Rimini Street Inc.
10/30/2025 | Press release | Distributed by Public on 10/30/2025 14:03
Quarterly Report for Quarter Ending September 30, 2025 (Form 10-Q)
Management's Discussion and Analysis of Financial Condition and Results of Operations.
CAUTIONARY NOTE ABOUT FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q (this "Report") includes forward-looking statements. All statements other than statements of historical facts contained in this Report, including statements regarding our future results of operations and financial position, business strategy and plans, and our objectives for future operations, are forward-looking statements. The words "anticipate," "assume," "believe," "continue," "could," "currently," "estimate," "expect," "forecast," "future," "intend," "may," "might," "outlook," "plan," "possible," "goal," "potential," "predict," "project," "seem," "seek," "should," "will," "would" and similar expressions that convey uncertainty of future events or outcomes are intended to identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking. Forward-looking statements include, but are not limited to, information concerning:
•the evolution of the enterprise software management and support landscape facing our clients;
•the settlement agreement dated July 7, 2025 (the "Settlement Agreement"), among us, our President, Chief Executive Officer and Chairman of the Board, Mr. Seth Ravin, and Oracle Corporation (and certain affiliates) relating to the Rimini IIlitigation and the wind down of support services for Oracle PeopleSoft software products (the "Wind Down");
•our ability to successfully complete the Wind Down by July 31, 2028 and our expectations as to future period revenue loss and costs incurred related to the Wind Down;
•estimates of our total addressable market;
•expectations of client savings relative to use of other providers;
•the occurrence of catastrophic events, including terrorism and geopolitical actions specific to an international region, that may disrupt our business or that of our current and prospective clients;
•our ability to maintain an adequate rate of revenue growth;
•our ability to maintain sufficient cash flow and capital or raise additional capital necessary to fund our operations and invest in new services and products;
•the impact of our Credit Facility's debt service obligations and financial and operational covenants on our business and related interest rate risk;
•our business plan and ability to effectively manage our growth and associated investments;
•the impact of any macro-economic trends, including inflation, rising interest rates and changes in foreign exchange rates;
•beliefs and objectives for future operations;
•our ability to expand our leadership position in independent enterprise software support and to sell our managed services, professional services and innovation offerings;
•our expectations regarding new product offerings, innovation solutions, partnerships and alliance programs;
•our ability to develop and maintain strategic partnerships;
•our ability to attract and retain clients and our ability to further penetrate our existing client base;
•our ability to maintain our competitive technological advantages against new entrants in our industry;
•our ability to timely and effectively scale and adapt our existing technology;
•our ability to innovate new products and bring them to market in a timely manner;
•our ability to maintain, protect, and enhance our brand and intellectual property;
•our ability to capitalize on changing market conditions including a market shift to hybrid and cloud/SaaS offerings for information technology environments and retirement of certain software releases by software vendors;
•benefits associated with the use of our services;
•our ability to expand internationally;
•our need and ability to raise equity or debt financing on favorable terms and our ability to generate cash flows from operations to help fund increased investment in our growth initiatives;
•the effects of increased competition in our market and our ability to compete effectively;
•our intentions with respect to our pricing model;
•cost of revenue, including changes in costs associated with production and client support, and the results of any efforts to manage costs to align with current revenue expectations and expansion of our offerings;
•changes in laws or regulations, including tax laws or unfavorable outcomes of tax positions we take;
•tariff costs, including tariff relief or the ability to mitigate tariffs, in light of new or increased tariffs imposed by the United States government and the potential for retaliatory trade measures by affected countries;
•a failure by us to establish adequate reserves for tax events;
•our ability to realize benefits from our net operating losses;
•any negative impact of environmental, social and governance matters on our reputation or business and the exposure of our business to additional costs or risks from our reporting on such matters;
•our ability to maintain our good standing with the United States government and international governments and capture new contracts with governmental entities;
•economic and industry trends or trend analysis;
•our ability to prevent unauthorized access to our information technology systems and other cybersecurity threats, protect the confidential information of our employees and clients and comply with privacy and data protection regulations, as well as any deficiencies associated with artificial intelligence (AI) technologies used by us or by our third-party vendors and service providers or incorporated by us into our service offerings;
•the amount and timing of repurchases, if any, under our stock repurchase program and our ability to enhance stockholder value through such program or any other actions to provide value to stockholders;
•the expected impact of reductions in our workforce during the last and current fiscal year;
•the attraction and retention of additional qualified personnel and the retention of key personnel;
•future acquisitions of or investments in complementary companies, products, subscriptions or technologies;
•the effects of seasonal trends on our results of operations, including the contract renewal cycles for vendor-supplied software support and managed services;
•our ability to maintain an effective system of internal control over financial reporting and our ability to remediate any identified material weaknesses in our internal controls; and
•other risks and uncertainties, including those discussed under "Risk Factors" in Part II, Item 1A of this Report.
We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy, short-term and long-term business operations and objectives, and financial needs. These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those referred to under "Risk Factors" in Part II, Item 1A of this Report, many of which are beyond our control. Moreover, we operate in very competitive and rapidly changing markets. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in this Report may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements.
You should not rely upon forward-looking statements as predictions of future events. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee that the future results, levels of activity, performance or events and circumstances reflected in the forward-looking statements will be achieved or occur. Moreover, neither we nor any other person assumes responsibility for the accuracy and completeness of the forward-looking statements. The forward-looking statements in this Report are made as of the date of the filing, and except as required by law, we disclaim and do not undertake any obligation to update or revise publicly any forward-looking statements in this Report. You should read this Report and the documents that we reference in this Report and have filed with the SEC as exhibits with the understanding that our actual future results, levels of activity and performance, as well as other events and circumstances, may be materially different from what we expect.
Overview
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the Unaudited Condensed Consolidated Financial Statements and the related notes to those statements included in Part I, Item 1 of this Report, and our Audited Consolidated Financial Statements for the year ended December 31, 2024, included in Part II, Item 8 of our 2024 Form 10-K.
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 based on such rounded figures but on the basis of such amounts prior to rounding. For this reason, percentage amounts in this section may vary slightly from those obtained by performing the same calculations using the figures in our Unaudited Condensed Consolidated Financial Statements or in the associated text. Certain other amounts that appear in this section may similarly not sum due to rounding.
