% is a trailing twelve-month, rearview view of the total number. We feel very good, and as I noted in the prepared remarks, we beat our internal numbers on the retention metric. It's just going to take a while to show up in the TTM number. Some of the RPO is even related to renewals. We're seeing good, strong renewals out of the first quarter and feel good about where we're looking for the year. Our goal is to see that TTM return to over 90%, and we expect to start seeing it show up in the metrics starting in the next quarter or so.

Operator, Operator

Our next question comes from the line of Alex Fuhrman from Lucid Capital Markets.

Alex Fuhrman, Analyst

Congratulations on the return to growth here in Q1. It looks like in the first quarter you added about 30 active clients relative to where you ended 2025. The last three years, Q1 has been about flat in terms of customer acquisition. Is this more of the same we've been talking about, increased demand for your AI solutions? Or are we maybe starting to see more of a year-round sales and adoption process as your clients are starting to implement more AI?

Seth Ravin, CEO and President

Thanks. We are absolutely seeing improvements in everything from the number of leads coming in to lead conversion to opportunity and opportunity-to-close. Higher quality pipeline and higher quality execution, and the demand environment is growing as well. The world of AI has changed the dynamics from a technological standpoint. You're also watching, as Rimini Street had predicted many years ago, the breakup of these big ERP monolithic systems into smaller pieces—composable ERP. Those pieces are breaking down further. Businesses and government organizations are now able to buy pieces a la carte versus having to buy them all in one big package. We're well positioned, perhaps the best positioned, to help customers through these technological transitions, including the thoughtful implementation of AI where it's appropriate. Because our number one objective is driving down the total cost of operations and improving profitability or improving shareholder return for government organizations, we think we are well-positioned to help customers for the long term—five, ten, fifteen, twenty years through this next phase of transition. All of that coming together is what we're watching and seeing show up in the numbers.

Alex Fuhrman, Analyst

Okay. That's really helpful. Thanks for all that color. I see you have a new line item here, research and development. It sounds like that's going to be more of a focus for the company going forward. How much should we expect to see there this year and in the future?

Michael Perica, CFO

I just want to augment Seth's point. This was incorporated overall in our guidance. We do expect R&D to creep up throughout the year and can exit the year at about 1% or so of revenue. That's how we're looking at it to augment these key technological investments, both with what we have existing and these new offerings that we're talking about.

Operator, Operator

Our next question comes from the line of Brian Kinstlinger from Alliance Global Partners.

Brian Kinstlinger, Analyst

I just wanted to confirm that today, revenue from the Agentic AI solution is quite modest, but that we'll begin to see that contribution pick up maybe in the second half of the year into next year? And then will there eventually be a report or some kind of metric that helps investors frame how much revenue is coming from that new solution?

Seth Ravin, CEO and President

Sure, Brian. It's not a material amount yet from the Agentic AI ERP solutions themselves. But two ways to think about this: one is the actual revenue that's accretive from solutions, sales, licensing and subscriptions in the Agentic bucket—this is a new set of products and services. The second, more important effect is already at work: we have created a vision, a path and a solution going forward for customers that leads them away from having to do vendor upgrades and migrations in the future and allows them to modernize their existing systems. That alone is driving a lot of the extra demand we're seeing because it creates new demand we did not have before and brings customers back who previously turned down proposals. We're now able to show them a path forward with an Agentic capability that lets them move forward now. Don't underestimate that the existence of this path, vision and technology is driving increased sales.

Operator, Operator

There are no further questions at this time. I will now turn the call over to Seth Ravin, CEO. Please continue.

Seth Ravin, CEO and President

Great. Well, thank you very much, and thanks, everyone, for joining us, and we will see you on the next earnings call. Have a great day.

Operator, Operator

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.