Q2 2024 E2open Parent Holdings Inc Earnings Call
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Greetings and welcome to the E. Two opened second quarter fiscal year 2024 earnings call. At this time, all participants are in a listen only mode.
And answer session will follow the formal presentation.
Do you want should require operator assistance during the conference. Please press star zero on your telephone keypad. Please note. This conference is being recorded.
I'll now turn the conference over to your host Dusty fuel you may begin.
Good afternoon, everyone. At this time I would like to welcome you all to the two open fiscal second quarter 2024 earnings Conference call.
Industrial deal kind of Investor relations here to open.
Today's call will include recorded comments from our interim Chief Executive Officer, Andrew <unk>, Our Chief Financial Officer, Marie Armstrong, Our Chief Commercial Officer, Greg Randolph following those comments, we'll open the call for a live Q&A session.
A replay of this call will be available on the company's Investor Relations website at investors don't eat two open dotcom information to access. This replay is listed in today's press release, which is also available on our Investor Relations website.
Before we begin I'd like to remind everyone that during today's call, we will be making forward looking statements regarding future events and financial performance, including guidance for our fiscal third quarter and full year 2024.
These forward looking statements are subject to known and unknown risks and uncertainties.
E. Two open cautions that these statements are not guarantees of future performance.
We encourage you to review our most recent reports, including our 10-Q or any applicable amendments for a complete discussion of these factors and other risks that may affect our future results or the market price of our stock and finally, we're not obligating ourselves to revise our results or are these forward looking statements in light of new information or future event.
Yes.
Also during todays call well refer to certain non-GAAP financial measures reconciliations of non-GAAP to GAAP measures and certain additional information are included in today's earnings press release, which can be viewed and downloaded from our investor Relations website at investors that eat you open dotcom.
And with that we'll begin by turning the call over to our interim CEO Andrew upheld.
Thanks, Dusty welcome everyone to the E. Two open fiscal second quarter 2024 earnings call before Murray and Greg jump into the results I want to take this opportunity to introduce myself as all of you learned earlier. The board has appointed me as interim CEO , while they conduct a thorough search to identify.
I E. Two opens next leader.
For more than a year I have served as a member of E. Two opens advisory board and through this work I have met in much of the executive team and have developed a strong understanding of the company's promising growth potential.
I am honored at the board of Directors has placed their trust in me to lead <unk> to open at this important time in its company's history.
I have spent the last 30 plus years of my career as a strategic operator focused on B to B technology centric businesses and serving the world's leading corporations on their most complex business challenges.
During my 14 years at Mckinsey I advised many of the world's leading companies on both strategy operations and technology programs.
During my six years at Aegon, where I was a named Executive officer I was the CEO of $2 billion plus divisions.
The operational transformation of the company and was promoted to be a <unk> first ever Chief operating officer. During my tenure at Aon the stock tripled in value.
Following and I served as president and CEO of IRI now, Sir Cana, where I led a team of dedicated individuals as we transformed IRI from an insights provider to a firm leveraging data technology and Proscriptive analytics. This enabled our clients to deliver consistent growth by leveraging our capabilities as a technology.
Focused big data Global company.
During this period revenues nearly tripled in the company's valuation increase significantly.
Over the past 14 months I've had the privilege of serving as a member of each opens advisory board or is able to interact with management and clients. During that time I have developed a managed respect for the companies people technology and solutions as well as introduced its capabilities to a number of major organizations that I had relationship.
With.
As I take this new role I feel very fortunate to have the opportunity to work with Murray, Greg and all the other members of each opened strong and experienced leadership team.
They are a talented group of individuals each with a track record of success at both into open and a variety of other leading companies.
They enjoy my strong support as well as the full confidence of our board and I will look to them as an important source of continuity and guidance as I dive into all aspects of the business over the coming weeks and months.
Before closing I want to emphasize that I look forward to meeting the fully two open team, our many customers and partners and our investment community and to gathering perspectives and sharing views on how we can best build the company and deliver distinctive products and solutions to clients.
I am confident that this company has a very bright future with a committed workforce and an engaged management team that are energized by the progress we can make together.
With that I will turn the call over to my new friend, and our Chief Financial Officer Marie Armstrong.
Thank you Andrew on behalf of all of you to open I'd like to welcome you to your new role at the company.