Rimini Street, Inc. was formed in the State of Nevada in 2005 and, through a merger in 2017 with a public company, became Rimini Street, Inc., a Delaware corporation, trading on the Nasdaq Global Market under the ticker symbol "RMNI."
Rimini Street, Inc. and its subsidiaries (referred to as "Rimini Street", the "Company", "we" and "us") are global providers of end-to-end enterprise software support, products and services. The Company offers a comprehensive family of unified solutions to run, manage, support, customize, configure, connect, protect, monitor, and optimize clients' enterprise application, database, and technology software platforms.
Over the years, as our reputation for technical capability, value, innovation, responsiveness and trusted reliability grew, clients and prospects began asking us to expand the scope of our support, product and service offerings to meet other current and evolving needs and opportunities related to their enterprise software. We also heard from prospects and clients that their goals include reducing the number of IT vendors to more manageable numbers from a governance perspective, with a desire to select vendors who can provide a wider scope of IT services and become true trusted partners.
To meet the needs of our clients and prospects and to service what we believe is a significantly expanded addressable market opportunity, we continue to expand our solutions portfolio (our "Solutions Portfolio") to a wider array of enterprise software - including an expanded list of supported software for VMware; managed services for Oracle, SAP, Salesforce®, IBM, ServiceNow®, and open-source database software; and new solutions for security, interoperability, observability and consulting. We also offer a unified package of our services as Rimini ONE™, a unique end-to-end, "turnkey" outsourcing option for certain Oracle and SAP landscapes designed to optimize our clients' existing technologies with a minimum of 15 extended years of operating lifespan and enable our clients to focus their IT talent and budget on potentially higher-value, innovative projects that will support competitive advantage and growth.
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. We also believe organizations are increasingly creating more complex IT environments that are a mixture of multiple technologies, business models and vendors, including perpetual license and subscription license software solutions, deployed across the client's system and cloud computing providers (hybrid IT environments), and consisting of proprietary and non-proprietary open-source software, all from a multitude of different technology vendors. The costs associated with running and supporting these systems; failure and downtime; security exposure; integrating and monitoring; and maintaining the tax, legal and regulatory compliance of these software systems, have increased in both actual spend and as a percentage of the full IT budget. 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 September 30, 2025, was generated from our support solutions.
In a traditional licensing model, the customer typically procures a perpetual software license and pays for the license in a single upfront fee ("perpetual license"), and base software support services can be optionally procured from the software vendor for an annual fee that is typically 20-23% of the total cost of the software license. In a newer subscription-based licensing model, such as software as a service ("SaaS"), the customer generally pays for the usage of the software on a monthly or annual basis ("subscription license"). Under a subscription license, the product license and a base level of software support are generally bundled together as a single purchase, and the base level of software support is not procured separately nor is it an optional purchase.
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. 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. We also offer a special support service, Rimini Street Extra Secure Support, available to clients that require a more rigorous level of security background checks and/or government security clearance for engineers accessing a client's system than our standard employment security background check and requirements. Clients may be asked to pay an additional fee for Rimini Street Extra Secure Support.
In addition to our support services, we also offer a breadth of enterprise software support, products and services through our full portfolio of solutions at an additional fee that is calculated based on a variety of factors and metrics. 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 our 2024 Form 10-K.
As of September 30, 2025, we employed over 2,000 professionals and supported over 3,150 active clients globally, including 81 Fortune 500 companies and 21 Fortune Global 100 companies across a broad range of industries. We define an active client as a distinct entity, such as a company, an educational or government institution, or a business unit of a company that purchases our services to support a specific product. For example, we count as two separate active clients instances where we provide support for two different products to the same entity.
Our subscription-based revenue provides a foundation for, and visibility into, future period results. For the three months ended September 30, 2025 and 2024, we generated revenue of $103.4 million and $104.7 million, respectively, representing a decrease of 1%. During the three months ended September 30, 2025, we recorded net income of $2.8 million, and as of September 30, 2025, we had an accumulated deficit of $202.1 million. Approximately 45% and 49% of our revenue was generated in the United States for the three months ended September 30, 2025 and 2024, respectively. Approximately 55% and 51% of our revenue was generated in foreign jurisdictions for the three months ended September 30, 2025 and 2024, respectively.
In 2024, we announced that we would Wind Down services for Oracle PeopleSoft products and began the Wind Down project. The Wind Down includes our Rimini Support™, Rimini Manage™ and Rimini Consult™ services for Oracle PeopleSoft products.
On July 7, 2025, we and Mr. Ravin entered into a Settlement Agreement with Oracle Corporation relating to the Rimini IIlitigation. Under the terms of this agreement, we are required to complete the Wind Down no later than July 31, 2028 (the "Wind Down Period"). The Wind Down includes our Rimini Support, Rimini Manage and Rimini Consult services for Oracle PeopleSoft products. As we provide services for Oracle PeopleSoft products to clients globally, the Wind Down process is expected to take place over the Wind Down Period, but both the pace of revenue reduction and the final date that the Company will receive revenue from the discontinued services is unknown as of the date of this Report. We expect significant reductions in revenue related to services for Oracle PeopleSoft products over the course of the Wind Down Period. Revenue related to providing services for Oracle PeopleSoft products accounted for approximately 6% of revenue for the nine months ended September 30, 2025 and approximately 8% of revenue for the nine months ended September 30, 2024.
Since our inception, we have financed our operations through cash collected from clients and net proceeds from equity financings and borrowings.
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 current military conflicts, and recent political and trade turmoil between the U.S. and other countries, amongst other global challenges. While we do not physically operate in some of these countries where conflict is occurring, we do have operations in Israel. These global events, together with inflationary pressures, have negatively impacted the global economy and driven changes in interest rates.
Uncertainty regarding changes continuing to be made in laws and regulations by the current U.S. administration, along with uncertainty about U.S. trade policies, particularly when pertaining to treaties, tariffs and other limitations on international trade, are causing economic and geopolitical uncertainty. Despite these macroeconomic and geopolitical pressures, we expect to continue to be able to market, sell and provide our current and future products and services to clients in non-sanctioned countries globally. We also expect to continue investing in the development and improvement of new and existing products and services to address client needs. Further, although our operations are influenced by general economic conditions, we do not believe the impacts of the economic disruptions described above had a significant net impact on our revenue or results of operations during the three and nine months ended September 30, 2025.
