10-Q: Rimini Street Swings to Profit on Oracle Settlement

Rimini Street, Inc. reported a significant swing to net income for Q3 and the nine months ended September 30, 2025, primarily driven by a litigation settlement with Oracle, despite a slight revenue decline.

Summary

• Net income for the three months ended September 30, 2025, was $2.8 million, a substantial improvement from a net loss of $43.1 million in the prior-year period.
• For the nine months ended September 30, 2025, net income was $36.4 million, compared to a net loss of $42.9 million in the same period last year.
• Revenue slightly decreased by 1.2% to $103.4 million for the three months ended September 30, 2025, and by 0.9% to $311.7 million for the nine months ended September 30, 2025.
• The company received approximately $37.9 million from Oracle on July 9, 2025, as part of a confidential settlement agreement for the Rimini II litigation, which was recognized as litigation settlement income.
• Cash and cash equivalents increased to $108.7 million as of September 30, 2025, from $88.8 million at December 31, 2024.
• Operating cash flow significantly improved, providing $40.7 million for the nine months ended September 30, 2025, compared to a use of $1.2 million in the prior-year period.
• The company is winding down its Oracle PeopleSoft support services, which accounted for approximately 5% of total revenue in Q3 2025 and 6% for the nine months ended September 30, 2025, with completion expected by July 31, 2028.
• Annualized recurring revenue (ARR) decreased to $391 million as of September 30, 2025, from $402 million as of September 30, 2024.
• The revenue retention rate remained stable at 89% for the 12 months ended September 30, 2025 and 2024.
• The Board of Directors extended the common stock repurchase program to June 1, 2029, with $40.5 million remaining available.
• The company had a working capital deficit of $41.4 million as of September 30, 2025, but considers its deferred revenue of $206.9 million (current) and future cash flows sufficient for liquidity.

Sentiment

Score: 7

Explanation: The significant swing to profitability and strong operating cash flow, primarily due to the Oracle litigation settlement, is a major positive. The extension of the stock repurchase program also signals confidence. However, the slight revenue decline and the ongoing impact of the PeopleSoft wind-down, coupled with general economic uncertainties, temper the overall positive sentiment.

Positives

• Achieved significant net income of $2.8 million for Q3 2025 and $36.4 million for the nine months, reversing prior-year losses.
• Received $37.9 million from Oracle as part of a litigation settlement, contributing to a substantial increase in cash from operations.
• Operating cash flow improved significantly to $40.7 million for the nine months ended September 30, 2025.
• Cash and cash equivalents increased to $108.7 million, strengthening the liquidity position.
• International revenue grew by 8% to $57.2 million for Q3 2025 and by 5% to $166.2 million for the nine months.
• The common stock repurchase program was extended to June 1, 2029, indicating confidence in future cash generation and commitment to shareholder value.
• The resolution of the Rimini II litigation with Oracle removes a significant legal overhang and uncertainty.

Negatives

• Total revenue declined by 1.2% for Q3 2025 and 0.9% for the nine months ended September 30, 2025.
• Annualized recurring revenue (ARR) decreased to $391 million from $402 million year-over-year, reflecting a reduction in client retention not fully offset by new engagements.
• United States revenue declined by 10% to $46.3 million for Q3 2025 and 7% to $145.5 million for the nine months.
• The company continues to operate with a working capital deficit of $41.4 million as of September 30, 2025.
• The wind-down of Oracle PeopleSoft support services will result in significant reductions in future revenue, with the pace and final impact currently unknown.
• Gross profit margin slightly decreased to 59.9% for Q3 2025 from 60.7% in the prior-year period due to changes in revenue mix.

