Q2 2025 E2open Parent Holdings Inc Earnings Call

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Operator: Welcome to the E2open second quarter of fiscal year 25 earnings call. At this time, all participants are in a listen-only mode.

Speaker Change: Greetings. Welcome to the E2 Open Second Quarter Fiscal Year 25 earnings call. At this time, all participants are an illicit only mode. A question and answer session will fall the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note, this conference is being recorded. I will now turn the conference over to your host, Dusty Buell, head of investor relations. You may begin.

Operator: A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note, this conference is being recorded.

Dusty Buell: I will now turn the conference over to your host, Dusty Buell, Head of Investor Relations. You may begin.

Dusty Buell: Good afternoon, everyone.

Dusty Buell: At this time, I would like to welcome you all to the E2open fiscal second quarter of 2025 earnings conference call. I am Dusty Buell, Head of Investor Relations here at E2open. Today's call will include recorded comments from our Chief Executive Officer, Andrew Appel, our Chief Commercial Officer, Greg Randolph, and our Chief Financial Officer, Marie Armstrong.

Speaker Change: Good afternoon, everyone. At this time, I would like to welcome you all to the E2 Open Cisco 2nd Quarter, 2025, earnings conference call. I am Dusty Buell, head of Investor Relations here at E2 Open.

Dusty Buell: Today's call will include recorded comments from our chief executive officer Andrew Appel, our chief commercial officer Greg Randolph, and our chief financial officer Marie Armstrong.

Dusty Buell: Following those comments, will open the call for a live Q&A session. A replay and transcript of this call will be available on the company's Investor Relations website at investors.e2open.com. Information to access this replay is listed in today's press release, which is also available on our Investor Relations website.

Dusty Buell: Following those comments will open the call for a live Q&A session.

Dusty Buell: A replay and transcript of this call will be available on the company's investor relations website at investors.e2open.com

Dusty Buell: Information to access this replay is listed in today's press release, which is also available on our Investor Relations website.

Dusty Buell: 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 in full year 2025. These forward-looking statements are subject to known and unknown risks and uncertainties. E2open cautions that these statements are not guarantees of future performance.

Dusty Buell: 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 in full year 2025.

Dusty Buell: These forward-looking statements are subject to known and unknown risks and uncertainties.

Dusty Buell: E2 Open Cautions that these statements are not guarantees of future performance. We encourage you to review our most recent reports, including our 10K, or any applicable amendments, for a complete discussion of these factors and other risks that may affect the future results or market price of our stock. And finally, we are not obligating ourselves to revise our results or these floor-looking statements in light of new information or future events.

Dusty Buell: We encourage you to review our most recent reports, including our 10-K or any applicable amendments, for a complete discussion of these factors and other risks that may affect the future results or market price of our stocks. And finally, we are not obligating ourselves to revise our results or these four-looking statements in light of new information or future events.

Dusty Buell: Also, during today's call, we'll refer to certain non-GAAP financial measures. Reconciliation 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.e2open.com.

Dusty Buell: Also, during today's call, we'll refer to certain non-gap financial measures.

Dusty Buell: Reconciliation of non-gap-to-gap 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.e2open.com and with that we'll begin by turning the call over to our CEO Andrew Appel.

Andrew Appel: And with that, we'll begin by turning the call over to our CEO, Angela Pell. Thank you, Dusty. And thanks to everyone for joining today's call.

Andrew Appel: Thank you, Dusty, and thanks to everyone for joining today's call. I'll begin with my thoughts on our fiscal second quarter performance as well as some broader commentary and how our return to growth work is progressing.

Andrew Appel: I'll begin with my thoughts on our fiscal second quarter performance, as well as some broader commentary on how our return to growth work is progressing. I'll then ask Greg to update you on our commercial highlights. Finally, Marie will review our Q2 results and discuss our Q3 and full-year guidance.

Andrew Appel: I'll then ask Greg to update you on our commercial highlights

Andrew Appel: Finally, Marie, or review our Q2 results.

Andrew Appel: Then we'll open the call for questions. Overall, our second quarter subscription revenue performance was solid, and while still down year over year, we saw signs of progress from the prior quarter. From my perspective, our subscription business feels like it is stabilized and is poised to approve further in the coming quarters. This represents real progress from where we were several quarters ago and gives me confidence in the operational cultural changes. We continue to implement the E2O. That said, we recognize that we are on a multi-period journey to fully develop our capabilities to drive higher bookings and maximize retention.

Andrew Appel: and discuss our Q3 and follow your guidance.

Andrew Appel: Then we'll open the call for questions.

Andrew Appel: Overall, our second quarter subscription revenue performance was solid, and while still down year over year, we saw signs of progress from the prior quarter.

Andrew Appel: For my perspective, our subscription business seals like it has stabilized and is poised to prove further in the coming quarters.

Andrew Appel: This represents real progress from where we were several quarters ago and gives me confidence in the operational cultural changes we continue to implement that each will open.

Andrew Appel: That's why we recognize that we are on a multi-period journey to fully develop our capabilities to drive higher bookings and maximize retention.

Andrew Appel: Doing so will put E2open back on a path to consistent performance in much higher revenue growth. I am pleased to say that we recorded a number of important news subscription wins, both with the existing and new logo clients during Q2. Overall, we increased quarterly subscription bookings year over year and sequentially, which is a positive sign of progress. Greg will share some of the highlights of these wins in a moment, but they demonstrate clearly the healthy market demand for supply chain software and the distinctive value that E2open solutions are capable of delivering. Our entire E2open team should be very proud that major companies continue to select our software to manage their mission-critical supply chain functions.

Andrew Appel: Doing so will put each of them back on a path that could assist in performance in much higher revenue growth.

Andrew Appel: I am pleased to say that we recorded a number of important news subscription wins, both with the existing and new logo clients are in Q2.

Andrew Appel: Overall, we increased cordless subscription bookings year over year and sequentially, which is a positive sign of progress.

Andrew Appel: Greg will share some of the highlights of these wins in a moment, but they demonstrate clearly the healthy market demand for supply chains software and the distinctive value that each open solutions are capable of delivering.

Andrew Appel: Our entire E2 Open Team should be very proud that major companies can continue to select our software to manage their mission critical supply chain functions.

Andrew Appel: Although these wins helped us increase Q2 subscription bookings compared to Q1, during the second quarter we continue to see large deals taking longer than expected to close, mainly due to extended customer timelines, which seems to be a combination across the software sector. Although we have closed a very high percentage of the deals that have been delayed in the past several quarters while losing very few, our overall pace of news subscription bookings, while moving in the right direction, is still not at the level needed to support double-digit growth. While our evolution to sustainable organic growth is on track and advancing according to plan, it is progressing at a slightly slower pace than we had expected.

Andrew Appel: Although these wins helped us increase Q2 subscription booking as compared to Q1, during the second quarter we continue to see large deals taking longer than expected to close.

Andrew Appel: Mainly due to extended customer timelines, which seems to be a common issue across the software sector.

Andrew Appel: Although we have closed a very high percentage of the deals that have been delayed in the past several quarters while losing very few, our overall pace of new subscription bookings while moving in the right direction is still not at the level needed to support double digit growth.

Andrew Appel: While our evolution is sustainable organic growth is on track and advancing according to plan, it is progressing in a slightly slower pace than we had expected.

Andrew Appel: Because our win rates on deals at advanced stages of development remain high, we expect to close many delayed Q2 deals in the coming months. As we do so, we will maintain our strong focus on increasing sales team productivity and driving pipeline growth in order to accelerate our commercial momentum. During Q2, we continue to make steady progress on all aspects of the comprehensive growth plan we outlined for you on the last several earnings calls. We are building repeatable processes in stronger competencies in multiple key areas, including sales execution, pipeline management, solution delivery, and partner relations. While some work streams are taking slightly longer than we initially expected, I am very pleased that employees embrace the culture of delighting clients and delivering distinctive value that our clients expect and deserve.

