Q2 2024 Rimini Street Inc Earnings Call
Ladies and gentlemen. This is your operator speaking todays conference is scheduled to begin momentarily until that time your lines will remain on music hold we thank you for your patience.
[music].
Good afternoon, ladies and gentlemen, and welcome to D. Rimini Street Q2, 'twenty 'twenty four earnings conference call.
At this time all lines are in listen only mode.
Following the presentation, we will conduct a question and answer session. If at any time. During this call you require immediate assistance. Please press star zero for the operator.
Dean Pohl: This call is being recorded on Wednesday July 31st 2024, I would now like to turn the conference over to Dean Pohl, VP Treasurer and Investor Relations. Please go ahead.
Dean Pohl: Thank you operator, I'd like to welcome everyone to Rimini Street second quarter 2024 earnings Conference call.
On the call with me today, it's that Raven, our CEO and president.
Speaker Change: And Michael <unk>, our CFO.
Today, we issued our earnings press release for the second quarter ended June 32024.
Dean Pohl: A copy of which can be found on our website under investor Relations a reconciliation of GAAP and non-GAAP financial measures has been provided in the tables following the financial statements in the press release.
Dean Pohl: An explanation of these measures and why we believe they are meaningful is also included in the press release under the heading.
All non-GAAP financial measures and certain key metrics.
Dean Pohl: As a reminder, today's discussion will include forward looking statements that reflect our current outlook. These forward looking statements are subject to risks and uncertainties that may cause actual results to differ materially from statements made today. We encourage you to review our most recent SEC filings, including our form.
<unk> 10-Q filed today for a discussion of risks that may affect our future results or stock price now before taking questions well begin with prepared remarks with that I'd like to turn the call over to yourself.
Thank you Dean and thank you everyone for joining us today.
Speaker Change: Rimini Street helps our clients achieve better business outcomes, such as significant operating cost savings improved profitability, new competitive advantages and accelerated growth.
Speaker Change: We can achieve these goals by significantly lowering the cost resources and time needed to support and manage mission critical transaction systems.
Speaker Change: Is the ERP financials, HCM and CRM.
We're also assisting clients with innovation projects that include cloud open source automation workflow.
Speaker Change: Ida analytics.
Speaker Change: AI reporting.
Dean Pohl: Application modernization.
Dean Pohl: Gration integrations.
Dean Pohl: Charity license management, and global I T governance.
Dean Pohl: To date, we believe we have already delivered over $8 billion of savings and reinvestment opportunity.
Dean Pohl: And as our clients operating in nearly 150 countries.
Speaker Change: Rimini Street services clients in more than 2100 employees working in 21 countries and two large lab operations in India and Brazil.
Dean Pohl: Our award winning software support delivers an average engineer response time of less than two minutes 24 by seven by $3 65, and earns an average client satisfaction score of 4.9 out of five were five is excellent.
Dean Pohl: Demand environment and competitive advantage.
Dean Pohl: We continue to see strong demand for our proven reliable trusted partner for mission critical transaction system services that can significantly reduce spending and allow organizations to consolidate their preferred service providers for streamlined vendor management.
Dean Pohl: Increased aggregated purchasing power and better business outcomes.
Dean Pohl: Competitively.
Dean Pohl: We have the broad portfolio of solutions top engineering talent proven systems methodologies serviced bottles and patented technology needed to win as a key IP service partner globally.
Dean Pohl: We have one deals competing against major technology players such as Oracle SAP IBM.
IBM: I B M M D C.
Dean Pohl: 2024, Q2 activity and results.
Dean Pohl: The second quarter was a mixed quarter of successes and shortfalls in sales.
Dean Pohl: While we achieved strong contract volumes, including $8 million or greater transactions in the quarter. We had many smaller transactions that ultimately reduced our ASP for the quarter.
Dean Pohl: The sales challenges are geographically centered around North America.
Dean Pohl: Within Europe, Japan and Australia.
Dean Pohl: In the second quarter, we responded to the unique and timely opportunity to deliver a comprehensive service offering for Vmware.
Dean Pohl: We launched the general availability of Rimini support Rimini protect and Rimini consult for Vmware products.
