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What changed in Rimini Street, Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Rimini Street, Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+384 added−386 removedSource: 10-K (2024-02-28) vs 10-K (2023-03-01)

Top changes in Rimini Street, Inc.'s 2023 10-K

384 paragraphs added · 386 removed · 294 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

58 edited+10 added−11 removed145 unchanged
Biggest changeThe table below sets out the vendors and products we currently support and/or could support in the future: -5- Supported Vendor or Product Category Supported Software SAP Applications Business Suite, R/3, BusinessObjects, S/4HANA, SuccessFactors, Ariba, Hybris, SAP IBP, SAP Analytics, Governance Risk and Compliance, IS-Oil, IS-Retail, IS-Media, IS-Utilities, IS-Auto, IS-Mills SAP Databases HANA, ASE (Sybase), IQ, MaxDB, SQL Anywhere Oracle Applications E-Business Suite, PeopleSoft, JD Edwards - Enterprise One, JD Edwards – World, Siebel, Hyperion, Oracle Retail (Retek), Agile Product Lifecycle Management (PLM), ATG Web Commerce, Oracle Utilities, Financial Services Analytical Applications (OFSAA), Communications, Endeca, Demantra, Governance Risk and Compliance (GRC), Oracle Transportation Manager (OTM), Primavera, Oracle Global Knowledge Software Releases/ User Productivity Kit (UPK), Oracle Banking Oracle Technology Oracle's Application Integration Architecture Releases, GoldenGate, OBI and OBIEE, Essbase, Fusion Middleware, Identity Management, WebLogic, WebCenter, SOA Suite, Oracle Data Integrator (ODI) Oracle Databases Oracle Database Microsoft Databases SQL Server IBM Databases Db2 Open-Source Databases PostgreSQL, MySQL, MongoDB, MariaDB Salesforce Service Cloud, Sales Cloud, Experience Cloud, Revenue Cloud, Marketing Cloud, Commerce Cloud Other Software OpenText, Informatica, IBM Middleware When we provide our Rimini Support solutions for a perpetual software license, we generally offer our clients service for a fee that is equal to approximately 50% of the annual fees charged by the software vendor for their base support.
Biggest changeThe table below sets out the vendors and products we currently support and/or could support in the future: -5- Supported Vendor or Product Category Supported and/or Managed Software SAP Applications Business Suite, R/3, BusinessObjects, S/4HANA, S/4HANA Cloud (public and private editions), SuccessFactors, Ariba, Hybris, SAP IBP, SAP Analytics, Analytics Cloud, Fieldglass, Concur, Governance Risk and Compliance, IS-Oil, IS-Retail, IS-Media, IS-Utilities, IS-Auto, IS-Mills, IS-Mining, IS-Aerospace & Defense, IS-Automotive, IS-Apparel & Footwear, IS-Public Sector, IS-Higher Education, IS-Healthcare, IS-Telco, IS-Insurance, IS-Banking SAP Databases HANA, ASE (Sybase), IQ, MaxDB, SQL Anywhere Oracle Applications E-Business Suite, PeopleSoft, JD Edwards - Enterprise One, JD Edwards – World, Siebel, Hyperion, Oracle Retail (Retek), Agile Product Lifecycle Management (PLM), ATG Web Commerce, Oracle Utilities, Financial Services Analytical Applications (OFSAA), Communications, Endeca, Demantra, Governance Risk and Compliance (GRC), Oracle Transportation Manager (OTM), Primavera, Oracle Global Knowledge Software Releases/ User Productivity Kit (UPK), Oracle Banking Oracle Technology Oracle’s Application Integration Architecture Releases, GoldenGate, OBI and OBIEE, Essbase, Fusion Middleware, Identity Management, WebLogic, WebCenter, SOA Suite, Oracle Data Integrator (ODI) Oracle Databases Oracle Database Microsoft Databases SQL Server IBM Databases Db2 Open-Source Databases PostgreSQL, MySQL, MongoDB, MariaDB Salesforce Service Cloud, Sales Cloud, Data Cloud, Experience Cloud, Energy and Utilities Cloud, CPQ, MuleSoft, Health Cloud, Field Service, Revenue Cloud, Marketing Cloud, Tableau, Commerce Cloud, Higher Education Cloud, ClickSoftware Other Software OpenText, Informatica, IBM Middleware When we provide our Rimini Support solutions for a perpetual software license, we generally offer our clients service for a fee that we believe is equal to approximately 50% of the annual fees charged by the software vendor for their base support.
Trial-and-error self-support and open-source community support are generally insufficient to -3- allow IT organizations to meet service-level requirements of business applications or to bring non-production workloads under their administration. We further believe enterprises seek help in navigating how to migrate parts of their enterprise software portfolio to open-source software and in supporting the resulting hybrid environment.
Trial-and-error self-support and open-source community support are generally insufficient to allow IT organizations to meet service-level requirements of business applications or to bring non-production workloads under -3- their administration. We further believe enterprises seek help in navigating how to migrate parts of their enterprise software portfolio to open-source software and in supporting the resulting hybrid environment.
We further believe that disparate AMS -4- offerings from other managed service providers are disconnected from the needs of enterprises and promote incremental costs and inefficiencies.
We further believe that disparate AMS offerings from other managed service providers are disconnected from the needs of enterprises and promote incremental costs -4- and inefficiencies.
Competition We compete in the global IT services market for enterprise software support, products and services and believe the principal competitive factors in our market include, but are not limited to, the following: • track record of technical capability to provide the required software support; • ability to identify, develop and deliver required tax, legal and regulatory updates; -13- • infrastructure model to deliver support globally within guaranteed service levels; • track record of providing a high level of client satisfaction; • ease of support model onboarding, deployment and usage; • breadth and depth of support functionality, including the ability to support customized software; • cost of products and services; • brand awareness and reputation; • capability for delivering services in a secure, scalable and reliable manner; • ability to innovate and respond to client needs rapidly; and • size of referenceable client base.
Competition We compete in the global IT services market for enterprise software support, products and services and believe the principal competitive factors in our market include, but are not limited to, the following: • track record of technical capability to provide the required software support; • ability to identify, develop and deliver required tax, legal and regulatory updates; • infrastructure model to deliver support globally within guaranteed service levels; • track record of providing a high level of client satisfaction; • ease of support model onboarding, deployment and usage; • breadth and depth of support functionality, including the ability to support customized software; • cost of products and services; • brand awareness and reputation; • capability for delivering services in a secure, scalable and reliable manner; • ability to innovate and respond to client needs rapidly; and • size of referenceable client base.
Independent assessments of our conformity to the ISO 27001 standard includes evaluating security risks, designing and implementing comprehensive security controls and adopting an information security management process to meet security needs on an ongoing basis. Our current ISO 27001:2013 certification is effective April 2022 through March 2025.
Independent assessments of our conformity to the ISO 27001 standard includes evaluating security risks, designing and implementing comprehensive security controls and adopting an information security management process to meet security needs on an ongoing basis. Our current ISO 27001:2013 certification is effective April 2022 through -13- March 2025.
When providing supplemental software support for a perpetual license, where the client procures our support service in addition to retaining the software vendor’s base support, we generally offer our clients service for a fee that is equal to approximately 25% of the annual fees charged by the software vendor for their base support.
When providing supplemental software support for a perpetual license, where the client procures our support service in addition to retaining the software vendor’s base support, we generally offer our clients service for a fee that we believe is equal to approximately 25% of the annual fees charged by the software vendor for their base support.
A key element of our support delivery model is the assignment of one or more named Primary Support Engineers (“PSE”), who serve as the primary product support contact for our clients. PSEs provide technical advice, functional expertise and general support to ensure the resolution of all support issues.
A key element of our support delivery model is the assignment of one or more named Primary -6- Support Engineers (“PSE”), who serve as the primary product support contact for our clients. PSEs provide technical advice, functional expertise and general support to ensure the resolution of all support issues.
Previously, he served as our Executive Vice President, Global Sales - Recurring Revenue from March 2020 until March 2021, our Senior Vice President, Global Sales - Recurring Revenue from January 2018 to March 2020 and our Senior Vice President, Global Sales from December 2008 to January 2018. Prior to joining us, Mr.
Previously, he served as our Executive Vice President, Global Sales - Recurring Revenue from March 2020 until March 2021, -15- our Senior Vice President, Global Sales - Recurring Revenue from January 2018 to March 2020 and our Senior Vice President, Global Sales from December 2008 to January 2018. Prior to joining us, Mr.
We also believe the lack of credible competitors of any scale other than the enterprise software vendors left software licensees with little choice but to agree to the software vendors’ terms of service, or risk potential tax, legal and regulatory non-compliance or failures of critical systems that require knowledge and skill sets beyond a licensee’s own abilities to resolve.
We believe the lack of credible competitors of any scale other than the enterprise software vendors left software licensees with little choice but to agree to the software vendors’ proposed terms of service, or risk potential tax, legal and regulatory non-compliance or failures of critical systems that require knowledge and skill sets beyond a licensee’s own abilities to resolve.
Our PSEs are focused exclusively on supporting our clients and have on average over 20 years of experience and significant real-world understanding of client -6- implementations and deployments.
Our PSEs are focused exclusively on supporting our clients and have on average over 20 years of experience and significant real-world understanding of client implementations and deployments.
For the year ended December 31, 2022, we delivered an average support call response time of less than two minutes for an experienced engineer to engage with a client to address critical (P1) and serious (P2) issues, which is significantly shorter than the 10-minute guaranteed response time that is standard in our client support agreements.
For the year ended December 31, 2023, we delivered an average support call response time of less than two minutes for an experienced engineer to engage with a client to address critical (P1) and serious (P2) issues, which is significantly shorter than the 10-minute guaranteed response time that is standard in our client support agreements.
Highly experienced management team Our senior management team has over 150 years of combined experience in the enterprise software and services industry with companies such as Accenture, EDS, Hewlett-Packard, JD Edwards, Oracle, PeopleSoft, ServiceSource, SAP, and Wind River and with a significant amount of time and experience focused on building, managing and delivering support products and services.
Highly experienced management team Our senior management team has over 150 years of combined experience in the enterprise software and services industry with companies such as Accenture, EDS, Hewlett-Packard, JD Edwards, Oracle, PeopleSoft, ServiceSource, and SAP and with a significant amount of time and experience focused on building, managing and delivering support products and services.
Lyskawa holds a Bachelor of Business Administration in Accounting and Finance from the University of North Dakota and a Masters Certificate in Marketing from the Cox School of Business at Southern Methodist University. Kevin Maddock has served as our Executive Vice President and Chief Recurring Revenue Officer since March 2021.
Lyskawa holds a Bachelor of Business Administration in Accounting and Finance from the University of North Dakota and a Master’s Certificate in Marketing from the Cox School of Business at Southern Methodist University. Kevin Maddock has served as our Executive Vice President and Chief Recurring Revenue Officer since March 2021.
The desire for business-control in IT roadmaps We believe enterprise software vendors have historically been the primary providers of software support services for their products, enabling such vendors to dictate which products and releases are supported and for how long, the scope of support services offered, service levels, terms and pricing.
The desire for business-control in IT roadmaps Enterprise software vendors have historically been the primary providers of software support services for their products, enabling such vendors to dictate which products and releases are supported and for how long, the scope of support services offered, service levels, terms and pricing.
Perica holds a Bachelor of Business Administration degree in Accounting from Central Michigan University and a Master of Business Administration degree from the University of Southern California, Marshall School of Business. David Rowe has served as our Executive Vice President, Global Transformation & Chief Product Officer since March 2023.
Perica holds a Bachelor of Business Administration in Accounting from Central Michigan University and a Master’s Degree in Business Administration from the University of Southern California, Marshall School of Business. David Rowe has served as our Executive Vice President, Global Transformation & Chief Product Officer since March 2023.
The following table summarizes and compares the software support features of our Rimini Support solution to what management believes in its experience are the typical features of competing support offerings from enterprise software vendors: Base Software Support Feature Rimini Street Typical Enterprise Software Vendor Annual Cost and Resource Savings Compared to the Software Vendor • Guaranteed 10-Minute Response Time 24x7 For Critical (Priority 1) Issues • Guaranteed Cadence of Case Update Communications for Open Cases • Named Primary Support Engineer (PSE) for Each Client • Issue Resolution and Software Bug Fixes • • Support for Application Customizations • Operational, Installation, Configuration and Upgrade Support • • Migration Support • Performance, Interoperability and Integration Support • Security Support (RSI - Security Advisory Services only) • • Localization Support • New Features, Functions and Technical Releases • • Tax, Legal and Regulatory Updates • • Our current Rimini Support solution provides services for a broad range of enterprise software vendors, product families and product lines.
The following table summarizes and compares the software support features of our Rimini Support solution to what management believes in its experience are the typical features of competing support offerings from enterprise software vendors: Base Software Support Feature Rimini Street Typical Enterprise Software Vendor Annual Cost and Resource Savings Compared to the Software Vendor • Guaranteed 10-Minute Response Time 24x7 For Critical (Priority 1) Issues • Guaranteed Cadence of Case Update Communications for Open Cases • Named Primary Support Engineer (PSE) for Each Client • Issue Resolution and Software Bug Fixes • • Support for Application Customizations • Operational, Installation, Configuration and Upgrade Support • • Performance, Interoperability and Integration Support • Security Support (RSI - Security Advisory Services only) • • Localization Support • Tax, Legal and Regulatory Updates • • Our current Rimini Support solution provides services for a broad range of enterprise software vendors, product families and product lines.
This IT service modernization strategy leverages simplicity to help improve service quality, scalability, and delivery speed. It also positions IT to be more strategic and helps improve business outcomes.
This IT service modernization strategy leverages simplicity to help improve service quality, scalability, and delivery speed. It also positions IT to be more strategic and can help improve business outcomes.
Our model includes unlimited support cases, requests, and tasks, and we offer industry-leading SLAs for response time and case update communications. Our team of over 1,000 support engineers, developers, and other experts span the globe, providing 24/7/365 “follow-the-sun” support to clients with operations in over 155 countries.
Our model includes unlimited support cases, requests, and tasks, and we offer industry-leading SLAs for response time and case update communications. Our team of over 1,280 support engineers, developers, and other experts span the globe, providing 24/7/365 “follow-the-sun” support to clients with operations in over 130 countries.
No foreign country individually comprised more than 10% of revenue for the three-year period ended December 31, 2022. -10- Expand the portfolio of supported vendors and products Since our inception over 17 years ago, we have developed a comprehensive portfolio of enterprise software support and related products and services, including support services for applications, databases and technologies; management services for applications, databases, technologies, cloud and security; security, interoperability and observability solutions; and professional services.
No other foreign country individually comprised more than 10% of revenue for the three-year period ended December 31, 2023. -10- Expand the portfolio of supported vendors and products Since our inception over 18 years ago, we have developed a comprehensive portfolio of enterprise software support and related products and services, including support services for applications, databases and technologies; management services for applications, databases, technologies, cloud and security; security, interoperability and observability solutions; and professional services.
For example, we maintain updates for tax, legal, and regulatory changes for over 100 countries on a continuous basis by employing a rigorous software development lifecycle that complies with ISO 9001:2015 standards to ensure that required and identified tax, legal, and regulatory changes are delivered in an accurate and timely manner that based on management’s experience and analysis, we believe is typically earlier than traditional enterprise software vendors.
For example, we deliver updates for tax, legal, and regulatory changes for multiple countries on a continuous basis by employing a rigorous software development lifecycle that complies with ISO 9001:2015 standards to ensure that required and identified tax, legal, and regulatory changes are delivered in an accurate and timely manner that based on management’s experience and analysis, we believe is typically earlier than traditional enterprise software vendors.
Our Product Delivery organization is scalable and has the capability to deploy its solutions for additional countries based on the needs of our clients. For the year ended December 31, 2022, we have delivered more than 57,000 tax, legal and regulatory updates to clients with quality and accuracy.
Our Product Delivery organization is scalable and has the capability to deploy its solutions for additional countries based on the needs of our clients. For the year ended December 31, 2023, we have delivered more than 51,000 tax, legal and regulatory updates to clients with quality and accuracy.
Maddock served in multiple roles at KPMG Consulting. From August 1987 to April 1993, Mr. Maddock served in various roles at Accenture (formerly Andersen Consulting). Mr. Maddock holds a Bachelor of Business Administration in Finance with Honors from the University of Notre Dame and a Masters of Business Administration from the Anderson School of Management at UCLA. -15- Michael L.
Maddock served in multiple roles at KPMG Consulting. From August 1987 to April 1993, Mr. Maddock served in various roles at Accenture (formerly Andersen Consulting). Mr. Maddock holds a Bachelor of Business Administration in Finance with Honors from the University of Notre Dame and a Master’s Degree in Business Administration from the Anderson School of Management at UCLA. Michael L.
We also believe that for many of these organizations, the cost of operating and supporting their hybrid IT environments consumes too many financial and labor resources, potentially preventing the strategic investment that is needed to compete effectively, grow revenue and improve margins. We believe that most IT organizations operate, manage, and support hybrid, multivendor IT environments.
We also believe that for many of these organizations, the cost of operating and supporting their hybrid IT environments consumes too many financial and labor resources, potentially reducing the strategic investment that is needed to grow revenue and improve margins. We believe that most IT organizations operate, manage, and support hybrid, multivendor IT environments.
We are continuing to make significant investments in sales and marketing and will continue our strong focus on acquiring new clients. Continue global expansion For the year ended December 31, 2022, we generated approximately 47% of our revenue outside of the United States.
