Let's please give a warm welcome to the stage, both CFO Michael Perica and Dean Pohl, VP, Treasurer of Rimini Street.
Thank you. Sorry, I hit this already. Thank you, Kendall, for the warm introduction. Michael and I are excited to discuss Rimini Street's evolution and how we help global organizations bypass forced vendor upgrades and take a path to true modernization, leveraging their existing ERP systems. Before digging in, please be aware of our standard safe harbor provisions. Our senior management team is unique in the industry, led by our founder, CEO Seth Ravin, the architect of third-party support. Our executive team consists of ERP and innovation executives. We were and have successfully disrupted the industry and taken on litigation that we have had a recent settlement a year ago to focus specifically on the business. We're moving towards focusing on higher growth, higher margin, longer lifetime value. Rimini Street was founded in 2005 by CEO Seth Ravin, growing the company to over $400 million annual recurring revenue.
We're a global company, over half our revenue from international operations. Since inception, we've saved our 6,700 clients $10 billion in savings, and we're supported in 150 countries, and we have a presence in 22. Our primary business is support for Oracle and SAP and managed service, Connect and Watch. Our TAM has grown significantly, $65 billion support, and optimize and innovate massive numbers. Now I'd like to turn the presentation over to CFO Michael Perica.
Okay, got the clicker. Thank you, Dean. Good afternoon, everyone. Thanks for coming by to listen to our story and presentation investment thesis. As Dean noted, what do we do? Our core revenue, if you see on the left there, support. We replace the vendor for support of licensed software. As he noted throughout our history, thousands of clients. We currently have 1,600 enterprises or so. Our specialty general availability that we do better than anybody else, 88% of revenue is replacing ERP, mainly your Oracle and your SAP platforms. We do it at half the price. We support the custom code. They don't support the code. This is the value we create for clients. Now, what we have built over since our inception 20+ years ago in 2005 is put them on a different roadmap alternate from the vendor.
The vendor is effectively now trying to say go from owned assets that we support, and we extract a tremendous amount of value and give you options. Our core business model is give you optionality and control of your IT ecosystem, real estate assets to extract value for the business, not for the vendor. That means you optimize. This is in line with our managed services, where we have a unified approach with our core support to give you business outcomes, not just the cheapest offering, because we know the core systems and the code itself better than anyone else, as good as the vendor, if not better. Then the innovation. This is where we have professional service, where we do have customized engagements, and this is where we expanded into directly and indirectly partnerships, agentic AI offerings on top and around your core systems.
This is what we do. This is the optionality. The control as the key theme in the IT landscape and what we enable better than anyone else is to give you optionality control so you can transition your IT team and your assets from buying to building and customizing. This is AI allows. We solve the problem of keeping your existing assets to work in that environment. What is your challenge with IT? Everlong challenge. Today, you are spending 91%, third party has done this research, of maintaining, and that includes through maintaining is, oh, a legacy system is going out of support. Vendor requires you to replatform new SI, have a large upfront money, upfront spend, that you capitalize, but it is significant cash. It is a multi-year disruption, sometimes many times, right? Et cetera.
We give the option through giving you control and optionality where you can take 40% to go for transformation. As we know now, transformation is not just putting in the latest gen of a system. Hence SaaSpocalypse. When Claude introduced the 12 plugins earlier this year in February that was targeting enterprise software workflows, it really woke the industry up. It woke the market up that there are other options out there. This is where we fit in. It is a driver for our business. The future is already here. What are we talking about the future? That is putting the innovation on top of and around your existing systems that obviates the need to upgrade these systems. What we do is, as you see in the top loop, effectively, we have a human in the loop to utilize and extract the value out of your technologies.
We do this around the clock. We have a dedicated on our P1 support tickets of a 10-minute response time. If you speak to any of our clients and do a channel check, they will tell you, if you lodge a P1 priority one ticket with Rimini Street, do not move from your desk because you will get a call almost immediately. We are averaging, we track ourselves, two minutes. We transfer it to engineers across our global capability centers. India, we have in the Far East, in Malaysia, and we also have Brazil, and of course, we have U.S. resources. We also have many, many languages in the local countries. Nobody does support better than we do, hence our 4.9 out of 5 satisfaction. Our applied AI digital solution blueprints. What we do is we create blueprints.
