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Rimini Street Announces Fiscal Third Quarter 2017 Financial Results
Street’s expectations, plans or forecasts of future events and views as of the date of this communication. Rimini Street anticipates that subsequent events and developments will cause Rimini Street’s assessments to change. However, while Rimini Street may elect to update these forward-looking statements at some point in the future, Rimini Street specifically disclaims any obligation to do so. These forward-looking statements should not be relied upon as representing Rimini Street's assessments as of any date subsequent to the date of this communication. © 2017 Rimini Street, Inc. All rights reserved. “Rimini Street” is a registered trademark of Rimini Street, Inc. in the United States and other countries, and Rimini Street, the Rimini Street logo, and combinations thereof, and other marks marked by TM are trademarks of Rimini Street, Inc. All other trademarks remain the property of their respective owners, and unless otherwise specified, Rimini Street claims no affiliation, endorsement, or association with any such trademark holder or other companies referenced herein. Rimini Street, Inc. and Subsidiaries Unaudited Condensed Consolidated Balance Sheets September 30, 2017 and December 31, 2016 (In thousands, except per share amounts) ASSETS 2017 2016 Current assets: Cash and cash equivalents $ 6,862 $ 9,385 Restricted cash 8,727 18,852 Accounts receivable, net of allowance of $55 and $36, respectively 33,711 55,324 Prepaid expenses and other 7,650 5,748 Total current assets 56,950 89,309 Long-term assets: Property and equipment, net 4,244 4,559 Deferred debt issuance costs, net 3,313 3,950 Deferred offering costs 3,957 - Deposits and other 972 965 Deferred income taxes, net 640 595 Total assets $ 70,076 $ 99,378 LIABILITIES AND STOCKHOLDERS’ DEFICIT Current liabilities: Current maturities of long-term debt $ 11,750 $ 24,750 Accounts payable 9,256 8,839 Accrued expenses 39,253 36,650 Deferred insurance settlement 13,230 - Liability for embedded derivatives 9,800 5,400 Deferred revenue 125,882 137,293 Total current liabilities 209,171 212,932 Long-term liabilities: Long-term debt, net of current maturities 68,406 63,314 Deferred revenue 27,082 27,538 Liability for redeemable warrants 21,336 7,269 Other long-term liabilities 4,129 1,835 Total liabilities 330,124 312,888 Stockholders’ deficit: Convertible preferred stock, $0.001 par value per share. Authorized, issued and outstanding 100,486 shares; aggregate liquidation preference of $20,551 19,542 19,542 Convertible Class A common stock, $0.001 par value. Authorized 500,000 shares; 529 and 340 shares issued and outstanding as of September 30, 2017 and December 31, 2016, respectively 1 - Convertible Class B common stock, $0.001 par value. Authorized 192,000 shares; 102,926 and 101,083 shares issued and outstanding as of September 30, 2017 and December 31, 2016, respectively 103 101 Common stock; $0.001 par value. Authorized 500,000 shares; no shares issued and outstanding - - Additional paid-in capital 21,676 19,003 Accumulated other comprehensive loss (886 ) (1,046 ) Accumulated deficit (300,484 ) (251,110 ) Total stockholders’ deficit (260,048 ) (213,510 ) Total liabilities and stockholders’ deficit $ 70,076 $ 99,378 Rimini Street, Inc. and Subsidiaries Unaudited Condensed Consolidated Statements of Operations (In thousands, except per share amounts) Three Months Ended Nine Months Ended September 30: September 30: 2017 2016 2017 2016 Net revenue $ 53,611 $ 40,723 $ 154,729 $ 113,438 Cost of revenue 20,109 17,231 58,002 48,074 Gross profit 33,502 23,492 96,727 65,364 Operating expenses: Sales and marketing 17,188 18,725 47,685 53,573 General and administrative 8,580 8,192 26,784 22,082 Write-off of deferred financing costs - - - 2,000 Litigation costs and related insurance recoveries: Professional fees and other defense costs of litigation 3,327 5,152 11,724 15,865 Insurance recoveries and reduction in deferred settlement liability (2,962 ) (4,988 ) (7,113 ) (6,868 ) Pre-judgment interest - 917 - 2,706 Total operating expenses 26,133 27,998 79,080 89,358 Operating income (loss) 7,369 (4,506 ) 17,647 (23,994 ) Non-operating expenses: Interest expense (9,152 ) (4,317 ) (33,629 ) (5,020 ) Other debt financing expenses (2,563 ) (3,973 ) (14,704 ) (4,278 ) Loss on embedded derivatives and redeemable warrants, net (4,417 ) (2,145 ) (18,467 ) (2,145 ) Other, net 108 (144 ) 422 (665 ) Loss before income taxes (8,655 ) (15,085 ) (48,731 ) (36,102 ) Income tax expense (385 ) (306 ) (643 ) (895 ) Net loss $ (9,040 ) $ (15,391 ) $ (49,374 ) $ (36,997 ) Net loss per common share: Basic and diluted $ (0.09 ) $ (0.15 ) $ (0.48 ) $ (0.37 ) Weighted average number of common shares outstanding: Basic and diluted 103,280 101,339 102,535 101,326 Rimini Street, Inc. and Subsidiaries Unaudited GAAP to Non-GAAP Reconciliations (In thousands, except per share amounts) Three Months Ended Nine Months Ended September 30: September 30: 2017 2016 2017 2016 Operating income (loss) (GAAP) $ 7,369 $ (4,506 ) $ 17,647 $ (23,994 ) Non-GAAP Adjustments: Litigation costs, net of related insurance adjustments 365 1,081 4,611 11,703 Stock-based compensation expense 1,202 593 1,916 1,829 Write-off of deferred financing costs - - - 2,000 Non-GAAP operating income (loss) $ 8,936 $ (2,832 ) $ 24,174 $ (8,462 ) Net loss (GAAP) $ (9,040 ) $ (15,391 ) $ (49,374 ) $ (36,997 ) Non-GAAP Adjustments: Litigation costs, net of related insurance adjustments 365 1,081 4,611 11,703 Stock-based compensation expense 1,202 593 1,916 1,829 Write-off of deferred financing costs - - - 2,000 Loss on embedded derivatives and redeemable warrants, net 4,417 2,145 18,467 2,145 Non-GAAP net loss $ (3,056 ) $ (11,572 ) $ (24,380 ) $ (19,320 ) EBITDA and Adjusted EBITDA: Net loss (GAAP) $ (9,040 ) $ (15,391 ) $ (49,374 ) $ (36,997 ) Interest expense 9,152 4,317 33,629 5,020 Income tax expense 385 306 643 895 Depreciation and amortization expense 505 444 1,477 1,296 EBITDA (Non-GAAP) 1,002 (10,324 ) (13,625 ) (29,786 ) Litigation costs, net of related insurance adjustments 365 1,081 4,611 11,703 Write-off of deferred financing costs - - - 2,000 Other debt financing expenses 2,563 3,973 14,704 4,278 Loss on embedded derivatives and redeemable warrants, net 4,417 2,145 18,467 2,145 Stock-based compensation expense 1,202 593 1,916 1,829 Adjusted EBITDA (Non-GAAP) $ 9,549 $ (2,532 ) $ 26,073 $ (7,831 ) About Non-GAAP Financial Measures and Certain Key Metrics To provide investors and others with additional information regarding Rimini Street’s results, we have disclosed the following non-GAAP financial measures and certain key metrics. We have described below Active Clients, Annualized Subscription Revenue and Revenue Retention Rate, each of which is a key operational metric for our business. In addition, we have disclosed the following non-GAAP financial measures: non-GAAP operating income (loss), non-GAAP net loss, EBITDA, and adjusted EBITDA. Rimini Street has provided a reconciliation of each non-GAAP financial measure used in this earnings release to the most directly comparable GAAP financial measure. Due to a valuation allowance for our deferred tax assets, there were no tax effects associated with any of our non-GAAP adjustments. These non-GAAP financial measures are also described below. The primary purpose of using non-GAAP measures is to provide supplemental information that may prove useful to investors and to enable investors to evaluate our results in the same way management does. We also present the non-GAAP financial measures because we believe they assist investors in comparing our performance across reporting periods on a consistent basis, as well as comparing our results against the results of other companies, by excluding items that we do not believe are indicative of our core operating performance. Specifically, management uses these non-GAAP measures as measures of operating performance; to prepare our annual operating budget; to allocate resources to enhance the financial performance of our business; to evaluate the effectiveness of our business strategies; to provide consistency and comparability with past financial performance; to facilitate a comparison of our results with those of other companies, many of which use similar non-GAAP financial measures to supplement their GAAP results; and in communication with our board of