We are continuing to make significant investments in sales and marketing and will continue our strong focus on acquiring new clients. Continue global expansion For the year ended December 31, 2023, we generated approximately 49% of our revenue outside of the United States.
Since our inception over 17 years ago, we have invested significant resources in developing our proprietary knowledge, software tools and processes to meet the growing needs of our clients. During the year ended December 31, 2022, we delivered more than 57,000 tax, legal and regulatory updates to our global client base.
Since our inception over 18 years ago, we have invested significant resources in developing our proprietary knowledge, software tools and processes to meet the growing needs of our clients. During the year ended December 31, 2023, we delivered more than 51,000 tax, legal and regulatory updates to our global client base.
On December 17, 2019, the United States Patent and Trademark Office granted Rimini Street its first patent, U.S. Patent No. 10,509,639 for the invention “Automatic Software-Update Framework”. On August 18, 2020, the United States Patent and Trademark Office granted Rimini Street its second patent, U.S.
Patent No. 10,509,639 for the invention “Automatic Software-Update Framework”. On August 18, 2020, the United States Patent and Trademark Office granted Rimini Street its second patent, U.S.
As of December 31, 2022, approximately 64% of our over 1,510 unique clients have selected us to provide services, products and solutions for more than one of their software product lines, and we believe there is additional opportunity for growth within our existing client base.
As of December 31, 2023, approximately 65% of our over 1,530 unique clients have selected us to provide services, products and solutions for more than one of their software product lines, and we believe there is additional opportunity for growth within our existing client base.
We became and remain the leading independent software support provider for Oracle and SAP products based on both the number of active clients supported and recognition by industry analyst firms.
We became and remain the leading independent software support provider for enterprise software based on both the number of active clients supported and recognition by industry analyst firms.
We generated approximately 53%, 53% and 59% of our revenue in the United States and approximately 47%, 47% and 41% of our revenue from our international business for the years ended December 31, 2022, 2021 and 2020, respectively. Our Industry We compete in the global IT services market for enterprise software support, products and services.
We generated approximately 51%, 53% and 53% of our revenue in the United States and approximately 49%, 47% and 47% of our revenue from our international business for the years ended December 31, 2023, 2022 and 2021, respectively. Our Industry We compete in the global IT services market for enterprise software support, products and services.
Patent No. 10,749,926 for the invention “Proxy for Modifying HTTP Messages to Comply with Browser,” and on November 23,2021, the United States Patent and Trademark Office granted Rimini Street its third patent, U.S. Patent No. 11,182,707 for the invention “Case Assignment Advisor,” which is a proprietary artificial intelligence (AI) based application.
Patent No. 10,749,926 for the invention “Proxy for Modifying HTTP Messages to Comply with Browser,” and on November 23, 2021, the United States Patent and Trademark Office granted Rimini Street its third patent, U.S. Patent No. 11,182,707 for the invention “Method and System for Providing a Multi-Dimensional Human Resource Allocation Advisor,” which is a proprietary artificial intelligence (AI) based application.
In addition to resources available through our health care plan providers, we provide voluntary web-based training on health and wellness topics (such as first aid/CPR, fire safety, and how to prepare for inclement weather conditions), as well as professional development seminars on topics such as time management and leadership skills.
In addition to resources available through our health care plan providers, we provide voluntary web-based training on health and wellness topics (such as first aid/CPR, fire safety, and how to prepare for inclement weather conditions).
For example, we recently announced multiple suites of services that bring together existing and new support, products and service solutions. Clients As of December 31, 2022, we supported 3,020 active clients globally, including 75 Fortune 500 companies and 17 Fortune Global 100 companies across a broad range of industries.
For example, we recently announced multiple suites of services that bring together existing and new support, products and service solutions. Clients As of December 31, 2023, we supported over 3,030 active clients globally, including 73 Fortune 500 companies and 20 Fortune Global 100 companies across a broad range of industries.
We believe that we offer the most comprehensive scope of tax, legal and regulatory research available from a single vendor, including collecting and analyzing information from more than 5,300 government sites, close to 3,500 information sources and over 26,000 localities for 145 countries.
We believe that we offer the most comprehensive scope of tax, legal and regulatory research available from a single vendor, including collecting and analyzing information from more than 4,400 government sites, close to 200 information sources and over 26,000 localities for 139 countries.
We believe that there is a large opportunity to grow our global business by increasing our direct sales force and by selective use of strategic marketing and sales partnerships around the world. We attribute revenue to individual countries based on the location of the contracting entity.
We believe that there is a large opportunity to grow our global business by increasing our direct sales force and by selective use of strategic marketing and sales partnerships around the world. We attribute revenue to individual countries based on the location of the contracting entity. For the year ended December 31, 2023, Japan represented 10% of total revenue.
This commitment starts with our Core Values, known as our “4 C’s”: As a key aspect of our success, we believe our culture enables us to recruit and retain high quality talent. In addition, we strive to offer compensation, bonus and benefit programs appropriate for proven top-performing professionals.
As a key aspect of our success, we believe our culture enables us to recruit and retain high quality talent. In addition, we strive to offer compensation, bonus and benefit programs appropriate for proven top-performing professionals.
For example, for fiscal year 2022, SAP reported that support revenue represented approximately 39% of its total revenue and, for fiscal year 2022, Oracle reported a margin of 83% for cloud services and license support.
For example, for fiscal year 2023, SAP reported that support revenue represented approximately 37% of its total revenue and, for fiscal year 2023, Oracle reported a margin of 78% for cloud services and license support.
Expand Managed Services global offering Our Rimini Manage for SAP and Oracle enterprise software was launched during the second half of 2019 and integrates our ultra-responsive traditional support services with clients’ day-to-day AMS needs.
Expand Managed Services global offering Our Rimini Manage for SAP and Oracle enterprise software integrates our ultra-responsive traditional support services with clients’ day-to-day AMS needs.
We generated revenue of $409.7 million, $374.4 million and $326.8 million for the years ended December 31, 2022, 2021 and 2020, respectively, representing a year-over-year increase of 9% and 15% for 2022 and 2021, respectively. We have a history of losses, and as of December 31, 2022, we had an accumulated deficit of $228.3 million.
We generated revenue of $431.5 million, $409.7 million and $374.4 million for the years ended December 31, 2023, 2022 and 2021, respectively, representing a year-over-year increase of 5% and 9% for 2023 and 2022, respectively. We have a history of losses, and as of December 31, 2023, we had an accumulated deficit of $202.2 million.
Large global client base As of December 31, 2022, we provided support, products and services for 3,020 active clients globally, including 75 Fortune 500 companies and 17 Fortune Global 100 companies.
Large global client base As of December 31, 2023, we provided support, products and services for over 3,030 active clients globally, including 73 Fortune 500 companies and 20 Fortune Global 100 companies.
We recorded a net loss of $2.5 million for the year ended December 31, 2022 and we recorded net income of $75.2 million and $11.6 million for the years ended December 31, 2021 and 2020, respectively.
For the years ended December 31, 2023, 2022 and 2021, we recorded net income of $26.1 million, net loss of $2.5 million and net income of $75.2 million, respectively.
Finally, through the Rimini Street Foundation, which is an initiative funded by the Company, we encourage our employees to “support humankind” and share our Company’s success by investing back into the communities we serve through in-kind donations, employee time and Company financial support. As of December 31, 2022, we employed over 1,920 professionals globally.
Finally, through the Rimini Street Foundation, which is an initiative funded by the Company, we encourage our employees to “support humankind” and share our Company’s success by investing back into the communities we serve through in-kind donations, employee time, Company financial support and funded volunteer activities around the world.
Rimini Manage permits us to “run” our clients’ systems for them day-to-day with an integrated application management and support services solution provided by a single trusted vendor.
Rimini Manage permits us to “run” our clients’ systems for them day-to-day with an integrated application management and support services solution provided by a single trusted vendor. Rimini Protect™ is our suite of proactive, fast, cost-effective, and personalized software security services and solutions.
As of December 31, 2022, we employed over 1,920 professionals and supported 3,020 active clients globally, including 75 Fortune 500 companies and 17 Fortune Global 100 companies, across a broad range of industries.
As of December 31, 2023, we employed over 2,120 professionals and supported over 3,030 active clients globally, including 73 Fortune 500 companies and 20 Fortune Global 100 companies, across a broad range of industries.
We control access to our proprietary technology by entering into confidentiality and invention assignment agreements with our employees and contractors, and confidentiality agreements with third parties, such as service providers, vendors, individuals and entities that may be exploring a business relationship with us.
We control access to our proprietary technology by entering into confidentiality and invention assignment agreements with our employees and contractors, and confidentiality agreements with third parties, such as service providers, vendors, individuals and entities that may be exploring a business relationship with us. -14- On December 17, 2019, the United States Patent and Trademark Office granted Rimini Street its first patent, U.S.
To connect to systems owned, leased or otherwise controlled by our clients, we utilize site-to-site tunnels, virtual private networks with secure firewall administration and other secure connection methodologies underpinned with a high level of global network reliability, security and performance. We maintain a formal and comprehensive information security management system, which is certified to ISO 27001: 2013.
Our operations support our client offerings, compliance requirements and future global expansion. To connect to systems owned, leased or otherwise controlled by our clients, we utilize site-to-site tunnels, virtual private networks with secure firewall administration and other secure connection methodologies underpinned with a high level of global network reliability, security and performance.
Ravin 56 Chief Executive Officer, Chairman of the Board of Directors and President Nancy Lyskawa 60 Executive Vice President, Global Client Onboarding Kevin Maddock 57 Executive Vice President and Chief Recurring Revenue Officer Michael L.
Ravin 57 President, Chief Executive Officer and Chairman of the Board of Directors Nancy Lyskawa 61 Executive Vice President & Chief Client Officer Kevin Maddock 58 Executive Vice President and Chief Recurring Revenue Officer Michael L. Perica 52 Executive Vice President and Chief Financial Officer David Rowe 58 Executive Vice President, Global Transformation & Chief Product Officer Seth A.
We currently have four patent applications pending in the United States. We own U.S. Patent No. 10,509,639 which will expire in August 2035, U.S. Patent No. 10,749,926 which will expire in September 2034, and U.S.
We currently have two patent applications pending in the United States. We own U.S. Patent No. 10,509,639 which will expire in August 2035, U.S. Patent No. 10,749,926 which will expire in September 2034, and U.S. Patent No. 11,182,707 which will expire in July 2039, as long as the patent maintenance fees are paid during the corresponding fee payment windows.
We also engage temporary employees and consultants as needed. None of our U.S.-based employees are covered by collective bargaining agreements. Certain of our non-U.S.-based employees are members of unions, works councils, trade associations or are otherwise subject to collective bargaining agreements in particular jurisdictions, as required by local labor laws.
Certain of our non-U.S.-based employees are members of unions, works councils, trade associations or are otherwise subject to collective bargaining agreements in particular jurisdictions, as required by local labor laws. We have not experienced any work stoppages, and we consider our relations with our employees to be very good. Technology Infrastructure and Operations We have IT infrastructure and staff globally.
Ravin holds a Bachelor of Science in Business Administration from the University of Southern California. Nancy Lyskawa has served as our Executive Vice President, Global Client Onboarding since March 2020. Previously she served as our Senior Vice President, Global Client Onboarding since joining the Company in September 2009. Prior to joining us, Ms.
Ravin holds a Bachelor of Science in Business Administration from the University of Southern California. Nancy Lyskawa has served as our Executive Vice President & Chief Client Officer since April 2023.
In 2021, we were granted a U.S. patent for our “Case Assignment Advisor,” which is one of our AI applications used as a competitive advantage in servicing our clients. We believe our AI applications have already delivered substantial service benefits to clients, including accelerating case resolution times by an average of 23% and reducing case escalations by approximately 29%.
In 2021, we were granted a U.S. patent for our “Case Assignment Advisor,” which is one of our AI applications used as a competitive advantage in servicing our clients.
It is designed to ensure the confidentiality and integrity of client data, protect against security threats or data breaches, and prevent unauthorized access to the data of our clients.
To ensure the confidentiality and integrity of client data, protect against security threats or data breaches, and prevent unauthorized access to the data of our clients, we maintain a formal and comprehensive system based on the ISO 27001:2013 Information Security Management System standard.
Further, we offer programs and resources designed to support the mental, physical, social and financial well-being of our employees.
As a company built on a foundation of remote and hybrid working, we believe these arrangements continue to provide flexibility to employees around the globe. We offer programs and resources designed to support the mental, physical, social and financial well-being of our employees.
Rowe served in various roles at Accenture (formerly Andersen Consulting). Mr. Rowe holds a Bachelor of Science degree in Engineering from Harvey Mudd College. Steven Salaets joined our company in 2009 and has served as our Chief Information Officer & Executive Vice President, Global Shared Services since January 2022.
Rowe served in various roles at Accenture (formerly Andersen Consulting). Mr. Rowe holds a Bachelor of Science in Engineering from Harvey Mudd College.
We also maintain trademark registrations for Rimini Street in Canada, the European Union, China, Japan, India, Australia and maintain or have applied for trademarks in certain other countries. Such registered trademarks will expire unless renewed at various times in the future. Policing unauthorized use of our processes and software tools and intellectual property rights is difficult.
We maintain trademark registrations for the Rimini Street, Engineered for Support, We Do Support, and Other Companies Do Software We Do Support trademarks in the United States. We also maintain trademark registrations for Rimini Street in Canada, the European Union, China, Japan, India, Australia and maintain or have applied for trademarks in certain other countries.
As of the date of this Report, we are not aware of any material breaches of our intellectual property rights. Information about our Executive Officers. The following table sets forth the names, ages and positions of our executive officers as of March 1, 2023: Name Age Position Executive Officers Seth A.
The following table sets forth the names, ages and positions of our executive officers as of February 28, 2024: Name Age Position Executive Officers Seth A.
For example, we count as two separate unique clients when two separate subsidiaries, divisions or business units of an entity purchase our products or services. Human Capital Resources We have built our culture centered on our dedication to provide our clients with an exceptional service experience.
For example, we count as two separate unique clients when two separate subsidiaries, divisions or business units of an entity purchase our products or services. Human Capital Resources Guided by our commitment to provide “extraordinary technology solutions powered by extraordinary people,” we strive to foster an environment that enables and encourages our employees in this pursuit.
Product Delivery The Product Delivery team manages the scoping, development, testing, and delivery of all client deliverables and internally developed applications, tools and technologies.
We believe our AI applications have already delivered substantial service benefits to clients, including accelerating case resolution times by an average of 23% and reducing cases that develop urgency by approximately 29%. Product Delivery The Product Delivery team manages the scoping, development, testing, and delivery of all client deliverables and internally developed applications, tools and technologies.
Our employees focus on providing exceptional service to our clients, and we strive to foster an environment that enables and encourages them in this pursuit. To this end, we view all employees as partners and are committed to providing an exciting, participatory and team-oriented work environment.
To this end, we believe that recruiting, retaining and developing high-performing talent is important to our success. We view all employees as partners and are committed to providing an exciting, participatory and team-oriented work environment. This commitment starts with our Core Values, known as our “4 C’s” – Company, Clients, Colleagues and Community – each with equal weight of importance.
Removed
Rimini Protect™ is our suite of innovative managed security solutions for applications, databases and technology infrastructure that is designed to be able to block newly identified attack vectors in minutes without any code changes to the software being protected; providing clients the ability to quickly protect their systems and data rather than risk remaining exposed potentially for weeks, months, or longer waiting for a solution from what we believe are dated, traditional vendor patching models that are typically not as responsive.
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Rimini Protect provides innovative security solutions for applications, databases, and technology infrastructure that are designed to protect against known and unknown threats and vulnerabilities and quickly deploy Rimini Protect updates without any required code changes to the software being protected.
Removed
As a pivotal part of a “defense-in-depth strategy,” Rimini Protect operates in conjunction with a client’s current security solutions and capabilities, while enhancing and strengthening the protection of the application stack. Utilizing advanced, real-time, active security controls, Rimini Protect is designed to monitor, remediate, and secure malicious application stack activity including the attempted exploitation of known and unknown vulnerabilities.
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Rimini Custom™ is a program that expands our support and related services to a broader portfolio of enterprise software, beyond Oracle, SAP, Salesforce and a few other vendor solutions for which we have historically provided support and services.
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We are committed to creating a diverse and inclusive environment and are proud to be an Equal Employment Opportunity Employer. Qualified applicants will receive consideration for employment without regard to age, race, color, religion, national origin, sexual orientation, gender or gender identity, disability, protected veterans’ status or any other characteristic protected by law.
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In 2023, we launched “Rimini Street University,” an internal program led by the Learning & Development arm of our Human Resources Department in partnership with various functions across the Company.
Removed
We have achieved Great Place to Work® (a recognized global authority on workplace culture and employee satisfaction) certifications in the United States, the United Kingdom, India, Korea, Australia, New Zealand, Japan, France and Israel.
Added
The program provides professional development and learning opportunities designed to support, guide and develop individual contributors, teams, managers and future leaders of Rimini Street, with plans to expand on its offerings each year. We are committed to creating a diverse and inclusive environment and are proud to be an Equal Employment Opportunity Employer.
Removed
The certification is achieved by distributing a third-party, anonymous survey to all employees in a geographic area and renewed each year to maintain certification. -12- From 2020 through 2022, in response to the COVID-19 pandemic, we provided special compensation bonuses for lower-paid employees and special compensation bonuses for the few of our employees who tested positive for COVID-19.