We have this Rimini Agentic UX, where we'll put into a proprietary solution your overall environment, and we will work with you and customize a Smart Path of support, innovate, and optimize, and give you the different roadmap and the optionality. Ultimately, we will help you taking care of existing assets and either using our innovation or a third-party partner's innovation to put on top. This is where we're positioned and a driver for us in delivering the Agentic AI ERP. That's not a new ERP. That's putting agentic AI in whatever form can work for you, not dedicated to one platform, one model, whether it can be a small language model, whether it can be an open source model, or a combination thereof. This is a really important graphic. You have the Agentic UX on top that will interface through our partner.
This is where the models would be entailed in the Now Platform, the green that you see there. Then you interact into these other systems. We have our Rimini Connect product. We get a lot of calls for this product because this has your MCP protocols and other protocols and allows the, what I call it is tomorrow, through our interface in Connect, to go to yesterday. So we can go to not only current gen, two gens, three, four, five gens old, and you can actually have this technology and these models get deep into these systems. We can extract value, hence the Agentic AI ERP, but not having to upgrade. Very compelling. Again, another look.
A graphic here that our market opportunity, as you see, trying to emulate the quadrants here in the far right, where we are shifting the customization and the complexity, but allowing you to control not on the vendor roadmap. You can pick and choose and use multiple elements of how you want to modernize, how you want to transform, and doing it with a whole host of technologies on existing systems. Making a determination, we're going through a lot of evaluations with clients that want to get to tomorrow, but recognize I don't have to just choose the next generation of a particular platform. I can either upgrade, don't have to upgrade, put customized solutions and tools, yes, it's AI, on top of it and around it. This is what we intend to own. We do own it.
We get inbounds all the time for new folks that want to partner with us. We can't extract value out of all of these. They can work in a particular region with a particular rep or a particular process or our own processes that we have unveiled and we're building on. Ultimately, why do they call us? We know how to tie into how to make ERP systems work, no matter how many gens old that are still functioning out there, better than anybody else. This is what we do. There's so much more value to those licenses that clients own, and they own perpetually to extract value because we can make tomorrow's solutions, models of today, the models of tomorrow work in those environments and your workflows. This is really key even when we're speaking with clients.
If you take a look at the ERP migration, they want to migrate to the new system, then you get access to their native AI captured within the system, not on other platforms to help you overall business workflows. That is a multi-year process. For us, it is take a look at your processes where you want to automate. Still, there is some RPA that can work, or you can use AI if you have identified, particularly agentic AI on top. Then you can assess whether you have to have a paid model, small language model. You can have an open source model. You pick and choose by workflows, or you can platform on top with our partner ServiceNow and just go across the board. You have options. It is going to happen a whole lot quicker. Guess what?
With our business model, if you are paying $5 million to existing vendor, we are $2.5 million. You can get to tomorrow with your same budget line. That is what we offer. Here is our client, the roadmap, how we see the evolution of our clients as we have introduced not only these solutions, these capabilities, our connect for models into the core systems through our partners, ServiceNow and others. We start with the Explorer Pack. We have dozens of these out there. We get to use cases. We can put customized apps together. We can use models you are already paying for, other models, identify it, and then we can effectively get your ERP system to be tomorrow's agentic ERP without having to upgrade. Very compelling economic opportunity to transition an IT team and a business, not always speaking with the IT group to buy into this.
Speaking to the business functions where they can allocate their dollars, and they can speak their business language on what process, then you can put the technology underneath. Really compelling, really fun stuff. What we are seeing here is, to the right, sample Rimini UX projects. These are capabilities that we have in our existing generally available toolkit to sell. What we are selling today, what we can put into whatever rev you have, you are running on an existing system. You do not have to upgrade your system, an agentic AI can run these business processes. How do we look at it from an investor standpoint? Our support optimize and our innovation, these revenue components, again, our core 88% is support. We, on the top, have our direct sales, what we are discussing today, how we are approaching with clients.
