E2open’s Mixed Earnings Call: Growth Amid Challenges

E2open Parent Holdings Inc ((ETWO)) has held its Q4 earnings call. Read on for the main highlights of the call.

E2open Parent Holdings Inc. recently held its earnings call, revealing a mixed sentiment among stakeholders. The company showcased modest improvements in subscription revenue, client satisfaction, and retention, alongside strong cash flow and industry recognition. However, these positives were tempered by declines in overall revenue, significant net losses due to goodwill impairments, and pressure on gross margins. Despite these challenges, E2open remains optimistic about its strategic direction and future growth potential.

Subscription Revenue Improvement

E2open reported sequential growth in subscription revenue over the past three quarters. The Q4 year-over-year subscription growth rate, when adjusted for currency impacts, came within a 0.5 percentage point of flat growth. This indicates a stabilizing trend in their subscription business, which is a crucial component of their revenue model.

Client Satisfaction and Retention

The company achieved improvements in both gross and net retention rates, which rose to 91% and 99%, respectively. This represents about a 1 percentage point improvement in each metric compared to the end of FY 2024, signaling enhanced client satisfaction and loyalty.

Industry Recognition

E2open was ranked a leader in 11 of the 16 industry quadrants across major functional areas. The company received accolades from IDC and Gartner for its leadership in supply chain planning and transformation management, underscoring its strong position in the industry.

Cash Flow and Balance Sheet Strength

The fiscal year concluded with a cash balance of $197.4 million, marking an increase of $63 million year-over-year. This robust cash generation capability highlights the company’s financial resilience and ability to invest in future growth.

Technological Advancements

E2open launched new AI tools across its Global Trade Technology suite, aimed at unlocking higher productivity, shorter cycle times, and greater compliance assurance. These technological advancements are expected to enhance operational efficiency and client offerings.

Decline in Overall Revenue

Total revenue for the fiscal fourth quarter was $152.7 million, reflecting a decline of 3.6% over the prior year quarter. For the full fiscal year 2025, total revenue was $607.7 million, indicating a negative growth rate of 4.2% compared to the previous year.

Professional Services Revenue Decline

Professional Services and Other revenue in the fiscal fourth quarter was $19.7 million, a year-over-year decline of 18.3%. For the full fiscal year 2025, Professional Services revenue was $79.7 million, marking a decline of 18.4%.

Net Loss and Goodwill Impairment

E2open reported a net loss of $268.5 million for the fiscal fourth quarter of 2025, including a non-cash goodwill impairment charge of $245 million. For the full fiscal 2025, the net loss was $725.8 million, with a goodwill impairment charge of $614.1 million.

Gross Margin Pressure

The non-GAAP gross margin for the full fiscal year 2025 was 68.5%, down from 69.4% in the prior year. This decline was driven by lower subscription and professional services revenue, alongside investments in client satisfaction.

Forward-Looking Guidance

Looking ahead, E2open provided guidance for fiscal year 2026, projecting subscription revenue to range between $525 million and $535 million, indicating a potential growth of -1.0% to 1.0% year-over-year. The first quarter of FY 2026 is expected to see subscription revenue between $129 million and $132 million. Total FY 2026 revenue is forecasted between $600 million and $618 million, with gross profit margins anticipated at 68% to 68.5%. Adjusted EBITDA is projected to be in the range of $200 million to $210 million, reflecting a margin of 33% to 34%.

In summary, E2open’s earnings call presented a complex picture of the company’s current state. While there are positive strides in subscription revenue and client retention, challenges remain in reversing revenue declines and managing net losses. The company’s strategic focus on technological advancements and industry leadership provides a foundation for potential future growth.