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EP

E2open Parent Holdings, Inc. (ETWO)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 FY25 revenue fell 4.0% YoY to $152.2M and subscription revenue declined 2.3% YoY to $131.6M, but adjusted EBITDA margin expanded to 36.1% as cost efficiencies offset softer top line .
  • Management cut FY25 guidance: subscription revenue to $526–$532M (from $532–$542M) and total revenue to $607–$617M (from $630–$645M); FY25 adjusted EBITDA now “low end” of the prior $215–$225M range, implying ~35% margin .
  • Sequential retention improved and bookings rose YoY and QoQ, yet large, strategic deals continued to experience elongated client approval timelines; management expects further retention gains and to close many delayed deals in 2H and into FY26 .
  • Near-term stock catalysts: guidance reset, evidence of churn/retention normalization, timing of delayed deal closures, PS revenue normalization, and any outcome of the ongoing strategic review .

What Went Well and What Went Wrong

  • What Went Well

    • Adjusted EBITDA margin increased to 36.1% (vs. 35.4% LY) on cost efficiencies (offshoring, facilities rationalization, G&A savings) despite lower revenue .
    • Sequential improvement in retention and increased subscription bookings YoY and QoQ; management emphasized a repeatable, client-centric renewal process and high win rates even as deal cycles lengthened .
    • Product momentum and AI: showcased “pragmatic applied AI” at Connect 2024 (universal forecasting, supply risk monitor, logistics and trade advancements) reinforcing differentiation in a disruption-heavy environment .

  • What Went Wrong

    • Guidance cut on subscription and services revenue due to elongated large-deal timelines, with FY25 total revenue lowered to $607–$617M from $630–$645M previously .
    • Professional Services revenue down 13.1% YoY to $20.6M and below expectations; management cited completion of several large engagements and delayed starts on attached services from slipped subscription deals .
    • Q2 adjusted operating cash flow was negative ($5.5M) and adjusted FCF negative ($11.6M) on seasonality and client investments; management expects stronger 2H cash generation .

Financial Results

MetricQ4 FY2024Q1 FY2025Q2 FY2025
Total GAAP Revenue ($M)158.4 151.2 152.2
Subscription Revenue ($M)134.4 131.4 131.6
Professional Services & Other ($M)24.1 19.8 20.6
Subscription % of Total84.8% 86.9% 86.5%
GAAP Gross Profit ($M)80.5 72.7 74.6
GAAP Gross Margin %50.8% 48.1% 49.0%
Non-GAAP Gross Profit ($M)110.9 102.6 105.0
Non-GAAP Gross Margin %70.0% 67.8% 69.0%
Adjusted EBITDA ($M)55.1 50.7 54.9
Adjusted EBITDA Margin %34.8% 33.6% 36.1%
GAAP Net Loss ($M)(45.5) (42.8) (32.9)
GAAP EPS ($)(0.14) (0.13) (0.10)
Adjusted EPS ($)0.05 0.04 0.05

Segment mix (revenue):

  • Subscription revenue ($M): 134.4 → 131.4 → 131.6
  • Professional Services & other ($M): 24.1 → 19.8 → 20.6

KPI and Cash Flow:

KPIQ4 FY2024Q1 FY2025Q2 FY2025
Adjusted Operating Cash Flow ($M)36.9 39.1 (5.5)
Adjusted Free Cash Flow ($M)30.0 33.0 (11.6)
Cash & Cash Equivalents ($M, end of period)134.5 160.2 142.2

Consensus vs Actual (S&P Global)

  • Revenue and EPS consensus: Unavailable due to S&P Global mapping for ETWO not being accessible in this session. Values retrieved from S&P Global were unavailable.
  • As a result, we cannot quantify beats/misses vs consensus for Q2. Management said subscription revenue was above the midpoint of guidance .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Subscription Revenue ($M)FY25$532–$542 $526–$532 Lowered
Total GAAP Revenue ($M)FY25$630–$645 $607–$617 Lowered
Non-GAAP Gross Margin %FY2568%–70% 68%–70% Maintained
Adjusted EBITDA ($M)FY25$215–$225 Low end of $215–$225 (~35% margin) Lowered (to low end)
Subscription Revenue ($M)Q3 FY25—$130–$133 New
Year-end Net LeverageFY25Below 4.0x ~4.0x Maintained/clarified