Andrew Appel: Because our wing rates on deals with advanced stages of development remain high, we expect to close many to way to two deals in the coming months.

Andrew Appel: As we do so, we will maintain our strong focus on increasing sales team productivity and driving pipeline growth in order to accelerate our commercial momentum.

Andrew Appel: During Q2, we continue to make steady progress on all aspects of the comprehensive growth plan we outlined for you on the last several earnings calls.

Andrew Appel: We are building repeatable processes and stronger competencies in multiple key areas, including sales execution, pipeline management, solution delivery and partner relations.

Andrew Appel: and while some work streams are taking slightly longer than we initially expected, I am very pleased that our employees are embraced the culture of delighting clients and delivering distinctive value that our clients expect and deserve.

Andrew Appel: Our strong client focus is now at the core of everything we do.

Andrew Appel: Our strong client focus is now at the core of everything we do. Last week, each open hosted our Connect 2024 conference with over 160 companies and 360 clients from North American region in attendance.

Andrew Appel: Last week, E2 Open hosted our Connect 2024 conference with over 160 companies and 360 clients from the North American region in attendance. The tone of the event, according to numerous clients that I met with, was markedly different from the past few years. Instead of focusing on service and delivery issues, for example, clients at this year's conference focused on our core vision, which is to be the best at helping the world's largest and most sophisticated companies build and run efficient and effective supply chains. During the conference, we made four concrete commitments to our clients that we will be their innovation and supply chain transformation partner, particularly an embedded AI, where we announced a set of new products and solutions.

Andrew Appel: The tone of the event, according to numerous clients that I met with is markedably different from the past few years.

Andrew Appel: Instead of focusing on service and delivery issues, for example, clients at this year's conference, focus on our core vision, which is to be the best at helping the world's largest and most sophisticated companies build and run efficient and effective supply chains.

Andrew Appel: During the conference we made four concrete commitments to our clients.

Andrew Appel: That we will be there, innovation and supply chain transformation partner, particularly in embedded AI, where we announce the set of new products and solutions.

Andrew Appel: We will bring the world's best capabilities in each of our application families to help clients navigate change, risk, and complexity in the ever-changing global business environment as quickly and as efficiently as possible. We will deliver measurable business and client value. And most importantly, we will be client-centric versus E2open-centric, which is the essence of my core philosophy of delighting our clients. Since becoming E2open-CEO, I've personally spoken to hundreds of our clients, and they have reacted very positively to our renewed focus on client satisfaction, flawless solution delivery, and maximum value realization, a strategy that we think is unique in our space.

Andrew Appel: We will bring the world's best capabilities in each of our application families to help clients navigate, change, risk and complexity and the ever-changing global business environment as quickly and as sufficiently as possible.

Andrew Appel: We will deliver measurable business and client value.

Andrew Appel: And most importantly, we will be Client Centric versus E. Jo open centric, which is the essence of my core philosophy of delighting our clients.

Andrew Appel: Since becoming each who open CEO, I personally spoke into hundreds of our clients and they reacted very positively to our renewed focus on client satisfaction, flawless solution delivery.

Andrew Appel: and Maxim Valley Realization, the strategy that we think is unique in our space.

Andrew Appel: Our ultimate goal is much higher organic growth, and our entire global team now understands that having a broad base of highly satisfied, reference-ready clients is an essential first step in reaching this goal. As I previously noted, improving our retention performance has been one of my top priorities since becoming E2open-CEO. During Q2, we delivered a material reduction in churn from the first quarter, and we remain on track to reduce churn and increase retention further as we move through the end of the year. This increases my confidence that we are past peak quarterly churn and are continuing to make good progress on our goal of getting our client retention metrics back to their previously strong levels.

Andrew Appel: Our ultimate goal is much higher organic growth and our entire global team now understands that having a broad base of highly satisfied, reference ready clients is an essential first step in reaching this goal.

Andrew Appel: As I previously noted, improving our retention performance has been one of my top priorities since becoming each to open CEO.

Andrew Appel: During Q2 we delivered a material reduction in churn from the first quarter and we remain on track to reduce churn and increase retention further as we move through the end of the year.

Andrew Appel: This increases my confidence that we are past peak quarterly churn and are continuing to make good progress on our goal of getting our client retention metrics back to their previously strong levels.

Andrew Appel: The success we have achieved in this critical area is the result of the strong operational cadence we put in place around renewals, as well as a distinct shift in E2open's underlying client-centric culture. For a client-relations standpoint, our number one priority is now building long-term partnerships and ensuring that our clients receive distinctive value from our solutions and innovations. This two mindsets supported by broad executive engagements and a willingness to constructively and flexibly address value gaps identified by our clients as contracts come up for renewal is enabling us to save at risk accounts and turn them into mutually beneficial success stories.

Andrew Appel: The success we have achieved in his critical areas the results of the strong operational cadence we put in place around renewals, as well as a distinct shift in each who opens underlying kind, central culture.

Andrew Appel: For a client relations standpoint, our number one priority is now building long-term partnerships and ensuring that our clients received distinctive value from our solutions and innovations.

Andrew Appel: This new mindset supported by broad executive engagements and a willingness to constructively inflexibly address value gaps identified by our clients as contracts come up for renewal is enabling us to save address accounts and turn them into mutually beneficial success stories.

Andrew Appel: This is positive for E2open-CEO respects. First, we retain the business that we worked so hard to book in the first place. And second, many clients have reacted to our new client-centric approach by opening up new dialogues on the next set of supply chain challenges that they need to solve. The underlying business logic of our new approach is simple and powerful. Happy clients stay longer, buy more, and are the foundation of a sustainable growth strategy. During Q2, our professional services organization continued to play an important role in delighting clients and supporting our growth. PS revenue for the second quarter improved modestly versus Q1, but was still the lower expectations for that business.

Andrew Appel: This is positive for each lovin' and two respects.

Andrew Appel: First, we retain the business that we work so hard to book in the first place. And second, many clients have reacted to our new client-centric approach by opening up new dialogues on the next set of supply chain challenges that they need to solve.

Andrew Appel: The underlying business logic for a new approach is simple and powerful, happy clients stay longer, buy more, and are the foundation of a sustainable growth strategy.

Andrew Appel: You're in queue to our professional services organization, continue to play an important role in delighting clients and supporting our growth.

Andrew Appel: P.S. Revenue for the second quarter improved modestly versus Q1, but was still below our expectations for that business.

Andrew Appel: That was partly due to the impact of delayed first half subscription bookings and attached services work, but also reflects the execution improvements our new PS leadership is still working to achieve. We continue to view professional services as a strategic component of our overall business, and Greg will talk more in detail about our PS performance in the moment. I'm also pleased to say that, as the operational changes we have made at E2open have become more ingrained, I have personally been able to allocate more time to strategic client relationships and long-term opportunity development. We now have underway a growing number of senior executive level dialogues with major new potential clients and industry segments, including consumer packaged goods, food and beverage, automotive, industrial, and high-tech, where we know we offer deep experience and improvement track record.

Andrew Appel: That was partly due to the impact of the laid first half subscription bookings on attached services work but also reflect the execution improvements our new PS leadership is still working to achieve.

Andrew Appel: We continue to do professional services as a strategic component of our overall business and Greg will talk more in detail about our PS performance in a moment.

Andrew Appel: I'm also pleased to say that as the operational changes we have made it, it's open and become more ingrained

Andrew Appel: I have personally been able to allocate more time to strategic client relationships and long-term opportunity development.