Added
Qualified applicants will receive consideration for employment without regard to age, race, color, religion, national origin, sexual orientation, gender or gender identity, disability, protected veterans’ status or any other characteristic protected by law. -12- We have earned multiple employee satisfaction awards and certifications, including: “2023 Top Workplaces USA” award from Energage; Great Place to Work ® (a recognized global authority on workplace culture and employee satisfaction) certifications in Australia, France, India, Korea, Japan, Singapore, the United Kingdom and the United States; Best Workplaces™ for Women Award (United Kingdom); Best Workplaces™ for Wellbeing Award (United Kingdom); top 50 ranking from India’s Best Workplaces™ in both the “Information Technology” and “Information Technology – Business Process Management” categories; and Stevie ® “Female Executive of the Year” distinction in the “Business Services” category.
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We have not experienced any work stoppages, and we consider our relations with our employees to be very good. Technology Infrastructure and Operations We have IT infrastructure and staff globally. Our operations support our client offerings, compliance requirements and future global expansion.
Added
In 2023, the initiative celebrated its 500 th charitable partnership since its launch in 2015. Other 2023 Rimini Street Foundation highlights include sponsoring and participating in the Susan G.
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Patent No. 11,182,707 which will expire in July 2039, as long as the patent maintenance fees are paid during the corresponding fee payment windows. -14- We maintain trademark registrations for the Rimini Street and Engineered for Support trademarks in the United States.
Added
Komen Foundation Walk for a Cure in Denver, Colorado, led by Rimini Street’s breast cancer support group, RMNI PINK, and the second annual launch of our $50,000 “RMNI LOVE” Grant Program, which for 2023 was hosted in Tokyo, Japan.
Removed
Perica 51 Executive Vice President and Chief Financial Officer David Rowe 57 Executive Vice President, Global Transformation & Chief Product Officer Steven Salaets 45 Chief Information Officer & Executive Vice President, Global Shared Services Seth A.
Added
Five selected Japan-based charities each received the equivalent of $10,000 USD and were celebrated at a meeting of over 200 Company client executives and senior leaders. As of December 31, 2023, we employed over 2,120 professionals globally. We also engage temporary employees and consultants as needed. None of our U.S.-based employees are covered by collective bargaining agreements.
Removed
Previously, he served as our Chief Information Officer, Chief People Officer & Executive Vice President, Global Security, Facilities, Quality and Internal Audit from July 2020 to January 2022, our Chief Information Officer and Executive Vice President, Global Security, Internal Audit and Quality from March 2020 until July 2020, our Chief Information Officer & Senior Vice President, Global Security, Quality and Internal Audit from December 2019 until March 2020 and our Senior Vice President, Global Security & Compliance and Chief Information Officer from August 2018 to December 2019.
Added
Such registered trademarks will expire unless renewed at various times in the future. Policing unauthorized use of our processes and software tools and intellectual property rights is difficult. As of the date of this Report, we are not aware of any material breaches of our intellectual property rights. Information about our Executive Officers.
Removed
Prior to that, he served as our Group Vice President, Information Technology & Global Security, Compliance and Internal Audit (December 2016 to July 2018) and our Group Vice President, Global Human Resources and Global Security, Risk and Compliance (September 2013 to November 2016).
Added
Previously, she served as our Executive Vice President, Global Client Onboarding from March 2020 to April 2023 and our Senior Vice President, Global Client Onboarding from September 2009 to March 2020. Prior to joining us, Ms.
Removed
Prior to September 2013, he held multiple other senior and director-level roles within our company focused on global security, risk and compliance. Prior to joining our company Mr. Salaets held management-level positions with Moody’s KMV and Wind River. He holds a Bachelor of Science degree in Computer Science from Groep-T in Leuven, Belgium.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

122 edited+51 added−29 removed215 unchanged
Biggest changeAn adverse outcome in the litigation could result in the payment of substantial attorneys’ fees and/or costs and/or an injunction against certain of our business practices. • The Oracle software products that are part of our ongoing injunction compliance and Rimini II litigation with Oracle represent a significant portion of our revenue. • Our ongoing litigation with Oracle presents challenges for growing our business. • Oracle has a history of litigation against companies offering alternative support programs for Oracle products. • Economic uncertainties, changes in economic conditions, including rising inflation, or downturns in the general economy or the industries in which our clients operate could disproportionately affect the demand for our products and services and may have a material adverse effect on our business. • The market for independent software support services is relatively undeveloped and may not grow. • We face significant competition for all components of our Solutions Portfolio. • We have had a history of losses and may not achieve or sustain revenue growth or profitability in the future. • If we are unable to attract new clients or retain and sell additional products or services to existing clients, our revenue growth will be adversely affected. • Because we recognize revenue from subscriptions over the term of the relevant contract, downturns or upturns in sales are not immediately reflected in full in our results of operations. • Our future liquidity and results of operations may be adversely affected by the timing of new orders, the level of client renewals and cash receipts from clients. • The loss of one or more key employees could harm our business. • The failure to attract and retain additional qualified personnel, including sales personnel, or to expand our marketing and sales capacities could prevent us from executing our business strategy. • Our past growth is not indicative of future growth, and, if we grow rapidly, we may not be able to manage our growth effectively. • Our failure to generate significant capital or raise additional capital necessary to fund our operations and invest in new services and products could reduce our ability to compete and could harm our business. • Our business may suffer if it is alleged or determined that our technology infringes others’ intellectual property rights. • Interruptions to or degraded performance of our services, including as a result of interruptions or performance problems with technologies provided by third parties, could result in client dissatisfaction, damage to our reputation, loss of clients, limited growth and reduction in revenue. • We may experience fluctuations in our results of operations due to the sales cycles for our products and services, which makes our future results difficult to predict and could cause our results of operations to fall below expectations or our guidance. • We may be subject to additional obligations to collect and remit sales tax and other taxes, and we may be subject to tax liability, interest and/or penalties for past sales, which could adversely harm our business. • Our reputation and/or business could be negatively impacted by ESG matters and/or our reporting of such matters. • Any actions taken by governments or clients in response to any lingering impacts of the COVID-19 pandemic in the future may have a material adverse effect on our business. • We may need to change our pricing to compete successfully. • If we are not able to scale our business quickly and grow efficiently, our results of operations could be harmed. • Our business will be susceptible to risks associated with global operations as our growth strategy involves further expansion of our sales to clients outside the United States . • Consolidation in our target sales markets is continuing at a rapid pace, which could harm our business. • If there is a widespread shift by clients or potential clients to enterprise software vendors, products and releases for which we do not provide software products or services, our business would be adversely impacted. • Cybersecurity threats continue to increase in frequency and sophistication; if our data security measures are compromised or our services are perceived as not being secure, clients may curtail or cease their use of our services, our reputation may be harmed, and we may incur significant liabilities. • We are subject to governmental and other legal obligations related to privacy, and our actual or perceived failure to comply with such obligations could harm our business. • If we are not able to maintain an effective system of internal control over financial reporting, investors could lose confidence in our financial reporting, which could harm our business and have an adverse effect on our stock price. • If we fail to enhance our brand, our ability to expand our client base will be impaired. • If we fail to adequately protect our proprietary rights, our competitive position could be impaired and we may lose valuable assets, experience reduced revenue and incur costly litigation to protect our rights. • The amount of and ultimate realization of the benefits from the net operating loss carryforwards for income tax purposes is dependent, in part, upon future events, the effects of which cannot be determined; if we are not able to use a significant portion of our net operating loss carryforwards, our profitability could be adversely affected. -17- • We are a multinational organization, and we could be obligated to pay additional taxes in various jurisdictions. • Reports published by analysts, including projections in those reports that differ from our actual results, could adversely affect the price and trading volume of our Common Stock.
Biggest changeAdverse outcomes and future adverse outcomes in the litigation could result in the payment of substantial attorneys’ fees and/or costs and/or injunctions against certain of our business practices. • The Oracle software products that are part of our ongoing Rimini I Injunction compliance and that are the subject of the Rimini II litigation with Oracle and the Rimini II Injunction represent a significant portion of our revenue. -16- • Our ongoing litigation with Oracle presents challenges for growing our business. • Oracle has a history of litigation against companies offering alternative support programs for Oracle products, and Oracle could pursue additional litigation with us. • Economic uncertainties, changes in economic conditions, including rising inflation, or downturns in the general economy or the industries in which our clients operate could disproportionately affect the demand for our products and services and may have a material adverse effect on our business. • The market for independent software support services is relatively undeveloped and may not grow. • We face significant competition for all components of our Solutions Portfolio. • We have had a history of losses and may not achieve or sustain revenue growth or profitability in the future. • If our retention rates decrease or we do not accurately predict retention rates, our future revenue and results of operations may be harmed. • If we are unable to attract new clients or retain and sell additional products or services to existing clients, our revenue growth will be adversely affected. • Because we recognize revenue from subscriptions over the term of the relevant contract, downturns or upturns in sales are not immediately reflected in full in our results of operations. • The variability of timing in our sales cycle or our failure to accurately forecast revenue could affect our results of operations and liquidity. • Our future liquidity and results of operations may be adversely affected by the timing of new orders, the level of client renewals and cash receipts from clients. • The loss of one or more key employees could harm our business. • The failure to attract and retain additional qualified personnel, including sales personnel, or to expand our marketing and sales capabilities could prevent us from executing our business strategy. • Our past growth is not indicative of future growth, and, if we grow rapidly, we may not be able to manage our growth effectively. • Our failure to generate significant capital or raise additional capital necessary to fund our operations and invest in new services and products could reduce our ability to compete and could harm our business. • Our business may suffer if it is alleged or determined that our technology infringes others’ intellectual property rights. • Interruptions to or degraded performance of our services, including as a result of interruptions or performance problems with technologies provided by third parties, could result in client dissatisfaction, damage to our reputation, loss of clients, limited growth and reduction in revenue. • Interruptions or performance problems with SaaS technologies and related services from third parties that we use to operate critical functions of our business, including any deficiencies associated with generative artificial intelligence technologies potentially used by such third parties, may adversely affect our business and operating results. • We may experience fluctuations in our results of operations due to the sales cycles for our products and services, which makes our future results difficult to predict and could cause our results of operations to fall below expectations or our guidance. • We may need to change our pricing to compete successfully. • If we are not able to scale our business quickly and grow efficiently, our results of operations could be harmed. • Our business will be susceptible to risks associated with global operations as our growth strategy involves further expansion of our sales to clients outside the United States . • Consolidation in our target sales markets is continuing at a rapid pace, which could harm our business. • If there is a widespread shift by clients or potential clients to enterprise software vendors, products and releases for which we do not provide software products or services, our business would be adversely impacted. • Cybersecurity threats continue to increase in frequency and sophistication; if our data security measures are compromised or our services are perceived as not being secure, clients may curtail or cease their use of our services, our reputation may be harmed, and we may incur significant liabilities. • We are subject to governmental and other legal obligations related to privacy, and our actual or perceived failure to comply with such obligations could harm our business. • If our products and services fail due to defects or other similar problems, and if we fail to correct any defect or other software problems, we could lose clients, become subject to service performance or warranty claims or incur significant costs. • If we are not able to maintain an effective system of internal control over financial reporting, investors could lose confidence in our financial reporting, which could harm our business and have an adverse effect on our stock price. • If we fail to enhance our brand, our ability to expand our client base will be impaired. • If we fail to adequately protect our proprietary rights, our competitive position could be impaired and we may lose valuable assets, experience reduced revenue and incur costly litigation to protect our rights. • We may be subject to additional obligations to collect and remit sales tax and other taxes, and we may be subject to tax liability, interest and/or penalties for past sales, which could adversely harm our business. -17- • The amount of and ultimate realization of the benefits from the net operating loss carryforwards for income tax purposes is dependent, in part, upon future events, the effects of which cannot be determined; if we are not able to use a significant portion of our net operating loss carryforwards, our profitability could be adversely affected. • We are a multinational organization, and we could be obligated to pay additional taxes in various jurisdictions. • Our reputation and/or business could be negatively impacted by ESG matters and/or our reporting of such matters.
In addition, certain of our existing clients may choose to license a new or different version of enterprise software from an enterprise software vendor, and such clients’ license agreements with the enterprise software vendor will typically include a minimum one-year mandatory maintenance and support services agreement.
In addition, certain of our existing clients may choose to license a new or different version of enterprise software from an enterprise software vendor, and such clients’ license agreements with the enterprise software vendor will typically include a minimum one-year mandatory maintenance and support services agreement.
In such cases, it is unlikely that these clients would renew their maintenance and support services agreements with us, at least during the early term of the license agreement. In addition, such existing clients could move to another enterprise software vendor, product or release for which we do not offer any products or services.
In such cases, it is unlikely that these clients would renew their maintenance and support services agreements with us, at least during the early term of the license agreement. In addition, such existing clients could move to another enterprise software vendor, product or release for which we do not offer any products or services.
Ravin has been under long-standing medical care for kidney disease, which includes ongoing treatment. Although Mr.
Mr. Ravin has been under long-standing medical care for kidney disease, which includes ongoing treatment. Although Mr.
Among other things, our certificate of incorporation and bylaws include provisions regarding: • a classified Board of Directors with three-year staggered terms, which could delay the ability of stockholders to change the membership of a majority of our Board of Directors; • the ability of our Board of Directors to issue shares of preferred stock, including “blank check” preferred stock, and to determine the price and other terms of those shares, including preferences and voting rights, without stockholder approval, which could be used to significantly dilute the ownership of a hostile acquirer; • the limitation of the liability of, and the indemnification of our directors and officers; • the exclusive right of our Board of Directors to elect a director to fill a vacancy created by the expansion of the Board of Directors or the resignation, death or removal of a director, which prevents stockholders from being able to fill vacancies on our Board of Directors; • the requirement that directors may only be removed from our Board of Directors for cause; • a prohibition on common stockholder action by written consent, which forces common stockholder action to be taken at an annual or special meeting of stockholders and could delay the ability of stockholders to force consideration of a stockholder proposal or to take action, including the removal of directors; • the requirement that a special meeting of stockholders may be called only by our Board of Directors, the chairperson of our Board of Directors, our chief executive officer or our president (in the absence of a chief executive officer), which could delay the ability of stockholders to force consideration of a proposal or to take action, including the removal of directors; • controlling the procedures for the conduct and scheduling of Board of Directors and stockholder meetings; • the requirement for the affirmative vote of holders of at least 66 2/3% of the voting power of the then outstanding shares of the voting stock, voting together as a single class, to amend, alter, change or repeal any provision of our certificate of incorporation or our bylaws, which could preclude stockholders from bringing matters before annual or special meetings of stockholders and delay changes in our Board of Directors and also may inhibit the ability of an acquirer to effect such amendments to facilitate an unsolicited takeover attempt; • the ability of our Board of Directors to amend the bylaws, which may allow our Board of Directors to take additional actions to prevent an unsolicited takeover and inhibit the ability of an acquirer to amend the bylaws to facilitate an unsolicited takeover attempt; and • advance notice procedures with which stockholders must comply to nominate candidates to our Board of Directors or to propose matters to be acted upon at a stockholders’ meeting, which could preclude stockholders from bringing matters before annual or special meetings of stockholders and delay changes in our Board of Directors and also may discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain control of our company.
Among other things, our certificate of incorporation and bylaws include provisions regarding: • a classified Board of Directors with three-year staggered terms, which could delay the ability of stockholders to change the membership of a majority of our Board of Directors; • the ability of our Board of Directors to issue shares of preferred stock, including “blank check” preferred stock, and to determine the price and other terms of those shares, including preferences and voting rights, without stockholder approval, which could be used to significantly dilute the ownership of a hostile acquirer; • the limitation of the liability of, and the indemnification of our directors and officers; • the exclusive right of our Board of Directors to elect a director to fill a vacancy created by the expansion of the Board of Directors or the resignation, death or removal of a director, which prevents stockholders from being able to fill vacancies on our Board of Directors; • the requirement that directors may only be removed from our Board of Directors for cause; • a prohibition on common stockholder action by written consent, which forces common stockholder action to be taken at an annual or special meeting of stockholders and could delay the ability of stockholders to force consideration of a stockholder proposal or to take action, including the removal of directors; • the requirement that a special meeting of stockholders may be called only by our Board of Directors, the chairperson of our Board of Directors, our chief executive officer or our president (in the absence of a chief executive officer), which could delay the ability of stockholders to force consideration of a proposal or to take action, including the removal of directors; • controlling the procedures for the conduct and scheduling of Board of Directors and stockholder meetings; • the requirement for the affirmative vote of holders of at least 66 2/3% of the voting power of the then outstanding shares of the voting stock, voting together as a single class, to amend, alter, change or repeal any provision of our certificate of incorporation or our bylaws, which could preclude stockholders from bringing matters before annual or special meetings of stockholders and delay changes in our Board of Directors and also may inhibit the ability of an acquirer to effect such amendments to facilitate an unsolicited takeover attempt; • the ability of our Board of Directors to amend the bylaws, which may allow our Board of Directors to take additional actions to prevent an unsolicited takeover and inhibit the ability of an acquirer to amend the bylaws to facilitate an unsolicited takeover attempt; and • advance notice procedures with which stockholders must comply to nominate candidates to our Board of Directors or to propose matters to be acted upon at a stockholders’ meeting, which could preclude stockholders from bringing matters before annual or special meetings of stockholders and delay changes in our Board of Directors and also may -37- discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain control of our company.
In addition, under Section 382 of the Internal Revenue Code of 1986, as amended, our ability to utilize net operating loss carryforwards or other tax attributes in any taxable year may be limited if we experience an “ownership change.” A Section -32- 382 “ownership change” generally occurs if one or more stockholders or groups of stockholders who own at least 5% of our stock increase their ownership by more than 50 percentage points over their lowest ownership percentage within a rolling three-year period.