Andrew has extensive experience in the technology industry, plus its proven expertise and business strategy and innovation.
A complete set of skills to accelerate our core strategy and improve our business performance.
Android is very well versed in all aspects of our business, including the many opportunities we have for profitable growth as well as the concrete steps, we need to take to realize that potential.
We're confident that Andrew will quickly make an impact at each open.
Importantly on behalf of the entire company I want to recognize and thank Michael for Luka.
Many contribution to each opened over the last eight plus years.
Under his leadership each open acquired 14 companies in seven years and built a unique asset the end to end supply chain platform that each opened its today.
Michael leaves the company strategically well positioned within the growing supply chain software space.
With a proven track record of providing mission critical software to the world's largest companies.
It's hard work and dedication has enabled us to build a strong positioning we have today.
I also want to thank our entire each opened team.
But the focus they've exhibited and hard work they've done all year long.
Our company is in the midst of our strategic transformation with a number of changes happening simultaneously.
And in this environment. The contribution of every single member of the E. Two open team matter greatly.
On behalf of the board of directors and the management team I want to extend my sincere gratitude and thanks to all of you.
There's a lot of positive momentum and change happening that will become apparent in the coming quarters and years.
Finally, before moving on to our second quarter results I also wanted to extend sincere gratitude and excitement to our many customers and partners.
Just last month, we held connect 2023, which is our annual customer and partner conference in Orlando, Florida.
This year's conference was the largest ever with attendance up over 30% compared to last year.
380 customers and partners participated in the three day event, including several of our major system integrators. The conference demonstrating the strength of each opened score client relationships as well as our customers' excitement about the ongoing investments, we're making in our products.
The event also highlighted the strength of our partner Mark, including the growing ecosystem of system integrators.
We have already partnered closely with our system integrators and select client win and we will continue to build on these relationships to grow our partner led pipeline and access a new tier of client opportunity.
Turning to the business results I'll begin with a review of our second fiscal quarter.
Then I'll introduce our new Chief commercial officer, Greg Randolph.
Greg will outline the concrete steps he has already taken to transform our sales organization to create repeatable and scalable go to market motion as well as changes is making to better realize cross sell and up sell opportunities within our world class customer base as well as new logo wins.
After that I will provide updates to our guidance and then we'll leave time for your questions at the end of the call.
Let's begin with our second quarter performance.
Our subscription revenue was $134 7 million, representing 85% of our total revenue and at the high end of our quarterly guidance.
However, the two 4% year over year growth rate we achieved.
It was well below our potential.
In particular, the Q2 finish was disappointing from a new bookings perspective for several reasons.
First the account coverage changes action at the end of Q1 led to a larger than anticipated temporary disruption to our go to market motion.
And second we continue to see large deal closing delays as customers overall are more closely scrutinizing spend and take longer to sign contracts.
While customer spending is more of a function of the broader macro environment.
Go to market effectiveness is something we have control over and Greg will talk more about improvements we're making.
Given most of our new bookings happened near the end of the quarter.
The impact of softer bookings on our Q2 top line was limited.
However, this will cause our second half revenues to be lower than previously expected.
Professional services and other revenue into fiscal second quarter was $23 8 million, reflecting an organic growth rate of negative 18, 2%.
These results were below expectations as we saw weaker sales of new unattached professional services projects.
Lower attached services from new subscription bookings.
Overall continued weak spending by large customers on ongoing services projects.
Greg has already taken action to realign the services business as.
As we are determined to reverse the trajectory of our professional services revenues.
However, these changes will likely take several quarters to show results as reflected in our lower services outlook for the year.
Total revenue for the fiscal second quarter was $158 5 million, reflecting organic growth of negative one 4% over the prior year quarter.
Before we move from the topic of topline growth to the rest of the P&L I want to hand, the call over to Greg to outline the concrete steps, we're taking to <unk>, our commercial execution issues were.
We're incredibly pleased to have Greg on board to lead the two open go to market motion and realizing its full potential.
With that I'd now like to turn call over to each opens chief commercial officer, Greg Randolph.
Thank you Murray and good evening, everyone, having joined the company on August 1st and officially taken over full leadership of the commercial organization on September one I'd like to share. Some of my initial thoughts on two opens position in the market and what issues need to be addressed to put the company back on a path to sustainable and accelerating growth.
