E2open Parent (ETWO) 10 Oct 232024 Q2 Earnings call transcript

Greetings. Welcome to the E2open Second Quarter Fiscal Year 2024 Earnings Call. [Operator Instructions] Please note, this conference is being recorded. I will now turn the conference over to your host, Dusty Buell.

You may begin.

everyone. afternoon, Good I the time, Call. to you welcome At Fiscal would Second to EXopen Conference Quarter all this like XXXX Earnings I of am Head here Dusty EXopen. at Investor Relations Buell, our will interim our recorded Financial Armstrong; Greg Commercial Marje our Officer, call Randolph. Today's comments Chief Chief Officer; Andrew include Executive Appel, Chief Officer, and from

to Following session. on this Information of be website. available this A the at we'll Investor access call which the website available on for call listed press open comments, our is replay those a Investor Q&A Relations company's in Relations live replay release, also will investor.eXopen.com. today's is

most Before we'll new our website investor.eXopen.com. And market of results begin to the information interim revise not included we can Appel. to viewed certain press obligating performance. risks known or XX-Q call our stock. And of events. risks for which future CEO, and you complete ourselves we'll affect refer third GAAP statements the quarter forward-looking measures today's price making to light and not be Relations Reconciliations finally, by statements of in for to future other during amendments these begin, are regarding XXXX. are information or uncertainties. discussion our our and and at during future subject from full today's our guarantees may that fiscal reports, downloaded over year financial statements a to I'd certain These earnings EXopen to guidance to statements of that, that factors everyone non-GAAP events encourage forward-looking turning our are forward-looking results non-GAAP unknown additional we We our any Andrew of with including we these be remind call, applicable call, and will recent and including that today's and release, Investor future cautions like in are financial performance, review or or our measures. Also, these

EXopen the Second Call. Thanks, Fiscal Earnings XXXX Quarter Dusty. to Welcome, everyone,

jump take Marje to want Greg opportunity and introduce Before into to I myself. results, this

learned the as interim they search EXopen's me As to next CEO Board earlier, has leader. identify of thorough a all you conduct while appointed

its a honored developed served of as a the business of this a For lead on work, understanding I Board. career promising their world's strategic EXopen placed the have executive me in last trust have much year, that And than of on strong Board Advisory more team challenges. their growth of the Directors history. I have this serving I have and time most member years in the complex I met has the of XX-plus spent am and potential. company's through technology-centric important businesses operator, company's to corporations my BXB EXopen focused at leading a as

my years on at both McKinsey, During and advised companies XX of operations many programs. I strategy, leading the world's technology

Aon's I operational at During X first my the led company, be ever promoted was transformation where officer, billion years and $X of divisions, Operating was plus the the executive was CEO named the to Chief Officer. I of Aon,

in the During value. at stock Aon, tripled my tenure

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period, revenues company's During increased valuation the this and tripled nearly significantly.

of a privilege clients. months, I've had XX as or and with of management Advisory past serving EXopen's member able to the Board is the Over interact

as well its number I organizations people, and immense of solutions for respect relationships capabilities to company's technology with. had major developed During that time, I introduced that a as have the

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our quarter with begin performance. second Let's

million, was revenue of end at high quarterly revenue guidance. our and XX% subscription Our of our representing $XXX.X total the

year-over-year new particular, X.X% perspective bookings In a However, achieved growth well potential. from finish reasons. QX our we the below the rate several for disappointing was was

led second, we And coverage are at closing account end action the than motion. more and the sign deal to overall delays large changes, larger a contracts. anticipated go-to-market QX see to spend closely of taking First, continue to to our disruption customers longer scrutinizing as temporary

environment, a will of function improvements of macro have broader we effectiveness more the and is Greg control is customer making. we're over, about something go-to-market While talk spending more

on line impact our happened near the end was our the limited. of softer bookings most of quarter, top QX bookings Given new the of

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on profitability. put clients EXopen. In deliver committed to experience, process can these have clients to remain driving entire efficiency we're comprehensive to support will confident training sharing our referenceable initiatives. Over improved quarters, our our as go-to-market our evidenced KPIs with of with coming to responding We that in all the forward track laser-focused rigorously consistent investing while motion how customer place customer of in about satisfaction. and look champions continued enable we ensure all more certification at and towards are become customer in business, and personnel. time, an you our everywhere changes initiative service we staying every service survey important product, that requirements these new customer-facing we will for our and higher excellence this We point customer And contact progress to us metrics,

our increase quarter basis. to of reflecting strength back an maintain model strong fiscal margin XXXX, compared year-over-year the the X.X% to in business results. organic gross even of year of XX.X% gross the XX.X% growth. the million, our in increase demonstrates ability our Turning in on profit quarter. The second lower-than-expected and to our period Gross margins financial $XXX.X quarter In second a was was prior a

