E2open Parent Holdings, Inc. (ETWO) Q2 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call reveals a decline in both subscription and total revenue year-over-year, with competitive pressures and economic factors delaying large deals. The company faces challenges in professional services and cash flow, with no shareholder return plan announced. Despite some improvement in bookings and churn, the outlook remains conservative. The Q&A highlights concerns over deal delays and unclear management responses. Given the market cap of approximately $1.3 billion, the stock price is likely to react negatively, falling between -2% to -8% over the next two weeks.
Key Financial Performance
Subscription Revenue $131.6 million, down 2.3% year-over-year; slight improvement over Q1's decline due to first half deal delays.
Professional Services and Other Revenue $20.6 million, down 13.1% year-over-year; below expectations due to delayed subscription bookings and execution improvements still being implemented.
Total Revenue $152.2 million, down 4.0% year-over-year; reflects declines in both subscription and professional services revenue.
Non-GAAP Gross Profit $105.0 million, down 4.1% year-over-year; gross margin roughly flat at 69.0% compared to 69.1% in the prior year.
Adjusted EBITDA $54.9 million, with a margin of 36.1%, compared to $56.1 million and 35.4% margin in the prior year; improvement in EBITDA margin due to cost reductions and efficiencies.
Adjusted Operating Cash Flow Negative $5.5 million for Q2; year-to-date adjusted operating cash flow was $33.6 million; Q2 typically the lowest cash generation quarter.
Cash and Cash Equivalents $142.2 million, down $18.0 million from Q1; increased $30.4 million year-over-year, indicating strong cash generation capability.
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Operating Highlights
New Products: E2open announced a set of new products and solutions during the Connect 2024 conference, focusing on embedded AI capabilities.
Market Expansion: E2open recorded several important new subscription wins with both existing and new clients, indicating healthy market demand for supply chain software.
Client Engagement: E2open hosted the Connect 2024 conference with over 160 companies and 360 clients, showcasing their commitment to client-centricity.
Operational Efficiencies: E2open reported a material reduction in churn and improved retention metrics, indicating progress in operational changes.
Sales Productivity: The company is focused on increasing sales team productivity and driving pipeline growth to accelerate commercial momentum.
Strategic Shifts: E2open is undergoing a strategic review led by the Board of Directors to evaluate options for the company's future.
Client-Centric Approach: The company has shifted its focus to a client-centric culture, emphasizing client satisfaction and value delivery.
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Risk or Challenges
Large Deal Delays: The company is experiencing delays in closing large deals, primarily due to extended customer timelines and additional evaluation processes at the CEO level. This trend is common across the software sector.
Subscription Revenue Decline: Subscription revenue for Q2 was $131.6 million, reflecting a year-over-year decline of 2.3%. The company anticipates a conservative outlook for future subscription revenue due to ongoing deal delays.
Professional Services Revenue: Professional services revenue declined by 13.1% year-over-year, attributed to the impact of delayed subscription bookings and the completion of several large engagements.
Client Retention and Churn: While there has been a material reduction in churn, the company acknowledges that improving client retention is a priority. The retention metrics are expected to improve further as the year progresses.
Economic Factors: The company is facing economic pressures that are causing clients to take longer to make strategic decisions, impacting the overall pace of new subscription bookings.
Regulatory and Competitive Pressures: The ongoing strategic review by the Board of Directors may create uncertainty among clients, potentially affecting deal closures. Additionally, the competitive landscape is evolving with recent M&A activity in the supply chain space.
Supply Chain Challenges: The company highlighted unprecedented marine port closures in the U.S. as a significant disruption to global commerce, emphasizing the need for resilient supply chains.
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Guidance & Outlook
Client-Centric Approach: E2open is focusing on a client-centric strategy to enhance client satisfaction and retention, which is seen as essential for sustainable growth.
Growth Plan Progress: The company is making steady progress on its comprehensive growth plan, focusing on sales execution, pipeline management, solution delivery, and partner relations.
Professional Services Strategy: E2open views professional services as a strategic component of its business, aiming to improve service delivery and client satisfaction.
Strategic Review: A strategic review led by the Board of Directors is ongoing, evaluating options for the company.
AI Innovations: E2open is committed to being a partner in supply chain transformation, particularly in embedded AI, with new products and solutions announced.
Q3 FY '25 Subscription Revenue Guidance: Expected in the range of $130 million to $133 million, reflecting a decline of 2.1% to an increase of 0.2% year-over-year.
FY '25 Subscription Revenue Guidance: Revised to a range of $526 million to $532 million, indicating a year-over-year decline of 2% to 1%.
FY '25 Total Revenue Guidance: Expected to be within $607 million to $617 million, representing a year-over-year decline of 4% to 3%.