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 FY24 and Q1 FY25)Current Period (Q2 FY25)Trend
Retention/ChurnIdentified churn as controllable via client-centric processes; outlined plan to return to historical levels . Q1: “Peak churn” expected in Q1 with sequential improvement thereafter; account-by-account renewal management .Sequential improvement in Q2 retention; on track for further improvement in Q3 and normalized baseline by FY26 .Improving sequentially
Large Deal TimingQ4: improved in-quarter conversion; late-stage pipeline focus . Q1: Many large deals slipped but nearly half closed in June .Continued elongation due to CEO-level scrutiny; delays are timing, not losses; most delayed deals ultimately close .Still elongated but high win rate
Systems Integrators (SIs)Building SI co-sell motion; growing SI-related pipeline . Q1: Integrated marketing, cleaned pipeline; continued SI collaboration .Deepening executive-level joint pursuits with SIs; targeting select accounts by vertical .Strengthening
AI/Tech InitiativesLaunched Supplier Network Discovery; quarterly updates continue . Q1: Ongoing product launches; investment in R&D efficiency .Pragmatic applied AI showcased (forecasting, risk monitor, logistics, trade) at Connect 2024 .Increasing emphasis
Professional Services (PS)Q4: expected modest growth in FY25 . Q1: PS weaker due to client investments, billable mix shift; expected normalization later in year .Q2 PS below expectations; expect improvement as delayed subs deals close and backlog is worked .Choppy near term; gradual normalization
Macro/Supply ChainVolatility seen as demand tailwind . Q1: Continued demand in logistics/trade .Elevated disruptions (port closures), ocean transit time increases; reinforces E2open value proposition .Supportive demand backdrop
Strategic ReviewAnnounced and discussed (no details) . Q1: Ongoing; outcome anticipated near term .Ongoing; no update until appropriate .Ongoing
SAP Upgrade Cycle—SAP migrations create both opportunities and timing dependencies; logistics seen as weak point for core modules, creating RFPs .Emerging tailwind with timing nuance

Management Commentary

  • Strategy and progress: “Our subscription business feels like it has stabilized and is poised to improve further… we increased quarterly subscription bookings year-over-year and sequentially… although we saw large deals taking longer than expected to close” – CEO Andrew Appel .
  • Client-centricity and retention: “We delivered a material reduction in churn from the first quarter… on track to reduce churn and increase retention further… new mindset… enabling us to save at-risk accounts” – CEO .
  • Cost discipline and margins: “Adjusted EBITDA was $54.9 million, a 36.1% margin… driven by offshore strategy, facilities rationalization, and efficiencies across G&A” – CFO Marje Armstrong .
  • Guidance rationale: “Given the extended timeline of large deal closures… we are adjusting our FY25 subscription and services revenue guidance to a more conservative view” – CFO .
  • Commercial execution: “Second quarter bookings were up year-over-year and sequentially… but we still have opportunity to further enhance sales productivity and execution” – CCO Greg Randolph .

Q&A Highlights

  • Large deal delays: Q2 improved vs Q1 but not as much as expected; delays reflect CEO-level reviews and elongated evaluations; most delayed deals ultimately close .
  • SAP upgrade cycle: Creates demand and RFPs (especially logistics), but early phases consume client capacity, affecting timing .
  • SI partnerships: Moving beyond implementation to joint transformation pursuits; co-sell at senior levels across select strategic clients .
  • Professional Services outlook: Lowered FY PS outlook driven by completed large projects and delayed starts tied to large subs deals; PS prioritizes client satisfaction and renewal support .
  • Churn normalization: Tracking to “normalized” levels by start of FY26, with ongoing improvements each quarter .

Estimates Context

  • S&P Global Wall Street consensus estimates for Q2 FY25 (revenue, EPS, EBITDA) were unavailable in this session due to missing mapping; therefore, we cannot quantify beats/misses vs consensus. Management indicated subscription revenue exceeded the midpoint of guidance .
  • Where estimates may adjust: Street likely to recalibrate FY25 revenue and PS trajectory downward in line with company’s updated guide ($607–$617M total revenue; $526–$532M subscription) and model stronger 2H cash generation with ~35% adjusted EBITDA margin .

Key Takeaways for Investors

  • Focus on margin durability: Despite soft revenue, adjusted EBITDA margin expanded to 36.1% on structural cost actions; supports downside protection while growth re-accelerates .
  • Guidance reset frames 2H setup: Lowered FY25 revenue guide reflects timing (not loss) of large deals; retention improving; watch for 2H bookings/ARR inflection .
  • Churn trajectory is the swing factor: Sequential improvements underway; returning to more “normalized” levels by FY26 underpins medium-term growth .
  • PS normalization is a lever: Choppy near term, but as large subs deals close and backlog is executed, PS revenue should improve, aiding consolidated gross margin .
  • Product/AI narrative strengthening: Connect 2024 and applied AI features highlight differentiation in a disruption-heavy market; reinforces pipeline and SI co-sell strategy .
  • Strategic review overhang: Any outcome could be a catalyst; meanwhile, management execution on retention, bookings, and FCF is key to multiple support .

Appendix: Other Relevant Press Releases (Q2 FY25 window)

  • Appointment Scheduling API (SSC) for TMS to improve dock scheduling and collaboration .
  • 2024 Sustainability Report highlighting platform support for evolving regulations (e.g., UFLPA, EU CS3D) and expanded emissions tracking .
  • Ocean Shipping Index showing global shipment duration increases (66 days avg; +8 YoY), underscoring macro disruption tailwinds for visibility and orchestration solutions .