In addition, under Section 382 of the Internal Revenue Code of 1986, as amended, our ability to utilize net operating loss carryforwards or other tax attributes in any taxable year may be limited if we experience an “ownership change.” A Section 382 “ownership change” generally occurs if one or more stockholders or groups of stockholders who own at least 5% of our stock increase their ownership by more than 50 percentage points over their lowest ownership percentage within a rolling three-year period.
As we increase our client base and our brand becomes more widely known and recognized, we may become more of a target for third parties seeking to compromise our systems or security measures or gain unauthorized access to our clients’ proprietary information and protected data as was the case in a 2021 successful phishing incident where we were a victim, which resulted in some unauthorized sharing of client addresses and outstanding billing data information, but did not significantly impact our business or client relationships.
As we increase our client base and our brand becomes more widely known and recognized, we may become more of a target for third parties seeking to compromise our systems or security measures or gain unauthorized access to our clients’ proprietary information and protected data as was the case in a 2021 successful phishing incident where we were a victim, which resulted in some unauthorized -30- sharing of client addresses and outstanding billing data information, but did not significantly impact our business or client relationships.
Any failure or perceived failure by us to comply -30- with these laws, policies or other obligations may result in governmental enforcement actions or litigation against us, with potential consequences such as fines and other expenses related to such governmental actions, an order requiring that we change our data practices or business practices, and could cause our clients to lose trust in us, any of which could have an adverse effect on our business.
Any failure or perceived failure by us to comply with these laws, policies or other obligations may result in governmental enforcement actions or litigation against us, with potential consequences such as fines and other expenses related to such governmental actions, an order requiring that we change our data practices or business practices, and could cause our clients to lose trust in us, any of which could have an adverse effect on our business.
While we believe our insurance coverage addresses all material risks to which we are exposed and is adequate and customary for our current global operations, we have observed rapidly changing conditions in the insurance markets relating to nearly all areas of traditional corporate insurance, resulting in higher premium costs, rising policy deductibles/self-insured retentions and lower coverage limits.
While we believe our insurance coverage addresses all material risks to which we are -38- exposed and is adequate and customary for our current global operations, we have observed rapidly changing conditions in the insurance markets relating to nearly all areas of traditional corporate insurance, resulting in higher premium costs, rising policy deductibles/self-insured retentions and lower coverage limits.
The successful assertion of one or more large -37- claims against us that exceed available insurance coverage , the occurrence of changes in our insurance policies, including premium increases, decreases in coverage and the imposition of large deductible, self-insured retentions, or co- insurance requirements, or the insolvency of any of our insurers, could have a material adverse effect on our business, results of operations and financial condition.
The successful assertion of one or more large claims against us that exceed available insurance coverage , the occurrence of changes in our insurance policies, including premium increases, decreases in coverage and the imposition of large deductible, self-insured retentions, or co- insurance requirements, or the insolvency of any of our insurers, could have a material adverse effect on our business, results of operations and financial condition.
Consolidation in our target sales markets is continuing at a rapid pace, which could harm our business in the event that our clients are acquired and their agreements are terminated, or not renewed or extended. Consolidation among companies in our target sales markets has been robust in recent years, and this continuing trend poses a risk for us.
Consolidation in our target sales markets is continuing at a rapid pace, which could harm our business in the event that our clients are acquired and their agreements are terminated, or not renewed or extended. -29- Consolidation among companies in our target sales markets has been robust in recent years, and this continuing trend poses a risk for us.
If we fail to attract highly qualified new sales and other personnel or fail to retain and motivate our current personnel, our growth prospects could be severely harmed. -24- Moreover, our sales personnel typically take an average of between nine to twelve months before any new sales personnel can operate at the capacity typically expected of experienced sales personnel.
If we fail to attract highly qualified new sales and other personnel or fail to retain and motivate our current personnel, our growth prospects could be severely harmed. Moreover, our sales personnel typically take an average of between nine to twelve months before any new sales personnel can operate at the capacity typically expected of experienced sales personnel.
Significant judgment is required in determining our worldwide provision for income taxes. In the ordinary course of our business, there are many transactions and calculations where the ultimate tax determination is uncertain. As such, our results may differ from previous estimates and may materially affect our financial position.
Significant judgment is required in determining our worldwide provision for income taxes. In the ordinary course of our business, there are many transactions and calculations where the -33- ultimate tax determination is uncertain. As such, our results may differ from previous estimates and may materially affect our financial position.
In addition, if the security measures of our clients are compromised, even without any actual compromise of our own systems or security measures, we may face negative publicity or reputational harm if our clients or anyone else incorrectly -29- attributes the blame for such security breaches to us, our products and services, or our systems.
In addition, if the security measures of our clients are compromised, even without any actual compromise of our own systems or security measures, we may face negative publicity or reputational harm if our clients or anyone else incorrectly attributes the blame for such security breaches to us, our products and services, or our systems.
While we currently believe our cash on hand, accounts receivable and contractually committed backlog provides us with liquidity to cover attorneys’ fees and related costs, such as travel, hotels, and consultants, associated ongoing litigation with Oracle, we cannot assure our liquidity will be sufficient.
While we currently believe our cash on hand, accounts receivable and contractually committed backlog provides us with liquidity to cover attorneys’ fees and related costs, such as travel, hotels, and consultants, associated with the ongoing litigation with Oracle, we cannot assure our liquidity will be sufficient.
Specifically, we face intense competition from enterprise software vendors, such as Oracle and SAP, who provide software support for their own products, as well as from other competitors who provide independent enterprise software support, products and services. Competitors, including enterprise software vendors, have offered, and may continue to offer, discounts to companies to whom we have marketed our services.
Specifically, we face intense competition from enterprise software vendors, such as Oracle and SAP, who provide software support for their own products, as well as from other competitors who -23- provide independent enterprise software support, products and services. Competitors, including enterprise software vendors, have offered, and may continue to offer, discounts to companies to whom we have marketed our services.
Such repurchase program will not obligate us to repurchase any further specific dollar amount -34- or number of shares of Common Stock within that authorization and may be suspended or discontinued at any time, which could cause the market price of our Common Stock to decline.
Such repurchase program will not obligate us to repurchase any further specific dollar amount or number of shares of Common Stock within that authorization and may be suspended or discontinued at any time, which could cause the market price of our Common Stock to decline.
Our current indebtedness and any inability to pay our debt obligations as they come due or an inability to incur additional debt could adversely affect our business and results of operations. -33- The terms of our Credit Facility impose operating and financial restrictions on us.
Our current indebtedness and any inability to pay our debt obligations as they come due or an inability to incur additional debt could adversely affect our business and results of operations. The terms of our Credit Facility impose operating and financial restrictions on us.
In addition, the laws of some countries do not protect proprietary rights to the same extent as the laws of the United States. To the extent we expand our global activities, our exposure to unauthorized copying and use of our brand, processes and software tools may increase.
In addition, the laws of some countries do not protect proprietary rights to the -32- same extent as the laws of the United States. To the extent we expand our global activities, our exposure to unauthorized copying and use of our brand, processes and software tools may increase.
Our current global operations and future initiatives will involve a variety of risks, including among others: • changes in a specific country’s or region’s political or economic conditions; • the occurrence of catastrophic events, including natural disasters, that may disrupt our business; • changes in regulatory requirements, taxes or trade laws or the imposition of trade sanctions; • currency exchange rate fluctuations and the resulting effect on our revenue and expenses, and the cost and risk of entering into currency exchange rate hedging transactions; • more stringent regulations relating to data security, such as where and how data can be housed, accessed and used, and the unauthorized use of, or access to, commercial and personal information; • differing labor regulations, especially in countries and geographies where labor laws are more advantageous to employees as compared to the United States, including deemed hourly wage and overtime regulations; • challenges inherent in efficiently managing an increased number of employees over large geographic distances, including the need to implement appropriate systems, policies, benefits and compliance programs as well as hire and retain local management, sales, marketing and support personnel, along with the ability to recapture costs to open up new geographies; • difficulties in managing a business in new markets with diverse cultures, languages, customs, legal systems, alternative dispute systems and regulatory systems; • increased logistics, travel, real estate, infrastructure and legal compliance costs associated with global operations; • limitations on our ability to reinvest earnings from operations in one country to fund the capital needs of our operations in other countries; • laws and business practices favoring local competitors or general preferences for local vendors; • limited or insufficient intellectual property protection; • war, political instability or terrorist activities, including geopolitical actions specific to an international region, such as the conflict between Russia and Ukraine; • exposure to liabilities under anti-corruption and anti-money laundering laws, including the United States Foreign Corrupt Practices Act and similar laws and regulations in other jurisdictions; and -28- • adverse tax burdens and foreign exchange controls that could make it difficult to repatriate earnings and cash.
Our current global operations and future initiatives will involve a variety of risks, including among others: • changes in a specific country’s or region’s political or economic conditions; • the occurrence of catastrophic events, including natural disasters, that may disrupt our business; • changes in regulatory requirements, taxes or trade laws or the imposition of trade sanctions; • currency exchange rate fluctuations and the resulting effect on our revenue and expenses, and the cost and risk of entering into currency exchange rate hedging transactions; • more stringent regulations relating to data security, such as where and how data can be housed, accessed and used, and the unauthorized use of, or access to, commercial and personal information; • differing labor regulations, especially in countries and geographies where labor laws are more advantageous to employees as compared to the United States, including deemed hourly wage and overtime regulations; • challenges inherent in efficiently managing an increased number of employees over large geographic distances, including the need to implement appropriate systems, policies, benefits and compliance programs as well as hire and retain local management, sales, marketing and support personnel, along with the ability to recapture costs to open up new geographies; • difficulties in managing a business in new markets with diverse cultures, languages, customs, legal systems, alternative dispute systems and regulatory systems; • increased logistics, travel, real estate, infrastructure and legal compliance costs associated with global operations; • limitations on our ability to reinvest earnings from operations in one country to fund the capital needs of our operations in other countries; • laws and business practices favoring local competitors or general preferences for local vendors; • limited or insufficient intellectual property protection; • war, political instability or terrorist activities, including geopolitical actions specific to an international region, such as the ongoing geopolitical conflict between Israel and Hamas; • exposure to liabilities under anti-corruption and anti-money laundering laws, including the United States Foreign Corrupt Practices Act and similar laws and regulations in other jurisdictions; and • adverse tax burdens and foreign exchange controls that could make it difficult to repatriate earnings and cash.
If we do not generate adequate resources, we may be required to refinance all or part of our then existing debt, sell assets or borrow more money, in each case on terms that may not be acceptable to us.
If we do not generate adequate -34- resources, we may be required to refinance all or part of our then existing debt, sell assets or borrow more money, in each case on terms that may not be acceptable to us.
Additionally, we intend to continue to expend significant funds to expand our sales and marketing operations, enhance our service offerings, expand into new markets, launch new product offerings and meet the increased compliance requirements associated with our operations as a public company.
Additionally, we intend to continue to expend significant funds to expand our sales and marketing operations, enhance our service offerings, expand into new markets, launch new product offerings and meet the compliance requirements associated with our operations as a public company.
If the enterprise software vendors offer deep discounts on certain services or lower prices generally, we may need to -27- change our pricing models, which could have an adverse effect on our results of operations.
If the enterprise software vendors offer deep discounts on certain services or lower prices generally, we may need to change our pricing models, which could have an adverse effect on our results of operations.
Corporate action might be taken even if other stockholders oppose the action being taken. This concentration of ownership might also have the effect of delaying or preventing a change of control of our company that other stockholders may view as beneficial.
Corporate action might be -36- taken even if other stockholders oppose the action being taken. This concentration of ownership might also have the effect of delaying or preventing a change of control of our company that other stockholders may view as beneficial.
The litigation involved our business processes and the manner in which we provided our services to our clients. After completion of jury trial in 2015 and subsequent appeals, the final outcome of Rimini I was that Mr.
The litigation involved our business processes and the manner in which we provided our services to our clients. After completion of a jury trial in 2015 and subsequent appeals, the final outcome of Rimini I was that Mr.
We may be unable to anticipate or prevent techniques used to obtain unauthorized access or to sabotage systems because they change frequently and generally are not detected until after an incident has occurred.
We may be unable to fully anticipate or prevent techniques used to obtain unauthorized access or to sabotage systems because they change frequently and generally are not detected until after an incident has occurred.
In addition, we believe the length of our sales cycle is longer than it otherwise would be due to prospective client -20- diligence on possible effects of the Oracle litigation on our business.
In addition, we believe the length of our sales cycle is longer than it otherwise would be due to prospective client diligence on possible effects of the Oracle litigation on our business.
If these services become unavailable due to extended outages or interruptions, security vulnerabilities, or cyber-attacks, because they are no longer available on commercially reasonable terms or prices, or due to other unforeseen circumstances, our expenses could increase, our ability to manage these critical functions could be interrupted, and our processes for and ability to manage sales of our products, recognize revenue, and support our customers could be impaired, all of which could adversely affect our business and operating results.
If these services become unavailable due to extended outages or interruptions, security vulnerabilities, or cyber-attacks, because they are no longer available on commercially reasonable terms or prices, or due to other unforeseen circumstances, our expenses could increase, our ability to manage these critical functions could be interrupted, and our processes for and ability to manage sales of our products, recognize revenue, and support our clients could be impaired, all of which could adversely affect our business and operating results.
As an expanding global company, we are subject to the laws and regulations of numerous jurisdictions worldwide regarding accessing, processing, sharing, using, storing, transmitting, disclosure and protection of personal data, the scope of which are constantly changing, subject to differing interpretation and related to jurisdictions where we have operations, customers, or where we conduct marketing, and such laws may be inconsistent between countries or in conflict with other laws, legal obligations or industry standards.
As an expanding global company, we are subject to the laws and regulations of numerous jurisdictions worldwide regarding accessing, processing, sharing, using, storing, transmitting, disclosure and protection of personal data, the scope of which are constantly changing, subject to differing interpretation and related to jurisdictions where we have operations, clients, or where we conduct marketing, and such laws may be inconsistent between countries or in conflict with other laws, legal obligations or industry standards.
Any sale of large amounts of our Common Stock on the open market or in privately negotiated transactions could have the effect of increasing the volatility in the price of our Common Stock or putting significant downward pressure on the price of our Common Stock.
Any sale of large amounts of our Common Stock on the open market or in privately negotiated transactions could have the effect of increasing the volatility and putting significant downward pressure on the price of our Common Stock.
Rimini Street, Inc. et al (United States District Court for the District of Nevada) (“District Court”), against us and our Chief Executive Officer and President, Seth Ravin, alleging that certain of our processes (Process 1.0) violated Oracle’s license agreements with its customers and that we committed acts of copyright infringement and violated other federal and state laws (“Rimini I”).
Rimini Street, Inc. et al (United States District Court for the District of Nevada) (the “District Court”) (“Rimini I”), against us and our Chief Executive Officer, Chairman of the Board and President, Seth Ravin, alleging that certain of our processes (Process 1.0) violated Oracle’s license agreements with its customers and that we committed acts of copyright infringement and violated other federal and state laws.
For example, the General Data Protection Regulation (“GDPR”) in the European Union (“EU”), creates a broad range of requirements and imposes substantial penalties for non-compliance, including possible fines of up to 4% of global annual revenue for the preceding financial year or €20 million (whichever is higher) for the most serious infringements.
For example, the General Data Protection Regulation in the European Union creates a broad range of requirements and imposes substantial penalties for non-compliance, including possible fines of up to 4% of global annual revenue for the preceding financial year or €20 million (whichever is higher) for the most serious infringements.
Although we attempt to mitigate these risks by employing a number of measures, including insurance, monitoring of our systems and networks, employee training and maintenance of backup and protective systems, our systems, networks, products and services remain potentially vulnerable to increasingly sophisticated advanced persistent threats that may have a material effect on our business.
Although we attempt to identify, mitigate and manage these risks by employing a number of measures, including insurance, monitoring of our systems and networks, employee training and maintenance of backup and protective systems, our systems, networks, products and services remain potentially vulnerable to increasingly sophisticated advanced persistent threats that may have a material effect on our business.
Our Credit Facility also requires us to achieve specified financial and operating results and maintain compliance with specified financial ratios, including as a condition to accessing additional amounts available for borrowing. As of December 31, 2022 and on the date of filing this Report, we were in compliance with each of these financial covenants.
Our Credit Facility also requires us to achieve specified financial and operating results and maintain compliance with specified financial ratios, including as a condition to accessing additional amounts available for borrowing. As of December 31, 2023 and on the date of filing this Report, we were in compliance with each of these financial covenants.
Risks Related to our Indebtedness, Capitalization Matters and Corporate Governance • Our level of indebtedness and any future indebtedness we may incur may limit our operational and financing flexibility. • The terms of our Credit Facility impose operating and financial restrictions on us. • Our variable rate indebtedness subjects us to interest rate risk, which, along with the phase-out of LIBOR and transition to SOFR, could cause our indebtedness service obligations to increase significantly. • The price of our Common Stock may be volatile. • Any issuance of Common Stock upon the exercise of remaining warrants will cause dilution to existing stockholders and may depress the market price of our Common Stock. • Certain of our common stockholders can exercise significant control, which could limit our stockholders’ ability to influence the outcome of key transactions, including a change of control. • Future resales of our Common Stock held by significant stockholders may cause the market price of our Common Stock to drop significantly. • Our stock repurchase program could affect the price of our Common Stock and increase volatility and may be suspended or terminated at any time, which may result in a decrease in the trading price of our Common Stock. • We do not currently intend to pay dividends on our Common Stock. • The DGCL and our organizational documents contain provisions that limit the ability of stockholders to take certain actions and could delay or discourage takeover attempts that stockholders may consider favorable. • Our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, stockholders or employees could be limited by our choice of forum in our bylaws.