The extent to which rising inflation, interest rate changes and continuing global economic and geopolitical uncertainty impact our business going forward, however, will depend on numerous evolving factors we cannot reliably predict and that are beyond our control, including continued governmental and business actions in response to increasing global economic and geopolitical uncertainty. 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 II, Item 1A of this Report) for a discussion of these factors and other risks.
Recent Developments
Reference is made to Note 8 to our Unaudited Condensed Consolidated Financial Statements included in Part I, Item 1 of this Report for a discussion of recent developments regarding our litigation with Oracle, including the July 7, 2025, Settlement Agreement referenced above.
Key Business Metrics
Number of clients
Since the founding of our Company, we have made the expansion of our client base a priority. We believe that our ability to expand our client base is an indicator of the growth of our business, the success of our sales and marketing activities, and the value that our services bring to our clients. We define an active client as a distinct entity, such as a company, an educational or government institution, or a business unit of a company that purchases our services to support a specific product. For example, we count as two separate active clients when support for two different products is being provided to the same entity. As of September 30, 2025 and 2024, we had approximately 3,155 and 3,097 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 products or services. 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 September 30, 2025 and 2024, we had approximately 1,590 and 1,577 unique clients, respectively.
The increases in both our active and unique client counts have been a combination of new unique client wins as well as cross-sales of new support products and services to existing clients. We intend to focus future growth on both new and existing clients and we believe that growth in our number of unique clients is an indication that we can grow our enterprise software products and services in the future.
Annualized recurring revenue
We recognize subscription revenue on a daily basis. We define annualized recurring revenue as the amount of subscription revenue recognized during a quarter and multiplied by four. This gives us an indication of the revenue that can be earned in the following 12-month period from our existing client base assuming no cancellations or price changes occur during that period. Subscription revenue, which excludes any non-recurring revenue, was $98 million, or 95% of total revenue for the three months ended September 30, 2025 and $100 million, or 96% of total revenue for the three months ended September 30, 2024.
Our annualized recurring revenue was $391 million and $402 million as of September 30, 2025 and 2024, respectively. The decline reflects the recent reduction in client retention, not fully offset by new client engagements.
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-cancellable 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 define revenue retention rate as the actual subscription revenue (dollar-based) recognized in a 12-month period from clients that existed on the day prior to the start of the 12-month period divided by our annualized recurring revenue as of the day prior to the start of the 12-month period. Our revenue retention rate was 89% for each of the 12 months ended September 30, 2025 and 2024, respectively.
Gross profit margin
We derive revenue through the provision of our enterprise software products and services. 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.
We define gross profit as the difference between revenue and the costs incurred in providing the software products and services. Gross profit margin is the ratio of gross profit divided by revenue. Our gross profit margin was approximately 59.9% and 60.7% for the three months ended September 30, 2025 and 2024, respectively. Our gross profit margin declined for the three months ended September 30, 2025 compared to the three months ended September 30, 2024 due to a change in our revenue mix as evidenced by a decline in PeopleSoft and other subscription revenue, which was offset, in part, by an increase in professional services revenue.
Results of Operations
Comparison of Three Months Ended September 30, 2025 and 2024
Our consolidated statements of operations for the three months ended September 30, 2025 and 2024, are presented below (in thousands):
|
Three Months Ended September 30, |
Variance | ||||||||||||||||||||||
| 2025 | 2024 | Amount | Percent | ||||||||||||||||||||
| Revenue | $ | 103,428 | $ | 104,672 | $ | (1,244) | (1.2)% | ||||||||||||||||
| Cost of revenue: | |||||||||||||||||||||||
| Employee compensation and benefits | 24,609 | 25,756 | (1,147) | (4.5)% | |||||||||||||||||||
| Engineering consulting costs | 7,359 | 6,375 | 984 | 15.4% | |||||||||||||||||||
|
Administrative allocations (1)
|
4,780 | 4,093 | 687 | 16.8% | |||||||||||||||||||
| All other costs | 4,742 | 4,911 | (169) | (3.4)% | |||||||||||||||||||
| Total cost of revenue | 41,490 | 41,135 | 355 | 0.9% | |||||||||||||||||||
| Gross profit | 61,938 | 63,537 | (1,599) | (2.5)% | |||||||||||||||||||
| Gross profit margin | 59.9 | % | 60.7 | % | |||||||||||||||||||
| Operating expenses: | |||||||||||||||||||||||
| Sales and marketing | 37,939 | 35,781 | 2,158 | 6.0% | |||||||||||||||||||
| General and administrative | 18,241 | 16,528 | 1,713 | 10.4% | |||||||||||||||||||
| Reorganization costs | 752 | 1,431 | (679) | (47.4)% | |||||||||||||||||||
| Litigation costs and related recoveries, net | 621 | 59,391 | (58,770) | (99.0)% | |||||||||||||||||||
| Total operating expenses | 57,553 | 113,131 | (55,578) | (49.1)% | |||||||||||||||||||
| Operating income | 4,385 | (49,594) | 53,979 | (108.8)% | |||||||||||||||||||
| Non-operating income and (expenses): | |||||||||||||||||||||||
| Interest expense | (1,446) | (1,577) | 131 | (8.3)% | |||||||||||||||||||
| Other income (expenses), net | 531 | (642) | 1,173 | (182.7)% | |||||||||||||||||||
| Income before income taxes | 3,470 | (51,813) | 55,283 | (106.7)% | |||||||||||||||||||
| Income taxes | (704) | 8,713 | (9,417) | (108.1)% | |||||||||||||||||||
| Net income | $ | 2,766 | $ | (43,100) | $ | 45,866 | (106.4)% | ||||||||||||||||
(1)Includes the portion of costs for IT, security services and facilities costs that are allocated to cost of revenue. In our Unaudited Condensed Consolidated Financial Statements, the total of such costs is allocated between cost of revenue, sales and marketing, and general and administrative expenses, based primarily on relative headcount, except for facilities which is based on occupancy.
Revenue.Revenue declined from $104.7 million for the three months ended September 30, 2024 to $103.4 million for the three months ended September 30, 2025, a decrease of $1.2 million or 1%. The decrease in revenue was driven, in part, by a reduction in PeopleSoft and other subscription clients. The subscription revenue decline of $2.6 million for the three months ended September 30, 2025 was offset, in part, by an increase in our professional services revenue of $1.4 million for the same three months ended September 30, 2025. Our average number of unique clients has increased 1% from 1,555 for the three months ended September 30, 2024 to 1,572 for the three months ended September 30, 2025. On a geographic basis, United States revenue declined from $51.6 million for the three months ended September 30, 2024 to $46.3 million for the three months ended September 30, 2025, a decrease of $5.3 million or 10%. Our international revenue grew from $53.1 million for the three months ended September 30, 2024 to $57.2 million for the three months ended September 30, 2025, an increase of $4.1 million or 8%.