FY '25 Adjusted EBITDA Guidance: Expected around the lower end of the range of $215 million to $225 million, with a margin of approximately 35%.
Cash Flow Expectations: Strong positive adjusted operating cash flow is expected in FY '25, despite a lower revenue outlook.
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Shareholder Return Plan
Shareholder Return Plan: E2open has not explicitly mentioned a Shareholder Return Plan, including any share buyback or dividend programs, during the earnings call.
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Key Q&A
Q:How did Q2 compare to Q1 in terms of large deal delays?
A:Q2 saw an improvement in bookings and overall churn deal cadence compared to Q1, but the improvement was not as significant as expected. Delays were primarily due to additional evaluations at the highest level of client decision-making.
Q:What is the current status of the SAP customer base and pipeline?
A:There is strong demand as clients reevaluate their entire portfolio during the ERP upgrade cycle. Some recent wins were initiated from SAP-related evaluations.
Q:What are you hearing from systems integrators regarding demand?
A:The dialogue with strategic integrators is focused on partnering to drive transformation and growth, with joint efforts to identify clients needing supply chain changes.
Q:What is driving the reduction in professional services revenue guidance?
A:The reduction is due to the inherent volatility in services, as large projects come to an end without new bookings, impacting the timing of revenue.
Q:What are the strongest areas of new bookings among the product portfolio?
A:Strong demand is seen in logistics, particularly in transportation management and last-mile parcel capabilities, as well as in global trade management.
Q:Are you tracking towards normalized churn rates by the start of fiscal year '26?
A:Yes, the company is tracking towards normalized churn levels, with a goal to continue lowering churn even further.
Q:Review of Unclear Management Responses
A:Management avoided providing specific details on the strategic review process and its potential impact on future performance, stating only that it is ongoing and they will share outcomes when possible.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
AI
Marje
MercuryGate
PS service
SAP
backlog
booking churn
booking retention
cash generation
client value
combination
component
cost
couple
deal delay
decline
demand supply
development
dialogue
digit
direction
employee
environment
evaluation
goal
innovation
integrator
market demand
orchestration
pace
partner
player
provider
reduction
renewal
service work
sign
situation
solution delivery
stage
subscription booking
subscription deal
timeline
timing
transformation
value approach
ETWO Transcript
Earnings call transcript: E2open Q4 2025 beats EPS, stock jumps
Unknown4-29
The earnings call reveals declining revenues, margins, and increased net losses, despite some improvements in retention. The guidance reflects a conservative outlook with expected declines in subscription and total revenue. The Q&A section highlights concerns over client satisfaction, churn, and global trade challenges. The lack of a shareholder return plan and cautious investment approach further contribute to a negative sentiment. Given the small market cap, the stock is likely to experience a negative reaction in the range of -2% to -8% over the next two weeks.
E2open Parent Holdings, Inc. (ETWO) Q4 2025 Earnings Call Transcript
Unknown4-29
The earnings call highlights several negative aspects: declining subscription and professional services revenues, significant net losses due to impairment charges, and a conservative outlook due to macroeconomic uncertainties. Although there are improvements in retention, bookings, and cash flow, the overall sentiment remains negative. The Q&A session further underscores concerns with cautious guidance and unclear responses. Given the company's small-cap status, the stock is likely to react negatively, falling in the -2% to -8% range over the next two weeks.
E2open Parent Holdings, Inc. (ETWO) Q3 2025 Earnings Call Transcript
Unknown1-10
The earnings call reveals several challenges: declining subscription revenue, professional services revenue pressure, and a significant goodwill impairment charge. Despite slight improvements in revenue decline rates and cash flow, weak guidance and lack of a shareholder return plan weigh negatively. The Q&A section highlights ongoing challenges like retention issues and longer sales cycles. The market cap suggests moderate sensitivity to these factors, leading to a negative stock price prediction over the next two weeks.
E2open Parent Holdings, Inc. (ETWO) Q2 2025 Earnings Call Transcript
Unknown10-10
The earnings call reveals a decline in both subscription and total revenue year-over-year, with competitive pressures and economic factors delaying large deals. The company faces challenges in professional services and cash flow, with no shareholder return plan announced. Despite some improvement in bookings and churn, the outlook remains conservative. The Q&A highlights concerns over deal delays and unclear management responses. Given the market cap of approximately $1.3 billion, the stock price is likely to react negatively, falling between -2% to -8% over the next two weeks.
ETWO Report
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They are generated by a specialized financial-language model trained exclusively on 15+ years of earnings transcripts. The model extracts financial figures, guidance, and tone with 97%+ accuracy and is regularly validated against human analysts. The full raw transcript always remains available for verification.