Risks Related to our Indebtedness, Capitalization Matters and Corporate Governance • Our level of indebtedness and any future indebtedness we may incur may limit our operational and financing flexibility. • The terms of our credit facility impose operating and financial restrictions on us. • Our variable rate indebtedness subjects us to interest rate risk, which, along with the phase-out of LIBOR and transition to SOFR, could cause our indebtedness service obligations to increase significantly. • Our stock repurchase program could affect the price of our Common Stock and increase volatility and may be suspended or terminated at any time, which may result in a decrease in the trading price of our Common Stock. • The price of our Common Stock may be volatile and risk compliance with stock exchange requirements. • Any issuance of Common Stock upon the exercise of remaining warrants will cause dilution to existing stockholders and may depress the market price of our Common Stock. • Certain of our common stockholders can exercise significant control, which could limit our stockholders’ ability to influence the outcome of key transactions, including a change of control. • We do not currently intend to pay dividends on our Common Stock. • The DGCL and our organizational documents contain provisions that limit the ability of stockholders to take certain actions and could delay or discourage takeover attempts that stockholders may consider favorable. • Our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, stockholders or employees could be limited by our choice of forum in our bylaws.
Also, the issuance of Common Stock upon exercise of warrants that remain outstanding and exercisable may result in immediate dilution to the equity interests of our existing common stockholders and might result in dilution in the tangible net book value of a share of Common Stock, depending upon the price on which the additional shares are issued.
Also, the issuance of Common Stock upon exercise of warrants that remain outstanding and exercisable may result in immediate dilution to the equity interests of our existing common stockholders and might result in dilution in the tangible net book value of a share of Common Stock, depending upon the price at which the additional shares are issued.
Ravin’s condition has not adversely impacted his performance as Chief Executive Officer and President or on the overall management of the Company, we can provide no assurance that his condition will not affect his ability to perform the role of Chief Executive Officer and President in the future.
Ravin’s condition has not adversely impacted his performance as Chief Executive Officer, Chairman of the Board and President or on the overall management of the Company, we can provide no assurance that his condition will not affect his ability to perform the role of Chief Executive Officer, Chairman of the Board and President in the future.
If one or more of these analysts ceases coverage of us or fails to publish reports on us regularly, our share price or trading volume could decline. If no additional analysts commence coverage of us, the market price and volume for our common shares could be adversely affected. -38-
If one or more of these analysts ceases coverage of us or fails to publish reports on us regularly, our share price or trading volume could decline. If no additional analysts commence coverage of us, the market price and volume for our common shares could be adversely affected. -39-
We may not successfully accomplish all or any of these objectives. In addition, our historical rapid growth has placed and may continue to place significant demands on our management and our operational and financial resources.
We may not successfully accomplish all or any of these objectives. -26- In addition, our historical growth has placed and may continue to place significant demands on our management and our operational and financial resources.
The following is a summary of some of the principal risk factors which are more fully described below. -16- Risks Related to Our Business, Operations and Industry • Since 2010, we and our Chief Executive Officer and President have been involved in continuing litigation with Oracle.
The following is a summary of some of the principal risk factors which are more fully described below. Risks Related to Our Business, Operations and Industry • Since 2010, we and our Chief Executive Officer, Chairman of the Board and President have been involved in continuing litigation with Oracle.
We rely on our management team and other key employees, including our Chief Executive Officer and President, and the loss or disability of one or more key employees could harm our business.
We rely on our management team and other key employees, including our Chief Executive Officer, Chairman of the Board and President, and the loss or disability of one or more key employees could harm our business.
In addition, we are required to have our independent registered public accounting firm attest to and report on management’s assessment of the effectiveness of our internal control over financial reporting.
We are required to have our independent registered public accounting firm attest to and report on management’s assessment of the effectiveness of our internal control over financial reporting.
If we are not able to maintain an effective system of internal control over financial reporting, current and potential investors could lose confidence in our financial reporting, which could harm our business and have an adverse effect on our Common Stock price. We have had material weaknesses in our internal control over financial reporting.
If we are not able to maintain an effective system of internal control over financial reporting, current and potential investors could lose confidence in our financial reporting, which could harm our business and have an adverse effect on our Common Stock price.
We depend and rely on software-as-a-service, or SaaS, technologies and related services from third parties in order to operate critical functions of our business, including billing and order management, financial accounting services, and customer relationship management services.
We depend and rely on software-as-a-service, or SaaS, technologies and related services from third parties to operate critical functions of our business, including billing and order management, financial accounting services, and client relationship management services.
We are self-insured for any costs related to any current or future intellectual property litigation, although we maintain and have tendered our errors and omissions insurance coverage for the wrongful acts alleged in Oracle’s contempt proceeding in order to seek determinations of a duty to defend.
We are self-insured for any costs related to any current or future intellectual property litigation, although we maintain and have tendered our errors and omissions insurance coverage for the wrongful acts alleged in Oracle’s Rimini I Injunction contempt proceeding to seek determinations of a duty to defend.
Our retention rates may decline or fluctuate as a result of a number of factors, including our clients’ decision to license a new product or release from an enterprise software vendor, our clients’ decision to move to another enterprise software vendor, product or release for which we do not offer products or services, any remaining impact of the COVID-19 pandemic and global economic conditions, including rising inflation and interest rates, on our clients’ businesses, client satisfaction with our products and services, the acquisition of our clients by other companies, and clients going out of business.
Our retention rates may decline or fluctuate as a result of a number of factors, including our clients’ decision to license a new product or release from an enterprise software vendor, our clients’ decision to move to another enterprise software vendor, product or release for which we do not offer products or services, global economic conditions, including rising inflation and interest rates on our clients’ businesses, client satisfaction with our products and services, the acquisition of our clients by other companies and clients going out of business.
Although we provide support services for additional Oracle product lines that are not subject to the Injunction and litigation with Oracle, as well as for software products provided by companies other than Oracle, our current revenue depends significantly on the product lines that are the subject of the Injunction and Rimini II litigation.
Although we provide support services for additional Oracle product lines that are not subject to the Rimini I Injunction or the Rimini II Injunction, as well as for software products provided by companies other than Oracle, our current revenue depends significantly on the product lines that are the subject of the Rimini I Injunction and Rimini II Injunction.
For further information regarding our controls and procedures, see “Controls and Procedures” in Part II, Item 9A of this Report. If we fail to enhance and protect our brand, our ability to expand our client base will be impaired and our financial condition may suffer.
For further information regarding our controls and procedures, see “Controls and Procedures” in Part I, Item 4 of this Report. If we fail to enhance and protect our brand, our ability to expand our client base will be impaired and our financial condition may suffer.
Oracle may file additional contempt motions against us at any time to attempt to enforce its interpretation of the Injunction or if it has reason to believe we are not in compliance with the express terms of the Injunction.
Oracle may file additional contempt motions against us at any time to attempt to enforce its interpretation of the Rimini I Injunction and/or the Rimini II Injunction or if it has reason to believe we are not in compliance with the express terms of the Rimini I Injunction and/or the Rimini II Injunction.
Risks Related to Our Business, Operations and Industry Risks Related to Litigation We and our Chief Executive Officer and President have been involved in continuing litigation with Oracle since 2010.
Risks Related to Our Business, Operations and Industry Risks Related to Litigation We and our Chief Executive Officer, Chairman of Board and President have been involved in continuing litigation with Oracle since 2010.
If we are obligated to pay substantial attorneys’ fees and/or costs to Oracle or are enjoined from certain business practices, this could reduce the amount of cash flows available to pay principal, interest, fees and other amounts due under our Credit Facility, which could result in an event of default, in which case the lenders could demand accelerated payment of principal, accrued and unpaid interest, and other fees.
If we are obligated to pay substantial attorneys’ fees and/or costs to Oracle as a result of the District Court’s rulings in Rimini II, or are enjoined from certain business practices, this could reduce the amount of cash flows available to pay principal, interest, fees and other amounts due under our Credit Facility, which could result in an event of default, in which case the lenders could demand accelerated payment of principal, accrued and unpaid interest, and other fees.
A disruption or failure of these systems in the event of an online attack, earthquake, fire, terrorist attack, geopolitical instability including the ongoing conflict between Russia and Ukraine, war, power loss, telecommunications failure, extreme weather conditions (such as hurricanes, wildfires or floods) or other catastrophic event could cause system interruptions, delays in accessing our service, reputational harm, loss of critical data or could prevent us from providing our products and services to our clients.
A disruption or failure of these systems in the event of an online attack, earthquake, fire, terrorist attack, geopolitical instability such as the conflicts between Israel and Hamas, war, power loss, telecommunications failure, extreme weather conditions (such as hurricanes, wildfires or floods) or other catastrophic event could cause system interruptions, delays in accessing our service, reputational harm, loss of critical data or could prevent us from providing our products and services to our clients.
Our efforts to attract, develop, integrate and retain highly skilled employees with appropriate qualifications may be compounded by intensified restrictions on travel (including restrictions implemented during a pandemic or similar circumstance), immigration, or the availability of work visas. Many companies with which we compete for experienced personnel have greater resources and less stock price volatility than we do.
Our efforts to attract, develop, integrate and retain highly skilled employees with appropriate qualifications may be compounded by intensified restrictions on travel, immigration, or the availability of work visas. Many companies with which we compete for experienced personnel have greater resources and less stock price volatility than we do.
Certain of our common stockholders can exercise significant control, which could limit our stockholders’ ability to influence the outcome of key transactions, including a change of control. Based on the number of shares of Common Stock outstanding as of December 31, 2022, two of our stockholders have aggregate voting power of 39.6% of our outstanding capital stock.
Certain of our common stockholders can exercise significant control, which could limit our stockholders’ ability to influence the outcome of key transactions, including a change of control. Based on the number of shares of Common Stock outstanding as of December 31, 2023, two of our stockholders have aggregate voting power of 38.3% of our outstanding capital stock.
Our directors and officers or persons affiliated with our directors and officers have aggregate voting power of approximately 42.0% as of December 31, 2022. As a result, these stockholders, acting together, have significant influence over all matters that require approval by our stockholders, including the election of directors and approval of significant corporate transactions.
Our directors and officers or persons affiliated with our directors and officers have aggregate voting power of approximately 39.9% as of December 31, 2023. As a result, these stockholders, acting together, have significant influence over all matters that require approval by our stockholders, including the election of directors and approval of significant corporate transactions.
Risks Related to our Indebtedness and Securities Our level of indebtedness and any future indebtedness we may incur may limit our operational and financing flexibility and negatively impact our business. On December 31, 2022, our outstanding indebtedness under the Credit Facility and finance leases totaled $78.8 million. We may incur substantial additional indebtedness in the future.
Risks Related to our Indebtedness and Securities Our level of indebtedness and any future indebtedness we may incur may limit our operational and financing flexibility and negatively impact our business. On December 31, 2023, our outstanding indebtedness under our Credit Facility and finance leases totaled $73.0 million. We may incur substantial additional indebtedness in the future.
Additionally, the emergence or spread of a pandemic or other widespread health emergency (or concerns over and response to the possibility of such an emergency), including any lingering impacts of the COVID-19 pandemic could adversely affect our business, financial condition and results of operations. Failure to comply with laws and regulations applicable to our operations could harm our business.
Additionally, the emergence or spread of a pandemic or other widespread health emergency (or concerns over and response to the possibility of such an emergency) could adversely affect our business, financial condition and results of operations. Failure to comply with laws and regulations applicable to our operations could harm our business.
If we are obligated to pay substantial civil assessments arising from any finding of contempt, this could reduce the amount of cash flows available to pay principal, interest, fees and other amounts due under our Credit Facility, which could result in an event of default, in which case the lenders could demand accelerated payment of principal, accrued and unpaid interest, and other fees.
If we are obligated to pay substantial civil assessments arising from any finding of contempt, this could reduce the amount of cash flows available to pay principal, interest, fees and other amounts due under our credit facility dated July 20, 2021, as amended (our “Credit Facility”), which could result in an event of default, in which case the lenders could demand accelerated payment of principal, accrued and unpaid interest, and other fees.
Such contempt proceedings or any judicial finding of contempt could result in a material adverse effect on our business and financial condition. In addition, the existence of the Injunction, alone, or the District Court’s January 12, 2022 order, could dissuade clients from purchasing or continuing to purchase our services.
Such contempt proceedings or any judicial finding of contempt could result in a material adverse effect on our business and financial condition. In addition, the existence of the Rimini I Injunction, the Rimini II Injunction, the District Court’s January 2022 order and/or the District Court’s July 2023 order could dissuade clients from purchasing or continuing to purchase our services.
Our past growth is not indicative of our future growth, and if we grow rapidly, we may not be able to manage our growth effectively. Our revenue grew from $374.4 million for the year ended December 31, 2021 to $409.7 million for the year ended December 31, 2022, representing a period over period increase of 9%.
Our past growth is not indicative of our future growth, and if we grow rapidly, we may not be able to manage our growth effectively. Our revenue grew from $409.7 million for the year ended December 31, 2022 to $431.5 million for the year ended December 31, 2023, representing a period over period increase of 5%.
Furthermore, due to geopolitical tensions related to the conflict between Russia and Ukraine and developments in China, the risk of cyber-attacks may be elevated. We have been the subject of cybersecurity threats and expect such threats to continue in the future.
Furthermore, due to tensions related to the ongoing geopolitical conflicts such as between Russia and Ukraine, the risk of cyber-attacks may be elevated. We have been the subject of cybersecurity threats and expect such threats to continue in the future.
Effective February 28, 2023, we amended both our Credit Facility and our then-effective interest rate swap agreement to implement certain changes in the reference rate from LIBOR to the Secured Overnight Financing Rate (“SOFR”) in response to the previous announcement by the ICE Benchmark Administration, the administrator of LIBOR, that it would cease publication of all remaining U.S.
Effective February 28, 2023, we amended both our Credit Facility and our then-effective interest rate swap agreement to implement certain changes in the reference rate from LIBOR to SOFR in response to the previous announcement by the ICE Benchmark Administration, the administrator of LIBOR, that it would cease publication of all remaining U.S. Dollar LIBOR settings effective June 30, 2023.
General worldwide economic conditions have experienced significant fluctuations in recent years, and market volatility and uncertainty remain widespread, with the expectation that inflation (including hyperinflation), other economic challenges and possible recession will be exacerbated for an extended period.
General worldwide economic conditions have experienced significant fluctuations in recent years, and market volatility and uncertainty remain widespread, with the expectation that inflation, other economic challenges and possible recession will be exacerbated for an extended period. Inflation has accelerated in the U.S. and globally.
We also deliver tax, legal and regulatory updates to our clients. If there are inaccuracies in these updates, or if we are not able to deliver them on a timely basis to our clients, our reputation may be damaged, and we could face claims for compensation from our clients and potentially lose clients.
We also deliver tax, legal and regulatory updates to our clients. If there are inaccuracies in these updates, or if we are not able to deliver them on a timely basis to our clients, our reputation may be damaged, and we could be found liable for damages to our clients and potentially lose clients.
An adverse outcome in the ongoing litigation could result in the payment of substantial attorneys’ fees and/or costs and/or an injunction against certain of our business practices, which could have a material adverse effect on our business and financial results.
Adverse outcomes and future adverse outcomes in the ongoing litigation could result in the payment of substantial attorneys’ fees and/or costs and/or injunctions against certain of our business practices, which could have a material adverse effect on our business and financial results.
Our ability to make these payments depends on our future performance, which will be affected by financial, business, economic and other factors, many of which we cannot control, including any lingering impacts of the COVID-19 pandemic, inflation and global economic conditions.
Our ability to make these payments depends on our future performance, which will be affected by financial, business, economic and other factors, many of which we cannot control, including inflation and global economic conditions.
We expect competition to continue to increase in the future, particularly if we prevail in Rimini II, which could harm our ability to increase sales, maintain or increase renewals and maintain our prices.
We expect competition to continue to increase in the future, particularly if we prevail in our appeal of the District Court’s order and injunction in Rimini II, which could harm our ability to increase sales, maintain or increase renewals and maintain our prices.
Dollar LIBOR settings effective June 30, 2023. As a result, we have a choice of interest rates between (a) Adjusted Term SOFR and (b) a Base Rate, in each case plus an applicable margin and as further defined in the Credit Facility.
As a result, we have a choice of interest rates between (a) Adjusted Term SOFR and (b) a Base Rate, in each case plus an applicable margin and as further defined in the Credit Facility.
On October 24, 2022, the District Court entered an order granting the Stipulation, dismissing with prejudice Oracle’s claims in Rimini II “for monetary relief of any kind under any legal theory [,] including but not limited to claims for damages, restitution, unjust enrichment, and engorgement [ . . . ].” In addition, Oracle’s claims for breach of contract, inducing breach of contract and an accounting were dismissed with prejudice.
The District Court entered an order on October 24, 2022, dismissing with prejudice Oracle’s claims in Rimini II “for monetary relief of any kind under any legal theory[,] including but not limited to claims for damages, restitution, unjust enrichment, and engorgement. . . .” In addition, Oracle’s claims for breach of contract, inducing breach of contract and an accounting were dismissed with prejudice, meaning that the claims (including for monetary damages) have been dismissed on their merits and that the judgment rendered is final.
Since November 2018, we have been subject to a permanent injunction which prohibits us from using certain support processes that had been found in Rimini I to “innocently” infringe certain Oracle copyrights (“Injunction”).