We are required to complete the Wind Down of support and services for Oracle PeopleSoft products no later than July 31, 2028. The percentage of revenue derived from support and services the Company provides solely for Oracle PeopleSoft products was approximately 5% and 8% of the Company's total revenue for the three months ended September 30, 2025 and 2024, respectively.
Cost of revenue.Cost of revenue increased from $41.1 million for the three months ended September 30, 2024 to $41.5 million for the three months ended September 30, 2025, an increase of $0.4 million or 1%. The key drivers related to the cost of revenue increase were a $1.0 million increase in engineering consulting costs and a $0.7 million increase in administrative allocations, which were offset, in part, by a decline in employee compensation and benefits of $1.1 million and a $0.2 million decrease in all other costs.
Gross profit.Gross profit decreased from $63.5 million for the three months ended September 30, 2024 to $61.9 million for the three months ended September 30, 2025, a decrease of $1.6 million or 3%. Gross profit margin for the three months ended September 30, 2024 was 60.7% compared to 59.9% for the three months ended September 30, 2025. For the three months ended September 30, 2025, the total cost of revenue increased by 1% compared to a decrease in revenue of 1% for the three months ended September 30, 2025. As a result, our gross profit margin declined by 80 basis points period over period. We will continue to monitor and manage our overall gross margin as we enter and invest in a broader mix of products and services.
Sales and marketing expenses.As a percentage of our revenue, sales and marketing expenses were 37% and 34% for the three months ended September 30, 2025 and 2024, respectively. In dollar terms, sales and marketing expenses increased from $35.8 million for the three months ended September 30, 2024 to $37.9 million for the three months ended September 30, 2025, an increase of $2.2 million or 6%. This increase was primarily due a $1.2 million increase in employee compensation and benefits, a $0.6 million increase related to travel expenses and a $0.8 million increase in allocated costs. These increases were primarily offset by a $0.3 million decrease in marketing and advertising expenses. We will continue to seek additional revenue by selectively investing in resources and marketing programs that we believe will be scalable and help drive future revenue growth.
General and administrative expenses.General and administrative expenses increased from $16.5 million for the three months ended September 30, 2024 to $18.2 million for the three months ended September 30, 2025, an increase of $1.7 million or 10%. This increase was due to an increase in employee compensation and benefits of $1.2 million and increase of other taxes of $1.8 million, primarily due to the settlement of a foreign tax audit for $0.8 million. The unfavorable variances were offset by an increased benefit of administrative allocation expenses by $1.5 million.
Looking forward on a quarter-over-quarter basis, we are monitoring the demand for our services in light of current global economic conditions and competitive pressures and will adjust our expenditures accordingly. However, we expect to incur higher expenses associated with supporting the growth of our business, both in terms of size and geographical diversity. Our company costs that are expected to increase in the future include costs relating to 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 expect continued pressure on our general and administrative expenses in future periods.
Reorganization costs. During the year ended December 31, 2024, we began a process to optimize our cost structure through a headcount reduction. We recognized reorganization costs of $0.8 million for the three months ended September 30, 2025 compared to $1.4 million for the three months ended September 30, 2024. The costs were primarily related to severance costs associated with our reorganization plan. We are likely to incur additional reorganization costs during the fourth quarter of 2025 as we continue to optimize our cost structure in areas where opportunities to streamline our operations exist.
Litigation costs and related recoveries, net.Litigation costs and related recoveries, net consist of the following (in thousands):
| Three Months Ended September 30, | |||||||||||||||||
| 2025 | 2024 | Variance | |||||||||||||||
| Litigation settlement | $ | - | $ | 58,512 | $ | (58,512) | |||||||||||
| Professional fees and other costs of litigation | 621 | 879 | (258) | ||||||||||||||
| Litigation costs and related recoveries, net | $ | 621 | $ | 59,391 | $ | (58,770) | |||||||||||
Litigation settlement expense decreased from $58.5 million for the three months ended September 30, 2024 to no expense for the three months ended September 30, 2025. In September 2024, the District Court issued its order on Oracle's motion for attorneys' fees and taxable costs and awarded Oracle approximately $58.5 million in attorneys' fees and costs, which we recorded during the three months ended September 30, 2024.
Professional fees and other costs associated with litigation decreased from $0.9 million for the three months ended September 30, 2024 to $0.6 million for the three months ended September 30, 2025, a decrease of $0.3 million. This decrease was primarily due to the timing of when litigation costs relating to the Rimini IIlitigation were incurred. Also, in July 2025, we entered into a Settlement Agreement with Oracle. While we expect to incur professional fees and other costs associated with litigation in the future throughout the Wind Down Period, it is our expectation that those costs will decrease from our historical spend. Please refer to Note 8 to our Unaudited Condensed Consolidated Financial Statements, included in Part I, Item 1 of this Report, for additional information regarding our litigation with Oracle.
Interest expense.Interest expense decreased from $1.6 million for the three months ended September 30, 2024 to $1.4 million for the three months ended September 30, 2025. Interest expense declined primarily due to a reduction in the SOFR rate for the three months ended September 30, 2025 compared to the prior year. This decline was offset in part by interest incurred on the revolving line of credit for the three months ended September 30, 2025.
Other income (expenses), net.Other income (expenses), net is primarily comprised of interest income, foreign exchange gains and losses, and other non-operating income and expenses. For the three months ended September 30, 2025, net other income of approximately $0.5 million was comprised of interest income of $1.0 million, which was offset by foreign currency losses of $0.4 million and other expenses of $0.1 million. For the three months ended September 30, 2024, net other expense of approximately $0.6 million was comprised primarily of foreign exchange losses of $1.7 million and other expenses of $0.1 million, which were offset by interest income from cash and cash equivalents of $1.1 million.
Income taxes.We had an income tax benefit of $8.7 million for the three months ended September 30, 2024 compared to an income tax expense of $0.7 million for the three months ended September 30, 2025. For the three months ended September 30, 2025, the primary reason for the change in income taxes was due to an increase of income before taxes of $55.3 million in the current year period compared to the prior year period because of the litigation settlement expense recognized during the three months ended September 30, 2024. In addition, we incurred income taxes as a result of our settlement of a foreign tax audit for $0.4 million during the three months ended September 30, 2025.