Turning to EBITDA.

onetime XX.X% margin $XX.X margin This quarter year adjusted second increase $XX.X an compared The year reflects in other in last run the adjusted SI-related EBITDA prior million to spend second consulting in operating quarter. spend during to FY compared repeat was EBITDA FY $X QX the marketing in continued related the growth of of year-over-year Our and It rate quarter, prior and year quarter was achieved to cost during did the for million that also of XX.X%. reflects quarter of EBITDA adjusted not second Second quarter savings million of items. XX.X% 'XX. EBITDA headcount, 'XX approximately additional

an on As cost we're in of our ensure focus weaker the always, efficient line and profitability sustainable and top strong performance. structure discipline maintaining order during operational period to current

customer in by to during our predecessor years prior BlueJay XXXX. a ruling as BlueJay, remains an invest fiscal quarter. expense the approximately Net X included our on ruling top The to and loss a pertains continue needed nonrecurring goal, second quarter for drive #X profitability. However, second million into arbitration acquisition as related a of we'll which, $XX.X XXXX loss QX a to This to the million. received to accelerating company contracts net was reminder, the up line. Finishing XXXX entered $XX.X growth was of to

Now cash turning flow. to

exclusive operating During million. cash generated flow and of our nonrecurring year-to-date we expenses, $XX.X adjusted flow, $X.X the fiscal second million was quarter, of cash

of team This and for factors. guidance. flow growth. flow quarter of be our to this on discussion reminder, fund remarks be our it continue in completes future to the Growth a results. At that annual cash our my bonuses quarter turn first I'll lower continues the seasonal core objective financial call, on to as QX enables to XXXX a due us management a point, other cash to organic noted fiscal we second in than As payment QX cash would

to of For $XXX the the negative compared to revenue to year represents expect X.X% be to subscription quarter. a third of as million. fiscal $XXX This third prior growth range X.X% the rate million we fiscal range quarter, in

two full Turning guidance, largely year based updating fiscal to full XXXX. year on factors. We're our

pushed the to above, These expectations, quarter and will noted have second below perspective. a cause as year. Several closings from the second closings the deal delayed rates now during deal had for quarter First, others a our pushed second our bookings that be lower assumes into next half of expected the further. while our balance finish revenues out deal quarter, guidance disappointing previous close will persist even

'XX significant with in previously be to first in we FY churn half improvement notably Second, second expected half. weighted,

half, we're and macro impacted volumes well in still small view been is has contracts improve continuing that significantly churn sales we to we're which compared to While expect churn. tail changes. on taking a the of higher more first rates discussed now as conservative long second churn This pressure an our previously half as half due is coverage second experiencing customer on area to account by the freight

board the go-to-market issues. top across making clear we're fixable articulated, and Greg to organization our address changes to line As our

While the the see subscription restart Based our the we factors, 'XX. follows. $XXX take to guidance on for do of organic actions to we in our $XXX to million the year quarters expect now updating of revenue need as above we're are FY taking. engine, it We million we're on laser-focused results what full growth be range to will several now to

to $XXX We million. expect the FY of 'XX total within million range $XXX to be revenue

flow importance the 'XX FY we our to on FY indicator, 'XX range within $XXX we implies gross range an $XXX on key to adjusted expect cash provide of like This to year. expectations flow strong as XX% margin would for 'XX. Emphasizing of of place I related And an be EBITDA million within for finally, XX% XX%. the performance range margin generation million. to FY We the EBITDA a to cash adjusted to be profit the XX% expect update

improvements not revenue our to for revenue plan and capital $XX expect of X% capital CapEx. versus to to CapEx it of a expectations to be FY million terms net be We 'XX, We have year-over-year In use approximately drivers 'XX within cash. of of year changed. interest FY in 'XX around be in full 'XX included in cash M&A-related range which FY million. of X% modest We cash working $XX working still still flow, to still key expect the drive expect FY

As includes net a and in income QX, reminder, receipts on rate cash callers executed the also which cash cash excess we are the benefit the interest on during interest money. currently of interest

for severance we due our be expect to above Finally, year well cash expect million $XX.X we full $XX costs, expectations in to 'XX year full we onetime FY incur cash settlement, previously 'XX we which to and paid costs primarily in the onetime year-end. which 'XX. incurred costs fiscal Overall, arbitration that FY as have FY by early mentioned QX slightly increased now as million higher

