GuruFocus –
- Subscription Revenue: $132.0 million, declined 0.6% year over year.
- Professional Services and Other Revenue: $19.7 million, declined 20.4% year over year.
- Total (EPA:) Revenue: $151.7 million, declined 3.7% year over year.
- Non-GAAP Gross Profit: $104.3 million, decreased 4.9% year over year.
- Non-GAAP Gross Margin: 68.8%, down from 69.6% in the prior-year quarter.
- Adjusted EBITDA: $53.6 million, 35.3% margin.
- Net Loss: $381.6 million, includes a non-cash goodwill impairment charge of $369.1 million.
- Adjusted Operating Cash Flow: $21.1 million for Q3, $54.7 million year-to-date.
- Cash and Cash Equivalents: $151.2 million, increased by $9.0 million from the second quarter.
Release Date: January 10, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- E2open Parent Holdings Inc (NYSE:ETWO) reported a solid increase in subscription revenue compared to the previous quarter, indicating stabilization in their subscription business.
- The company successfully closed several strategically important subscription deals with both existing and new clients, showcasing their ability to attract high-caliber global clients.
- E2open’s retention results were positive and consistent with internal targets, suggesting that the company is past peak churn and moving towards industry benchmarks.
- The company is actively incorporating emerging technologies like generative AI into their product suite, enhancing the functionality and appeal of their software solutions.
- E2open has strengthened its executive team with the appointment of a new Chief Strategy Officer and Chief Product and Technology Officer, aiming to accelerate innovation and growth.
Negative Points
- Subscription revenue still declined year over year, although the rate of decline has improved compared to previous quarters.
- Professional Services and Other Revenue saw a significant year-over-year decline of 20.4%, impacting overall revenue performance.
- Total revenue for the fiscal third quarter declined by 3.7% compared to the prior-year quarter, reflecting ongoing challenges in revenue growth.
- The company recorded a substantial non-cash goodwill impairment charge of $369.1 million, contributing to a net loss for the quarter.
- Large deals continue to take longer to close, affecting the timing and realization of potential revenue from these deals.
Q & A Highlights Q: Can you explain the improvements in subscription billings and deferred revenue, which seem to be up year over year?
A: Marje Armstrong, CFO, noted that the year-over-year increase in Q3 was mainly driven by timing related to renewal and billing of large deals. This improvement is expected to normalize in Q4.
Q: Could you rank the success of your three growth initiatives: cross-selling, the new system integrator channel, and driving new logos?
A: Gregory Randolph, Chief Commercial Officer, highlighted significant momentum in cross-selling, evidenced by two major wins in Q3. New logo growth is also strong, particularly in North America, while progress with system integrators is ongoing.
Q: What needs to happen for success in the midmarket segment, given past mixed results?
A: Gregory Randolph explained that stabilizing retention, dedicating sales capacity for targeted products like global trade, and focusing on logistics are key strategies. A new leader has been brought in to drive these efforts.
Q: How do trade policy uncertainties affect customer behavior, and what opportunities do they present?
A: Gregory Randolph noted that trade policy changes create demand for E2open’s global trade platform, which covers 230 countries. This leads to increased conversations and preparation among clients, similar to the response seen during the initial Trump administration’s tariff announcements.
Q: Are you seeing any changes in sales cycles for large deals, and have any slip deals from the previous quarter closed?
A: Andrew Appel, CEO, stated that while sales cycles for large deals remain lengthy, they are not getting longer. Most slip deals have closed, indicating strong conversion rates once deals reach that stage.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