Yes.
Let me start by emphasizing that I joined <unk>, because I truly believe that the company has all the key ingredients needed to drive organic growth.
Including an industry, leading suite of software applications and impressive customer list of household brands and a large and growing addressable market to serve.
Additionally, the network of connected partners that E. Two open has built is unique in the industry and distinguishes us from our competitors.
With our end to end platform and extensive network, we are ideally positioned to meet growing market demand for supply chain software solutions.
I also believe that my experience, leading the commercial functions at software companies with diverse product portfolios.
Complex sales cycles, and large enterprise clients is a perfect fit for <unk>.
During my first two months with the company I've had a chance to experience all of these attributes firsthand.
Through numerous meetings with our sales and product teams through many discussions with customers large and small and through multiple visits to <unk> to open sites.
My most important initial observations are twofold.
First the internal focus placed on acquisition integration has led to considerable disruption in the sales organization and our customer base.
The most meaningful impacts have been high salesforce turnover combined with significant changes to account coverage.
While the company has done a commendable job of backbone and salesforce gaps with new hires and transfers I was very surprised to find such a high percentage of sales professionals, including people responsible for major clients, who are new to <unk> new to the accounts they are covering or both.
In my experience it is very challenging to execute a world class consistent sales motions involving a mission critical software portfolio and large sophisticated customers. When salespeople are still learning the products and getting to know the customers they are selling to.
Product and industry knowledge customer intimacy and time and seat are critical attributes of a high functioning salesforce and today. He to open is behind the curve in these vital areas.
In my view this disruption in the sales organization has been the primary factor and a topline weakness that <unk> opening is experiencing this year.
Second the company has not succeeded in developing the level of deep comprehensive customer engagement that is an absolute requirement. If you are pursuing a strategy of cross selling enterprise software to large customers.
To a certain extent the time in seat issue I mentioned earlier is a factor, but beyond that issue. The company has much work to do to develop a deep consistent level of engagement across our broad base of 600 plus enterprise clients.
Since joining me to open I've seen examples where the company has become an embedded trusted partner to some of the worlds leading brand owners deep engagement is a key to cross selling mission critical enterprise software to large customers and the white space growth, we have been able to achieve when we engaged deeply with clients is clear.
Evidence of what we can achieve when we make client engagement a top priority.
The gap, we need to bridge a key to unlocking much higher growth is creating the same depth of engagement across our entire portfolio of enterprise clients.
There are multiple best practices around customer engagement, so we need to implement a D to open and then execute on consistently across our entire sales organization.
Some of the changes we need to make our organizational others are operational and some cultural.
But the goal is clear.
We have to turn customer engagement into a top priority. Once we do this we will be in a much stronger position to drive repeat business and successfully cross sell our large existing customer base as well as to keep churn at a minimum.
The end result, we want to achieve and what our investors expect as a much smoother and faster transition from an M&A focused company to one that drive significant organic growth.
Before handing the call back over to Murray.
I want to give you a preview of some of the near term actions. We are taking to immediately improve sales force execution and driving more consistent sales attainment.
On the professional services side of our business, where our results have been below expectations. We have realigned the organization to both improve service delivery and drive higher attached and unattached services revenue.
Until now responsibility for service delivery has been split across multiple parts of the business.
Accountability for services sales was similarly shared rather than being centralized in a dedicated sales organization.
Under the realignment, we have combined all PFS delivery personnel into a single services delivery organization and we have also created a dedicated <unk> sales team all under the leadership of executive team member with sole responsibility for all aspects of professional services.
We are confident that these changes will result in more centralized accountability for service delivery and sales better engagement with our customers and improve PFS revenue performance.
Regarding our broader sales function. We have also taken recent steps to flatten the sales organization optimized spans of control within it and better aligning sales leadership roles with key elements of our business, while not creating any further account level coverage changes.
This move is designed to free up critical sales resources and refocus organizational attention on increasing customer engagement.
Within a few weeks, we will be kicking off a major project to upgrade our sales enablement function and materials, including creation of sales Playbooks and battle cards refreshes of sales AIDS and collateral and implementation of new training and coaching programs.