Andrew Appel: We now have underway a growing number of senior executive level dialogues with major new potential clients and industry segments, including consumer packets goods, food and beverage, automotive, industrial and high-tech, where we know we offer deep experience in a proven track record.

Andrew Appel: We have developed some of these relationships on our own; others were facilitated by partners, including our strategic integrators. What we consistently find as we engage with our clients is that our distinctive capabilities in the areas of supply chain visibility, connectivity, and orchestration resonate extremely well with these large global companies. These long-term roadmap discussions involving complex supply chain challenges are a central component of our future growth plans. While developing these opportunities will take time, in some cases longer than we'd like, they provide a foundation for us to expand our business, open new service areas and industries.

Andrew Appel: We have developed some of these relationships on our own, others were facilitated by partners including our strategic integrators.

Andrew Appel: What we consistently find as we engage with our clients is that our distinctive capabilities.

Andrew Appel: In the areas of supply chain visibility, connectivity and orchestration resonated extremely well with these large global companies.

Andrew Appel: These long-term roadmap discussions involving complex supply chain challenges or essential component of our future growth plans.

Andrew Appel: While developing these opportunities will take time in some cases longer than we'd like. They provide a foundation for us to expand our business coping in new service areas and industries.

Andrew Appel: The changes we are implementing at E2open, combined with healthy market demand for supply chain solutions, should position us well to accelerate bookings as we move through FY25 and into the next fiscal year. But as Marie will describe for you, based on the longer deal cycles we have seen so far this fiscal year, we are taking a somewhat more conservative view of our likely failure bookings and revenue results. From my perspective, this changes largely at timing adjustment, reflecting delayed deals as well as the pace of our ongoing go-to-market transformation. I remain very confident that our business is getting better and stronger every day and that our focus on client-centricity and value delivers the right strategy to return E2 open to strong organic growth.

Andrew Appel: The changes we are implementing at each who are open combined with healthy market demand supply chain solutions should position as well to accelerate bookings as we move through FYX-25 into the next fiscal year.

Speaker Change: But as Marie will describe for you, based on the longer deals cycles we've seen so far, this fiscal year, we're taking a somewhat more conservative view of our likely full year bookings and revenue results.

Speaker Change: From my perspective this changes largely at timing adjustment reflecting delay deals as well as the pace of our ongoing go to market transformation.

Speaker Change: I remain very confident that our business is getting better and stronger every day, and then our focus on clients and trinity and values, deliveries, the right strategy to return each over to strong organic growth.

Andrew Appel: Before I turn the call over to Greg, I want to comment on the strategic review that we announced in March. The review, which is led by our Board of Directors, is ongoing. Our directors are committed to a careful and thorough evaluation of the options we have available to us.

Speaker Change: Before I turn the call over to Greg, I want to comment on the strategic review that we announced in March. The review, which is led by our Board of Directors, is ongoing.

Speaker Change: Our directors are committed to a careful and thorough evaluation of the options we have available to us.

Andrew Appel: While we will not comment further on the review today, we look forward to sharing its outcome as soon as possible.

Speaker Change: While we will not comment further on their view today, we look forward to sharing its outcome as soon as possible.

Gregory Randolph: With that, I will ask Greg to provide our commercial update. Thank you, Andrew. During the second quarter, our commercial organization remained focused on improving E2 open sales productivity and accelerating growth. Our performance drinks you too showed progress in key areas and gives me confidence that we are headed in the right direction. As Andrew noted, second quarter bookings were up year-over-year and sequentially. I want to commend our sales and product teams for the work they did to close deals during the quarter, despite extended client timelines in many cases. Our Q2 wins demonstrate the strong market demand that we are experiencing in the broad product areas of logistics, global trade, supply chain orchestration, and supplier discovery and collaboration.

Speaker Change: With that, I'll ask Greg to provide our commercial update.

Greg Randolph: Thank you Andrew. During the second quarter, our commercial organization remained focused on improving each two open sales productivity and accelerating growth.

Greg Randolph: Our performance during Q2 showed progress in key areas and gives me confidence that we are headed in the right direction.

Greg Randolph: As Andrew noted, second quarter bookings were up year over year and sequentially.

Greg Randolph: I want to commend our sales and product teams.

Greg Randolph: For the work they did to close deals during the quarter despite extended client timelines in many cases.

Greg Randolph: Our Q2 wins demonstrate the strong market demand that we are experiencing in the broad product areas of logistics, global trade, supply chain orchestration and supplier discovery and collaboration.

Gregory Randolph: Our largest new deal of the second quarter was a high-value ARR cross-cell wind with a leading global manufacturer of high technology components. This long-standing client of E2open supply applications will now implement E2open's global logistics orchestration solution. This highly strategic project will provide the client who collaborates with an ecosystem of over 20,000 global suppliers with greatly enhanced visibility into the location and arrival times of inbound materials and the resulting impact on inventory levels and production schedules. Given the importance of this project to the client's global business, the client assessed the capabilities of a who's who list of supply chain software providers before awarding the work to E2open.

Greg Randolph: Our largest new deal of the second quarter was a high-value ARR cross-sell win with a leading global manufacturer of high technology components.

Greg Randolph: This long-standing client of E2 Open Supply Applications will now implement E2 Open's global logistics orchestration solution.

Greg Randolph: This highly strategic project will provide the client who collaborates with an ecosystem over 20,000 global suppliers with greatly enhanced visibility into the location and arrival times of inbound materials and the resulting impact on inventory levels and production schedules.

Greg Randolph: Given the importance of this project to the client's global business, the client assessed the capabilities of a huge hoodlist of supply chainsaw for providers before awarding the work to eat to open.

Gregory Randolph: Also in the global membership-based retailer that will now implement E2open's industry-leading global trade management solution. This project will automate and streamline the client's manual global trade functions, deliver a more predictable total-landed cost of imported goods, and enable the client's operations to scale more efficiently with business growth. E2open competed successfully for this new logo business against some of the most well-known names in enterprise software. The client shows E2open with a high quality of our global trade application, our proprietary trade content database, which is the most complete in the industry, and the opportunity to further leverage our broad network-based suite of applications as they continue their supply chain journey.

Greg Randolph: Also, in the second quarter, we want a large new logo deal with a global membership-based retailer that will now implement E2 opens industry-leading global trade management solution.

Greg Randolph: This project will automate and streamline the client's manual global trade functions.

Greg Randolph: Deliver a more predictable, total-landed cost of imported goods and enable the client's operations to scale more efficiently with business growth.

Greg Randolph: E2 Open competed successfully for this new logo business, against some of the most well-known names in Enterprise Software.

Greg Randolph: The client shows you to open with a high quality of our global trade application, our proprietary trade content database, which is the most complete in the industry.

Greg Randolph: and the opportunity to further leverage our broad network-based suite of applications as they continue their supply chain journey.

Gregory Randolph: And finally, during Q2, we want another new logo deal with a household name manufacturer and marketer of a diverse portfolio of branded personal care products. This new client will replace its manual and self-directed transportation model with connected automated workflows powered by a combination of E2open's transportation management, last mile parcel, and logistics support solutions. We won this important new business in competition with a major ERP provider based on our industry-leading TMS platform, our ability to expand the client's logistics partner network, and track record of driving material operating cost efficiencies.

Greg Randolph: And finally, during Q2, we want another new logo deal with a household name manufacturer and marketer of a diverse portfolio of branded personal care products.

Greg Randolph: This new client will replace its manual and self-directed transportation model with connected, automated workflows powered by a combination of E2 Open's transportation management, last-mile parcel, and logistics support solutions.

Greg Randolph: We won this important new business in competition with a major ERP provider based on our industry leading TMS platform, our ability to expand the client's logistics partner network, and the track record of driving material operating cost efficiencies.