Since November 2018, we have been subject to a permanent injunction (the “Rimini I Injunction”) prohibiting us from using certain support processes that had been found in Rimini I to “innocently” infringe certain Oracle copyrights.
We may also be required to accept terms that further restrict our ability to incur additional indebtedness, take other actions that would adversely impact the short-term price of our Common Stock, or force us to maintain specified liquidity or other ratios, any of which could harm our business, results of operations and financial condition and reduce the value of our Common Stock. -25- Our business may suffer if it is alleged or determined that our technology infringes the intellectual property rights of others.
We may also be required to accept terms that further restrict our ability to incur additional indebtedness, take other actions that would adversely impact the short-term price of our Common Stock, or force us to maintain specified liquidity or other ratios, any of which could harm our business, results of operations and financial condition and reduce the value of our Common Stock.
As of December 31, 2022, (i) approximately 26.6% of our outstanding voting capital stock is held by Adams Street Partners LLC and certain Adams Street fund limited partnerships and (ii) approximately 12.9% of our outstanding voting capital stock is beneficially owned by our Chief Executive Officer and President.
As of December 31, 2023, (i) approximately 26.3% of our outstanding voting capital stock is held by Adams Street Partners LLC and certain Adams Street fund limited partnerships and (ii) approximately 12.0% of our outstanding voting capital stock is beneficially owned by our Chief Executive Officer, Chairman of the Board and President.
We cannot provide assurances that we will have sufficient assets which would allow us to repay such indebtedness in full at such time. As a result, we could be forced into bankruptcy or liquidation. In October 2014, we filed a separate lawsuit, Rimini Street Inc. v.
We cannot provide assurances that we will have sufficient assets which would allow us to repay such indebtedness in full at such time. As a result, we could be forced into bankruptcy or liquidation.
During the course of these cases, we anticipate there will be rulings by the District Court in Rimini II, the District Court in the contempt proceedings, and the Court of Appeals in both the contempt proceedings and in Rimini II in connection with hearings, motions, decisions, and other matters, as well as other interim developments related to the litigations.
During the course of these cases, we anticipate there will be additional rulings by the District Court in Rimini II with respect to attorneys’ fees and costs and the Court of Appeals in Rimini II in connection with hearings, motions, decisions, and other matters, as well as other interim developments related to the litigation.
It is presently expected that we will retain all earnings for use in our business operations and, -35- accordingly, it is not expected that our Board of Directors will declare any dividends on our Common Stock in the foreseeable future.
It is presently expected that we will retain all earnings for use in our business operations and, accordingly, it is not expected that our Board of Directors will declare any dividends on our Common Stock in the foreseeable future. Therefore, the success of an investment in shares of our Common Stock will depend upon any future appreciation in its value.
Our success depends, in part, upon protecting our proprietary products, services, knowledge, software tools and processes. We rely on a combination of copyrights, trademarks, service marks, trade secret laws and contractual restrictions to establish and protect our proprietary rights. However, the steps we take to protect our intellectual property may be inadequate.
We rely on a combination of copyrights, trademarks, service marks, trade secret laws and contractual restrictions to establish and protect our proprietary rights. However, the steps we take to protect our intellectual property may be inadequate.
The loss of or a disability that would prevent our Chief Executive Officer and President or any of our key senior members of management from substantially performing their duties could have a material adverse effect on our business, operating results and financial condition, particularly if we are unable to hire and integrate suitable replacements on a timely basis. Mr.
Additionally, the failure to attract and retain additional qualified personnel, including sales personnel, or to expand our marketing and sales capabilities could prevent us from executing our business strategy. -25- The loss of or a disability that would prevent our Chief Executive Officer, Chairman of the Board and President or any of our key senior members of management from substantially performing their duties could have a material adverse effect on our business, operating results and financial condition, particularly if we are unable to hire and integrate suitable replacements on a timely basis.
Therefore, the success of an investment in shares of our Common Stock will depend upon any future appreciation in its value. There is no guarantee that shares of our Common Stock will appreciate in value or even maintain the price at which our stockholders have purchased their shares.
There is no guarantee that shares of our Common Stock will appreciate in value or even maintain the price at which our stockholders have purchased their shares.
Further, our competitors may attempt to use the Oracle litigation and the existence of the Injunction described above under the section titled “Risks Related to Litigation,” to dissuade certain of our prospective or existing clients from purchasing or continuing to purchase any or all of the components of our Solutions Portfolio, including our enterprise software support services. -22- We have had a history of losses and may not achieve or sustain revenue growth or profitability in the future.
Further, our competitors may attempt to use the Oracle litigation and the existence of the Rimini I Injunction and the Rimini II Injunction described above under the section titled “Risks Related to Litigation,” to dissuade certain of our prospective or existing clients from purchasing or continuing to purchase any or all of the components of our Solutions Portfolio, including our enterprise software support services.
The consequences of transitioning to SOFR could result in an increase in the cost of our variable rate indebtedness, which may impact our ability to refinance some or all of our existing indebtedness or otherwise have a material adverse impact on our business, financial condition and results of operations.
The consequences of transitioning to SOFR could result in an increase in the cost of our variable rate indebtedness, which may impact our ability to refinance some or all of our existing indebtedness or otherwise have a material adverse impact on our business, financial condition and results of operations. -35- Our stock repurchase program could affect the price of our Common Stock and increase volatility and may be suspended or terminated at any time, which may result in a decrease in the trading price of our Common Stock.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeWe also have offices located in Pleasanton, California; Chicago, Illinois; New York, New York; Wilmington, Delaware; Greensboro, North Carolina; Hong Kong; London, United Kingdom; Sydney, Australia; Melbourne, Australia; Brisbane, Australia; Auckland, New Zealand; Dubai, United Arab Emirates; Kuala Lumpur, Malaysia; Mexico City, Mexico; Amsterdam, Netherlands; São Paulo, Brazil; Frankfurt, Germany; Paris, France; Warsaw, Poland; Stockholm, Sweden; Taipei, Taiwan; Tel Aviv, Israel; Tokyo, Japan; Osaka, Japan; Seoul, South Korea; Hyderabad, India; Bengaluru, India; and Singapore.
Biggest changeWe also have offices located in Pleasanton, California; Chicago, Illinois; Greensboro, North Carolina; London, United Kingdom; Sydney, Australia; Melbourne, Australia; Brisbane, Australia; Dubai, United Arab Emirates; Kuala Lumpur, Malaysia; Mexico City, Mexico; Amsterdam, Netherlands; São Paulo, Brazil; Frankfurt, Germany; Paris, France; Stockholm, Sweden; Taipei, Taiwan; Tel Aviv, Israel; Tokyo, Japan; Osaka, Japan; Seoul, South Korea; Hyderabad, India; Bengaluru, India; and Singapore.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeRegardless of the outcome, litigation can have an adverse impact on us because of judgment, defense and settlement costs, diversion of management resources and other factors. Item 4. Mine Safety Disclosures Not applicable. -39- PART II
Biggest changeRegardless of the outcome, litigation can have an adverse impact on us because of judgment, defense and settlement costs, diversion of management resources and other factors. Item 4. Mine Safety Disclosures Not applicable. -42- PART II
Item 3. Legal Proceedings The legal proceedings and government inquiry described in Note 10 of the 2022 consolidated financial statements included in Item 8 of this Report are incorporated in this Item 3. Legal Proceedings by reference.
Item 3. Legal Proceedings The legal proceedings and government inquiry described in Note 10 of the 2023 consolidated financial statements included in Item 8 of this Report are incorporated in this Item 3. Legal Proceedings by reference.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeItem 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information Our Common Stock trades on the Nasdaq Global Market under the symbol “RMNI.” Holders On February 27, 2023, there were approximately 45 stockholders of record of our Common Stock.
Biggest changeItem 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information Our Common Stock trades on the Nasdaq Global Market under the symbol “RMNI.” Holders On February 26, 2024, there were approximately 46 stockholders of record of our Common Stock.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeResults of Operations Comparison of Years ended December 31, 2022 and 2021 -47- Our consolidated statements of operations for the years ended December 31, 2022 and 2021 are presented below (in thousands): Variance 2022 2021 Amount Percent Revenue $ 409,662 $ 374,430 $ 35,232 9.4% Cost of revenue: Employee compensation and benefits 102,314 95,053 7,261 7.6% Engineering consulting costs 23,296 18,871 4,425 23.4% Administrative allocations (1) 15,416 14,681 735 5.0% All other costs 11,359 7,859 3,500 44.5% Total cost of revenue 152,385 136,464 15,921 11.7% Gross profit 257,277 237,966 19,311 8.1% Gross margin 62.8 % 63.6 % Operating expenses: Sales and marketing 143,018 128,496 14,522 11.3% General and administrative 75,367 64,172 11,195 17.4% Impairment charges related to operating lease right-of-use assets 3,013 1,649 1,364 82.7% Reorganization costs 2,525 — 2,525 N/A Litigation costs and related recoveries, net 25,265 16,876 8,389 49.7% Total operating expenses 249,188 211,193 37,995 18.0% Operating income 8,089 26,773 (18,684) (69.8)% Non-operating expenses: Interest expense (4,271) (1,550) (2,721) 175.5% Loss from change in fair value of redeemable warrants — (4,183) 4,183 (100.0)% Other expenses, net (13) (1,605) 1,592 (99.2)% Income before income taxes 3,805 19,435 (15,630) (80.4)% Income taxes (6,285) 55,784 (62,069) (111.3)% Net income (loss) $ (2,480) $ 75,219 $ (77,699) (103.3)% _____________________ (1) Includes the portion of costs for information technology, security services and facilities costs that are allocated to cost of revenue.
Biggest changeResults of Operations Comparison of Years ended December 31, 2023 and 2022 Our consolidated statements of operations for the years ended December 31, 2023 and 2022 are presented below (in thousands): Variance 2023 2022 Amount Percent Revenue $ 431,496 $ 409,662 $ 21,834 5.3% Cost of revenue: Employee compensation and benefits 103,700 102,314 1,386 1.4% Engineering consulting costs 26,738 23,296 3,442 14.8% Administrative allocations (1) 14,540 15,416 (876) (5.7)% All other costs 17,535 11,359 6,176 54.4% Total cost of revenue 162,513 152,385 10,128 6.6% Gross profit 268,983 257,277 11,706 4.5% Gross margin 62.3% 62.8% Operating expenses: Sales and marketing 142,339 143,018 (679) (0.5)% General and administrative 73,044 75,367 (2,323) (3.1)% Impairment charges related to operating lease right-of-use assets — 3,013 (3,013) (100.0)% Reorganization costs 59 2,525 (2,466) (97.7)% Litigation costs and related recoveries, net 9,776 25,265 (15,489) (61.3)% Total operating expenses 225,218 249,188 (23,970) (9.6)% Operating income 43,765 8,089 35,676 441.0% Non-operating expenses: Interest expense (5,522) (4,271) (1,251) 29.3% Other income (expenses), net 2,989 (13) 3,002 (23,092.3)% Income before income taxes 41,232 3,805 37,427 983.6% Income taxes (15,173) (6,285) (8,888) 141.4% Net income (loss) $ 26,059 $ (2,480) $ 28,539 (1,150.8)% _____________________ (1) Includes the portion of costs for information technology, security services and facilities costs that are allocated to cost of revenue.
For the year ended December 31, 2022, the non-cash expenses, net amounted to $20.9 million and were comprised of the following: stock-based compensation expense of $10.9 million, amortization and accretion related to ROU assets and liabilities of $5.5 million, a non-cash impairment charge related to ROU assets of $3.0 million, depreciation and amortization expense of $2.5 million, and accretion and amortization of debt discount and issuance costs of $1.0 million.
For the year ended December 31, 2022, the non-cash expenses, net of $20.9 million were comprised of the following: stock-based compensation expense of $10.9 million, amortization and accretion related to ROU assets and liabilities of $5.5 million, a non-cash impairment charge related to ROU assets of $3.0 million, depreciation and amortization expense of $2.5 million, and accretion and amortization of debt discount and issuance costs of $1.0 million.
Accordingly, these are the policies we believe are the most critical to aid in fully understanding and evaluating our consolidated financial condition and results of operations. Income Taxes and Valuation of Deferred Tax Assets We account for income taxes in accordance with ASC 740, “Income Taxes” (“ASC 740”).
Accordingly, these are the policies we believe are the most critical to aid in fully understanding and evaluating our consolidated financial condition and results of operations. Income Taxes and Valuation of Deferred Tax Assets -56- We account for income taxes in accordance with ASC 740, “Income Taxes” (“ASC 740”).
When providing supplemental software support for a perpetual license, where the client procures our support service in addition to retaining the software vendor’s base support, we generally offer our clients service for a fee that is equal to approximately 25% of the annual fees charged by the software vendor for their base support.
When providing supplemental software support for a perpetual license, where the client procures our support service in addition to retaining the software vendor’s base support, we generally offer our clients service for a fee that we believe is equal to approximately 25% of the annual fees charged by the software vendor for their base support.
Our solutions are designed to meet specific client needs and are designed to provide what we believe is exceptional value and return for the fees charged. For more details about our Solutions Portfolio, please see Item 1 “Business” included in Part I of this Report.
Our solutions are designed to meet specific client needs and are designed to provide what we believe is exceptional value and return -46- for the fees charged. For more details about our Solutions Portfolio, please see Item 1 “Business” included in Part I of this Report.
These expenses also include non - employee expenses, such as travel - related expenses, outside services, legal, auditing and other professional fees, and general corporate expenses, along with an allocation of our general overhead expenses. -46- Impairment charges related to operating lease right-of-use assets.
These expenses also include non - employee expenses, such as travel - related expenses, outside services, legal, auditing and other professional fees, and general corporate expenses, along with an allocation of our general overhead expenses. Impairment charges related to operating lease right-of-use assets.
When we provide our support solutions for a perpetual software license, we generally offer our clients service for a fee that is equal to approximately 50% of the annual fees charged by the software vendor for their base support.
When we provide our support solutions for a perpetual software license, we generally offer our clients service for a fee that we believe is equal to approximately 50% of the annual fees charged by the software vendor for their base support.
The sales lead is followed by an -45- assessment of the prospect’s current software license contract terms where relevant, systems environment, products and releases being used, needs and objectives.
The sales lead is followed by an assessment of the prospect’s current software license contract terms where relevant, systems environment, products and releases being used, needs and objectives.
The evaluation of deferred tax assets requires judgment in assessing the -55- likely future tax consequences of events that have been recognized in our financial statements or tax returns and forecasting future profitability.
The evaluation of deferred tax assets requires judgment in assessing the likely future tax consequences of events that have been recognized in our financial statements or tax returns and forecasting future profitability.
Effective July 20, 2021, we received $89.3 million of net proceeds related to the Credit Facility. The borrowings under the Credit Facility were discounted at 0.375%. As part of the transaction, we incurred issuance costs of $4.2 million, which were capitalized and will be amortized over the term of the Credit Facility.
Effective July 20, 2021, we received $89.3 million of net proceeds pursuant to the Credit Facility. The borrowings under the Credit Facility were discounted at 0.375%. As part of the transaction, we incurred issuance costs of $4.2 million, which were capitalized and will be amortized over the term of the Credit Facility.
For the year ended December 31, 2022, cash used in investing activities of $24.4 million consisted of investment purchases of $31.2 million, offset in part by investment sales of $11.1 million as we began to invest funds in September 2022, and capital expenditures of $4.3 million.
For the year ended December 31, 2022, cash used in investing activities of $24.4 million consisted of investment purchases of $31.2 million, offset in part by investment sales of $11.1 million as we began to invest funds in September 2022, as well as capital expenditures of $4.3 million.
The lower gross margin for the year ended December 31, 2022 was primarily due to accelerating employee compensation and benefits, engineering consulting costs and all other costs more rapidly than our revenue growth. Sales and marketing expenses.
The lower gross margin for the year ended December 31, 2023 was primarily due to accelerating employee compensation and benefits, engineering consulting costs and all other costs more rapidly than our revenue growth. Sales and marketing expenses.
As of December 31, 2022, 2021 and 2020, we had approximately 3,020, 2,840 and 2,480 active clients, respectively. We define a unique client as a distinct entity, such as a company, an educational or government institution or a subsidiary, division or business unit of a company that purchases one or more of our support, products or services.
As of December 31, 2023, 2022 and 2021, we had approximately 3,030, 3,020 and 2,840 active clients, respectively. We define a unique client as a distinct entity, such as a company, an educational or government institution or a subsidiary, division or business unit of a company that purchases one or more of our support, products or services.
As a result, we believe that licensees often view enterprise software support, products and services as a mandatory cost of doing business. -43- The majority of our revenue through December 31, 2022, was generated from our support solutions.
As a result, we believe that licensees often view enterprise software support, products and services as a mandatory cost of doing business. The majority of our revenue through December 31, 2023, was generated from our support solutions.
The foreign exchange gain was offset by other non-operating expenses of $25 thousand for the year ended December 31, 2022. Income taxes.
The foreign exchange gain was offset by other non-operating expenses of $25 thousand for the year ended December 31, 2022.
We count as two separate unique clients when two separate subsidiaries, divisions or business units of an entity purchase our products or services. As of December 31, 2022, 2021 and 2020, we had over 1,510, 1,470 and 1,310 unique clients, respectively.
We count as two separate unique clients when two separate subsidiaries, divisions or business units of an entity purchase our products or services. As of December 31, 2023, 2022 and 2021, we had over 1,530, 1,510 and 1,470 unique clients, respectively.