And as we proceed in our efforts to build a world class sales organization, we will put a major focus on our performance management system to make sure that we recruit develop and retain a high performing sales team.
In sum my first few months at <unk> to open have been very busy and they have made me an even bigger believer in the future potential of this company.
We understand what is holding our go to market performance back and are committed to moving quickly to make changes although it will take some time for these changes to have a measurable impact on Epo opens topline.
But the good news is that many of these are standard playbook items, we're achieving sales actions.
Our near term focus will be on what I call being brilliant in the basics, which means putting in place the prerequisite for repeatable and accountable sales execution that will increase customer engagement and drive much higher sales productivity I've.
I've seen this work many times before in my career and I'm confident that it can work here at <unk> with that I'll hand, the call back over to Murray.
Thank you Greg it's great to see how quickly Greg has come up to speed on the business and dug into all the opportunities for improvement closely collaborating with other areas of the company to improve our sales execution and drive organic growth.
The sales improvement that Greg is driving go hand in hand, with a renewed emphasis we're placing on transforming our client experience model.
Our goal is to make it as easy as possible for customers to work with each open to incorporate the voice of our customer into everything that we do and to drive deeper levels of customer satisfaction across the board.
We started the transformation last year by establishing a new global client experience organization that brought together all our customer service functions into one unified team.
We also hired new experienced leaders at all levels within this organization and empower them to create a customer centric culture of operational excellence.
Since then we have reorganized our customer support team into subgroups that directly align with our five software application suites channel planning global trade logistics and supply.
We have rolled out a new structure for our customer success managers assigned to our top accounts. So that our CSM now have smaller portfolios of key customers.
We have put in place new metrics Kpis and an improved customer survey process to rigorously track our progress towards higher customer satisfaction.
And we will support this entire initiative with the certification requirements and comprehensive training for all customer facing service personnel.
Overtime, we are confident that these changes will enable us to deliver a consistent service excellence at every point of customer contact and ensure that our clients become reference vault champions of each open.
In the coming quarters, we look forward to sharing more with you about how our clients are responding to these important initiatives.
We remain committed to investing in our business customer experience go to market motion and our product. While also staying laser focused on driving efficiencies everywhere, we can as evidenced in our continued profitability.
Turning back to our financial results in the fiscal second quarter of 2024, our gross profit was $109 5 million, reflecting a two 5% increase on an organic basis.
Gross margin was 69, 1% in the second quarter compared to 66, 5% in the prior year quarter.
The year over year increase demonstrates the strength of our business model and our ability to maintain strong gross margins even in a period of lower than expected growth.
Turning to EBITDA, our second quarter, adjusted EBITDA was $56 1 million compared to $48 3 million in the prior year quarter, an increase of 16, 1%.
Second quarter adjusted EBITDA margin was 35, 4% compared to EBITDA margin of 31% for the prior year quarter.
This continued year over year growth in adjusted EBITDA reflects approximately $5 million in one time marketing and Si related spend during Q2 of last year that did not repeat in the second quarter of FY 'twenty four.
It also reflects additional run rate cost savings achieved during the second quarter of FY 'twenty four related to head count consulting spend in other operating items.
As always we're maintaining our focus on an efficient cost structure and operational discipline in order to ensure strong and sustainable profitability. During the current period of weaker topline performance.
However, accelerating growth remains our number one goal and we will continue to invest as needed to drive the topline.
Finishing up on profitability net loss for the fiscal second quarter of 2024 was $38 6 million.
Q2, net loss included a $17 8 million nonrecurring expense related to an arbitration ruling which seemed during the second quarter.
This ruling pertained to 2014 customer contracts entered into by a predecessor company to Glu chain, which as a reminder was approximately seven years prior to our acquisition of Blue Jay in 2021.
Now turning to cash flow.
During the fiscal second quarter, we generated $7 7 million of adjusted operating cash flow and our year to date cash flow exclusive of nonrecurring expenses was $45 1 billion.
As a reminder, on our Q1 call. We noted that second quarter cash flow would be lower than in the first quarter due to the payment of annual cash bonuses and other seasonal factors.
Growth in cash flow continues to be a core objective for our management team as it enables us to continue to fund future organic growth.
This completes my remarks on our fiscal Q2 2024 results.
At this point I'll turn to a discussion of financial guidance.