Dean Pohl: We were able to leverage our existing proven enterprise software support model and have already signed Vmware service contracts and have begun providing mission critical service to clients.
Dean Pohl: We made several changes to the executive management and revenue generation, including the hiring of Steve Hershkowitz as Chief revenue Officer.
Speaker Change: Martin, who got curious theater GM for EMEA, and Andrew Manners as regional GM for ANZ.
Speaker Change: We are continuing to hire globally, if needed at cross marketing lead generation pre sales sales and client success teams to get the right team feel that to meet our sales growth targets.
Speaker Change: Billings for the second quarter increased six 9% year over year.
Speaker Change: The positive Billings result was achieved primarily with deals that close across our portfolio of solutions various industries and geographies.
Speaker Change: However.
Speaker Change: The year over year decrease in quarterly revenue annual recurring revenue and revenue retention rate.
Speaker Change: I normally due to flow through from the non renewal of certain large client contracts that were previously noted in our prior quarterly report and it related to specific client services delivered and projects completed specifically.
Speaker Change: In order to drive increased profitability streamline operations and assure we have the right skill sets required to sell and service our larger product portfolio globally.
Speaker Change: We began our reorganization and cost reduction program in the second quarter targeting $35 million and aggregate savings.
Speaker Change: We continue to aggressively hire for needed skill sets and capabilities that enable our business and growth plan.
Speaker Change: Additionally, after careful consideration we have.
Speaker Change: Decided to wind down our offering of services for Oracle people soft products.
Speaker Change: This includes our Rimini support.
Speaker Change: <unk> manage and there are many consult services.
Speaker Change: As we provide services for Oracle peoplesoft products to clients globally.
Speaker Change: The wind down process is expected to take place over several phases and will likely take a year longer before we're able to cease providing all people soft surfaces.
Speaker Change: Oracle litigation update.
Speaker Change: Rimini Street into Oracle has been in litigation for more than 14 years, including cases, known as Rimini, one and Rimini two.
Speaker Change: With respect to Rimini, one, which was followed by Oracle against Rimini Street in 2010.
Speaker Change: Litigation has run its course and there are no current litigation activities related to would be the one.
Speaker Change: However, there is a rimini one permanent injunction that remains in effect.
Speaker Change: With respect to Rimini, two which was filed by Rimini Street against Oracle in 2014.
Speaker Change: Currently three post trial litigation matters still before a court.
Speaker Change: One appeal of the remaining two findings otherwise known as the merits appeal and the remaining two injunction before the court of Appeals.
Speaker Change: Two.
Speaker Change: Emotion to further stay the remaining two injunction pending a decision on <unk> appeal of the injunction, which is also before the court of appeals.
Speaker Change: And three.
Speaker Change: Litigation before the district court of her oracle's request recovery of certain of their attorneys fees and costs related to the Rimini two case that is on appeal.
Speaker Change: With respect to the remaining two merits appeal and appeal of the Rimini two injunction briefings were submitted prior to oral arguments and oral arguments were made before the court of Appeals on June five 2024.
Speaker Change: The court's decision is pending.
Speaker Change: For additional information and disclosures regarding the company's litigation with Oracle. Please see our disclosures in the company's quarterly report on Form 10-Q filed today July 31, 2024, with the U S Securities and Exchange Commission.
Speaker Change: Please also note that at this time, we are still unable to provide material additional information beyond the disclosure statements in our press releases filings with the FCC and court filings nor provide guidance with respect to future financial results nor are we able.
Speaker Change: To provide additional commentary related to the pending Oracle litigation and potential impacts of the remaining two injunction because the matters are still before various courts and the outcomes cannot be predicted.
Speaker Change: Summary.
Speaker Change: While the quota delivered mixed results. We remain confident that we are continuing to take the right actions and making the right investments to accelerate our return to growth and profitability.
Speaker Change: Enhance shareholder value and bring our litigation with Oracle to a successful conclusion.
Speaker Change: However, if Rimini street is not adequately reorganize its operations to reduce costs or does not ultimately prevail in the post trial litigation matters summarized above and detailed in our SEC filings. It could have a material adverse impact on our business and financial results.