Comparison of Nine Months Ended September 30, 2025 and 2024
Our consolidated statements of operations for the nine months ended September 30, 2025 and 2024, are presented below (in thousands):
|
Nine Months Ended September 30, |
Variance | ||||||||||||||||||||||
| 2025 | 2024 | Amount | Percent | ||||||||||||||||||||
| Revenue | $ | 311,746 | $ | 314,540 | $ | (2,794) | (0.9)% | ||||||||||||||||
| Cost of revenue: | |||||||||||||||||||||||
| Employee compensation and benefits | 75,748 | 80,957 | (5,209) | (6.4)% | |||||||||||||||||||
| Engineering consulting costs | 20,113 | 18,905 | 1,208 | 6.4% | |||||||||||||||||||
|
Administrative allocations (1)
|
13,315 | 12,324 | 991 | 8.0% | |||||||||||||||||||
| All other costs | 14,245 | 14,044 | 201 | 1.4% | |||||||||||||||||||
| Total cost of revenue | 123,421 | 126,230 | (2,809) | (2.2)% | |||||||||||||||||||
| Gross profit | 188,325 | 188,310 | 15 | -% | |||||||||||||||||||
| Gross profit margin | 60.4 | % | 59.9 | % | |||||||||||||||||||
| Operating expenses: | |||||||||||||||||||||||
| Sales and marketing | 110,214 | 112,299 | (2,085) | (1.9)% | |||||||||||||||||||
| General and administrative | 52,617 | 54,460 | (1,843) | (3.4)% | |||||||||||||||||||
| Reorganization costs | 1,936 | 4,639 | (2,703) | (58.3)% | |||||||||||||||||||
| Litigation costs and related recoveries, net | (31,386) | 63,918 | (95,304) | (149.1)% | |||||||||||||||||||
| Total operating expenses | 133,381 | 235,316 | (101,935) | (43.3)% | |||||||||||||||||||
| Operating income | 54,944 | (47,006) | 101,950 | (216.9)% | |||||||||||||||||||
| Non-operating income and (expenses): | |||||||||||||||||||||||
| Interest expense | (4,750) | (4,401) | (349) | 7.9% | |||||||||||||||||||
| Other income (expenses), net | 1,686 | 1,814 | (128) | (7.1)% | |||||||||||||||||||
| Income before income taxes | 51,880 | (49,593) | 101,473 | (204.6)% | |||||||||||||||||||
| Income taxes | (15,506) | 6,662 | (22,168) | (332.8)% | |||||||||||||||||||
| Net income | $ | 36,374 | $ | (42,931) | $ | 79,305 | (184.7)% | ||||||||||||||||
(1)Includes the portion of costs for IT, security services and facilities costs that are allocated to cost of revenue. In our Unaudited Condensed Consolidated Financial Statements, the total of such costs is allocated between cost of revenue, sales and marketing, and general and administrative expenses, based primarily on relative headcount, except for facilities which is based on occupancy.
Revenue.Revenue declined from $314.5 million for the nine months ended September 30, 2024 to $311.7 million for the nine months ended September 30, 2025, a decrease of $2.8 million or 1%. The decline in revenue was driven, in part, by a reduction in PeopleSoft and other subscription clients. The subscription revenue decline of $8.8 million for the nine months ended September 30, 2025 was offset, in part, by an increase in our professional services revenue of $6.1 million over the same nine months ended September 30, 2025. On a geographic basis, United States revenue declined from $156.9 million for the nine months ended September 30, 2024 to $145.5 million for the nine months ended September 30, 2025, a decrease of $11.3 million or 7%. Our international revenue grew from $157.7 million for the nine months ended September 30, 2024 to $166.2 million for the nine months ended September 30, 2025, an increase of $8.5 million or 5%.
We are required to complete the Wind Down of support and services for Oracle PeopleSoft products no later than July 31, 2028. The percentage of revenue derived from support and services the Company provides solely for Oracle PeopleSoft products was approximately 6% and 8% of the Company's total revenue for the nine months ended September 30, 2025 and 2024, respectively.
Cost of revenue.Cost of revenue decreased from $126.2 million for the nine months ended September 30, 2024 to $123.4 million for the nine months ended September 30, 2025, a decrease of $2.8 million or 2%. The key drivers related to the cost of revenue decrease were a $5.2 million decrease in employee compensation and benefits as the average headcount
decreased 6%, which was offset by a $1.2 million increase in engineering consulting costs, a $1.0 million increase in administrative allocations and a $0.2 million increase in all other costs.
Gross profit.Gross profit increased $15 thousand from $188.3 million for the nine months ended September 30, 2024 to $188.3 million for the nine months ended September 30, 2025. Gross profit margin for the nine months ended September 30, 2024 was 59.9% compared to 60.4% for the nine months ended September 30, 2025. For the nine months ended September 30, 2025, the total cost of revenue decreased by 2%, primarily due to a decrease in average headcount of 6% compared to a decline in revenue of 1% for the nine months ended September 30, 2025. As a result, our gross profit margin improved by 50 basis points period over period. We will continue to monitor and manage our overall gross margin as we enter and invest in a broader mix of products and services.
Sales and marketing expenses.As a percentage of our revenue, sales and marketing expenses were 35% and 36% for the nine months ended September 30, 2025 and 2024, respectively. In dollar terms, sales and marketing expenses decreased from $112.3 million for the nine months ended September 30, 2024 to $110.2 million for the nine months ended September 30, 2025, a decrease of $2.1 million or 2%.
This decline was primarily due to a reduction of $3.0 million related to travel and entertainment costs incurred as part of a sales training event held in January 2024. In addition, marketing and advertising costs declined $1.0 million for the nine months ended September 30, 2025. These declines were offset, in part, by increases in costs for employee compensation and benefits of $0.7 million and for administrative allocations of $1.3 million, respectively, for the nine months ended September 30, 2025. We will continue to seek additional revenue by selectively investing in resources and marketing programs that we believe will be scalable and help drive future revenue growth.
