Rimini: Substantial Recurring Revenue, Reallocation Of Resources, And Undervalued

Core Viewpoint - Rimini Street, Inc. (RMNI) is experiencing undervaluation despite reporting recurrent revenue, a diverse client base, and international growth opportunities. The company has announced a stock repurchase program which may enhance stock demand and lower capital costs [1][6][20]. Group 1: Financial Performance - As of June 30, 2024, RMNI reported annualized recurring revenue of $399 million, with a market capitalization below$300 million. The company has over 3,000 active clients, including 74 Fortune 500 companies [3][4]. - The company has positive free cash flow and net income, with a conservative forecast suggesting significant undervaluation [1][3]. - The expected EPS growth for the year ending 2025 is projected at 5.7% year-over-year [2]. Group 2: Business Model and Client Base - RMNI offers a portfolio of enterprise software solutions and managed services, including partnerships with major vendors like SAP, IBM, and Salesforce. The company aims to optimize clients' technologies through its Rimini ONE service [2][3]. - The client base is well-diversified, with a significant portion of revenue generated from international markets. Approximately 50% of revenue comes from the United States, with the remainder from foreign jurisdictions [4][20]. Group 3: Strategic Initiatives - The company is reallocating resources and optimizing its cost structure, which may enhance future net profit margins. This includes ceasing services for Oracle PeopleSoft products, which accounted for 8% of total revenue in 2023 [5][20]. - RMNI has authorized an increase in its stock repurchase program from $15 million to$50 million over the next four years, which could lower the weighted average cost of capital (WACC) and potentially increase stock prices [6][7]. Group 4: Risks and Challenges - Ongoing litigation with Oracle poses risks, including potential fines and impacts on net income growth. The company has faced lawsuits for over ten years, but fines have been relatively small [15][16]. - Changes in pricing agreements with enterprise software vendors could negatively affect revenue and free cash flow margins. The company may need to adjust pricing models in response to competitive pressures [18][20]. - The sale of shares by a large shareholder could increase market volatility and downward pressure on stock prices, which may deter potential investors [19][20].