Speaker Change: Now over to you Michael.
Michael: Thank you Seth and thank you for joining us everyone Q.
Michael: Q2 2024 results.
Michael: Revenue for the second quarter 2024 was $103 1 million the year over year decrease of three 1%.
Speaker Change: Clients within the United States represented 50%, while international clients represented 50% of total revenue for the second quarter of 2024.
Speaker Change: We note that for the second quarter of 2024, our total revenue measures on a constant currency basis was negatively impacted by one 3% due to FX movements.
Speaker Change: Annualized recurring revenue was $399 4 million for the second quarter the year over year decrease of two 6%.
Speaker Change: Revenue retention rate for service subscriptions, which makes up 96, 8% of our revenue was 88% with approximately 74% of subscription revenue noncancelable for at least 12 months.
Speaker Change: For the second quarter were $111 6 million compared to $104 4 million for the prior year second quarter, an increase of six 9%.
Speaker Change: Unfavorable FX movements reduced second quarter 2020 for calculated billings by $2 9 million.
Speaker Change: Gross margin was 59, 1% of revenue for the second quarter compared to 63.0% of revenue for the prior year second quarter.
Speaker Change: On a non-GAAP basis, which excludes stock based compensation expense gross margin was 59, 5% of revenue for the second quarter compared to 63, 5% of revenue for the prior year second quarter.
Speaker Change: Gross margin declined during the second half of 2023 and the first half of 2024 in part as a result of continued investments in an expansion of our global engineering team needed to serve new client engagements and advance it related ratable contract revenue recognition.
Speaker Change: As noted in previous earnings calls, we are expecting continued gross margin pressure as we scale to meet new client engagements.
Speaker Change: <unk>, we are working to improve gross margins by driving efficiencies and leveraging the benefits of growing global scale.
Speaker Change: Operating expenses.
Speaker Change: As Jeff noted, we implemented a reorganization plan to reduce the net operating cost by $35 million on an annualized basis of which approximately $15 million occurred during the second quarter with another 20 million targeted for the third quarter.
Speaker Change: For the second quarter, we incurred a reorganization charge of $3 2 million.
Speaker Change: While inflationary pressures and high cost are still persistent for skilled labor across all theaters, we continue to attract and retain key talent.
Speaker Change: Moreover, our margin performance in light of the pressures highlighted previously underscores the advantage of our global footprint with centers of excellence and geographies for both the talent and value remain attractive compared to higher priced markets.
Speaker Change: Sales and marketing expenses as a percentage of revenue was 36, 2% of revenue for the second quarter compared to 35% of revenue for the prior year second quarter.
Speaker Change: On a non-GAAP basis, which excludes stock based compensation expense sales and marketing expenses as a percentage of revenue was 35, 7% for the second quarter compared to 34, 3% of revenue for the prior year second quarter.
Speaker Change: General and administrative expenses as a percentage of revenue excluding outside litigation costs was 18, 9% of revenue for the second quarter compared to 17, 7% of revenue for the prior year second quarter on.
Speaker Change: On a non-GAAP basis, which excludes stock based compensation expense and litigation costs G&A was 17, 6% of revenue for the second quarter compared to 15, 2% of revenue for the prior year second quarter.
Speaker Change: We are addressing the year over year increase as part of the restructuring program mentioned earlier.
Speaker Change: Uh huh.
Speaker Change: However, G&A expenses as a percentage of revenue are expected to remain elevated compared to our peers due in large part to the ongoing cost for in house legal and compliance teams and other costs made necessary by your ongoing Oracle litigation and compliance activities.
Speaker Change: Net outside litigation expense was $1 6 million for the second quarter compared to zero point $6 million for the prior year second quarter.
Speaker Change: Our non-GAAP operating margin, which excludes outside litigation spend is stock based compensation expense was six 2% of revenue for the second quarter compared to 14.0% for the prior year second quarter.
Speaker Change: The net loss attributable to shareholders for the second quarter was $1 1 million or negative <unk> <unk> per diluted share compared to the prior year second quarter net income of five.
Speaker Change: <unk> per diluted share.
Speaker Change: On a non-GAAP basis.