Gregory Randolph: Beyond these important wins and other signs of progress, our comprehensive efforts to rebuild E2open's organic growth engine are a work in progress. As I've noted before, one of our primary goals has been to combine a robust growing pipeline of sales opportunities, a more team-based client and value-centric approach with a sustainably higher conversion rate. During Q2, we showed some improvement in all of these areas. However, we still have significant opportunity to further enhance our sales productivity and execution. In order to take full advantage of the attractive software market segment that we operate in, we need to further improve our sales performance by becoming even more client-centric and value-focused in our approach, and by continuing to train and upskill our sellers to drive higher attaining amendment.

Greg Randolph: Beyond these important wins and other signs of progress, our comprehensive efforts to rebuild e2 opens organic growth engine or a work in progress.

Greg Randolph: As I've noted before, one of our primary goals has been to combine a robust, growing pipeline of sales opportunities, a more team-based client and value-centric approach with a sustainably higher conversion rate.

Greg Randolph: During Q2, we showed some improvement in all of these areas, however, we still have significant opportunity to further enhance our self productivity and execution.

Greg Randolph: In order to take full advantage of the attractive software market segment that we operate in, we need to further improve our sales performance by becoming even more client-centric and value-focused in our approach and by continuing to train and upskill our sellers to drive higher attainment.

Gregory Randolph: Overall, what we have added early stage opportunities to our pipeline, and must continue to do so, we need to better leverage our presales, sales, and product teams to create repeatable, efficient processes to move early stage prospects into more advanced development stages with greater velocity. This combination of higher-closed rates applied to a rising volume of mature stage deals is a pre-requisite to much faster growth. We are committed to driving more proactive execution in this area due to the balance of the FY25. In addition, with our retention levels now moving in the right direction, our sales force will be able to allocate less time to supporting renewals and more time to moving leads smoothly and swiftly through our pipeline.

Greg Randolph: Overall, but we have added early stage opportunities to our pipeline and must continue to do so. We need to better leverage our presales, sales and product teams to create repeatable efficient processes.

Greg Randolph: to move early stage prospects into more advanced development stages with greater velocity.

Greg Randolph: This combination of higher clothes rates applied to a rising volume of mature stage deals is a pre-wreck was it to much faster growth. We are committed to driving more proactive execution in this area through the balance of the FY25.

Greg Randolph: In addition, with our retention levels now moving in the right direction, our sales force will be able to allocate less time to supporting renewals and more time to moving lead smoothly and swiftly through our pipeline.

Gregory Randolph: Turning to professional services, as Andrew noted, although we saw small sequential improvement in PS revenue, our services business performed below potential in Q2. During the quarter, as expected, the volume of unbuilded PS worked declined from the Q1 peak, but remained up year over year due to targeted work with existing clients to improve their levels of adoption, consumption, and value realization of E2open solutions. Additionally, Q2 performance was impacted by the completion of several large PS engagements in Q2, combined with delays we experienced in the first half of the year in booking several large subscription deals. Such deals typically carry a higher volume of attached services work in smaller deals with shorter implementations, and their delayed start impacted our ability to meet our PS billable hour targets for the quarter.

Greg Randolph: Turning to professional services as Andrew noted, although we saw small sequential improvement in PS revenue, our services business performed below potential in Q2.

Greg Randolph: During the quarter, as expected, the volume of unbilled PS worked declined from the Q1 peak, but remained up year over year due to targeted work with existing clients to improve their levels of adoption, consumption, and value realization of E2 open solutions.

Greg Randolph: Additionally, Q2 performance was impacted by the completion of several large PS engagements in Q2, combined with delays we experienced in the first half of the year in booking several large subscription deals.

Greg Randolph: Such deals typically carry a higher volume of attached services work and smaller deals with shorter implementations. And their delayed start impacted our ability to meet our PS billable hour targets for the quarter.

Gregory Randolph: As we move forward, our services business will continue its focus on flawless solution delivery and working through its existing backlog more efficiently. As we make further progress in these areas, and as we add attached backlog from the closing delayed subscription deals, we expect our run rate of services revenue to improve.

Greg Randolph: As we move forward, our services business will continue its focus on flawless solution delivery and working through its existing backlog more efficiently.

Greg Randolph: As we make further progress in these areas and as we add a touch backlog from the closing delayed subscription deals, we expect our run rate of services revenue to improve.

Gregory Randolph: Before turning the call over to Marie, I'd like to close with some comments on connect our North America customer conference with Andrew and I attended last week in Orlando, along with hundreds of our clients and partners and dozens of E2 Open supply chain professions. From both our vantage points, it was an outstanding event that allowed us to clearly communicate the key elements of E2 Open Strategy, including delighting our clients, delivering flawless implementations and measurable business value, and continuing our legacy of software development and AI-based innovations. That, going Andrew's earlier comments, I can tell you that our messaging in these areas was very well received by the many partners and clients and attendants.

Greg Randolph: Before turning the call over to Marie, I'd like to close with some comments on Connect, our North America customer conference, which Andrew and I attended last week in Orlando, along with hundreds of our clients and partners and dozens of E2 Open Supply Chain Professions.

Greg Randolph: from both our vantage point.

Greg Randolph: It was an outstanding event that allowed us to clearly communicate the key elements of each open strategy, including delighting our clients, delivering flawless implementations and measurable business value, and continuing our legacy of software development and AI-based innovations.

Marie Armstrong: That going Andrew's earlier comments. I can tell you that our messaging in these areas was very well received by the many partners and clients and attendants.

Gregory Randolph: He has meant provided us with an important opportunity to articulate E2 Open's vision for continued product innovation and platform development, including important topics such as enhanced network differentiation, new investments we are making in embedded AI, and our philosophy on how this adds value. We also presented new capabilities we have released this year and innovations we will roll out over the next year. On the AI front, our product team specifically highlighted innovations in four areas: a universal forecasting engine in connected planning, business risk management for the supply environment, expanded capabilities across connected logistics, and continuing our leading position in global trade, leveraging embedded AI power innovation.

Marie Armstrong: The event provided us with an important opportunity to articulate each who opens vision for continued product innovation and platform development, including important topics such as enhanced network differentiation, new investments we are making in embedded AI, and our philosophy on how this adds value.

Marie Armstrong: We also presented new capabilities we have released this year and innovations we will roll out over the next year.

Marie Armstrong: On the AI front, our product team specifically highlighted innovations in four areas.

Marie Armstrong: a universal forecasting engine in connected planning, business risk management for the supply environment, expanded capabilities across connected logistics, and continuing our leading position in global trade, leveraging embedded AI power innovation to transform unstructured information and get actionable decision-grade insights.

Gregory Randolph: We transform unstructured information into actionable decision-gradents. sites.

Gregory Randolph: During the Connect Conference, discussions on our product roadmap took place against a backdrop of news headlines announcing unprecedented marine board closures in the United States. These closures, which threaten a significant disruption to global commerce, support our view, which is shared by major industry analysts such as Gartner, that ensuring agile supply change remains central to board and executive team agenda around the world. These events also highlighted the fact that supply chains have become more challenging to manage and transform and help reinforce if you open a unique capability to make supply chains more resilient, or self-healing, and more adapted to our complex and volatile global business environment.

Marie Armstrong: During the Connect Conference, discussions on our product roadmap took place against a backdrop of news headlines announcing unprecedented Marine Corps closures in the United States.

Marie Armstrong: These closures which threaten a significant disruption to global commerce support our view, which is shared by major industry analysts such as Gartner, that ensuring agile supply change remains central to board an executive team agenda around the world.

Marie Armstrong: These events also highlighted the fact that supply chains have become more challenging to manage and transform and help reinforce if you open a unique capability to make supply chains more resilient or self-healing and more adapted to our complex and volatile global business environment.