Risks

• Any uncured, material breach of the July 7, 2025, Settlement Agreement with Oracle could result in future adverse litigation outcomes, potentially lifting the judicial stay and leading to significant financial penalties.
• The company cannot guarantee the outcome or timing of the Oracle PeopleSoft Wind Down by July 31, 2028, or predict the total associated costs, which could materially impact business and financial condition.
• Oracle could pursue additional litigation, which would be costly, distract management, and reduce client interest and sales revenue.
• Economic uncertainties, including rising inflation, interest rates, and geopolitical conflicts (Middle East, Russia-Ukraine, U.S.-China), may increase operational costs, disproportionately affect demand, and negatively impact results.
• Significant competition from enterprise software vendors (Oracle, SAP) and other independent providers could harm the ability to acquire and retain clients and grow the client base.
• The company has a history of losses and may not achieve sustained revenue growth or profitability in the future.
• Failure to attract new clients or retain and sell additional products/services to existing clients could adversely affect revenue growth.
• Decreasing client retention rates or inaccurate predictions of retention rates could harm future revenue and results of operations.
• The subscription-based revenue model means downturns in sales are not immediately reflected, making rapid revenue increases difficult.
• Variability in the sales cycle could lead to inaccurate revenue forecasts and misaligned expenditures, adversely affecting results and liquidity.
• The loss or disability of key employees, including the President, CEO, and Chairman of the Board, Mr. Seth Ravin, could harm the business.
• Failure to attract and retain additional qualified personnel, especially sales, or to expand marketing and sales capabilities could hinder business strategy execution.
• Inability to generate sufficient capital through operations or raise additional capital could reduce competitiveness and harm the business.
• Allegations or determinations of intellectual property infringement, including those related to AI technologies, could harm the business.
• Interruptions or degraded performance of services, including those relying on third-party SaaS and AI technologies, could lead to client dissatisfaction, reputational damage, and financial liabilities.
• Fluctuations in results of operations due to sales cycles and seasonality make future results difficult to predict.
• The need to change pricing models to remain competitive could adversely affect results of operations.
• Inability to scale business systems quickly enough or decrease costs adequately in response to changing client demand could harm results.
• Global operations expose the company to risks such as currency exchange rate fluctuations, trade regulations, political instability, and data security challenges.
• Consolidation in target sales markets could lead to termination or non-renewal of client agreements.
• A widespread shift by clients to enterprise software vendors, products, or releases not supported by the company could adversely impact the business.
• Cybersecurity threats and data breaches could harm reputation, lead to client loss, and incur significant liabilities.
• Failure to comply with governmental and legal obligations related to privacy and security (e.g., GDPR, CCPA) could result in enforcement actions or litigation.
• Product and service defects or errors could lead to client loss, warranty claims, or significant costs.
• Inability to maintain an effective system of internal control over financial reporting could erode investor confidence.
• Failure to enhance and protect the brand could impair the ability to expand the client base.
• Inadequate protection of proprietary rights could impair competitive position and lead to costly litigation.
• Potential for additional sales tax, VAT, and other tax obligations, including penalties for past sales.
• Limitations on the utilization of net operating loss carryforwards due to ownership changes (Section 382) could adversely affect profitability.
• Complex international tax issues could lead to additional tax obligations in various jurisdictions.
• Negative impacts from environmental, social, and governance (ESG) matters or reporting could harm reputation and business.
• Indebtedness and future indebtedness may limit operational and financing flexibility.
• Covenants in the 2024 Credit Facility impose operating and financial restrictions.
• Variable rate indebtedness subjects the company to interest rate risk, potentially increasing debt service obligations.
• Stock price volatility, dilution from warrant exercises, and sales by large stockholders could depress the market price.
• Concentration of ownership by certain stockholders could limit the ability of other stockholders to influence key transactions.
• The stock repurchase program may not enhance shareholder value and can be suspended or terminated at any time.
• No assurance of future dividends on Common Stock.
• Anti-takeover provisions in corporate documents could delay or discourage takeover attempts.
• Delaware forum selection clause in bylaws could limit stockholders' ability to choose a favorable judicial forum.

Future Outlook

The company expects to continue investing in the development and improvement of new and existing products and services. It anticipates significant reductions in revenue related to Oracle PeopleSoft products over the Wind Down Period, which is expected to be completed by July 31, 2028. The company believes its current cash, cash equivalents, restricted cash, and future cash flow from operating activities, along with its 2024 Credit Facility, will be sufficient to meet anticipated cash needs for at least 12 months. Management expects continued pressure on general and administrative expenses due to business growth and geographical diversity, and anticipates incurring additional reorganization costs in Q4 2025.

Management Comments

• We believe that current cash, cash equivalents, restricted cash, and future cash flow from operating activities will be sufficient to meet our 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.
• We will continue to monitor and manage our overall gross margin as we enter and invest in a broader mix of products and services.
• 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.
• We expect to incur higher expenses associated with supporting the growth of our business, both in terms of size and geographical diversity.
• While we expect to incur professional fees and other costs associated with litigation in the future throughout the Wind Down Period, it is our expectation that those costs will decrease from our historical spend.

Industry Context

The company operates in the enterprise software support, products, and services market, which is a large category of global IT spending. The industry is characterized by increasingly complex IT environments, including hybrid and cloud/SaaS offerings. The company aims to expand its solutions portfolio to address a wider array of enterprise software and reduce the number of IT vendors for clients. The market is highly competitive, with significant competition from major enterprise software vendors like Oracle and SAP, as well as other independent providers. Global economic uncertainties, including inflation and geopolitical conflicts, are impacting client IT budgets and demand for services.

Comparison to Industry Standards

• The company's gross profit margin of 59.9% for Q3 2025 is a slight decrease from 60.7% in Q3 2024, indicating some pressure on profitability within its service mix, which includes a decline in PeopleSoft subscription revenue offset by professional services growth.
• The revenue retention rate of 89% for the 12 months ended September 30, 2025, suggests a stable, but not growing, client base in terms of recurring revenue, which is a key metric for subscription-based businesses and can be compared to industry benchmarks for SaaS or recurring revenue models.
• The company's strategy to offer support services at approximately 50% of the annual fees charged by software vendors for base support, and 25% for supplemental support, positions it as a cost-effective alternative to original equipment manufacturers like Oracle and SAP.
• The expansion of the solutions portfolio to include support for VMware, managed services for Oracle, SAP, Salesforce, IBM, ServiceNow, and open-source databases, along with new solutions for security, interoperability, observability, and consulting, indicates a move towards broader IT services, similar to larger IT consulting and managed services firms.

Corporate Governance

Legal Proceedings

• The company and Mr. Ravin entered into a confidential settlement agreement with Oracle on July 7, 2025, to resolve the Rimini II litigation.
• As part of the settlement, the company received approximately $37.9 million from Oracle on July 9, 2025, for attorneys' fees and costs.
• The Rimini II litigation has been stayed by the District Court as of July 18, 2025.
• The settlement requires the company to complete the wind down of Oracle PeopleSoft support services by July 31, 2028.
• The Rimini I and Rimini II injunctions remain in effect, and the District Court retains jurisdiction to enforce them.
• The company is self-insured for intellectual property litigation costs but has obtained a duty to defend from its primary errors and omissions insurance carrier for the Rimini I Injunction contempt proceeding.
• From time to time, the company may be a party to other litigation and claims incident to the ordinary course of business, which are not expected to have a material adverse effect.

Related Party Transactions

• An affiliate of Adams Street Partners (ASP) is a member of the company's Board of Directors and owned approximately 25.7% of the company's issued and outstanding common stock as of September 30, 2025.

Stakeholder Impact

• **Shareholders:** The significant net income and positive operating cash flow, largely due to the Oracle settlement, are beneficial. The extension of the stock repurchase program indicates a commitment to shareholder value. However, revenue decline and the PeopleSoft wind-down present future uncertainties.
• **Employees:** The company underwent a cost structure optimization process, including headcount reductions, which may impact employee morale and retention. New long-term incentive plans aim to align employee interests with company performance.
• **Customers:** The wind-down of Oracle PeopleSoft support services by July 31, 2028, will require existing PeopleSoft clients to transition, potentially causing disruption. The company aims to assist with transitions, but some clients may choose not to renew other services.
• **Creditors:** The company is in compliance with its 2024 Credit Facility covenants and has $35.0 million in available borrowing capacity, indicating a stable position to meet debt obligations.
• **Oracle:** The settlement agreement resolves the Rimini II litigation, providing a path to dismissal, but the Rimini I and II injunctions remain in effect.

Next Steps

• Complete the wind down of Oracle PeopleSoft support and services no later than July 31, 2028.
• Notify all existing PeopleSoft customers of the Wind Down and provide quarterly progress reports to Oracle.
• File a stipulation with the District Court to dismiss the Rimini II litigation with prejudice after Wind Down completion and certification.
• Continue to optimize the cost structure, with additional reorganization costs likely in Q4 2025.
• Invest in the development and improvement of new and existing products and services.
• Monitor and manage overall gross margin as the company invests in a broader mix of products and services.
• Seek additional revenue by selectively investing in scalable resources and marketing programs.
• Assess the impact of new accounting standards (ASU 2024-03, ASU 2025-01, ASU 2025-05, ASU 2025-06) on financial statements and disclosures.

Key Dates

Recommendation

The company's significant swing to net income and positive operating cash flow for the nine months ended September 30, 2025, is a strong positive, primarily driven by the resolution of the long-standing Oracle litigation and the receipt of a $37.9 million settlement. This removes a major overhang and de-risks the company's legal position. The extension of the stock repurchase program also signals management's confidence and commitment to shareholder value. However, the slight decline in overall revenue and annualized recurring revenue, coupled with the ongoing wind-down of the Oracle PeopleSoft business (which will continue to impact revenue for several years), presents headwinds. While international revenue is growing, U.S. revenue is declining. Given these mixed signals—a significant one-time positive from the litigation settlement, but underlying revenue challenges and strategic transitions—a 'hold' recommendation is appropriate. Investors should monitor the company's ability to grow its non-PeopleSoft revenue streams and improve its ARR to offset the planned wind-down.

Keywords

Enterprise Software Support, SEC Filing, 10-Q, Financial Results, Oracle Litigation, PeopleSoft Wind Down, Software as a Service, SaaS, Recurring Revenue, Cash Flow, Stock Repurchase, Corporate Governance, Risk Management, Cybersecurity, Data Privacy, Global Operations, IT Services, RMNI