Speaker Change: Net income for the second quarter was $6 1 million or <unk> <unk> per diluted share compared to the prior year second quarter of <unk> <unk> per diluted share.
Speaker Change: Adjusted EBITDA defined in our press release.
Speaker Change: <unk> was $8 8 million for the second quarter or eight 5% of revenue compared to the prior year second quarter of 14, 8% of revenue.
Speaker Change: Balance sheet.
Speaker Change: We ended the second quarter June 32024, with a cash balance and short term investments of $134 2 million compared to $147 million of cash and short term investments for the prior year second quarter.
Speaker Change: On a cash flow basis for the second quarter operating cash flow increased $6 3 million compared to the prior year's second quarter increase of $13 1 million.
Speaker Change: FX headwinds reduced operating cash flow by $3 1 million.
Speaker Change: Deferred revenue as of June 32024 was $262 8 million compared to deferred revenue of $285 3 million from the prior year second quarter.
Speaker Change: Backlog, which includes the sum of billed deferred revenue and noncancelable future revenue was $556 7 million as of June 32024, compared to $565 1 million for the prior year second quarter.
Jeff: As Jeff noted.
Speaker Change: We have decided to wind down our offering of services for Oracle Peoplesoft products.
Speaker Change: Revenue related to providing services for people soft products accounted for approximately $36 1 million or 8% with fiscal year, 2023 revenue and $16 6 million or 8% of first half of 2024 revenue respectively.
Speaker Change: Business outlook.
Speaker Change: Company is continuing to suspend guidance as to future financial results until there is more clarity around impacts from current litigation activity before the U S federal courts, and the company's ongoing litigation with Oracle.
Speaker Change: For additional information and disclosures regarding the company's litigation with Oracle. Please see our disclosures in the company's quarterly report on Form 10-Q filed on July 31, 2024, with the U S Securities and Exchange Commission.
Speaker Change: This concludes our prepared remarks, operator, we will now take questions.
Speaker Change: Thank you ladies and gentlemen, we will now begin the question and answer session should you have a question. Please press star followed by one on your Touchtone phone.
Speaker Change: You'll hear a prompt that your hand has been raised.
Speaker Change: Should you wish to decline from the polling process. Please press star followed by two.
Speaker Change: We're using a speaker phone please lift the handset before pressing any keys.
Speaker Change: One moment. Please for your first question.
Speaker Change: Okay Alright.
Speaker Change: First question comes from Brian Kim Slinger with Alliance Global Partners. Please go ahead.
Speaker Change: Great. Thanks, so much for taking my questions.
Speaker Change: My first question is if you could talk about what was behind the decision to exit that people shop support business.
Brian: Sure Brian.
Brian: As we noted in the.
Speaker Change: The statement, we did look at several factors we looked at financial factors, we looked at legal factors and as you know this product line over time.
Speaker Change: Has reduced in size dramatically for us he used to be the majority of our business and today, it's at 8%.
Speaker Change: And when you look at the 8% and you look at the revenue and you look at the margins associated with it you look at the legal costs associated around the product line at the end of the day, we took a look at those factors and decided that we would be better.
Brian: Winding down the business.
Brian: And are focusing our efforts elsewhere and our capital elsewhere.
Speaker Change: So while I know you can't comment on legal you did mention the.
Speaker Change: The legal related to it well and I think it's clear to people soft piece is the one place Oracle has been successful. So are there any thoughts to changes in legal expense going forward related to this.
Speaker Change: Well I think you can I think you could probably take a look and say that if you look over the last Rimini two case look over a menu. One you look over the last 14 years of litigation the majority focus, including injunctions and compliance challenges have been related to people soft.
Speaker Change: And just for clarity.
Speaker Change: The battle over people soft has primarily been related to the original people soft license agreements that were written before Oracle acquired people saw back in 2005, and we had been challenging back and forth with Oracle in the courts over language in those agreements.
Speaker Change: Which specifically stated.
Speaker Change: According to Oracle and the courts that the product had to be run and used an oracle I'm sorry on the client's own computer systems.
Speaker Change: And so that was a difference between that and all the other license agreements that you've seen in the Oracle world.