Marie Armstrong: With that, I'll turn the call over to Marie. Thank you, Greg. Subscription revenue in the fiscal second quarter, 2025 was 131.6 million, above the midpoint of our 129 to 132 million dollar guidance. Subscription revenue declined 2.3% over year, which was a small improvement over the Q1 year-over-year decline, but it reflected some negative impact from the first half deal delays that Andrew and Greg mentioned. Professional services are another revenue in the fiscal second quarter was 20.6 million, a year-over-year decline of 13.1%. This was the lower expectation, but as Greg noted, we expect the temporary headwinds to our PS business to begin to subside in the coming quarters.

Marie Armstrong: With that, I'll turn the call over to Marie.

Marie Armstrong: Thank you, Greg.

Marie Armstrong: Subscription revenue in the fiscal second quarter 2025 was 131.6 million, above the midpoint of our 129 to 132 million dollar guidance.

Marie Armstrong: The description revenue declined 2.3% year over year, which was a small improvement over the Q1 year over year decline, but it reflected some negative impact from the first half deal delays that Andrew and Greg mentioned.

Marie Armstrong: Professional Services and other revenue in the fiscal second quarter was 20.6 million, a year over a year decline of 13.1%.

Marie Armstrong: This was the lower expectation, but as Greg noted, we expect the temporary headwinds to our PS business to begin to subside in the coming quarters.

Marie Armstrong: Total revenue for the fiscal second quarter was 152.2 million, a decline of 4.0% over the prior year quarter. Turning to gross profit in the fiscal second quarter of 2025, our non-GAAP gross profit was 105.0 million, a 4.1% decrease year over year. Non-GAAP gross margin was roughly flat year over year, at 69.0% in Q2, versus 69.1% in the prior year quarter. Q2 gross margin increased sequentially from the 67.8% in the first quarter, due to slightly higher services revenue and lower costs in both our subscription and services businesses. Turning to EBITDA, our second quarter adjusted EBITDA was 54.9 million, the 36.1% margin compared to 56.1 million and 35.4% margin in the prior year quarter.

Marie Armstrong: Total revenue for the fiscal second quarter was $152 million, the decline of 4.0% over the prior year quarter.

Marie Armstrong: Turning to gross profits in the fiscal second quarter of 2025, our non-gap gross profit was 105.0 million, a 4.1% decrease year we're year.

Marie Armstrong: Non-gap gross margin was roughly flat year over year, at 69.0% in Q2 versus 69.1% in the prior year quarter.

Marie Armstrong: Q2 gross margin increased sequentially from the 67.8% in the first quarter due to slightly higher services revenue and lower costs in both our subscription and services businesses.

Marie Armstrong: Turning to EBITDA, our second quarter adjusted EBITDA was 54.9 million, a 36.1% margin compared to 56.1 million and 35.4% margin in the prior year quarter.

Marie Armstrong: Year-over-year EBITDA margin improvement in Q2 was a result of our continued focus on reducing headcount cost by utilizing our successful offshore strategy, as well as finding additional efficiencies in non-client-facing activities across our GNA functions. We're also reorienting our marketing spend with a more targeted, customer valued driven approach. In addition, we're systematically carrying out a defined cost reduction plan for facilities as we rationalize the office footprint inherited from past MNA and adjust to post-COVID flexible work policies and the resulting lower office utilization. We also drove year-over-year savings in Q2 related to T&E and realized some one-time employee-benefit efficiencies, which led to EBITDA margins above our full-year run-right.

Marie Armstrong: Year over year E.B.R. margin improvement in Q2 was a result of our continued focus.

Marie Armstrong: on Reducing Headcountcast.

Marie Armstrong: by utilizing our successful offshore strategy.

Marie Armstrong: as well as finding additional efficiencies in non-client facing activities across our GNA functions.

Marie Armstrong: We're also reorienting our marketing spend with a more targeted customer value driven approach.

Marie Armstrong: In addition, we're systematically carrying out a defined cost reduction plan for facilities as we rationalize the office footprint inherited from past M&A and adjust to post-COVID flexible work policies and the resulting lower office utilization.

Marie Armstrong: We also drove your career savings in Q2 related to Tanny and realized some one-time employee benefit efficiencies which led to EBITDA margins above our full year run right.

Marie Armstrong: Now turning to cash flow, adjusted operating cash flow in Q2 was negative 5.5 million, and year-to-date adjusted operating cash flow was 33.6 million. As a reminder, Q2 is typically our lowest cash generation quarter due to a number of factors, including seasonality of customer collections and annual employee compensation payments. We still expect cash flow to grow materially in the second half of FY25 as compared to the first half, as the seasonal factors normalize. We ended Q2 with 142.2 million of cash and cash equivalents, a decline of 18.0 million from the first quarter due to the seasonal factors that I just mentioned.

Marie Armstrong: Now turning to cash flow. Adjust it operating cash flow in Q2 with negative 5.5 million.

Marie Armstrong: and year-to-date adjusted operating cash flow was 33.6 million.

Marie Armstrong: As a reminder, Q2 is typically our lowest cash generation quarter due to a number of factors, including seasonality of customer collections and annual employee compensation payments.

Marie Armstrong: We still expect cash look to grow material in the second half of FY25 as compared to the first half.

Marie Armstrong: as the seasonal factors normalize.

Marie Armstrong: We ended Q2 with 142.2 million of cash and cash equivalents, a decline of 18.0 million from the first quarter due to the seasonal factors that I just mentioned.

Marie Armstrong: Our Q2 cash balance increased 30.4 million year-over-year, demonstrating the strong cash generation capability of our business.

Marie Armstrong: Our Q2 cash balance increased 30.4 million year over year, demonstrating the strong cash generation capability of our business.

Marie Armstrong: This completes my remarks on our fiscal Q2 financial results.

Marie Armstrong: This completes my remarks on our fiscal Q2 financial results.

Marie Armstrong: At this point, I'd like to turn to our third fiscal quarter and full-year guidance discussion. But the third fiscal quarter of FY25, we expect subscription revenue in the range of 130 to 133 million, representing a decline of 2.1% to an increase of 0.2%. As compared to the prior year to the third quarter, our Q3 subscription revenue guidance incorporates the impact of deal delays that we experience during the first half of FY25 and is consistent with a more conservative outlook for full-year revenue. However, as Andrew and Greg mentioned, we still expect to improve our bookings and customer retention metrics sequentially from Q2.

Marie Armstrong: At this point, I'd like to turn to our third fiscal quarter and full-year guidance discussion.

Marie Armstrong: But a third fiscal quarter of FY25, we expect subscription revenue in the range of 130 to 133 million. Representing a decline of 2.1% to an increase of 0.2% as compared to the prior year, the school third quarter.

Marie Armstrong: Our Q3 subscription revenue guidance incorporates the impact of deal delays that we experienced during the first half of FY25 and is consistent with a more conservative outlook for full-year revenue.

Marie Armstrong: However, as Andrew and Greg mentioned, we still expect to improve our bookings and customer retention metrics, sequentially from Q2.

Marie Armstrong: Express by 25, we're revising the full-year guidance that we've provided on April 29, 2024, as follows. We expect FY25 subscription revenue to be in the range of 526 to 532 million, representing a year-over-year growth rate of negative 2% to negative 1%. We expect FY25 total revenue to be within the range of 607 to 607 million, representing a year-over-year growth rate of negative 4% to negative 3%. The reduction in total revenue for the full year reflects the change in subscription revenue guidance, as well as a more conservative view regarding the full year performance of our professional services business.

Marie Armstrong: Graph by 25, we're revising the full year guidance that we've provided on April 29, 2024 as follows.

Marie Armstrong: We expect FY25 subscription revenue to be in the range of 526 to 532 million, representing a year over year, growth rate of negative 2% to negative 1%.