General and administrative expenses.General and administrative expenses decreased from $54.5 million for the nine months ended September 30, 2024 to $52.6 million for the nine months ended September 30, 2025, a decrease of $1.8 million or 3%. This decrease was comprised of several items, which included a decrease in employee compensation and benefits of $0.5 million, an increase in administrative allocations of $2.3 million, a decrease of contract labor of $0.6 million and a reduction of professional fees of $0.7 million for the nine months ended September 30, 2025. These favorable variances were offset by an increase in other taxes of $1.6 million, primarily due to the settlement of a foreign tax audit for $0.8 million, and rent and facility costs of $0.6 million.
Reorganization costs.During the year ended December 31, 2024, we began a process to optimize our cost structure through a headcount reduction. We recognized reorganization costs of $1.9 million for the nine months ended September 30, 2025 compared to $4.6 million for the nine months ended September 30, 2024. The costs were primarily related to severance costs associated with our reorganization plan. We are likely to incur additional reorganization costs during the fourth quarter of 2025 as we continue to optimize our cost structure in areas where opportunities to streamline our operations exist.
Litigation costs, net of related insurance recoveries.Litigation costs, net of related insurance recoveries, consist of the following (in thousands):
| Nine Months Ended September 30, | |||||||||||||||||
| 2025 | 2024 | Variance | |||||||||||||||
| Litigation settlement | $ | (36,196) | $ | 58,512 | $ | (94,708) | |||||||||||
| Professional fees and other costs of litigation | 4,810 | 5,406 | (596) | ||||||||||||||
| Litigation costs and related recoveries, net | $ | (31,386) | $ | 63,918 | $ | (95,304) | |||||||||||
Litigation settlement expense decreased from an expense of $58.5 million for the nine months ended September 30, 2024 to a litigation settlement benefit of $36.2 million for the nine months ended September 30, 2025, a change of $94.7 million. In September 2024, the District Court issued its order on Oracle's motion for attorneys' fees and taxable costs and awarded Oracle approximately $58.5 million in attorneys' fees and costs, which we recorded during the nine months ended September 30, 2024. In July 2025, in accordance with the terms of the Settlement Agreement, we received from Oracle approximately $37.9 million of the $58.5 million in attorneys' fees and costs and $0.2 million of interest that we previously paid to Oracle in late 2024. This loss recovery was recognized as litigation settlement income of $36.2 million and interest income of $1.7 million during the nine months ended September 30, 2025. While we expect to incur professional fees and other costs associated with litigation in the future throughout the Wind Down Period, it is our expectation that those costs will decrease from our historical spend.
Professional fees and other costs associated with litigation decreased from $5.4 million for the nine months ended September 30, 2024 to $4.8 million for the nine months ended September 30, 2025, a decrease of $0.6 million. This decrease was primarily due to the timing of when litigation costs relating to the Rimini IIlitigation were incurred. Please refer to Note 8 to our Unaudited Condensed Consolidated Financial Statements, included in Part I, Item 1 of this Report, for additional information regarding our litigation with Oracle.
Interest expense.Interest expense increased from $4.4 million for the nine months ended September 30, 2024 to $4.8 million for the nine months ended September 30, 2025. Interest expense increased primarily due to borrowing $15.0 million in October 2024 under the revolving line of credit, which resulted in interest expense of $0.5 million for the nine months ended September 30, 2025.
Other income (expenses), net.Other income (expenses), net is primarily comprised of interest income, foreign exchange gains and losses, and other non-operating income and expenses. For the nine months ended September 30, 2025, net other income of approximately $1.7 million was comprised primarily of interest income of $4.1 million, which included $1.7 million related to interest income comprising a portion of the total $37.9 million of attorneys' fees and costs remitted by Oracle to us as well as interest income earned from cash and cash equivalents. The interest income was offset, in part, by foreign exchange losses of $2.1 million and other expenses of $0.3 million. For the nine months ended September 30, 2024, net other income of approximately $1.8 million was comprised primarily of income from cash equivalents and investments of $3.0 million which were offset, in part, by foreign exchange losses of $0.6 million and other expenses of $0.6 million.
Income tax expense.We recorded an income tax benefit of $6.7 million for the nine months ended September 30, 2024 compared to an income tax expense of $15.5 million for the nine months ended September 30, 2025. For the nine months ended September 30, 2025, the primary reason for the increase in income tax expense was due to an increase of income before taxes of $101.5 million in the current year period compared to the prior year period was because of reaching a Settlement Agreement with Oracle in July 2025.
Liquidity and Capital Resources
Overview
As of September 30, 2025, we had a working capital deficit of $41.4 million and an accumulated deficit of $202.1 million. For the three months ended September 30, 2025, we recorded net income of $2.8 million. As of September 30, 2025, we had available cash, cash equivalents and restricted cash of $109.9 million.
In April 2024, we refinanced our Original Credit Facility, which had an outstanding principal balance of $70.9 million, with a new five-year senior secured credit facility ("2024 Credit Facility") consisting of a $75.0 million term loan and a $35.0 million revolving line of credit. As of September 30, 2025, we had outstanding term loan borrowings of $70.3 million and no borrowings on the revolving line of credit under our 2024 Credit Facility, as we repaid the remaining $10.0 million outstanding on July 15, 2025. As a result, we had net available borrowing capacity of $35.0 million under our revolving line of credit as of September 30, 2025.
We have a choice of interest rates under the 2024 Credit Facility between (a) SOFR and (b) Base Rate, in each case plus an applicable margin. The applicable margin remains the same as the Original Credit Facility and is based on our Consolidated Total Leverage Ratio (as defined in the 2024 Credit Facility) and whether we elect SOFR (ranging from 2.75% to 3.50%) or a Base Rate (ranging from 1.75% to 2.5%). Interest on the unused portion of the revolving credit line is at rates of between 25 to 40 basis points, depending on our Consolidated Total Leverage Ratio. Annual minimum principal payments over the five-year term for the 2024 Credit Facility are 5%, 5%, 7.5%, 7.5%, and 10%, respectively, with the remaining balance due at the end of the original term.
The 2024 Credit Facility contains certain financial covenants, including a minimum fixed charge coverage ratio greater than 1.25, a total leverage ratio less than 3.75, and a minimum liquidity balance of at least $20 million in U.S. cash. We believe that we are in compliance with these financial covenants for the three months ended September 30, 2025.
Please refer to Note 5 to the Unaudited Condensed Consolidated Financial Statements included in Part I, Item 1 of this Report for information regarding our 2024 Credit Facility.