For the fiscal third quarter, we expect subscription revenue to be in the range of 130 $233 million.
This range represents a growth rate of negative three 6% to one 4% as compared to the prior year fiscal third quarter.
Turning to full fiscal year 2024, we're updating our full year guidance largely based on two factors.
First as noted above our second quarter had a disappointing finish from a bookings perspective.
Several expected deal closing.
Into next quarter, while others have pushed out even further.
Delayed deal closings will cause our second half revenues to be below previous expectations and our guidance now assumes that the lower deal close rates during the second quarter will persist for the balance of the year.
Second we previously expected churn in FY 'twenty four to be notably first half weighted with significant improvement in second half.
While we still expect second half churn to improve compared to first half. We're now taking a more conservative view on second half churn. This is due to the continuing macro pressure on freight volumes and rates as well as higher churn we're experiencing in our long tail of small customer contracts, which is an area that has been impacted.
Significantly by the previously discussed sales account coverage change it.
As Greg articulated we're making across the board changes to our go to market organization to address are clear and fixable topline issues.
While we are laser focused on what we need to do to restart our organic growth engine. It will take several quarters to see the results of the actions we're now taking.
Based on the above factors, we're updating our full year guidance as follows we now expect subscription revenue to be in the range of $530 million to $538 million for FY 'twenty four.
We expect FY 'twenty for total revenue to be within the range of $625 million to $635 million we.
We expect FY 'twenty for gross profit margin to be within the range of 60% to 70% and finally, we expect FY 'twenty for adjusted EBITDA to be within the range of $215 million to $220 million.
This range implies an adjusted EBITDA margin of 34% to 35% for FY 'twenty four.
Emphasizing the strong importance, we place on cash flow generation as a key performance indicator I would like to provide an update on our cash flow related expectations for the year.
In terms of key drivers for FY 'twenty for cash flow.
Our expectations around full year Capex have not changed we still expect it to be approximately 5% of revenue in FY 'twenty four versus 7% of revenue in FY 'twenty, three which included M&A related capex.
We still plan to drive year over year improvements in working capital and expect FY 'twenty for working capital to be a modest use of cash.
We still expect net cash interest to be within the range of $95 million to $99 million as a run.
Reminder, net cash interest includes the benefit of interest income on excess cash and also cash receipts on interest rate collars, we executed during Q2, which are currently in the money.
Finally, our expectations for full year onetime cash costs have increased primarily due to previously mentioned $17 8 million arbitration settlement, which we paid in early fiscal Q3, FY 'twenty four as well as higher severance costs, which we expect to incur by year end.
Overall, we now expect full year FY 'twenty for onetime cash cost to be slightly above the $29 million that we incurred in FY2023.
Given the above factors, which include lower EBIT, our guidance as well as reduced expectations around end of year cash balance.
We now expect ending FY 'twenty four net leverage to be approximately four three times or below by the end of the fiscal year.
Before turning the call over for your questions I want to conclude by emphasizing my confidence in the growth platform that we have assembled at each open.
This company possesses clear competitive advantages that make us truly unique amongst supply chain software vendors.
Including our large customer base of name brand clients, our broad array of industry, leading software applications and our unique network of interconnected partners.
And we're just getting started with the development of other highly promising growth initiatives.
Including our system integrator strategy.
But today, we're far from realizing this growth potential.
And it is clear that we need to address our shortfalls around sales execution with a greater degree of urgency.
I can assure you that our board of directors are new interim CEO and our entire management team are intensely focused on the steps we need to take to put the company back on a long term growth path.
That concludes our prepared remarks.
You all for joining us today, and we look forward to continuing the dialogue as we move throughout the back half of the year.
With that Andrew Greg and I are ready to take your questions.
Operator, please open up the line and begin the Q&A session.
This time, we will be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue.
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One moment, please while we poll for questions.
Okay.
And our first question comes from Adam Hotchkiss with Goldman Sachs. Adam. Please proceed.
Great. Thanks for taking my questions I guess to start could you talk a little bit more about what changed at the end of the quarter to drive the bookings weakness.
Fully appreciate the commentary around the deal delays, but are any of these deals being delayed indefinitely and what do you think is driving the lack of visibility on your part here.
I guess, how much would you breakdown how much of the underperformance was with macro driven right at the end of the quarter versus being related to the internal challenges Greg spoke about.