Marie Armstrong: We expect FY25 total revenue to be within the range of 607 to 617 million, representing a year-over-year growth rate of negative 4% to negative 3%.

Marie Armstrong: The Reduction in Total Revenue for the full year reflects the change in subscription revenue guidance.

Marie Armstrong: as well as a more conservative view regarding the full year performance of our professional service development.

Marie Armstrong: As Greg outlined, we expect services revenue to improve in the second half of the year, as on-build work continues to moderate, we catch up on existing backlog and create additional attached services backlog from growth in subscription bookings. However, this improvement is now forecasted to be slower than previously expected. We still expect FY25 gross profit margin to be within the range of 68% to 70%. Given the reduction in our revenue outlook, we now expect FY25 adjusted EBITDA to be around the lower end of the previously provided range of 215 to 225 million, and full year adjusted EBITDA margin to be approximately 35% for FY25.

Greg Randolph: As Greg outlined, we expect services revenue to improve in the second half of the year. As unbuild work continues to moderate, we catch up on existing backlog and create additional attached services backlog from growth and subscription bookings.

Greg Randolph: However, this improvement is now forecasted to be slower than previously expected.

Greg Randolph: We still expect FY-25 gross profit margin to be within the range of 68 to 70%.

Greg Randolph: Given the reduction in our revenue outlook, we now expect FY-25 adjusted EBITDA to be around the lower end of the previously provided range of 215 to 225 million and full year adjusted EBITDA margin to be approximately 35% for FY-25.

Marie Armstrong: We expect the year we year decline in EBITDA to be lower than in revenue, as we continue to drive efficiencies in the business, as already demonstrated in the first half of FY25, while mindfully reinvesting some of the savings to ensure that our primary goal of returning to double digit top line gross remains on track. We still expect to generate strong positive adjusted operating cash flow in FY25, although our lower revenue outlook will have an incrementally negative impact on cash generation. It will be partially offset by lower interest expense due to the declines in interest rates and overall focus on cost savings.

Greg Randolph: We expect a year over a year declining EBITDA to be lower than in revenue as we continue to drive the efficiencies in the business.

Greg Randolph: has already demonstrated in the first half of FY25, while mindfully reinvesting some of the savings to ensure that our primary goal of returning to double digit top line growth remains on track.

Greg Randolph: We still expect the generate strong positive adjusted operating cash flow in FY25.

Greg Randolph: Although our lower revenue outlook will have an incrementally negative impact on cash generation.

Greg Randolph: It will be partially offset by lower interest expense due to the declines in interest rates and overall focus on cost savings.

Marie Armstrong: We expect year in FY25 net leverage to be approximately 4.0 times. The underlying cash generation capability of our business remains strong and a continued area of focus for us.

Greg Randolph: We expect DRN FY25 net leverage to be approximately 4.0 times.

Greg Randolph: The underlying cash generation capability of our business remains strong and a continued area of focus for us.

Marie Armstrong: In conclusion, during the fiscal second quarter, we made continued progress in our work to put E to open back on a sustainable double-digit top line growth path. The key revenue drivers of bookings and retention both improved year over year and compared to Q1, which we now view as the full year low point for each. We are well positioned for continued improvement in both bookings and retention as we move through the end of this fiscal year, with the impact of revenue expected to accelerate as we approach year end. While we have experienced some delays in booking large new subscription deals, we view this just as a timing issue, while our underlying strategy, product strengths, and market positioning are intact and hold tremendous future potential.

Greg Randolph: In conclusion, during the fiscal second quarter, we made continued progress in our work to put each open back on this sustainable double digit top-line growth path.

Greg Randolph: The key revenue drivers of booking and retention both improved year over year and compared to Q1, which we now view as the full year low point for each.

Greg Randolph: We are well-positioned for continued improvement in both bookings and retention as we move through the end of this fiscal year. With the impact of revenue expected to accelerate as we approach year-end.

Greg Randolph: now

Greg Randolph: While we have experienced some delays in booking large news subscription deals, we view this just as a timing issue while our underlying strategy product strengths and market positioning are intact and hold tremendous future potential.

Marie Armstrong: Before closing, I want to thank all of E to open employees, customers, and partners for their continued support as we work through the transition designed to position E to open for strong and consistent growth for the long term.

Greg Randolph: Before closing, I want to thank all of you to open employees, customers and partners.

Greg Randolph: for their continued support as we work through the transition, designed to position E to open for strong and consistent growth for the long term.

Operator: That concludes our prepared remarks.

Operator: Operator, please open the line and begin the Q&A session. Thank you. At this time, we will be conducting a question-and-answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question Q. You may press star 2 if you would like to remove your question from the Q. For participants using speaker equipment, it may be necessary to pick up your hands set before pressing star keys. One moment, please, while we pull for questions. Once again, please press star 1 if you have a question or a comment.

Greg Randolph: That concludes our prepared remarks. Operator, please open the line and begin the Q&A session.

Speaker Change: Thank you. At 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. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your hands set before pressing the star keys. One moment please while we pull for questions. Once again, please press star one if you have a question or a comment. The first question comes from Chris Quinn Tarrow with Morgan Stanley, please proceed.

Christopher Quintero: The first question comes from Chris Quintaro with Morgan Stanley. Please proceed.

Christopher Quintero: and Andrew, Greg, and Marie, thanks for taking our questions here. I want to double-click on the large deal delays. Just curious how Q2 may be compared versus Q1.

Speaker Change: Hey Andrew, Greg and Marie, thanks for taking our questions here. I want to double click on the large deal delays. Just curious how Q2 may be compared versus Q1, the things get to the country worse there in terms of the number of delays or was it more so you are kind of expecting an improvement that did not end up materializing?

Christopher Quintero: The things get to the country worse there in terms of the number of delays, or was it more so you are kind of an expectant improvement that did not end up materializing?

Andrew Appel: Yeah, so hey Chris, thanks for the question. And look, I think, you know, if you think about the nature of the big deals that we do, they're very strategic. These are CEO level initiatives.

Speaker Change: Yeah, so, hey, Chris, thanks for the question. Look, I think, you know, if you think about the nature of the big deals that we do, they're very strategic. These are...

Andrew Appel: And so what we experienced is, as you can, you know, look across other enterprise software companies, they are, you know, these decisions are taking much longer than anticipated. They're going through additional cycles of review. And so we certainly saw the way, primarily based on just the additional evaluation at the highest level of our client base. And just that, we refer reference that in the prepared remarks, but when you compare Q1 and Q2, Q2, looking and overall, you know, turn deal cadence, it did improve, but it did not improve to the degrees that we expected. So we did still see flow nets in sort of the deal timing, but again, directionally, Q2 was improvement over Q1.

Speaker Change: CEO level initiatives and so what we experienced is you can look across other enterprise software companies.

Speaker Change: They are, you know, these decisions are taking much longer than anticipated. They're going through additional cycles of review and so we certainly saw the ways primarily based on just an additional evaluation at the highest level of our client base.

Speaker Change: and just decided that we referenced it in the prepared remarks, but when you compare Q1 and Q2, Q2, looking and overall, you know...

Speaker Change: Turn, deal cadence, it did improve, but it did not improve to the degree that we expected. So we did still see slowness in sort of the deal timing, but again, directionally Q2 was improvement over Q1, Q2 was also an improvement year-over-year on both bookings and turn.

Christopher Quintero: Q2 was also an improvement year over year on both booking and turn. Got it, that's really helpful.

Christopher Quintero: And then, of course, you hear what you're seeing with your SAP customer base and pipeline. We've gone all work around the EOP upgrades cycle, you know, happening right now. And it seems like there's a lot of momentum there and acceleration. So I think about 80% of your customers are also SAP customers. So which is wondering if you're seeing any signs of that momentum there, starting to translate over into your pipeline.