Our indirect partners are leading with the innovation in inserting Rimini Street because it is, "Okay, how do I pay for this?" Well, here is Rimini Street. You do not have to worry about the vendor forcing you to upgrade. They will come and support and also help make sure it runs really well because nobody knows it better than Rimini Street on your core system. So they will lead with the innovation, pull through our support and the optimize.
We lead with our support and optimize to stabilize, give you optionality, and control, and then upsell into innovation. Above all, the green arrow to the right, what does this lead to? Enhanced retention of our core offering. We last quarter ticked up our retention. This is a gross retention, not a net retention of 90%. It was in the mid to upper 80%s previously. What is the driver? Folks are looking at this.
Take back control, optionality, and control of their environment. Just quick from a financial standpoint, this is easy to see. It is on the website available through Q2, of course. Later on this month, I believe, October 29th, right, Dean, we will have our Q3 results out. Interesting timing of this conference. From our revenue and our billings, we do adjust it for PeopleSoft, which through a very long, drawn-out litigation with Oracle, we agreed to taper off the PeopleSoft offering. It has to be done by July 2028. It is down to now about 2% of revenue. We adjust that data out. ARR, as you see, based on the trends and the driver of the industry, particularly the usage of AI on existing systems ticking up there. Our RPO. That has since Q3 of 2025, clients are engaging with us.
We are having more engagements for the multiple drivers discussed here today and also talking about signing up longer-term arrangements with us reflected in that RPO expansion. Overall gross margin, our key target is to maintain a six in front of it. We are very conscious, very close in monitoring that and managing. Our adjusted EBITDA, we are expecting have been guiding towards leverage to our model. We have been hovering in the high single digits, low double digits, and see that coming up. Our revenue retention rate, as I discussed previously, our active client system supported over 3,000 and growing. Take a look at it. We had Investor Day December of last year, set these targets. Look at the middle column. Effectively, the 46%, I call it GAAP, on the top line, excluding the PeopleSoft. That gives you that extra one, two-ish percent or so from a growth.
Actually, in Q2, when you adjust out for the PeopleSoft, revenue grew in double digits. The trends that we discussed, it was 10%. Bottom line, you see the guidance, the 12.5% on 15.5% on the adjusted EBITDAs, where we are looking for leverage to begin in the second half of 2026 as we have been guiding. Model at scale. What does this look like? A key metric for us that we are challenging ourselves as an executive leadership team is a path to achieving the rule of 40. Combination of your mid double digits on the top line and then your corresponding what is needed on the bottom line is you see at scale. At scale is not $1 billion, so we now have to double from here to achieve these objectives, what we are driving towards. Simple historical financial performance here, pretty straightforward. Everybody has access to this.
Even a model can get that for you real quick these days. GAAP to non-GAAP reconciliation is pretty straightforward now that we do not have that cash legal spend, more of a traditional reconciliation of your EBITDA to adjusted EBITDA. From a capitalization perspective, thanks to our Treasurer here, Dean, we recently continued and announced that we bought shares back in the most recent open window as well as have been paying down debt throughout the year, where we are in a very comfortable net cash position, and we also have a swap and a fixed instrument on our term loan credit facility, and also have a $35 million revolver. So, very well capitalized and more focused on the capital return with regard to debt paydown and share repurchases. Just overall, our differentiated business model with our durable moat, with our retention and position in supporting these critical systems.
Then the opportunity to giving clients the opportunity to assess and modernize their existing system, which is really compelling and interesting for us to have these different conversations with our clients to land and expand our margin profile that we are working towards and committed to expanding, and also attractive to begin with. That's all I have. We can move to Q&A. Yes, sir.
I need to understand your product. What I understand is, A, you enter and offer a support contract for them so they can ditch their current support. Then you talk to the business units and allow them to upgrade particular business functions of the software using your AI, right. Then you get into a position where all of a sudden you can begin to try to sell them to go to your AI. Is that a tier of products, or am I wrong?