Hi, Adam This is Maria thank you so much for the question I'm sorry.
In terms of the second quarter finish as I mentioned in the prepared remarks, it was definitely disappointing.
And I would say, it's hard to break down the specific macro impacts versus the.
The internal issues were working through in terms of sales account changes and just overall.
Broader overhaul that we are undertaking under greg's leadership.
For the sales team.
In terms of the.
Macro just to touch on that a little bit you know the end markets that we've talked about that had been slower for us where we have larger exposure.
Including tax and then transportation and carriers continued to show.
<unk> weakness, so I would say that that's a continuing and I would say the other piece is just our exposure to large large.
Large deals right so.
Large deals versus.
Smaller deals the larger deals continued to get scrutinized I think what what's different for Q2 versus Q1 is that we closed several large deals in Q1 than for Q2.
Those large deals are more of those got pushed some of them. Some of the deals that got pushed you know we've actually closed already.
And some of them have pushed a couple of quarters and further out.
Say overall.
Our close rates.
Oh were lower than expected a very disappointing for Q2 and as a result, we've taken a more conservative loss a conservative view for the balance of the year and apply those similar close rates now.
Nothing fundamentally has changed in terms of those deals still being available for us but.
We are now expecting that the changes that Greg, it's making them will take a couple of quarters to show results and hence the change to our view in terms of the second half.
Okay, Great. That's really helpful. And then I guess philosophically and this can be for Andrew Maria Greg does the calculus around the tradeoff between growth and profitability change here I mean this is a company that has operated in the mid <unk> percentages from an EBITDA margin perspective for a number of years do you think there needs to be an investment cycle.
Needs to happen to get the sales organization back on track or is this just a reorientation that you think can be done without significant incremental cost.
Great question as you know our stated investment plan and strategy for this year has been the investment in sales team and they go to market motion.
Bringing Greg on board.
We've cut down on marketing spend for example that had a one time spikes last year and everywhere else.
But we're still committed to investing in our go to market motion ads.
As we've.
Been clear that that's the plan for this year in terms of any incremental investment. We don't think that there is necessarily more dollars.
And then we already in the current plan are needed at this point, but the the plan that Greg is evolving is obviously really the focus for the company more broadly and the area, where we're investing this year and quite frankly, we're funding it what I'm just finding efficiencies across the board and other teams.
And that's that's the state that's the.
Okay really helpful. Thanks Marie.
Absolutely Thanks, Adam.
Okay. The next question comes from Tyler Mcguinness with UBS Taylor. Please proceed.
Yeah, Hi, Thanks for asking my question. So I wanted to dive in to you know all of the changes that have been made from a leadership perspective. So I'm wondering can you provide you with an update in terms of like where we stand in that evolution. So have you guys made all the changes necessary you know are there still more.
Angel to come like within the Org, whether that'd be more restructuring on the sales front just an update in terms of our board of where we stand with that would be helpful.
Yeah, absolutely. So you know obviously.
The sales org changes in leadership changes I'll, let Greg speak to that but.
But you know obviously the biggest change that we made this quarter.
It's bringing in Andrew as the interim CEO .
There are no other sort of big changes planned at this point that that we are.
And anticipate however, within the go to market organization, you know Brad will continue to evaluate and make changes so Greg maybe you can speak to that.
Marie and thank you Taylor for the question. So yes, we made as I said in my opening remarks, two primary changes to the commercial organization. One is we centralize the PFS the professional services organization to create much more focused around customer engagement.
Customer delivery and more repeat ability in our services revenue and then the second piece on the sales side, we as I mentioned some of the changes that have been made in the past created.
Some some gaps in account coverage. So we wanted to make sure that we are we didn't impact account coverage at all but there were obvious efficiencies that we could gain through simple flattening of the organization and addressing some span of control issues.
The net result is creating a sales organization that is laser focused on driving <unk> growth and serving customers.
And so I don't expect significant overarching changes I think.
The message that I'm delivering to my team and to our customer base is working out where we're going to laser focus on near term execution.
And as I said being brilliant basics.
Awesome. Thanks for that and then my last question is so now with them subscription revenue decreasing quarter over quarter and that's also implied in the <unk> Guide can you just provide a little bit more color on the source of the churn that you're seeing in the business and when we look at <unk> It seems like Thursday.