Speaker Change: Got it, that's way helpful.

Speaker Change: and then I'm curious to hear what you're seeing with your SAP customer-based and pipeline. We've done a lot of work around the EOP upgrades I go, you know, happening right now. And it seems like there's a lot of momentum there and acceleration. So I think about 80% of your customers are also SAP customers, which is wondering if you're seeing any signs of that momentum there, starting to translate over into your pipeline.

Andrew Appel: Yeah, there's no doubt we're seeing demand, you know, as, you know, clients, any time you have a massive upgrade, you know, cycle shift in enterprise architecture, clients are reevaluating their entire portfolio, creating opportunities for us, and we're directly engaged with clients. They help them better understand our value proposition across our entire supply chain solution set. And so we're creating, you know, two of the wins that we won into two around logistics, where they were initiated from an SAP-related evaluation. So we're definitely seeing demand there. We've got a unique capability around SAP. So yeah, we're definitely seeing an opportunity to increase pipeline.

Speaker Change: Yeah, there's no doubt we're seeing demand, you know, as, you know, clients, you know, anytime you have a massive upgrade, you know, cycle shift in enterprise architecture, clients are reevaluating their entire portfolio, creating opportunities for us and we're directly engaged with clients, they help them better understand our value proposition across.

Speaker Change: our entire supply chain solution set, and so we're creating two of the wins that we won.

Speaker Change: In Q2, around logistics, where they were initiated from an SAP related evaluation. So, we're definitely seeing demand there. We've got unique capabilities around SAP.

Speaker Change: Yeah, we're definitely seeing an opportunity to increase pipeline. Okay, well. Hey, Greg, just to add to it. This may be just the sample of clients. I think what happens is...

Christopher Quintero: Thank you.

Andrew Appel: I agree. I'm just to add to it.

Andrew Appel: This may be just the sample of clients. I think what happens is, as clients go to the upgrade, two things happen. One is that some of the new modules don't meet their expectations. So kind of puts pieces of the SAP central core into our peer opportunity.

Speaker Change: As clients go to the upgrade to things happen, one is that...

Speaker Change: Some of the new modules don't meet their expectations, so kind of puts pieces of the SAP Central Corps into RFP or opportunities.

Andrew Appel: Police, the Flintside, and this is the part of what is, is that there is a natural timing to this because during the early phases, it takes up a lot of the capacity of the management of the management team. I was talking to, with big, you know, software hardware maker and they said, look, you know, the team is very with one of our strategic integration partners. The client is very focused on rolling out their SAP HANA implementation and aren't ready to engage in other things here. So do you agree with that? Yeah, absolutely. So there are things that spin out through the process that lead to an opportunity, especially in logistics, which feels like a weak point of the core modules.

Speaker Change: The Flint side, and this is the part of one of his edits.

Speaker Change: There is a natural timing to this because during the early phases it takes up a lot of the capacity of the management of the management team I was talking to with big, you know, software hardware maker and they said, look.

Speaker Change: You know the team is very with one of our strategic integration partners.

Speaker Change: The client is very focused on rolling out their SAP HANA implementation and are ready to engage in other things here. So do you agree with that? Yeah, absolutely. So there are things that spit out through the process that lead to an opportunity, especially in logistics, which feels like a weak point of the core modules. And then there's also a look, we just got to get through this before we're going to start looking at new things like anterior supply collaboration, which is not part of SAP's capability.

Andrew Appel: And then there's also a, hey, look, we just got to get through this before we're going to start looking at, you know, new things like anterior supply collaboration, which is not part of SAP's capability.

Christopher Quintero: Excellent, super helpful.

Christopher Quintero: Thank you all.

Speaker Change: Act on Super helpful. Thank you all.

Adam Hotchkiss: Okay, the next question comes from Adam Hotchkiss with Goldman Sachs. Please proceed.

Speaker Change: Okay, the next question comes from Adam Hottkiss with Goldman Sachs, please proceed.

Adam Hotchkiss: Great. Thanks so much for taking the questions. I guess to start, what are you seeing in hearing from your systems and creators as a channel for demand? I know a lot has been going on internally with sales focused on customer success. So I imagine there's more of an opportunity for the SIs to step in here.

Adam Hottkiss: Great. Thanks so much for taking the questions. I guess to start what are you seeing in hearing from your systems integrators as a channel for demand? I know a lot has been going on internally with sales focused on customer success. So I imagine there's more of an opportunity for the size to step in here. I guess what do you have to do on your end to sort of make that happen and spur that process and where are we on that today? Okay.

Andrew Appel: I guess what you have to do on your end to sort of make that happen and spur that process, and where are we on that today? Yeah. What the dialogue we're having with the make a couple, a subset of the major strategic integrators, is about arguing together to drive transformations. So that we can help them grow, help them win more work, and that we will envy this, you know, provider of choice. And to get in together, you know, at the beginning, it's quite think about transformation. So we're, one example is a, you know, one of the top 10 type of CPG food companies in the U.S.

Speaker Change: Yeah, I'm...

Speaker Change: What the dialogue we're having with.

Speaker Change: That make a couple of subset of the major strategic integrators is about partnering together to drive transformations.

Speaker Change: So that we can help them grow.

Speaker Change: Helped them win more work and that we will envy the provider of choice and to get in.

Speaker Change: Together, you know, at the beginning, it's quiet to think about transformation. So we're wanting to sample, is it, you know, one of the top ten packets, CPG food companies in the U.S. with me and the partner from the strategic integrator joined it to have.

Andrew Appel: with me and the partner from the strategic integrator joined at the hip. They're doing laying out a multi, you know, a dimensional transformation across their whole supply chain demand. We're starting with demand; we're moving to supply, collab, and co-packers. And then we're about to kick off a whole work stream around transportation because we think we can save 100, 100 million dollars or something like that. So the conversation, and I've had, I think, four e-conversations with, you know, account owners and industry group leaders in that particular strategic, and it's all about how we can help them grow.

Speaker Change: Faith in laying out a multi-dimensional transformation across their whole.

Speaker Change: Supply Qing, Demand, we're starting with Demand

Speaker Change: We're moving to supply, collab, and co-packers, and then we're about to kick off a whole work stream around transportation because we think we could save 100 million dollars or something like that. So, the conversation, and I've had, I think.

Speaker Change: Forty conversations with account owners and industry group leaders in that.

Speaker Change: particular strategic and it's all about how we can help them grow and jointly grow. And then we met with another one at TNAX.

Andrew Appel: And jointly grow. And then we've had with another one, a connect, which we had the exact same conversation. Let's pick five clients that are important to you, that you think are going to be, you know, right for supply chain changes. Next year we'll pick our five in four verticals. We'll get a list of seven clients, and then we'll work with their industry group leaders to basically start dialogues with their, you know, charging their relationships with the generally higher than ours. But it's all about joint service lines, so I keep the ability to try to grow the transformation.

Speaker Change: which we had the exact same conversation. Let's pick five clients that are important to you that you think are going to be, you know, right for supply changes next year. We'll pick R5 in four verticals. We'll get a list of seven clients and I will work with their industry group leaders to basically start dialogues with their, you know, leveraging their relationships with the generally higher than ours, but it's all about joint.

Speaker Change: Service Line, joint capabilities, drug, road transformation, and we're going to build some reference clients. We've got two big ones with one of the better known SIs, one at CPG and there's another one on them.

Andrew Appel: And we're going to build some reference clients. We've got two big ones with one of the better known SIs, one at CPG, and there's another one. David, Andrew, Greg; I don't know if they could do it.

Speaker Change: and then success began success. So it's a little different that it was to, you know, previously, we're not seeing them as a source of kind of implementation support. I mean, they could do it, but it's not where they're going to make their money off of working with us.