An impairment charge is recognized for the amount by which the carrying amount of the asset, or asset group, exceeds its fair value. Reorganization costs. These costs consist primarily of severance costs associated with our reorganization plan that occurred as of the year-end. Litigation costs and related recoveries, net.
An impairment charge is recognized for the amount by which the carrying amount of the asset, or asset group, exceeds its fair value. Reorganization costs. These costs consist primarily of severance costs associated with our reorganization plan that occurred in 2022. Litigation costs and related recoveries, net.
For the year ended December 31, 2022, we experienced significant changes in foreign currency exchange rates as the U.S. Dollar strengthened against the majority of foreign currencies where our foreign entities operate until the fourth quarter of 2022, when the U.S. Dollar started to weaken against some of our foreign currencies. The overall strengthening of the U.S.
For the year ended December 31, 2022, we experienced significant changes in foreign currency exchange rates as the U.S. dollar strengthened against the majority of foreign currencies where we operate until the fourth quarter of 2022 when the U.S. dollar began to weaken against some of our foreign currencies.
Therefore, we believe that working capital deficit is not as meaningful in evaluating our liquidity since the costs of fulfilling our commitments to provide services to customers are currently limited to approximately 37% of the related deferred revenue based on our gross margin of 63% for the year ended December 31, 2022.
Therefore, we believe that working capital deficit is not as meaningful in evaluating our liquidity since the costs of fulfilling our commitments to provide services to customers are currently limited to approximately 38% of the related deferred revenue based on our gross margin of 62% for the year ended December 31, 2023.
References to “management” or “management team” refer to the officers and directors of the Company. A discussion regarding our financial condition and results of operations for fiscal 2022 compared to fiscal 2021 is presented below.
References to “management” or “management team” refer to the officers of the Company. -44- A discussion regarding our financial condition and results of operations for fiscal 2023 compared to fiscal 2022 is presented below.
Key Components of Consolidated Statements of Operations Revenue. We currently derive nearly all of our revenue from subscription-based contracts for software services. Revenue from these contracts is recognized ratably on a straight-line basis over the applicable service period. Cost of revenue.
We currently derive nearly all of our revenue from subscription-based contracts for software services. Revenue from these contracts is recognized ratably on a straight-line basis over the applicable service period. Cost of revenue.
Cash Flows from Financing Activities For the year ended December 31, 2022, cash utilized in financing activities of $13.6 million was attributable to principal payments related to the Credit Facility of $9.5 million, payments to repurchase shares of Common Stock totaling $4.7 million and finance lease payments of $0.3 million.
Cash Flows from Financing Activities For the year ended December 31, 2023, cash utilized in financing activities of $6.9 million was attributable to principal payments related to the Credit Facility of $5.6 million, payments to repurchase shares of Common Stock totaling $1.0 million and finance lease payments of $0.3 million.
We are self-insured for any costs related to any current or future intellectual property litigation. We currently believe our cash on hand, accounts receivable and contractually committed backlog provides us with sufficient liquidity to cover costs related to our litigation with Oracle. Interest expense.
We are self-insured for any costs related to any current or future intellectual property litigation. We currently believe our cash on hand, accounts receivable and contractually committed backlog provides us with sufficient liquidity to cover costs related to our litigation, including Rimini II.
As a result, we collect cash from our customers in advance of when the related service costs are incurred, which resulted in deferred revenue of $265.8 million that is included in current liabilities as of December 31, 2022.
As a result, we collect cash from our customers in advance of when the related service costs are incurred, which resulted in deferred revenue of $263.1 million that is included in current liabilities as of December 31, 2023.
As such, the effects of the COVID-19 pandemic, rising inflation, interest rate increases and other negative impacts on the global economy may not be fully reflected in our financial results until future periods. Refer to “Risk Factors” (Part I, Item 1A of this Report) for a discussion of these factors and other risks.
As such, the effects of rising inflation, interest rate increases and other negative impacts on the global economy may not be fully reflected in our financial results until future periods. Refer to “Risk Factors” (Part I, Item 1A of this Report) for a discussion of these factors and other risks. Key Components of Consolidated Statements of Operations Revenue.
Interest expense is incurred under our Credit Facility and other debt obligations. The components of interest expense include the amount of interest payable in cash at the stated interest rate, interest that is payable in kind through additional borrowings, make-whole applicable premium, and accretion of debt discounts and issuance costs (“DDIC”) using the effective interest method.
The components of interest expense include the amount of interest payable in cash at the stated interest rate, interest that is payable in kind through additional borrowings, make-whole applicable premium, and accretion of debt discounts and issuance costs (“DDIC”) using the effective interest method.
Annual minimum principal payments over the five year term for the Credit Facility will be 5%, 5%, 7.5%, 7.5%, and 10%, respectively, with the remaining balance due at the end of the term. For the year ended December 31, 2022, the Company made principal payments of $9.5 million.
Annual minimum principal payments over the five year term for the Credit Facility are 5%, 5%, 7.5%, 7.5%, and 10%, respectively, with the remaining balance due at the end of the term. For the year ended December 31, 2023, the Company made principal payments of $5.6 million.
Insurance costs and related recoveries, net decreased from a net benefit of $7.1 million for the year ended December 31, 2021 to net benefit of $0.4 million for the year ended December 31, 2022. These balances represent insurance proceeds received relating to our litigation costs incurred as part of the injunction proceedings.
Insurance costs and related recoveries, net changed from a net benefit of $0.4 million for the year ended December 31, 2022 to no activity for the year ended December 31, 2023. These balances represent insurance proceeds received relating to our litigation costs incurred as part of the injunction proceedings.
For the years ended December 31, 2022 and 2021, cash flows provided by operating activities amounted to $34.9 million and $66.9 million, respectively. For the year ended December 31, 2022, cash flows provided by operating activities amounted to $34.9 million.
For the years ended December 31, 2023 and 2022, cash flows provided by operating activities amounted to $12.5 million and $34.9 million, respectively. For the year ended December 31, 2023, cash flows provided by operating activities amounted to $12.5 million.
As a percentage of our revenue, sales and marketing expenses have increased from 34% for the year ended December 31, 2021 to 35% for the year ended December 31, 2022.
As a percentage of our revenue, sales and marketing expenses have decreased from 35% for the year ended December 31, 2022 to 33% for the year ended December 31, 2023.
Cash Flows Used in Investing Activities Cash flows used in investing activities were primarily driven by investment purchases, investment sales and capital expenditures for computer equipment as we continued to invest in our business infrastructure and advance our geographic expansion.
Cash Flows Used in Investing Activities Cash flows used in investing activities were primarily driven by investment purchases, investment sales and capital expenditures for software development costs, computer equipment and leasehold improvements as we continued to invest in our business infrastructure and geographic locations.
The capital expenditures of $4.3 million consisted of new computer equipment and capitalized development costs for a new payroll and client portal system in our U.S. entity.
The capital expenditures consisted of new computer equipment and capitalized development costs for new payroll and client portal systems in our U.S. entity.
A discussion regarding our financial condition and results of operations for fiscal 2021 compared to fiscal 2020 that are not in this Report can be found under Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations," in our Annual Report on the Form 10-K for the fiscal year ended December 31, 2021, which was filed with the SEC on March 2, 2022, and is available on the SEC’s website at sec.gov. -41- The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the consolidated financial statements and the related notes to those statements included in Item 8 of this Report.
A discussion regarding our financial condition and results of operations for fiscal 2022 compared to fiscal 2021 that are not in this Report can be found under Part II, Item 7, "Management’s Discussion and Analysis of Financial Condition and Results of Operations," in our Annual Report on the Form 10-K for the fiscal year ended December 31, 2022, which was filed with the SEC on March 1, 2023, and is available on the SEC’s website at sec.gov.
The extent to which any lingering impacts of the COVID-19 pandemic, rising inflation, interest rate increases and continuing global economic and geopolitical uncertainty impact our business going forward, however, will depend on numerous evolving factors we cannot reliably predict, including continued governmental and business actions in response to any lingering impacts of the pandemic and increasing global economic uncertainty, including the possibility of recession or financial market instability.
The extent to which rising inflation, interest rate increases and continuing global economic and geopolitical uncertainty impact our business going forward, however, will depend on numerous evolving factors we cannot reliably predict, including continued governmental and business actions in response to increasing global economic and geopolitical uncertainty.
Further, although our operations are influenced by general economic conditions, we do not believe the lingering impacts of the COVID-19 pandemic had a significant net impact on our revenue or results of operations during the ended December 31, 2022.
Further, although our operations are influenced by general economic conditions, we do not believe the impacts of the economic -48- disruptions described above had a significant net impact on our revenue or results of operations during the year ended December 31, 2023.
Cash used in investing activities totaled $24.4 million and $2.1 million for the years ended December 31, 2022 and 2021, respectively.
Cash provided by investing activities totaled $3.1 million and cash used in investing activities was $24.4 million for the years ended December 31, 2023 and 2022, respectively.
Our provision for income taxes consists primarily of foreign taxes for the periods presented, as our taxable income for U.S. federal and state purposes is offset by net operating losses.
The provision for income taxes is based on the amount of our taxable income and enacted federal, state and foreign tax rates, as adjusted for allowable credits and deductions. Our provision for income taxes consists primarily of foreign taxes for the periods presented, as our taxable income for U.S. federal and state purposes is offset by net operating losses.
Public company costs that are expected to increase in the future include additional information systems costs, costs for additional personnel in our accounting, human resources, IT and legal functions, SEC and Nasdaq fees, and incremental professional, legal, audit and insurance costs. As a result, we currently expect our general and administrative expenses to increase in dollar terms in future periods.
Public company costs that are expected to increase in the future include additional information systems costs, costs for additional personnel in our accounting, human resources, IT and legal functions, SEC and Nasdaq fees, and incremental -51- professional, legal, audit and insurance costs.
The unfavorable change in deferred costs was due to capitalizing $22.0 million of commission costs and amortizing $17.7 million of these costs during the year ended December 31, 2022. For the year ended December 31, 2021, cash flows provided by operating activities amounted to $66.9 million.
The unfavorable change in deferred contract costs of $0.8 million was due to capitalizing $20.1 million of commission costs and amortizing $19.4 million of these costs during the year ended December 31, 2023. For the year ended December 31, 2022, cash flows provided by operating activities amounted to $34.9 million.
We believe enterprise resource planning (“ERP”), customer relationship management (“CRM”), product lifecycle management (“PLM”) database and technology software systems have become increasingly important in the operation of mission-critical business processes over the last 30 years.
Our Business Model Enterprise software support, products and services is one of the largest categories of overall global information technology (“IT”) spending. We believe enterprise resource planning (“ERP”), customer relationship management (“CRM”), product lifecycle management (“PLM”) database and technology software systems have become increasingly important in the operation of mission-critical business processes over the last 30 years.
Adoption of enterprise software products and services We believe the existing market for independent enterprise software support services is underserved. We are a global provider of enterprise software products and services, the leading third-party support provider for Oracle and SAP software products, and a Salesforce partner.
Any of these outcomes could result in a material adverse effect on our business. Adoption of enterprise software products and services We believe the existing market for independent enterprise software support services is underserved. We are a global provider of enterprise software products and services, the leading third-party support provider for Oracle and SAP software products, and a Salesforce partner.
Percentage figures included in this section have not in all cases been calculated on the basis of such rounded figures but on the basis of such amounts prior to rounding.
Certain figures, such as interest rates and other percentages included in this section have been rounded for ease of presentation. Percentage figures included in this section have not in all cases been calculated on the basis of such rounded figures but on the basis of such amounts prior to rounding.
Given that the increase in the cost of revenue was 12% compared to the increase in revenue of 9%, it resulted in a decrease of 80 basis points in our gross margin for the year ended December 31, 2022 compared to the year ended December 31, 2021.
Given that the increase in the cost of revenue was 7% compared to an increase in revenue of 5%, it resulted in a decline of 50 basis points in our gross margin for the year ended December 31, 2023 compared to the year ended December 31, 2022.
As of December 31, 2022, we employed over 1,920 professionals and supported 3,020 active clients globally, including approximately 75 Fortune 500 companies and 17 Fortune Global 100 companies across a broad range of industries.
As of December 31, 2023, we employed over 2,120 professionals and supported over 3,030 active clients globally, including approximately 73 Fortune 500 companies and 20 Fortune Global 100 companies across a broad range of industries.
We intend to continue investing for long-term revenue growth and profitability. We have invested and expect to continue investing in expanding our ability to market, sell and provide our current and future products and services to clients globally.
Since our inception, we have financed our operations through cash collected from clients and net proceeds from equity financings and borrowings. We intend to continue investing for long-term revenue growth and profitability. We have invested and expect to continue investing in expanding our ability to market, sell and provide our current and future products and services to clients globally.
Liquidity and Capital Resources Overview As of December 31, 2022, we had a working capital deficit of $71.3 million and we had an accumulated deficit of $228.3 million. We recorded a net loss of $2.5 million and net income of $75.2 million for the years ended December 31, 2022 and 2021, respectively.
Liquidity and Capital Resources Overview As of December 31, 2023, we had a working capital deficit of $47.7 million and we had an accumulated deficit of $202.2 million. We recorded net income of $26.1 million for the year ended December 31, 2023 and a net loss of $2.5 million for the year ended December 31, 2022, respectively.
Total cost of revenue increased from $136.5 million for the year ended December 31, 2021 to $152.4 million for the year ended December 31, 2022, an increase of $15.9 million or 12%.
Total cost of revenue increased from $152.4 million for the year ended December 31, 2022 to $162.5 million for the year ended December 31, 2023, an increase of $10.1 million or 7%.
We may choose to seek additional debt or equity financing to support these long-term capital requirements. Alternatively, we may also consider reducing amounts outstanding under our Credit Facility to minimize our exposure to rising interest rates.
We may also enter into arrangements to acquire or invest in complementary businesses, services, technologies, or intellectual property rights in the future. We may choose to seek additional debt or equity financing to support these long-term capital requirements. Alternatively, we may also consider reducing amounts outstanding under our Credit Facility to minimize our exposure to rising interest rates.
We believe our primary competitors for our support services are the enterprise software vendors whose products we service and support, including IBM, Microsoft, Oracle and SAP. We believe our primary competitors for our other solutions include systems integrators, security, interoperability and observability vendors; and IT consulting firms.
We believe our primary competitors for our support services are the enterprise software vendors whose products we service and support, including IBM, Microsoft, Oracle and SAP.
Factors Affecting Our Operating Performance Litigation The information from Item 3, Legal Proceedings and Item 1A, “ Risk Factors-—Risks Related to Litigation — “We and our Chief Executive Officer and President are involved in litigation with Oracle.
We believe the gross margin provides an indication of how efficiently and effectively we are operating our business and serving our clients. -47- Factors Affecting Our Operating Performance Litigation The information from Item 3, Legal Proceedings and Item 1A, “ Risk Factors-—Risks Related to Litigation — “We and our Chief Executive Officer and President are involved in litigation with Oracle.
For claims on which Oracle has prevailed or may prevail, we have been and could be required to pay substantial damages for our current or past business activities or be enjoined from certain business practices. Any of these outcomes could result in a material adverse effect on our business.
For claims on which Oracle has prevailed or may prevail, we have been and could be required to pay substantial damages or reimbursement of legal expenses incurred in connection with the proceedings or for our current or past business activities or be enjoined from certain business practices.
The $6.6 million increase in general and administrative expenses attributable to employee compensation and benefits for the year ended December 31, 2022, was primarily due to an increase in salaries, wages and benefit costs of $6.1 million due to a 22% increase in the average number of employees devoted to general and administrative functions, annual pay increases, and increased bonus payouts, and an increase of $0.5 million in stock-based compensation expense.
The $1.4 million increase in cost of revenue attributable to employee compensation and benefits for the year ended December 31, 2023, was primarily due to an increase in salaries, wages and benefit costs due to a 16% increase in the average number of employees devoted to cost of revenue functions and annual pay increases.
Additionally, reference is made to Note 6 to our consolidated financial statements included in Part II, Item 8 of this Report for a discussion of developments related to our Series A Preferred Stock and Credit Facility.
Additionally, reference is made to Note 5 to our consolidated financial statements included in Part II, Item 8 of this Report for a discussion of developments related to our credit facility dated July 20, 2021, as amended (as amended, the “Credit Facility”).
The cost of revenue includes all direct product line expenses, as well as the expenses incurred by our shared services organization which supports all product lines. We define gross profit as the difference between revenue and the costs incurred in providing the software products and services. Gross margin is the ratio of gross profit divided by revenue.
All the costs incurred in providing these products and services are recognized as part of the cost of revenue. The cost of revenue includes all direct product line expenses, as well as the expenses incurred by our shared services organization which supports all product lines.
In addition to historical financial information, the following discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results and timing of selected events may differ materially from those anticipated in these forward-looking statements as a result of many factors, including those discussed under “ Risk Factors ” in Item 1A and elsewhere in this Report.
Our actual results and timing of selected events may differ materially from those anticipated in these forward-looking statements as a result of many factors, including those discussed under “ Risk Factors ” in Item 1A and elsewhere in this Report. See also “ Cautionary Note Regarding Forward-Looking Statements ” contained in this Report.
Our revenue for the year ended December 31, 2022 increased by $35.2 million or 9% compared to the year ended December 31, 2021. Total cost of revenue for the year ended December 31, 2022 increased by $15.9 million, or 12%, compared to the year ended December 31, 2021.
Total cost of revenue for the year ended December 31, 2023 increased by $10.1 million, or 7%, compared to the year ended December 31, 2022.