Speaker Change: Specially their native products and so that has been a continuing battle for 14 years and again, you get down to 8% of revenue those equation start to change about what does it mean and what's the value of continuing the product line versus again, focusing our efforts elsewhere.
Speaker Change: Terms of.
Speaker Change: Expectations are reduced legal and compliance costs.
Speaker Change: I think those are potentially fair assumptions that could come with that.
Speaker Change: Great.
Speaker Change: The retention rate has dropped in each of the last few quarters. We hit if you think of low since I've I've looked back many years of 88%.
Speaker Change: What are the factors that you would attribute this to.
Speaker Change: Well I think you had a couple of things one we talked to in previous conference calls about some reduction in rotation of some of the product lines.
Speaker Change: We are supporting today.
Speaker Change: Youre starting to see more revenue that is outside of subscription in our consulting business as that continues to grow.
Speaker Change: I also think again, we have this flow through from Q4, and Q1, where we had some large contracts come to an end.
Speaker Change: And some of those coming to an end was not just because of customer rolled off a product that was unexpected some of it was that they were short term contracts that were very large and we completed them successfully.
Speaker Change: The net result was still that they rolled off of which you saw the recurring revenue streams and were watching that flowed through from Q4 Q1.
Speaker Change: Naturally into Q2, those take several quarters to flow through so I believe that's a primary component of Youre seeing there.
Speaker Change: Great last question I have is you began your script shadwick you continuing to see strong demand for proven and trusted partners and I assume you're talking about third party support services.
Speaker Change: Can you reconcile that with.
Speaker Change: The bookings over the last few years that have led to decelerating growth in the first quarter, we've seen year over year declines.
Speaker Change: For for Rimini.
Speaker Change: Sure well as I noted the the billings number had increased for Q2 year over year.
Speaker Change: The numbers that you saw flowing through on the revenue.
Speaker Change: Orderly revenue again related to those larger contracts that we saw which shouldnt be confused with the overall health of the business.
Speaker Change: We have had as you well know several years of transformation from being a third party support provider.
Speaker Change: Replacement services, just for Oracle and SAP.
Speaker Change: Two expanding that service dramatically in terms of the products covered even vmware in the last quarter.
Speaker Change: On top of that we added in our Ams services entirely large new business line, we added in expansions to the security product line to our connect product line of interoperability tools, we added new observe ability capabilities and we've built out an entire can.
Speaker Change: Salting business over the last few years and we're talking on a global basis, serving customers in over 150 countries.
Speaker Change: So I would tell you that we probably underestimated the amount of time and effort. It would take to bring all of that to market bring that all to market across the world and all these different countries. The personnel and the time it takes to get them trained up to change the way we see.
Speaker Change: Cell from just selling a replacement of maintenance at 50% off to being out there selling large projects that go beyond just that maintenance and that required a different skill set even amongst the sellers. So it has been a transformational project over the last few years and of course.
Speaker Change: The number is still aren't bearing out yet all of the green shoots that we see from this business, but we are closing excellent contracts from a qualitative standpoint around the world.
Speaker Change: Again, we've got too many small deals as I mentioned in the prepared remarks, we need to see those asps crawl back up again.
Speaker Change: Also need to see that our customers are buying in larger and larger contract volumes, where were seeing more products in those mixes and we're already starting to see that more and more around the world and we would expect that that will show up in future financials.
Speaker Change: Okay. Thank you.
Speaker Change: Sure.
Speaker Change: Thank you. Your next question comes from Derrick Wood with TD Cowen. Please go ahead.
James Derrick Wood: Great. Thanks, guys. This is call on for Derek.
James Derrick Wood: I'll just start with the people from again.
Speaker Change: Yes, 8% of revenue is going to kind of be neither a model.
Speaker Change: As part of his head count restructuring the restructuring that you're doing is this is it.
Speaker Change: You too.
Speaker Change: Cutting cost along the people saw.
Speaker Change: Either in support for sales teams and G&A.
Speaker Change: Just more color there would be helpful.
Speaker Change: Sure we would expect that this 8% to wood would transition over time as we mentioned, we do have quite a few clients all around the world.
Speaker Change: That are under contract and so it's going to take a while to work through all of that.