Speaker Change: Okay, understood that's really helpful. And then I just wanted to touch on the professional services revenue. I think it looks like you lowered the full year guide by about 17 million implied by the subscription and the total revenue guide. So I'm just curious, you talked about the pushing out of deals impacting this. And obviously there's some unbuilt work in there, but could you maybe dig into that a little bit more and help us understand what's driving the magnitude of the cut on that?

Speaker Change: Yeah, maybe I'll start and then Gregory and I'd add to it a good question, so, you know

Speaker Change: Obviously, just by the nature of not being on multiplayer contracts, there's inherent volatility in the services business, and, you know, large deals, large projects come to an end if you don't have new bookings coming in, it can create volatility and timing. As we mentioned, some of the large deals that we've seen, we've seen flip.

Speaker Change: Generally, come with more attached PS services, so the larger the booking, the more like later to have also large PS attached revenue, so there were some impacts from that perspective.

Speaker Change: and then I would say in addition, we've talked about it in the last couple of quarter calls. We've brought a new leadership to the PS org to also really drive additional operational and execution changes to be more efficient in working through backlog. But I would also say that there's been a point of focus on really driving flawless implementations and driving customer satisfaction and we take that very seriously. PS revenue is not something that we think of as a standalone necessarily. It's really designed.

Speaker Change: to drive higher subscription revenue, create happy customers, figure relationships and that's how we think about it for the long term.

Speaker Change: Okay, I'm on the list now.

Speaker Change: Yeah, okay, yeah, I think you can't stop it, yeah.

Adam Hottkiss: All right, thanks you Adam.

Speaker Change: Okay, the next question comes from Taylor McGennis with UBS, please proceed.

Speaker Change: Yeah, hi, thanks much for taking my question. So, first one, if I look at the second half implied subscription revenue outlook, it still implies like a bit of an uptick in 4Q. I know you talked about the expectation that you're going to see better retention rates, and then also you're going to close some of these larger deals that are in the pipeline. But can you just talk about how much I guess that uptick is really coming from improving retention versus closing some of these larger deals?

Speaker Change: When you think about what's giving you the confidence or comfort in that, is that because, you know, maybe some of these have already closed, some of the efforts that you're talking about, like, is there any new ones in place to further drive or tension higher? Maybe it's just getting through tougher renewals, but can you maybe, like, talk through some of the things that are giving you guys that comfort?

Speaker Change: Yeah, absolutely. So if you look at our guidance, you know, when you're looking at the low end of the guidance, it really, you know, very conservatively assumes no improvement in what we saw in first half.

Speaker Change: and that's why I say that conservative is that as we mentioned in our prepared remarks, we already saw improvement in both churn and bookings, quarter over quarter and year over year. So we're seeing that trend and we're expecting to see that continue into Q3 and Q4, not at the pace that we previously expected, but we are already seeing that in action. And so when you think about, the mid and the high end of the guidance range, that basically factors in what we're seeing in the improvement from Q1 to Q2 and what we're expecting for Q3 and Q4.

Andrew Appel: No, I think, yeah, look, if three quarters ago we said, look, we were going to spend time focusing on retaining clients because they're hard to win, and we're losing too many of them. So that has manifested itself in what will manifest itself as a decline in turn and increase of attention. It's that simple. What we learned in a long way is that clients maintain a lot of those decisions, you know, 18 to 24 months ago, not 12 to 18 months ago, and so that pace of decline took a little longer. It's been taking a little longer than they expect, but we look at the second half of the year, it looks materially better than the first half of the year and when we look at the first half of the next year, it looks materially better than the second half of this year.

Speaker Change: I think I'm going to play the instrument, Gregory Randolph, I think I'm going to play the instrument.

Speaker Change: Yeah, look.

Speaker Change: Three quarters ago, we said, look, we were going to spend time focusing on the changing clients because they're hard to win and we're losing too many of them.

Speaker Change: Dad!

Speaker Change: has manifested itself in, or will manifest itself as a decline in the term and increase in retention. It's that simple. What we learned a thing along the way is that clients made a lot of those decisions 18 to 24 months ago, not 12 to 18 months ago. And so that pace of decline took a little longer. It's going to take a little longer than we expect. But if you look at the second half of the year.

Speaker Change: It looks materialy, better than the first half of the year, and we look at the first half of the next year. It looks materialy better than the second half of this year. So those are just the facts, right? It's the tail, whatever of the puff.

Andrew Appel: So those are just the facts, right?

Andrew Appel: It's the tail, whatever of the stakes made two years ago, and it's perfect as any formula predictable and also leads to our cross out. I'm sorry, I'm sorry, I'm sorry, I tangibly.

Speaker Change: for Stakes May 2 years ago.

Speaker Change: Perfect, is it formidable and also leads to a cross out, a cross out, a cross out.

Adam Hotchkiss: And we see it explicitly, clients, you know, once we solve their issues and retain them, they will not do any really helpful, and then maybe it's my second question. So now you talked a little bit earlier about some of the on-build services work, and I know that you guys have had some efforts there in order to help improve retention.

Speaker Change: and we see it explosively, clients.

Speaker Change: You know, once we saw their issues and retain them, they opened up the door for new opportunity.

Speaker Change: Really helpful. And then maybe is my second question. So I know you talked a little bit earlier about some of the on-build services work and I know that you guys have had some efforts there in order to help improve retention. So I guess when you think about the sequential improvement that you guys saw, how was the on-build services a big contributor to that? And then maybe you can just give us an update on how that's going. When we think about the lower professional services out there, look where you was any of part of that increasing the scope of maybe some of these customers that you're helping work through some of these hurdles. Any additional color that would be helpful. Thanks.

Andrew Appel: So I guess when you think about the sequential improvement that you guys saw, how, like, was the on build services a big contributor to that and then maybe you can just give us, you know, the lower professional services outlook, where you, was any of part of that increasing the scope, right, of maybe some of these customers that you're helping work through some of these hurdles, any additional call of error would be helpful. So I want to, so one piece of clarity, in general investment, the clients that I build is far more for making sure we implement the existing projects with success and it is for saving an account, right, saving an account is usually, you know, making sure they're using the software today that they should be and that they're getting value from it and that's working.

Speaker Change: So I want to, so one piece of clarity.

Speaker Change: In general, investments are clients that aren't bill is far more for making sure we implement the existing projects with success than it is for.

Speaker Change: Saving an account, right? Saving an account is usually, you know, making sure they're using the software.

Speaker Change: Today's what there should be.

Speaker Change: and that they're getting value from it and that it's working.

Andrew Appel: And so that's the first thing, right? Where there's investments with professional services and clients, it's generally in, you know, where an implementation or a commitment was made that succeeded, you know, taking more work to get done. We don't think we should have the clients for more money and that we have a couple of situations that in order to retain a client, we had to, you know, the solution that was a result of a percentage of that wasn't right and so we had to kind of make, we continue to have to make an investment, to make sure that client is happy versus food.

Speaker Change: and so.

Speaker Change: That's the first thing, right? So, where there's investments?

Speaker Change: with Professional Services in Clients.

Speaker Change: It's generally in where an implementation or a commitment was made that succeeded, you know, seeking more work to get done, and we don't think we should have the clients for more money.

Speaker Change: and that.

Speaker Change: We have a couple of situations that in order to retain a client, we had to, you know, the solution I was through the result percentage to them wasn't right, and so we had to kind of make, we continued to make an investment to make sure that client is happy versus who's the client.

Andrew Appel: Klein. But in general, what we're seeing is those investments are for deep-getting implementations of things we sold, done because what we found insurance that we lose a child because clients never actually implement it as software, believe it or not. So, and we're seeing a material, you know, we track a hundred clients, you know, our number of clients that are green status, red status is down by 50%. