E2open Parent Holdings, Inc. (ETWO) Q3 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
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.
Key Financial Performance
Subscription Revenue $132.0 million, a decline of 0.6% year-over-year, but an improvement compared to the previous quarter's decline.
Professional Services and Other Revenue $19.7 million, a decline of 20.4% year-over-year, impacted by PS-related investments in client satisfaction and the completion of large projects in the prior quarter.
Total Revenue $151.7 million, a decline of 3.7% year-over-year.
Non-GAAP Gross Profit $104.3 million, a decrease of 4.9% year-over-year.
Non-GAAP Gross Margin 68.8%, down from 69.6% in the prior year, due to lower professional services revenue.
Subscription Gross Margin 76.1%, flat year-over-year.
Adjusted EBITDA $53.6 million, with a margin of 35.3%, compared to $55.4 million and a margin of 35.1% in the prior year.
Net Loss $381.6 million, including a non-cash goodwill impairment charge of $369.1 million.
Adjusted Operating Cash Flow $21.1 million for Q3, with year-to-date adjusted operating cash flow at $54.7 million.
Cash and Cash Equivalents $151.2 million, an increase of $9.0 million from the second quarter and $40.9 million year-over-year.
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Operating Highlights
New Product Development: E2open is actively incorporating generative AI into its products, enhancing logistics applications to improve decision-making for shippers.
Product Expansion: E2open's comprehensive product platform is designed to manage supply chain complexities, providing visibility and traceability.
Market Expansion: E2open is focusing on expanding its client base, particularly in the mid-market segment, and has seen success in cross-selling to existing clients.
New Client Acquisition: In Q3, E2open added significant new clients, including a multinational manufacturer and a major consumer retail group.
Operational Efficiency: E2open has implemented better controls and processes around client renewals, leading to improved retention metrics.
Cost Management: The company has streamlined G&A expenses and refocused marketing spend to enhance operational efficiency.
Leadership Changes: Pawan Joshi has been appointed Chief Strategy Officer, and Rachid Lohoney has joined as Chief Product and Technology Officer to drive innovation.
Strategic Review: E2open's ongoing strategic review aims to enhance its market positioning and operational effectiveness.
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Risk or Challenges
Subscription Revenue Decline: Subscription revenue declined year over year, although the rate of decline improved compared to previous quarters. This indicates ongoing challenges in stabilizing revenue.
Retention Challenges: Historically strong retention metrics weakened over the past two years, contributing to growth slowdown. Although recent improvements have been noted, the company is still working to stabilize retention.
Sales Cycle Lengthening: Sales cycles for larger, transformational deals are taking longer to close, which may impact revenue growth and operational efficiency.
Professional Services Revenue Pressure: Professional services revenue declined significantly due to delayed closures of large subscription deals and a mix of lower revenue deals, impacting overall revenue.
Economic and Regulatory Uncertainties: The new US administration's trade policies and potential tariffs may increase complexity in global business operations, affecting client decision-making and demand for services.
Supply Chain Challenges: Ongoing supply chain issues such as port congestion, labor disruptions, and compliance with new regulations continue to pose risks to operational efficiency and client satisfaction.
Foreign Exchange Impact: Strengthening of the US dollar is expected to negatively impact revenue, with an estimated $800,000 headwind for Q4.
Goodwill Impairment: A significant non-cash goodwill impairment charge of $369.1 million was recorded, reflecting a decline in share price and raising concerns about company valuation.
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Guidance & Outlook
Retention Improvement: E2open has made significant progress in improving client retention, with Q3 retention results meeting internal targets and stabilizing after a peak churn in Q1.
Management Team Expansion: Pawan Joshi has been appointed Chief Strategy Officer to enhance strategic initiatives, while Rachid Lohoney joins as Chief Product and Technology Officer to accelerate innovation.
AI Integration: E2open is actively incorporating traditional and generative AI into its products to enhance functionality and address supply chain complexities.
Focus on Client Satisfaction: The company is prioritizing client satisfaction and operational efficiency to drive growth and improve retention.
Mid-Market Strategy: E2open is renewing its focus on the mid-market segment, aiming to stabilize retention and drive new business through targeted product sales.
Q4 Subscription Revenue Guidance: For Q4 FY25, E2open expects subscription revenue between $131 million and $134 million, reflecting a decline of 2.5% to 0.3% year-over-year.
FY25 Subscription Revenue Guidance: For FY25, subscription revenue is projected to be between $526 million and $529 million, indicating a year-over-year decline of 2.0% to 1.5%.
Total Revenue Guidance: Total revenue for FY25 is expected to be between $607 million and $611 million, representing a decline of 4.3% to 3.7% year-over-year.
Gross Profit Margin Guidance: FY25 gross profit margin is expected to be in the range of 68% to 70%.
Adjusted EBITDA Guidance: FY25 adjusted EBITDA is anticipated to be near the low end of the original guidance range of $215 million to $225 million.
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Shareholder Return Plan
Shareholder Return Plan: E2open Parent Holdings, Inc. has not explicitly mentioned a Shareholder Return Plan, including any share buyback or dividend program during the earnings call.
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Key Q&A
Q:Can you comment on the subscription billings and deferred revenue improvements?
A:The increase in billings and deferred revenue year over year was mainly driven by timing related to renewal and billing of large deals relative to prior timing.
Q:What are the three new growth initiatives and their current success?
A:We are seeing significant momentum in cross-selling, particularly with two significant wins in Q3. New logo growth in North America is also strong, and we are making progress with systems integrators.
Q:What needs to happen for success in the mid-market segment?
A:We need to stabilize retention in the mid-market, focus on targeted product sales, and create dedicated sales capacity for specific products like global trade and logistics.
Q:Can you provide examples of customer behavior during trade policy uncertainties?
A:Historical precedents show that significant changes, like tariffs, create demand for our solutions as clients prepare for new regulations. The current environment is generating many conversations and opportunities.
Q:Are large deals taking longer to close compared to previous quarters?
A:The length of time to close large transformational deals is similar to previous quarters, not lengthening, but the decision process involves more stakeholders.
Q:What demand trends are you seeing in your TMS and parcel delivery businesses?
A:We are seeing growth in demand for logistics optimization, and our unique offerings are compelling in the marketplace.
Q:Review of Unclear Management Responses
A:Management avoided giving a direct answer regarding the specifics of the strategic review initiated in March of last year, stating they would not comment further on it during the call.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
Adam Hotchkiss
Armstrong CFO
CEO Greg
CFO Chris
Capital Greetings
Chris Quintero
Conference ET
ET SVP
Greetings participant
Greg Randolph
Hotchkiss Goldman
Marje Armstrong
Morgan Stanley
Officer Marje
President Head
Quintero Morgan
Relations today
SVP CEO
Sachs Schappel
Senior Vice
Stanley Adam
Vice President
host Senior
mode answer
participant mode
presentation Instructions
session presentation
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
Frequently Asked Questions
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Who creates the AI Summary and Key Q&A highlights shown above the transcript?
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.