A key component of our business model requires that substantially all clients prepay us annually for the services we will provide over the following year or longer. As a result, we typically collect cash from our clients in advance of when the related service costs are incurred, which resulted in deferred revenue of $206.9 million that is included in current liabilities as of
September 30, 2025. 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 clients are currently limited to approximately 40% of the related deferred revenue based on our gross profit percentage of 60% for the three months ended September 30, 2025.
For the next year, assuming that our operations are not significantly impacted by inflation, continued interest rate changes, other global economic or geopolitical uncertainties, political and trade turmoil between the U.S. and China, continuation or resumption of conflict in Israel and other countries, or the litigation matters as disclosed in Note 8 to our Unaudited Condensed Consolidated Financial Statements included in Part I, Item 1 of this Report, we believe that cash, cash equivalents and restricted cash of $109.9 million as of September 30, 2025, plus future cash flows from operating activities and our 2024 Credit Facility will be sufficient to meet our anticipated cash needs including working capital requirements, planned capital expenditures and our contractual obligations.
Our future capital requirements depend on many factors, including client growth, number of employees, expansion of sales and marketing activities, and the introduction of new and enhanced services offerings. 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. In an economic downturn, however we may be unable to raise capital through debt or equity financings on terms acceptable to us or at all. Covenants in our 2024 Credit Facility could also have consequences on our operations, including restricting or delaying our ability to obtain additional financing, potentially limiting our ability to adjust to rapidly changing market conditions or respond to business opportunities. Additionally, in challenging and uncertain economic environments, we cannot predict when macroeconomic uncertainty may arise, whether or when such circumstances may improve or worsen or what impact such circumstances could have on our business and our liquidity requirements.
Cash Flows Summary
Presented below is a summary of our operating, investing and financing cash flows (in thousands):
| Nine Months Ended September 30, | |||||||||||
| 2025 | 2024 | ||||||||||
| Net cash provided by (used in): | |||||||||||
| Operating activities | $ | 40,659 | $ | (1,169) | |||||||
| Investing activities | (3,865) | 7,128 | |||||||||
| Financing activities | (21,810) | 46 | |||||||||
The effect of foreign currency translation changes was favorable for $5.7 million for the nine months ended September 30, 2025 compared to an unfavorable impact of $1.9 million for the nine months ended September 30, 2024, respectively, due to favorable foreign exchange impacts related to our foreign cash. For the nine months ended September 30, 2025, we experienced a change in foreign currency exchange rates as the U.S. dollar weakened against the majority of foreign currencies where we operate. The favorable foreign currency impact was primarily related to our foreign cash held in Japan and other foreign entities as those local currencies strengthened against the U.S. dollar.
Cash Flows Provided By (Used In) Operating Activities
As clients typically prepay us annually for the services which we will provide over the following year or longer, we typically collect cash in advance of the date when the vast majority of the related services are provided. Historically, we have experienced seasonality in our operating cash flows as we tend to generate cash from operating activities during the first half of the year. Our operating cash flows are then utilized by operating activities during the second half of the year. This has been due to the cyclical variations in our billings from period to period.
For the nine months ended September 30, 2025, cash flows provided by operating activities was approximately $40.7 million, which included the receipt of $37.9 million of litigation settlement proceeds in July 2025. The other key drivers resulting in our cash provided by operating activities for the nine months ended September 30, 2025, included net income of $36.4 million and adjustments to reconcile net income to net cash totaling $25.1 million, offset in part by unfavorable changes in operating assets and liabilities of $20.8 million, resulting in net cash provided by operating activities of $40.7 million.
For the nine months ended September 30, 2025, adjustments to reconcile net income to net cash consisted primarily of stock-based compensation expense of $8.4 million, amortization and accretion related to operating lease ROU assets of
$3.7 million, depreciation and amortization expense of $2.8 million, accretion and amortization of debt discount and issuance costs of $0.5 million and a favorable change in deferred income taxes of $9.7 million. For the nine months ended September 30, 2025, the changes in operating assets and liabilities, net consisted of favorable changes to accounts receivable of $50.3 million and deferred contract costs of $0.3 million. The favorable change to accounts receivable was a result of collecting $303.9 million during the nine months ended September 30, 2025 which was offset by billings, net of $256.5 million during the nine months ended September 30, 2025. As a result, our days sales outstanding for accounts receivable was 119 days as of September 30, 2025. The favorable change in deferred contract costs was due to capitalizing $13.8 million of commissions and amortizing $14.2 million of deferred contract costs during the nine months ended September 30, 2025.
Offsetting these favorable changes were unfavorable changes to deferred revenue of $59.6 million, accrued compensation, benefits, commissions and other of $4.3 million and prepaid expenses, deposits and other of $6.9 million for the nine months ended September 30, 2025. The use of cash for deferred revenue was due to recognizing $311.7 million in revenue for the current period, which was offset by recording billings, net of $256.5 million during the current period. The unfavorable use of prepaid expenses, deposits and other of $6.9 million was primarily due to payments for software licenses $4.0 million and future marketing trade shows for $1.2 million. The unfavorable use of accrued liabilities of $4.3 million was due primarily to payments for bonuses, commissions and taxes during the nine months ended September 30, 2025.
For the nine months ended September 30, 2024, cash flows used in operating activities amounted to approximately $1.2 million. The key drivers resulting in our cash provided by operating activities for the nine months ended September 30, 2024, included a net loss of $42.9 million and adjustments to reconcile a net loss to net cash totaling $0.8 million, as well as favorable changes in operating assets and liabilities of $41.0 million, resulting in net cash used in operating activities of $1.2 million.
For the nine months ended September 30, 2024, adjustments to reconcile a net loss to net cash consisted primarily of stock-based compensation expense of $7.1 million, amortization and accretion related to operating lease ROU assets of $3.4 million, depreciation and amortization expense of $2.7 million, accretion and amortization of debt discount and issuance costs of $0.6 million and an unfavorable change in deferred income taxes of $13.0 million. For the nine months ended September 30, 2024, the changes in operating assets and liabilities, net consisted of favorable changes to accounts receivable of $51.1 million, accrued liabilities of $48.3 million and deferred contract costs of $4.0 million. The favorable change to accounts receivable was a result of collecting $304.8 million during the nine months ended September 30, 2024 which was offset by billings, net of $250.9 million during the nine months ended September 30, 2024. As a result, our days sales outstanding for accounts receivable was 115 days as of September 30, 2024. The favorable change related to accrued liabilities was primarily a result of recording an expense of $58.5 million related to the District Court ruling for the nine months ended September 30, 2024. The favorable change in deferred contract costs was due to capitalizing $10.8 million of commissions and amortizing $14.8 million of deferred contract costs during the nine months ended September 30, 2024.