FY the end leverage 'XX as the end-of-year expect which around X.Xx include ending factors, cash Given approximately by year. be above we or lower well net fiscal balances, of EBITDA to reduced guidance now the below expectations as

the Before And you year. degree our turning Directors, clients, amongst make that team new Operator, supply for steps base session. focused on of large Thank truly platform growth with have management including growth initiatives name the growth in clear need us company continuing the around strategy. put conclude as I questions, can applications remarks. and begin chain all assembled entire my today, this Board back possesses This our emphasizing software your assure line system joining throughout execution are of the array integrator your call of our just to our far started look to CEO vendors, highly broad competitive promising of Andrew, today, software potential. us Greg we take open dialogue from the prepared industry-leading concludes realizing our I company confidence interconnected move it brand need we development unique up at urgency. is and a we EXopen. long-term on take we including our advantages to half to of greater address a network that interim getting with want the With and we're partners, unique we're path. That Q&A to shortfalls our and by forward back and other the and that, are we of growth customer the clear questions. over you that But the for sales of our I that ready please the intensely our to

[Operator our Hotchkiss Goldman from Instructions] Adam And first question comes Sachs. with

around being at challenges deal how visibility about. guess talk a down at driving the the you your guess, start, drive you the internal appreciate but the macro-driven, related fully little Greg part deals the quarter could end to would about I versus think is weakness of what end any of delayed And I here on these bookings right the indefinitely? the lack more what changed you quarter to much the of to of bit break how being commentary much the spoke the was underperformance delays, are do of

question. Marje. Thank you this is the Adam, for so much

macro it sales team. working I under would finish, overhaul to are So through the say definitely internal I hard disappointing. in terms the terms of that prepared sales undertaking overall versus we're for of the account broader we specific issues down in the Greg's it's mentioned leadership just break impacts remarks, as changes was second in quarter and the

tech we terms just carriers the then have including where us, to slower exposure, that larger transportation the that to end of been talked on show bit, macro, little weakness. and In continue for about markets we've that and have a touch

The just to say exposure larger smaller versus larger our really would deals, I that piece So scrutinized. so that's to deals. continuing. get other And say would the right, large deals deals I continue is

both different versus QX QX, QX pushed. QX got think several large we those deals, for was large more deals and I -- that closed for is in what

pushed, the -- deals them similar actually for result, very of close -- And couple our some of and have than overall, expected, those balance further would as a applies I for we've taken that Some out. of QX. some disappointing a lower of closed got them rates. view and a rates conservative already close we've and quarters year the say, pushed of were the more

of available are expecting a for Now of the Greg deals We'll terms that But to fundamentally second half. change now to our in view changed has nothing the show we couple us. results quarters hence still is take of terms in those being making. changes and the that

And margin company here? growth an between helpful. around do of guess, be you the that operated think change needs trade-off on costs? be can Okay. reorientation that EBITDA from that's cycle and a I just philosophically, perspective this Andrew, and think significant to track? a without Or Marje the back an number you Great. for That's this be for the mean profitability mid-XXs there in calculus sales can done happen percentages Do a or really years. needs then organization I incremental investment is to get Greg, is this the to

Great question.

plan been that year committed had last know, example, as and you onetime down still year marketing for our stated for motion sales and to cut As Greg our has in this been in that, and board. on investing that's else. clear year. go-to-market the we're strategy the for bringing plan spend, motion, everywhere investment spikes this we've on the But go-to-market investment team We've

cost there's sales terms company Greg line. teams. more for evolving across focus year. this with necessarily and frankly, that's point. any to investment, efficiencies help obviously finding we're the broadly for that area the think is funding it at the is of will just current the the quite top that the incremental dollars the really while than we're in keeping board is And investing don't focus other productivity us needed real in in we the that In But plan and increase line also the where plan already And we're this more

The with Taylor. Taylor question comes next from McGinnis UBS

to I want dive have made the into been that a leadership perspective. all from changes

So provide that terms in can an where you we like wondering, evolution. update I'm in stand us of

Just be within more org, that guys more still Are So update changes on have sales changes the of all whether stand, would front? to restructuring you necessary? like where made we there the the be in terms an helpful. that come

Yes, absolutely.