Gonna be the guide implies a sequential rebound the Murray can you just provide more color on the churn rate that you're embedding in the second half guide versus what you guys are seeing today and why we should expect to see that that rebounded portio.
Yeah. So in terms of churn you know.
As I mentioned in my prepared remarks.
We are taking a more conservative view on the second half churn them, although we still expect second half to be better than first half.
But the continuing pressure on freight volumes right and higher churn.
That we're seeing in the long tail of small customer account.
Accounts and it's really the the reason for the uptick.
Greg has taken action are in a very pointed focus on those smaller accounts.
With one point of ownership.
But again those changes will likely take some time.
And just to give you some color in terms of the long tail.
There are some there's a variety of them.
For that you know.
Many of those are sort of noncore duplicative products, we've acquired through M&A.
And you know we need to do a better job in terms of you know moving those customers to a more modern platforms and are in the right products with a more tailored go to market approach around that we know and we've identified the issues and we know what we need to do.
And Greg it's closely partnering with you know the rest of the organization everywhere from customer service to product to <unk>.
Finance to to take action and we do expect that.
That to bear fruit, but it's just going to take a little longer which again is the reason really for our more conservative approach to to churn.
Great. Thanks, so much for taking my question.
Right.
The next question comes from Mark Chapell with loop capital markets Mark. Please proceed.
Alright, Thank you for taking my question.
In your prepared remarks around guidance, you know the deals being pushed out in the next quarter and into next year. I was wondering if any of those slipped deals have been lost to other competitors.
Thank you for the question.
I would say that we lose deals for variety of reasons.
Many times during this period of sort of macro pressures and budget cuts a lot of.
A lot of customers ultimately decide to kind of do things in house and kind of maintain the.
The current ways of doing them you have to remember that.
Our solutions provide sort of an upgrade for those legacy our in house products and and many times those decisions are just delayed.
You know there are obviously select times, we lose the customers as well, but I wouldn't say that anything has notably changed on that front.
You know it's it continues to be the same mix of.
A mix of different reasons and and again in.
In terms of the the.
The deals that we lose to competition again focus on go to market and the changes that Greg is making obviously will help us they're tremendously as well over time.
Okay. Thank you and then Greg a question for you I appreciate your deep dive on the sales organization and your prepared remarks are you comfortable with the current sales systems in place and are you comfortable with the current sales capacity of the company.
Yeah. Thanks.
Thanks for the question Mark I think.
Clearly we have improvements to make to scale up this organization you know as you know.
This company has been assembled or you know by largely acquisitions and as a result.
No.
The focus tends to be less on building scalable processes and systems to drive long term repeatable topline growth and so.
We're absolutely evaluating every aspect of what it takes to do just that and.
And we believe that some of the steps that we're taking near term.
Two to begin that process, we're going to start to show momentum near term there are certainly things.
That we should do in terms of.
Discipline around sales execution, small example, where literally I'm, leading a weekly call for 90 minutes to review all of the key strategic deals that we need to deliver in the second half and so if you think about.
Overall sales capacity.
We have the capacity that we need in place to deliver a once we get every single individual delivering at the level that we need them to so we're laser focused on sales productivity.
Short term, but I'm convinced that over time, we will have complete clarity on the exact systems and and long term processes that we need to implement.
Great. Thanks, and then one final question and then a few months or so that you have been with the company a.
Do you believe that are there any gaps in the product suite in terms of sales.
Integration of our product architecture that could be contributing to the difficulty on the cross sell efforts.
Yeah, Great. Great question look I'm part of why I joined this company is because we have an amazing platform of capabilities. It's a very broad set of capabilities that are <unk>.
<unk> really are one of the only platforms that offer.
Our customers end to end visibility in their supply chain and I think part of the challenge that we faced in delivering that value proposition.
Is that we have not done an effective job at equipping our sales organization with the proper messaging and value proposition and tools that they need to deliver that value proposition. So we're laser focused on that and I'm convinced you know we just launched at connect Marie mentioned, our Big annual user conference.
Two compelling new products, one called connected planning and the other called connected logistics that are incredibly compelling in the marketplace I'm convinced that we have the products, we need to drive top line growth near term.