directors concerning our financial performance. Investors should be aware however, that not all companies define these non-GAAP measures consistently. An Active Client is a distinct entity that purchases our services to support a specific product, including a company, an educational or government institution, or a business unit of a company. For example, we count as two separate active clients when support for two different products is being provided to the same entity. We believe that our ability to expand our active clients 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. Annualized Subscription Revenue is 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. Revenue Retention Rate is the actual subscription revenue (dollar-based) recognized over a 12-month period from customers that were clients on the day prior to the start of such 12-month period, divided by our Annualized Subscription Revenue as of the day prior to the start of the 12-month period. Non-GAAP Operating Income (Loss) is operating income (loss) less stock-based compensation expense, litigation costs, net of related insurance recoveries and adjustments, and write-off of deferred financing costs. Non-GAAP Net Loss is net loss less stock-based compensation expense, litigation costs, net of related insurance recoveries and adjustments, write-off of deferred financing costs, and loss on embedded derivatives and redeemable warrants. Specifically, management is excluding the following items from its non-GAAP financial measures, as applicable, for the periods presented: Stock-Based Compensation Expense: The company’s compensation strategy includes the use of stock-based compensation to attract and retain employees. This strategy is principally aimed at aligning the employee interests with those of our stockholders and to achieve long-term employee retention, rather than to motivate or reward operational performance for any particular period. As a result, stock-based compensation expense varies for reasons that are generally unrelated to operational decisions and performance in any particular period. Litigation Costs, Net of Related Insurance Adjustments: Litigation costs and the associated insurance recoveries and adjustments to the deferred settlement liability relate to outside costs on the litigation activities, for which we are currently appealing the 2016 judgment and for which we have asserted certain counterclaims. These costs reflect the ongoing litigation we are involved with, and do not relate to the day-to-day operation or our core business of serving our clients. Write-off of Deferred Financing Costs: The write-off of deferred financing costs relates to certain costs that were expensed in 2016 because we determined that the arrangements related to these costs would not result in future financings when we completed our credit facility in June 2016. As such, these write-offs are not related to how we manage our business and operational decisions on an ongoing basis. Loss on Embedded Derivatives and Redeemable Warrants, Net: Our credit facility includes features that were determined to be embedded derivatives requiring bifurcation and accounting as separate financial instruments. We have determined to exclude the gains and losses on embedded derivatives and redeemable warrants related to the change in fair value of these instruments given the financial nature of this fair value requirement. We are not able to manage these amounts as part of our business operations nor are the costs core to servicing our clients and have excluded them. EBITDA is net loss, adjusted to exclude: interest expense, income tax expense, and depreciation and amortization. Adjusted EBITDA is EBITDA adjusted to exclude: other debt financing expenses, stock-based compensation expense, write-off of deferred financing costs, gains and losses on embedded derivatives and redeemable warrants, and litigation costs, net of insurance recoveries. Contacts Rimini Street, Inc. Investor Relations Contact Dean Pohl, +1 203-347-4446 dpohl@riministreet.com or Media Relations Contact Michelle McGlocklin, +1 925-523-8414 mmcglocklin@riministreet.com Permalink : http://aetoswire.com/news/4986/en
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