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1/15 Despite its recent run up, $RMNI still only trades at 1.7x 2021 ARR & 3.4x EV/Gross profit w/ growing operating leverage.
Here is a thread of what I’m looking for at their first ever analysts’ day 2/1.
Here is a thread of what I’m looking for at their first ever analysts’ day 2/1.
2/15 Mgmt has given a teaser as the 1st session is titled “Vision, Strategy, and Accelerating Growth to $1B Revenue by 2026”. If they are inline with their Q4 report, this would imply a 6-yr revenue CAGR of 21%, with revenue going from ~$325M to $1B in 6 yrs.
3/15 Gartner has predicted their market of 3rd party software support, of which they have 90%+ share, will reach $1 billion by 2023, three years earlier than RMNI seems to be forecasting: https://www.riministreet.com/blog/gartner-predicts-2020/
4/15 Gartner’s forecast also doesn’t take into account $RMNI’s AMS initiatives. Per CEO this biz is a >$1B rev opportunity just w/in RMNI’s customer base as a cross-sell opp. https://www.riministreet.com/solutions/support-services/application-management/
5/15 While $RMNI’s growth has slowed below 20%, the opp to accelerate above 20% is real. What I will be looking for is how they are planning to get there & what the unit economics look like when & if they do. At 1.7x ARR, they don’t need to grow that fast for the stock to work.
6/15 Question 1: Assuming they get to $1B in revs, what does EBIT look like? It’s our belief they should be in the 62% gm range, 25% on S&M, and 10% G&A at that sales level, so EBIT would be $270M. At a 15x EBIT multiple that would value RMNI at roughly $4B vs. ~$660M today.
7/15 Even at 60% gross margin & 30% S&M, & a 12x EBIT multiple we are still looking at a multi-bagger. We hope the new CFO will outline some of this.
8/15 Quest. 2: What does the trajectory to $1B look like? Is it 15% growth this year ramping to 25%, or more consistent 20% growth?
When teams give these LT targets they are less credible if more/most of the growth comes in the back years.
When teams give these LT targets they are less credible if more/most of the growth comes in the back years.
9/15 Q3:
What investments need to be made to hit this target? They have already spoken about substantially growing the salesforce, but should we expect a margin/cashflow hit to get to these targets?
What investments need to be made to hit this target? They have already spoken about substantially growing the salesforce, but should we expect a margin/cashflow hit to get to these targets?
10/15 Seth (CEO) has always pitched balanced growth/profits, but we are OK taking down margins a bit to accelerate their growth back closer to 30%, where it historically has been until recently.
Gross margins have already come down a bit to build AMS infrastructure. What else?
Gross margins have already come down a bit to build AMS infrastructure. What else?
11/15 Q4:
They have 92% retention currently, but how does cross-selling AMS improve those #s? We believe it will
help substantially as customers will be more holistically relying on $RMNI for support.
They have 92% retention currently, but how does cross-selling AMS improve those #s? We believe it will
help substantially as customers will be more holistically relying on $RMNI for support.
12/15 Q5:
What is the path to wiping out the convertible Pfd equity? This is expensive paper at 13% divd, so removing saves them $15M/yr in cash & ongoing dilution. The higher the stock price b/w now & then, the cheaper it will be.
What is the path to wiping out the convertible Pfd equity? This is expensive paper at 13% divd, so removing saves them $15M/yr in cash & ongoing dilution. The higher the stock price b/w now & then, the cheaper it will be.
13/15 Q6:
What is the trial with $ORCL in 2022, and what it is not? While we feel we understand this & have hired law firms to evaluate it, the most common pushback we get on the name revolves around the lingering Oracle II lawsuit, which we view as likely a non-event.
What is the trial with $ORCL in 2022, and what it is not? While we feel we understand this & have hired law firms to evaluate it, the most common pushback we get on the name revolves around the lingering Oracle II lawsuit, which we view as likely a non-event.
14/15 $RMNI
Additionally, I am excited to see all the old/new mgmt laying out their vision. I’ve met some of them at their HQs & was extremely impressed. Shining a light on the depth of mgmt. bench will help for sure, especially evangelizer Sebastien Grady.
Additionally, I am excited to see all the old/new mgmt laying out their vision. I’ve met some of them at their HQs & was extremely impressed. Shining a light on the depth of mgmt. bench will help for sure, especially evangelizer Sebastien Grady.
15/15 I view $RMNI as one of the cheapest software names out there, but the reasons (lawsuit, Pfd equity) have catalysts for removal & op momentum is strong. It is one of the few SaaS stocks out there I can still outline a multi-bagger scenario for over the next few yrs.