Speaker Change: Just from an organizational perspective.
Speaker Change: The cost reductions that we're trying to do it very much in line with what Youre seeing around the world I think you're watching another wave of 10% cuts. We're looking at similar types of numbers. Most of it is to streamline operations and take cost out of the equation, which makes sense when your phone.
Speaker Change: <unk> on profit and I think we've been very clear that while we're waiting for the top line to turn and to begin the growth cycle back up.
Speaker Change: We are very focused on delivering bottom line results for shareholders. We believe in the rule of 40 as you well know.
Speaker Change: We do have a ways to code to get there, but we do see that as a guiding light for us and if we're going to be light on top line growth.
Speaker Change: Then we expect that we should be pushing that to the bottom line and cost reductions are a clear way to get there.
Speaker Change: Got it.
Speaker Change: And then when you kind of match.
Speaker Change: Imagine that youre going to focus capital elsewhere.
Speaker Change: What what other areas of the business do you think.
Speaker Change: Kind of showed dividends if you shift resources from people saw.
Speaker Change: Uh huh.
Speaker Change: And the other.
Bob: Bob or maybe.
Speaker Change: Well, we have other product lines, which are generating even on the support side of the house, we have other product lines, whether their oracle product lines product lines.
Speaker Change: B M, where others that are showing higher gross margins return than were seeing on the people soft side, which is a very heavy fixed cost component to it due to the tax legal and regulatory costs and the way that those have to be developed and so when you look at those numbers.
Speaker Change: It tells you that we if we were spending that money instead of marketing and selling people soft we were solid other products with higher gross margins, obviously, we would lift.
Speaker Change: The overall blended gross margin rate.
Speaker Change: As well as drive additional profit to the bottom line.
Speaker Change: Yes, sure and then just.
Speaker Change: One more here.
Speaker Change: Some of the flow through on larger contracts with <unk> and.
Speaker Change: Are weighing down on revenue growth and then the retention as well.
Speaker Change: So that.
Speaker Change: Third quarter around that you've called it out.
Speaker Change: Any visibility on the win.
Speaker Change: These are going to kind of dry up.
Speaker Change: That's something that.
Speaker Change: And kind of go on for a while just just a little more clarity on what we can expect going forward for the rest of the year would.
Speaker Change: It would be helpful.
Speaker Change: Sure.
Speaker Change: So the deals and we keep pointing out from Q4 and Q1, because they are flow through.
Speaker Change: We're not seeing and you noticed we didn't say that there were a big deals that were lost and renewals in the second quarter.
Speaker Change: That is because of those where Q4 Q1 deals that were noting causing the the biggest impact there. So we're not seeing this as a systemic issue. These were specific contracts that had specific end dates or were specific projects that were completed.
Speaker Change: And I would say of those deals.
Speaker Change: I think the very little of them were really surprises they were really understood to be a rolling off contracts that we had visibility too.
Speaker Change: So again from that point of view, we were little bit hampered over the last few quarters. As you know we haven't provided guidance since the court ruling and Rimini two last July and that has left us in a position, where we werent going to provide guidance on some of the things that we may have seen.
Speaker Change: For that very reason.
Speaker Change: So that's why they seem to be surprises, but they weren't necessarily surprises to us.
Speaker Change: Great I'll see the floor. Thanks.
Speaker Change: Yeah.
Speaker Change: Thank you. Your next question comes from Bryan Keane Slinger with Alliance Global Partners. Please go ahead.
Speaker Change: Great. Thanks, a follow up in the December quarter, you peaked at $112 million of quarterly revenue.
Speaker Change #109: About $9 million on a quarterly basis from that peak, so that implies about $36 million of annual revenue.
Speaker Change: So maybe you could quantify how much the contracts had ended.
Speaker Change: Represented on an annual run rate.
Speaker Change: That will help us understand the health of the underlying business, if we excluded that.
Speaker Change: Yes, Brian I think that Youre talking about the number you're speaking to if you look at it my guess is somewhere in the $20 million to $25 million of those big contracts combined in Q4 and Q1. So a good substantial amount of that number on an annualized basis.
Speaker Change: This would have been related to those larger contracts ended rolled off.