Great. Thank you that's all for me.
Okay. The next question comes from Chad Bennett with Craig Hallum Chad. Please proceed.
Great. Thanks for taking my questions. So I.
I don't recall did you guys.
At the start of the year end of last year.
<unk> raised prices like most software companies are doing whether it's inflation related or cost of living or whatever you want to call it and.
Can you give us a sense for.
How much you did if you did.
Yeah. Thanks for the question.
We have not we haven't publicly disclosed specific changes to our pricing, but you know obviously we did.
Also take price.
Similar to other other software company, we haven't previously quantified the specific numbers.
Okay.
Just in terms of of asking I think piggybacking on a prior question about <unk>.
The balancing act between growth Reacceleration, and an EBITDA and free cash flow generation. So.
It doesn't sound like at least for this year, there is incremental sales and marketing go to market investment needed.
Especially which I'd love to know kind of where or how the $20 million was spent an incremental investment the last year.
But is.
Is it fair to say that's not definitive in terms of the need for incremental investment in the next fiscal year.
Yes. Thanks for the question. So if you recall last fiscal year. We made pointed investments are in our brand relaunch as well as our marketing overall.
Those are one time investments as articulated last year. We also did a made a lot of our XI system integrator related investments to kick start those relationships.
These were the one time our investments last year.
Joe We've pared down those you know again last year's one time investment and instead it seems.
At the beginning of the year. Our stated strategy has been to invest in the go to market motion.
And currently again, where we are really focused on working within that envelope there could be slight changes here and there, but really the focus is increasing the productivity and the approach and and and all the things that Greg had mentioned throughout the call in terms.
Next year, you know again, we're not providing guidance for fiscal year 'twenty five at this point, but again along with.
Our new interim CEO and Greg you know, we're gonna be working on the plans, obviously in and starting the pre planning for next year and we'll make sure to update you as those plans evolve.
Okay, one last one for me.
So just in terms of.
Looking at the business fresh in changing our restructuring things going forward, whether its go to market or otherwise.
Just just in terms of of everything that's on the table.
I think everybody appreciates. The fact that you have the broadest supply chain and then platform out there in the market, but I think some of the maybe the feedback from from salespeople.
At least we have associated with us.
Especially if theres a lot of churn and new salespeople is.
Do you have too much to sell.
And do all these 14 15 acquisitions over the last seven or eight years. It makes sense to be under the umbrella and I guess is it some type of you know.
Monetization potential of these assets on the table, especially considering the leverage on the balance sheet, then I'll jump off thanks.
Yeah, Great Great question I think.
You know in many ways there you're exactly right. This is what we're doing as a management team right now again partnering between sales finance and product to really define the focus and investment areas. You know in terms of products and also understanding.
We're already a rationalized.
Rationalization opportunities in terms of Skus.
Non core legacy products.
Are there opportunity to divest some of them et cetera. So this is all the opportunity that we're going to be working through them as a team and you know in the next coming years and months quite frankly. So this is exactly the opportunity that were we.
We have in front of us and it's part of the broader.
Post a big wave of M&A integration.
Integration and rationalization.
Yeah, and look I would I would I would add that you know in my 25 year career of leading enterprise software sales organizations I've had a much broader portfolio of products that would exist here I think the point, you're making is a valid point and that's we sure.
Wouldn't try to approach the market by boiling the ocean and I think that.
The the approach that we've got appeal to take US is a very measured focused approach and in the industries are the use cases.
And the geographies and end markets that we play well in and be Super Ah Ah Ah.
Focused on delivering the appropriate value proposition in the segments and I'm convinced.
But we can absolutely make that happen with the portfolio of products that we take to market and again just to round that up you know ultimately the end to end supply chain software platform that has been assembled through the acquisition.
He is ultimately going to be a key.
<unk> advantage for us and and.
Continuing to provide cross sell opportunities, we just need to execute on those and that's really the the the task at hand is to make sure that we have the right people in the right seats with the right product knowledge and ability to understand the customers understand the products and and really execute this broader strategy in there.
<unk> for the company.
Got it I appreciate the color. Thank you.
Thank you for the question.
Okay. We have no further questions in queue. We have reached the end of the question and answer session.
This concludes today's conference and you may disconnect your lines at this time. Thank you.
You for your participation.