The $6.1 million increase in sales and marketing expense attributable to employee compensation and benefits for the year ended December 31, 2022 was primarily due to an increase in (i) salaries, wages and benefit costs of $5.5 million due to a 4% increase in the average number of employees devoted to sales and marketing functions, annual pay increases, and higher bonus payouts and (ii) commissions of $0.6 million due to new customer wins in excess of the prior year.
The $0.6 million increase in sales and marketing expense attributable to employee compensation and benefits for the year ended December 31, 2023 was primarily due to an increase in bonus payouts and commissions of $2.2 million due to new customer wins, which was offset by a reduction salaries, wages and benefit costs of $1.6 million. General and administrative.
On a regional basis, United States revenue grew from $199.8 million for fiscal 2021 to $215.4 million for fiscal 2022, an increase of $15.6 million or 8%, while international revenue grew from $174.6 million for fiscal 2021 to $194.3 million for fiscal 2022, an increase of $19.7 million or 11%. Cost of revenue.
On a regional basis, United States revenue grew from $215.4 million for fiscal 2022 to $220.0 million for fiscal 2023, an increase of $4.6 million or 2%, while international revenue grew from $194.3 million for fiscal 2022 to $211.5 million for fiscal 2023, an increase of $17.2 million or 9%. -50- Cost of revenue.
For year ended December 31, 2021, the non-cash expenses, net amounted to a use of $37.8 million and were comprised of stock-based compensation expense of $9.7 million, amortization and accretion related to ROU assets and liabilities of $6.1 million, a loss from change in fair value of redeemable warrants of $4.2 million, depreciation and amortization expense of $2.4 million, a non-cash impairment charge related to ROU assets of $1.6 million and accretion and amortization of debt discount and issuance costs of $0.4 million.
For the year ended December 31, 2023, the non-cash expenses, net of $27.5 million were comprised of the following: stock-based compensation expense of $12.5 million, amortization and accretion related to ROU assets and liabilities of $4.5 million, depreciation and amortization expense of $2.8 million, accretion and amortization of debt discount and issuance costs of $1.0 million, and deferred tax provision expense of $6.6 million.
Our annualized subscription revenue was approximately $420 million, $393 million and $349 million as of December 31, 2022, 2021 and 2020, respectively. -44- Revenue retention rate A key part of our business model is the recurring nature of our revenue.
Our annualized subscription revenue was approximately $432 million, $420 million and $393 million as of December 31, 2023, 2022 and 2021, respectively. Revenue retention rate A key part of our business model is the recurring nature of our revenue. As a result, it is important that we retain clients after the completion of the non-cancelable portion of the support period.
In dollar terms, sales and marketing expenses increased from $128.5 million for the year ended December 31, 2021 to $143.0 million for the year ended December 31, 2022, an increase of $14.5 million or 11%.
In dollar terms, sales and marketing expenses declined slightly from $143.0 million for the year ended December 31, 2022 to $142.3 million for the year ended December 31, 2023, a decline of $0.7 million or 0.5%.
While we do not physically operate in Russia, the Ukraine or in mainland China, these global events, together with fiscal and monetary policy adopted during the pandemic, has increased inflationary cost pressures, negatively impacting the global economy and causing the U.S. Federal Reserve began to raise interest rates in March 2022. We expect additional rate increases in the future.
While we do not physically operate in Russia, the Ukraine or in mainland China, we do have operations in Israel. These global events, together with inflationary pressures, have negatively impacted the global economy, causing the U.S. Federal Reserve to raise interest rates in 2022.
Impairment charges related to operating lease right-of-use assets. We recognized an impairment charge of $1.6 million for the year ended December 31, 2021 compared to $3.0 million for the year ended December 31, 2022, related to our -49- office leases as we ceased to use additional portions of our office space due to increased use of remote work.
We recognized an impairment charge of $3.0 million for the year ended December 31, 2022, related to our office leases as we ceased to use portions of our office space due to increased use of remote work. In addition, we revised our estimates for sublease rent due to real estate market conditions.
This increase was primarily due to additional support required for the client growth which resulted in an increase in employee compensation and benefits of $7.3 million, an increase in engineering consulting costs of $4.4 million, an increase in all other costs of $3.5 million and an increase in allocated costs of $0.7 million.
This increase was primarily due to additional client support required which resulted in an increase in employee compensation and benefits of $1.4 million, an increase in engineering consulting costs of $3.4 million and an increase in all other costs of $6.2 million, driven primarily by a $4.8 million increase in outside services and $1.3 million increase in computer software licenses.
Contractual Obligations The following table summarizes our contractual obligations on an undiscounted basis as of December 31, 2022 and the period in which each contractual obligation is due (in thousands): Year Ending December 31: 2023 2024 2025 2026 2027 Thereafter Total Credit Facility Principal payments plus interest at 6.1% $ 10,377 $ 11,120 $ 11,804 $ 59,936 $ — $ — $ 93,237 Lease obligations: Operating 5,340 4,625 3,050 2,446 208 — 15,669 Financing 398 398 332 — — — 1,128 Total $ 16,115 $ 16,143 $ 15,186 $ 62,382 $ 208 $ — $ 110,034 Off-Balance Sheet Arrangements During the periods presented, we did not have any relationships with unconsolidated organizations or financial partnerships, such as structured finance or special purpose entities, which were established for the purpose of facilitating off - balance sheet arrangements.
Contractual Obligations The following table summarizes our contractual obligations on an undiscounted basis as of December 31, 2023 and the period in which each contractual obligation is due (in thousands): Year Ending December 31: 2024 2025 2026 2027 2028 Thereafter Total Credit Facility Principal payments plus interest at 7.2% $ 11,895 $ 12,501 $ 60,279 $ — $ — $ — $ 84,675 Lease obligations: Operating 5,155 3,671 2,946 566 368 — 12,706 Financing 398 332 — — — — 730 Purchase commitments and other 4,265 4,000 3,000 — — — 11,265 Total $ 21,713 $ 20,504 $ 66,225 $ 566 $ 368 $ — $ 109,376 Off-Balance Sheet Arrangements During the periods presented, we did not have any relationships with unconsolidated organizations or financial partnerships, such as structured finance or special purpose entities, which were established for the purpose of facilitating off - balance sheet arrangements.
This increase was primarily due to (i) increases in compensation and benefit costs of $6.6 million, (ii) an increase in computer software and license costs of $3.1 million, (iii) an increase of travel expenses of $2.3 million, (iv) an increase in other taxes of $1.5 million, (v) an increase in contract labor of $0.9 million, and (vi) an increase in all other costs of $0.5 million.
This decrease was primarily due to (i) a reduction of computer software costs of $1.9 million, (ii) a decline of contract labor costs of $1.6 million, (iii) a decrease in rent and facility costs of $1.3 million, (iv) a decline in travel and entertainment costs of $0.4 million and (v) a net decrease in sales and other taxes of $0.2 million.
We believe our operating cash flows for the year ending December 31, 2022 will be sufficient to fund the portion of our contractual obligations that is not funded with existing capital resources. -52- Cash Flows Summary Presented below is a summary of our operating, investing and financing cash flows for the years ended December 31, 2022 and 2021 (in thousands): 2022 2021 Change Net cash provided by (used in): Operating activities $ 34,898 $ 66,945 $ (32,047) Investing activities (24,445) (2,108) (22,337) Financing activities (13,568) (26,565) 12,997 The effect of foreign currency translation was unfavorable by $7.4 million and $6.2 million for the years ended December 31, 2022 and 2021, respectively, due to unfavorable foreign exchange impacts related to foreign cash.
Cash Flows Summary Presented below is a summary of our operating, investing and financing cash flows for the years ended December 31, 2023 and 2022 (in thousands): 2023 2022 Change Net cash provided by (used in): Operating activities $ 12,467 $ 34,898 $ (22,431) Investing activities 3,077 (24,445) 27,522 Financing activities (6,892) (13,568) 6,676 The effect of foreign currency translation was unfavorable by $2.2 million and $7.4 million for the years ended December 31, 2023 and 2022, respectively, due to unfavorable foreign exchange impacts related to foreign cash.
Also, reference is made to Note 10 to our consolidated financial statements included in Part II, Item 8 of this Report for a discussion of developments in our litigation with Oracle. Our Business Model Enterprise software support, products and services is one of the largest categories of overall global information technology (“IT”) spending.
We also expect to continue investing in the development and improvement of new and existing enterprise software support, products, and services to address current and evolving client needs. Recent Developments Reference is made to Note 10 to our consolidated financial statements included in Part II, Item 8 of this Report for a discussion of developments in our litigation with Oracle.
As a result, it is important that we retain clients after the completion of the non-cancelable portion of the support period. We believe that our revenue retention rate provides insight into the quality of our products and services and the value that our products and services provide our clients.
We believe that our revenue retention rate provides insight into the quality of our products and services and the value that our products and services provide our clients.
The Credit Facility originally bore interest at the London Interbank Offered Rate (“LIBOR”), plus a margin ranging from 1.75% to 2.50%. For the year ended December 31, 2022, the interest rate on the Credit Facility was 5.8%. Effective February 28, 2023, we amended the Facility to implement certain changes in the reference rate from LIBOR to SOFR.
Credit Facility On February 22, 2023, the Company amended its Credit Facility. The Credit Facility originally bore interest at the London Interbank Offered Rate (“LIBOR”), plus a margin ranging from 1.75% to 2.50%. The amendment implemented certain changes in the reference rate from LIBOR to the Secured Overnight Financing Rate (“SOFR”).
In addition, we revised our estimates for sublease rent due to current real estate market conditions. Reorganization costs. We recognized reorganization costs of $2.5 million for the year ended December 31, 2022. The costs consist primarily of severance costs associated with our reorganization plan. Litigation costs and related recoveries, net.
There was no such impairment charge for the year ended December 31, 2023. Reorganization costs. We recognized reorganization costs of $2.5 million for the year ended December 31, 2022 compared to $0.1 million for the year ended December 31, 2023. The costs consist primarily of severance costs associated with our 2022 reorganization plan. Litigation costs and related recoveries, net.
Global Economic Uncertainty and Impact of COVID-19 We have experienced some clients not renewing our services as their businesses have been adversely impacted during the COVID-19 pandemic and the resulting global economic uncertainty, as well as by the further economic disruption caused by the Russian invasion of Ukraine in early fiscal 2022 and recent political turmoil in China.
Global Economic Uncertainty We have experienced some clients not renewing our services due to the adverse impact on their businesses from current global economic uncertainty, as well as by the economic disruption continuing to be caused by the Israel-Hamas conflict, the Russian invasion of Ukraine in early 2022 and recent political and trade turmoil with China, amongst other global challenges.
Revenue increased from $374.4 million for the year ended December 31, 2021 to $409.7 million for the year ended December 31, 2022, an increase of $35.2 million or 9%. The vast majority of this increase was driven by a 7% increase in the average number of unique clients, as opposed to existing unique clients subscribing to additional services.
Revenue increased from $409.7 million for the year ended December 31, 2022 to $431.5 million for the year ended December 31, 2023, an increase of $21.8 million or 5%. In part, this increase was driven by a 2% increase in the average number of unique clients and a 3% increase in the average revenue per unique client.
Interest expense increased from $1.6 million for the year ended December 31, 2021 to $4.3 million for the year ended December 31, 2022, an increase of $2.7 million.
Income taxes increased from $6.3 million for the year ended December 31, 2022 to $15.2 million for the year ended December 31, 2023, an increase of $8.9 million or 141%.
We recognized net income of $75.2 million, non-cash expenses resulting in a use of $37.8 million and favorable changes in operating assets and liabilities, net of $29.5 million for the year ended December 31, 2021.
We recognized net income of $26.1 million, non-cash expenses, net amounted to $27.5 million, and unfavorable changes in operating assets and liabilities, net were $41.1 million for the year ended December 31, 2023.
A key component of our business model generally requires that customers prepay us annually for the services we will provide over the following year or longer.
Please refer to Notes 5, 7 and 8 to the consolidated financial statements included in Part II, Item 8 of this Report for information regarding our Credit Facility. A key component of our business model generally requires that customers prepay us annually for the services we will provide over the following year or longer.
Recent Accounting Pronouncements From time to time, new accounting pronouncements are issued by the FASB or other standard setting bodies that are adopted by us as of the specified effective date.
We regularly evaluate currently available information to determine whether an accrual is required, an accrual should be adjusted and if a range of possible loss should be disclosed. Recent Accounting Pronouncements From time to time, new accounting pronouncements are issued by the FASB or other standard setting bodies that are adopted by us as of the specified effective date.
For the year ended December 31, 2021, other expense, net of $1.6 million was primarily comprised of foreign exchange losses of $1.4 million and other non-operating expenses of $0.2 million. For the year ended December 31, 2022, we experienced a significant change in foreign currency exchange rates as the U.S.
For the year ended December 31, 2022, we had other expenses, net of $13 thousand as compared to other income, net of $3.0 million for the year ended December 31, 2023, an increase of $3.0 million. For the year ended December 31, 2022, we experienced a significant change in foreign currency exchange rates as the U.S.
For the year ended December 31, 2021, capital expenditures of $2.1 million consisted of new computer equipment and leasehold improvements of $1.1 million for our U.S. facilities, and $1.0 million for computer equipment at our foreign locations, primarily in India.
The capital expenditures of $7.2 million consisted primarily of $3.6 million for capitalized software development costs, new computer equipment, and furniture and fixtures in our U.S. entity, and $3.6 million for computer equipment at our foreign locations, primarily in India of $1.9 million, Brazil of $0.7 million, and Japan of $0.7 million.
We have a history of losses, and as of December 31, 2022, we had an accumulated deficit of $228.3 million. We recorded net loss of $2.5 million for the year ended December 31, 2022 and we recorded net income of $75.2 million and $11.6 million for the years ended December 31, 2021 and 2020, respectively.
We generated revenue of $431.5 million, $409.7 million and $374.4 million for the years ended December 31, 2023, 2022 and 2021, respectively, representing a year-over-year increase of 5% and 9% for 2023 and 2022, respectively. We have a history of losses, and as of December 31, 2023, we had an accumulated deficit of $202.2 million.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

7 edited+1 added−0 removed3 unchanged
Biggest changeWe do not have material exposure to market risk with respect to investments, as any investments we enter into are primarily highly liquid investments. Variable Rate Debt In July 2021, we entered into the Credit Facility, which originally bore interest at LIBOR plus a margin ranging from 1.75% to 2.50%.
Biggest changeVariable Rate Debt In July 2021, we entered into the Credit Facility, which originally bore interest at LIBOR plus a margin ranging from 1.75% to 2.50%. Effective February 28, 2023, we amended our Credit Facility to implement certain changes in the reference rate from LIBOR to SOFR.
We generated between 41% and 47% of our revenue from our international business for the years ended December 31, 2022, 2021 and 2020. Increases in the relative value of the U.S. Dollar to other currencies may negatively affect our revenue, partially offset by a positive impact to operating expenses in other currencies as expressed in U.S. Dollars.
We generated between 47% and 49% of our revenue from our international business for the years ended December 31, 2023, 2022 and 2021. Increases in the relative value of the U.S. Dollar to other currencies may negatively affect our revenue, partially offset by a positive impact to operating expenses in other currencies as expressed in U.S. Dollars.
Inflation Risk With regards to inflation risk and other economic conditions, please refer to Item 1A. Risk Factors included in Part I of this Report. -57-
Inflation Risk With regards to inflation risk and other economic conditions, please refer to Item 1A. Risk Factors included in Part I of this Report. -58-
As of December 31, 2022, the effect of a hypothetical 10% change in foreign currency exchange rates applicable to our business would have impacted our income before income taxes by a plus or minus of $1.1 million in our Consolidated Statements of Operations and Comprehensive Income (Loss) and would have impacted the effect of foreign currency changes on cash by a plus or minus $6.5 million in our Consolidated Statement of Cash Flows. -56- Interest Rate Sensitivity We hold cash and cash equivalents for working capital purposes.
As of December 31, 2023, the effect of a hypothetical 10% change in foreign currency exchange rates applicable to our business would have impacted our income before income taxes by a plus or minus of $0.7 million in our Consolidated Statements of Operations and Comprehensive Income (Loss) and would have impacted the effect of foreign currency changes on cash by a plus or minus $6.6 million in our Consolidated Statement of Cash Flows.
As of December 31, 2022, we had $74.8 million outstanding debt under the Credit Facility. As of this date, a reasonably possible hypothetical adverse change of 100 basis points in would have resulted in an increase of approximately $0.1 million in annual interest expense.
As of this date, a reasonably possible hypothetical adverse change of 100 basis points in would have resulted in an increase of approximately $0.7 million in annual interest expense.
While we have not engaged in the hedging of our foreign currency transactions to date, we are evaluating the costs and benefits with the expectation that we will initiate such a program and we may in the future hedge selected significant transactions denominated in currencies other than the U.S. Dollar.
While we have not engaged in the hedging of our foreign currency transactions to date, we evaluate the costs and benefits of entering into future hedge transactions for currencies other than the U.S. Dollar.
Effective February 28, 2023, we amended our Credit Facility to implement certain changes in the reference rate from LIBOR to SOFR. Accordingly, we were previously exposed to market risk due to variable interest rates based on LIBOR and are currently exposed to market risk due to variable interest rates based on SOFR.
Accordingly, we were previously exposed to market risk due to variable interest rates based on LIBOR and are currently exposed to market risk due to variable interest rates based on SOFR. As of December 31, 2023, we had $72.6 million outstanding debt under the Credit Facility.
Added
Interest Rate Risk Risk with Respect to Investments We hold cash and cash equivalents for working capital purposes. We do not have material exposure to market risk with respect to investments, as any investments we enter into are primarily highly liquid investments.

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