That's accurate. That's absolutely accurate. The common question was, okay, we come and replace the vendor for support. Check. That's part one. Land, as we say, at the code level, 50% off the vendor. Also obviates the need to upgrade with the vendor long-term total cost of ownership, you have 90% savings. Giving them the option, it can be our AI. Also, our managed services on this platform, think of it as the support replaces the vendor. Managed services frees up your staff, IT, to work on your value-added AI projects and/or automation projects, modernization.
You'll let us build on. You'll include the business units, and you'll allow them to build on their upgrade to their business processes and support it fully with the existing ERP?
That's exactly correct. We will allow them, that's correct. Where it's less of talking tech. That is a conversation talking about a business process where we listen, and we will create. You can choose a model if you're already paying for it and work within a model or a technology if you're committed to a Claude, a Groq, or an OpenAI, or even use a small one or an open source model. We can make it sing and dance, or we can make it work through your existing systems. That's what a lot of folks cannot do. Or we can bring a partner in if you'd like, as well, you've been working with a consultancy and/or a tech vendor. The key point is we're needed support the existing platforms, obviate the need, circumvent the need for upgrade, and we can make it work with these older systems.
After you get them addicted to your services, you can then transition them, "Hey, let's just get rid of the existing vendor," and boom, we're-
We can do it a couple ways to think about this or most important is with the ERP, that's generally a variable where we have more expertise and skill and installed base than anybody else in third party, created the industry fundamentally. That's a $20 billion revenue stream. There is $60 billion we are attacking on top of that for $80 billion in total, and we're seeing a lot of engagements here where it's, "Okay, this is not a mission-critical system. I don't want to go to the SaaS or the next rev. Can you support this?" We build a custom program. For clients, that's not a half-off proposition, but you don't have to upgrade.
Oh, and by the way, now you can put innovation on top of this, and you can invest in innovation on this platform because we're going to keep it going for a decade plus. That's where we land and expand with our clients or prospects.
What is the average engagement to get to the point where you enter, get to the point where you are the Agentic AI ERP provider?
It is condensing. We have seen it was typically nine months to two to three years because you have annual contract cycles, right? Where some folks get it, do the work. Many times it is you coming around with the open window to give the termination notice with the vendor. But we are seeing that actually condense. We are actually even seeing transfer comes within their. Given the awareness, we have been doing this a long time. They call us, say, "It is time for us to engage. We like the roadmap. Let us do a deal with this one particular." Then we come, and then we land and go through the process that you are referencing. We are seeing that come down our selling cycle. We are obviously pleased with that. Yes, sir.
Your 90% retention rate, 10% churn. When clients churn, what their reason, they switch back to the vendor, and they are looking at our support services, but when
Two main drivers. It would be going to, and this is our mostly pre-committing before this opportunity on the AI to the SaaS, right? The viewpoint of modernization going to the SaaS platform is one. And two, a lot through M&A. When there is a lot of business combination, the first thing is to come and standardize. Sometimes it is on the system that we are supporting that more comes in. Many times it is going to a different system where we are not the existing support provider and/or going to an upgraded new system. So those are the two main reasons. Yes, sir.
Any legacy litigation spending this year or next year that is left over?
Externally, de minimis, hence why we do not carve it out. It is not reported anymore. Internally, yes. There is still a need for both legal as well as compliance as we are winding down. And it is always going to be present more than typical because we are effectively a one of one out there as we created law as to how it is lawfully, which we do every ticket, all of our support, in line with the injunctions that are in place in compliance with the copyright law that we tested and we litigate over 15 years. So there is an element of always a more than typical compliance factor. But it is good. We know how to do this lawfully more than anybody else. Yes, sir.
To that point, is there any future risk of some other software vendor suing you? Or is that set of law now what you guys do after the settlement and no one
Anybody can initiate, as you know, right? Across the board, but given as to that prior question, right, with regard to our spend, there is always going to be an elevated, never waver level of compliance that if somebody initiated it, here is the same facts. Here is how we have operated as we did previously that was deemed lawful by the courts. So I am not concerned about that. I am not concerned. Free to do so. Well, thanks, everybody. Thank you for the questions. Enjoy the rest of the conf-