Speaker Change: Got it and was it.
Speaker Change: Not to beat the dead horse here, but is it a couple of contracts like two or three or are we talking like 10 or 11, I'm just trying to understand when you say Oh no.
Speaker Change #112: No we're talking we're talking a handful.
Speaker Change #106: Yeah, Yeah, we're talking 45.
Speaker Change: Okay, and then you you highlighted a $35 million number you're targeting I think in cost cuts.
Speaker Change: Is that right and then second.
Speaker Change #105: Will that be offset.
Speaker Change: Whatever you are able to achieve will that be offset by hiring as you said you have some key positions you're looking to hire stone.
Speaker Change: Well I think like most people in their 10% cut I think you're watching on an industrywide basis. My guess is 7% to 8% is going to be direct to the bottom line cost cutting and streamlining.
Speaker Change: But everybody's over cutting it two or 3% because theyre doing skills rotation as you know theres a massive amount of AI hiring for example, and skill sets where people are rotating out of older skill sets that are more in the rearview mirror, replacing them and re skilling. We saw this with cloud we've seen this with.
Speaker Change: Other.
Speaker Change: Other technologies when they come real hard into the market and we're seeing the same on AI Rimini Street's no different that we are overshooting.
Speaker Change: What we'd like to do in terms of cost cutting for streamlining to make room for some new skill sets that we need in order to grow the business. For example, we found that the level of requirement for enterprise architects in our business is extremely high.
Speaker Change: We do very well when we bring enterprise architects in with customers to help them not only solve the immediate issues of maintenance costs, our overall costs within their it organization, but helping them figure out the road map going forward part of our World will get you there programs and so.
Speaker Change #107: We are deploying a regional <unk> around the world. Those are expensive heads. So you have to pay for them somehow so you're watching us reduced sales and marketing costs, reducing number of sellers, replacing them with CTO is changing the mix of people on the field in order to give us.
Speaker Change #107: A better sales capability for larger more complex contracts, that's the kind of work we're doing.
Speaker Change: Okay.
Speaker Change #101: The last question I have is the $3 2 million in restructuring charges.
Speaker Change #101: How much does that represent and cuts that you've already made on an annualized expense basis.
Speaker Change #101: Michael you want to take that one.
Speaker Change #101: Sure Ken Bryan how are you this afternoon and Michael the answer is.
Speaker Change: They have not.
Speaker Change #100: You have not experienced those in Q2 on the P&L.
Speaker Change: More of the effect will be felt starting in Q3 as we noted that remaining.
Speaker Change: Component will occur in large in Q3 with the greater effect overall to the P&L starting in Q4. This year, just as a matter of timing.
Speaker Change: Alright, I'm, sorry, I'm asking on timing you already did some restructuring predicted $3 2 million I assume that severance or some other charges.
Speaker Change: Those actions how much did dose before we look go forward looking I mean, you'll you'll announce that next quarter or two but that was $3 2 million in restructuring charges. How much does that already take out of the business on an annualized basis whenever it starts.
Speaker Change #102: I understand apologies, Brian that is a $15 million annualized run rate of cost reductions such that our target is remaining $20 million in the current quarter.
Speaker Change #104: Got it okay. Thank you so much.
Speaker Change #103: Thank you.
Speaker Change #103: Yes.
Speaker Change #103: Thank you there are no further questions at this time I would like to turn the call back over to Seth Ravin for closing remarks.
Seth A. Ravin: Great. Thank you very much again I'm going to thank everyone for joining us on the quarterly call. We of course, we will look forward to seeing again as we move to the third quarter.
Speaker Change: All coming in the next few months.
Speaker Change: And until then again, please be safe about those in Harm's way, we live in a complex world.
Speaker Change #108: <unk> is a global company doing business in every continent, and very aware of the challenges that even some of our own people face today.
Speaker Change #108: Our thoughts are with them of course, and wishing everybody well. Thank you very much and be healthy. Thanks al.
Speaker Change #111: Ladies and gentlemen, this concludes today's conference call. Thank you for your participation you may now disconnect.
Speaker Change: Okay.
Speaker Change: Yeah.
Speaker Change: Yes.