| 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
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