I'll at the let changes. no we sort leadership change in can obviously, made to big this anticipate. and Greg CEO. changes org changes sales as bringing that. speak the of of quarter are planned that But terms in that Andrew point is this There interim the other obviously, biggest we So

changes. will evaluate organization, within and continue Greg However, make to go-to-market the

Greg, speak maybe can that. So to you

Yes. you, Marje, the and for you, Taylor, thank question. Thank

-- made, So past then some mentioned, engagement, my as our that repeatability the been centralized opening as yes, more revenue. And the created to we we the around and more remarks, I focus create piece of is primary said we the organization. services commercial in the services some on organization in have I One professional customer in side, customer sales made the PS, account changes changes two in much the delivery to second gaps coverage.

that organization coverage serving So a creating didn't organization were all. of we net driving that ARR and gain the we issues. sales that at impact simple sure and to But some customers. there we could span result make laser-focused account growth is wanted of addressing obvious is efficiencies on The flattening through control

And don't expect changes. overarching so significant I

message I base our to in to said, as going I'm focus laser basics. team and think is customer I and delivering on the near-term the to brilliant we're my execution being that

to with guide just in is, churn that a revenue so then now the And be on the Awesome. implied at question my in the bit business? color XQ that more quarter-over-quarter going And XQ, guide. of sequential rebound. also seems Can seeing the we you're implies look like it source last decreasing the a when -- provide and subscription you there's little

churn can versus the we see should why second that expect what Marje, in And you XQ? color seeing half the provide in that So rebound are guide guys you're embedding to more you on rate today? just

Yes.

through variety the terms on the closely the we half. approach just I to fruit, duplicative churn pressure long we moving that that we've changes give long of customer the of service the partnering expect remarks, reason my tailored as rates taking Many of mentioned modern with those taken the our churn, a bear to a is second Greg everywhere although churn, of to the to pointed we've that. of Greg And of likely issues to is continuing need There second take half a those more in of some that. acquired still approach better more accounts for there's the what which, just reasons for focus longer, time. know to to to terms tail go-to-market are products know has half is the of the sort noncore conservative right one of product, very point We But take So organization than with from with conservative a action. we're But really more small in churn those you do to smaller it's action on customer going churn. in in again, freight some do are And be customers ownership. but we again, around products a are tail. some we platforms need M&A. prepared we seeing little And better expect color we to accounts in a the on identified higher for and take finance, and volumes, really will And and reason uptick. first terms -- in and do. rest more to those view job

Capital next comes Mark Schappel The question with Loop from Markets.

those slip your and the wondering prepared pushed noted any competitors. year. [ lost was you if next to remarks in in deals into of quarter out been Marje, guidance, deal is have being the next ] around I

of and current lose kind decide them. for do of budget customers deals ultimately we a pressures macro of this of maintain variety you period reasons. for would things I the sort to Thank times cuts, lot the a doing of question. ways that in-house of kind say of and Many during

remember us those again, mix lose continues changed be time. we just go-to-market as anything Greg tremendously well, ] is sort terms to notably same There legacy delayed. the that solutions on obviously those to You the front. over for to customers an It obviously, well say in focus making, we lose have to deals are I upgrade our times, of as of times, [ mix that competition, the of on products And and that has help wouldn't bear selected are changes provide that many and will of but again, that different in-house decisions or reasons.

Greg, with with for in you you capacity a place? appreciate sales systems question on sales the Okay. current you. dive comfortable And are the your comfortable prepared then, the current remarks. the deep I company. with organization And Are in your sales

improvements Yes, question, scale this to to we Mark. clearly, the think, organization. make I for Thanks up have Yes.

drive top As know, acquisitions. has this tends and company to to growth. result, the as building line by be on you a been processes largely systems assembled long-term repeatable less And focus scalable

to half. key of literally we that that. And some to it should so small believe to XX process that are around A aspect the steps going absolutely just that deliver every start we begin to the minutes term near we for strategic call taking of things we are in deals momentum near need we're that a certainly And takes discipline the leading what -- are of evaluating There do do review that weekly sales execution. to of terms example, term. we're I'm all second show to in

we about deliver the the delivering to the so place once you them need And capacity, to. level overall we sales every individual we have that think capacity we that at in single need if get

the over complete to processes But implement. need on systems that clarity that we're exact So I'm time, convinced we'll have laser-focused sales productivity on and we long-term short term.

so the Great. say, or the to believe with any do or cross-sell product suite on that integration And be you've that there could are terms then in been months the architecture, few the question. gaps product In company, difficulty product final you of, the in that contributing one efforts?