Offsetting these favorable changes were unfavorable changes to deferred revenue of $60.8 million, accounts payable of $1.4 million and prepaid expenses, deposits and other of $0.2 million for the nine months ended September 30, 2024. Regarding the use of cash for deferred revenue, it was due to recognizing $314.5 million in revenue for the current period, which was offset by recording billings, net of $250.9 million during the nine months ended September 30, 2024.
Cash Flows Provided By (Used In) Investing Activities
Cash used in investing activities totaled $3.9 million for the nine months ended September 30, 2025 and cash provided by investing activities totaled $7.1 million for the nine months ended September 30, 2024. For the nine months ended September 30, 2025, cash used in investing activities was primarily driven by capital expenditures for leasehold improvements, software development costs, and computer equipment of $3.9 million. Specifically, these capital expenditures were primarily located in Brazil, the U.S. and Korea. In Brazil, our capital expenditures included leasehold improvements of $1.4 million, furniture and fixtures of $0.4 million and computers of $0.4 million. In the U.S., our capital expenditures consisted of capitalized software development costs of $0.7 million and computers of $0.3 million. In Korea, we capitalized leasehold improvements of $0.3 million and computers of $0.1 million.
For the nine months ended September 30, 2024, cash provided by investing activities of $7.1 million was primarily driven by proceeds from sales and maturities of short-term investments of $17.3 million, which were offset by purchases of short-term investments of $7.5 million and capital expenditures of $2.7 million for leasehold improvements, software development costs, and computer equipment. The capital expenditures of $2.7 million consisted primarily of capitalized software development costs, new computer equipment, and furniture and fixtures in our U.S. entity of $2.0 million and $0.7 million for computer equipment at our foreign locations, primarily in Brazil of $0.2 million and in India of $0.3 million.
Cash Flows Provided By (Used In) Financing Activities
For the nine months ended September 30, 2025, cash utilized in financing activities of $21.8 million was attributable to principal payments related to the 2024 Credit Facility for the revolving line of credit of $15.0 million and the term loan of $2.8 million, payments to repurchase shares of Common Stock totaling $3.8 million and capital lease payments of $0.3 million. These activities were offset, in part, by proceeds from stock option exercises of $59.0 thousand.
For the nine months ended September 30, 2024, cash provided by financing activities of $46.0 thousand was attributable to proceeds received from the 2024 Credit Facility of $2.9 million, which were offset by principal payments related to the Original Credit Facility of $2.6 million and capital lease payments of $0.3 million.
Foreign Subsidiaries
Our foreign subsidiaries and branches are dependent on our U.S.-based parent for continued funding. We currently do not intend to repatriate any amounts that have been invested overseas back to the U.S.-based parent. However, we may still be liable for withholding taxes, state taxes, or other income taxes that might be incurred upon the repatriation of foreign earnings. We have not made any provision for additional income taxes on undistributed earnings of our foreign subsidiaries. As of September 30, 2025, we had cash and cash equivalents of $35.9 million held by our foreign subsidiaries.
Critical Accounting Estimates
Our management's discussion and analysis of financial condition and results of operations is based on our Unaudited Condensed Consolidated Financial Statements, which have been prepared in accordance with U.S. GAAP. The preparation of these Consolidated Financial Statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the Consolidated Financial Statements, as well as the reported revenue and expenses during the reporting periods. These items are monitored and analyzed for changes in facts and circumstances, and material changes in these estimates could occur in the future. We base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Changes in estimates are reflected in reported results for the period in which they become known. Actual results may differ from these estimates under different assumptions or conditions. We describe our significant accounting policies in Note 2 to our Consolidated Financial Statements for the year ended December 31, 2024, included in Part II, Item 8 of our 2024 Form 10-K, and we discuss our critical accounting policies and estimates in the "Management's Discussion and Analysis of Financial Condition and Results of Operations" section included in Part II, Item 7 of our 2024 Form 10-K. Since the filing of our 2024 Form 10-K, there have been no material changes in our critical accounting policies and estimates from those disclosed therein.
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 additional information on recently issued accounting standards and our plans for adoption of those standards, please refer to the section titled Recent Accounting Pronouncementsunder Note 2 to our Unaudited Condensed Consolidated Financial Statements included in Part I, Item 1 of this Report.
Recently Issued Accounting Standards Not Yet Adopted
In November 2024, the FASB issued ASU 2024-03, "Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses,"and in January 2025, the FASB issued ASU 2025-01, "Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Clarifying the Effective Date."ASU 2024-03 requires additional disclosure of the nature of expenses included in the income statement as well as disclosures about specific types of expenses included in the expense captions presented in the income statement. ASU 2024-03, as clarified by ASU 2025-01, is effective for annual periods beginning after December 15, 2026 and interim periods within fiscal years beginning after December 15, 2027 on a prospective basis. Both early adoption and retrospective application are permitted. We are assessing the impact of the adoption of these standards on our Consolidated Financial Statements and related disclosures.
In July 2025, the FASB issued ASU 2025-05, "Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets."ASU 2025-05 provides entities with a practical expedient to simplify the estimation of expected credit losses on current accounts receivable and current contract assets that arise from transactions accounted for under ASC 606, "Revenue from Contracts with Customers"by allowing the assumption that current
conditions as of the balance sheet date will not change during the remaining life of the asset. ASU 2025-05 is effective for annual periods beginning after December 15, 2025 and interim reporting periods within those annual reporting periods, with early adoption permitted. We are assessing the impact of the adoption of this standard on our Consolidated Financial Statements and related disclosures.
In September 2025, the FASB issued ASU 2025-06, "Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software." ASU 2025-06 modernizes the accounting for internal-use software by removing the stage-based model and introducing a principles-based framework for capitalization. ASU 2025-06 is effective for annual periods beginning after December 15, 2027 and interim reporting periods within those annual reporting periods, with early adoption permitted. We are assessing the impact of the adoption of this standard on our Consolidated Financial Statements and related disclosures.
We believe that no other recently issued accounting standards will have a material impact on our Unaudited Condensed Consolidated Financial Statements or apply to our operations.
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