value joined capabilities. is And very and not at proposition. of an done that value chain. is challenge because platforms only in are supply I'm in broad the equipping need our -- an deliver It's why the delivering we faced that organization our of I Look, proposition with they their think capabilities that that and proper we value Yes. I customers platform we've visibility proposition tools of sales part one that messaging the amazing of a of have Great company to set effective offer that this part that question. really end-to-end job

laser-focused we at products two near we're And the big that. called are Marje and products, the drive annual our other the compelling we on that I'm Planning top we line growth Logistics have convinced user one just incredibly compelling launched Connected mentioned Connected that Connect, So new -- marketplace. need conference, term. in convinced I'm called to

question Craig from next The Chad Bennett Hallum. comes with

you inflation last did or cost So year, us guys, a end you can much doing, sense most recall, the the of related like of prices give whatever you it's are I did, start at living raised want if did? it? call you of year, to or companies whether you for And don't software how

for Thanks Yes. the question.

We disclosed have other did price take publicly also to software specific But similar companies. to not we -- obviously, pricing. haven't changes we

numbers. quantified previously haven't We specific the

question free about Okay. a in EBITDA cash and kind generation. we think just -- prior reacceleration terms of flow piggybacking act on Have and I of asking, growth in the between balancing

year. at this marketing There's like, and of I'd how least year? needed. incremental love next definitive go-to-market know million is incremental need I where investment not sound But last to was that's for guess, the terms $XX to of in doesn't investment year. fiscal the it or incremental fair So in for investment Well, sales kind the which say especially spent it in

for Thanks Yes. question. the

we recall, investments articulated last our So made brand marketing if you fiscal well as year. Those pointed last in were as relaunch as investments overall. year, onetime

slight year's made instead, stated down again, the of last investments the related investments. onetime to on the were paired to did And are also integrator within the all beginning here year. onetime year, investments Those that invest that changes the kickstart really, really has mentioned is those, And system since and strategy of currently, has the SI call. be the the But We in and working year, productivity relationships. approach there. last we and This those focused a Greg the again, our motion. increasing There could lot throughout envelope. things go-to-market we've been focus

But point. interim at plans we're this update next providing evolve. make the we're starting of again, with plans, and for and be year, not fiscal our and along as to year, going guidance In on 'XX for Greg, CEO terms those the year to working next you preplanning sure new obviously, again, we'll

for one me. last One Okay.

umbrella? of at table. is otherwise, acquisitions go-to-market at whether to X forward, have I on is, of too it's if new and all do the restructuring XX X, things on or that's in XX, So sense to be just on guess salespeople you changing I'll terms makes table, these it? there's some in the a years looking type over think from terms in sell everything the everybody just of And assets salespeople business the the going lot the fresh I mean, under the sheet. I much the balance supply or the some -- that you the there maybe the jump off. these out we've And And monetization EX especially market. do platform appreciates potential the But last chain churn broadest feedback in least I with have think fact end-to-end considering leverage associated -- especially of it's of of

question. great Yes,

as there opportunities again, of the opportunities the between management et doing SKUs, partnering products, right understanding in now, and rationalization and and legacy some terms noncore are really focus product to to divest terms exactly ways, them where products think team This in what you're investment a cetera. define of areas is of many finance in are right. sales, I also we're

to So working coming frankly. new next all in we're team opportunity months, and a the going this quite is that years be through as the

of this that in M&A the have integration and big and post of -- rationalization. So front is the we part of exactly us, it's broader wave we're a opportunity

broader here. Yes. that leading exists I enterprise of what I portfolio a And would sales software of much organizations, my than had career in add XX-year products look,

can ocean. I And very in got it super portfolio the absolutely geographies on in in think approach make and that focused those that [products] the think by proposition we that that to the appropriate well industries, I And delivering point we that play value markets making that is point we've approach the we the the valid to segments. take take focused to use the we boiling be a try the I'm you're cases a convinced and with measured, to market. shouldn't and in happen is the peel approach market

task through again, ultimately, ultimately execute those. round platform is the for right this make have company. product really And the broader just these provide the acquisitions And been key right to people in at that's advantage products the the strategy be to going supply vision software and has just customers, the and continuing really a the the hand right seats assembled understand execute that is an to need that with to on to end-to-end to that sure us. up, We And we cross-sell knowledge, chain understand competitive ability opportunities. for

Okay.

no have We queue. further questions in

you today's at you your We may your have Thank participation. disconnect question-and-answer this reached the concludes end session. lines and This conference, time. of the for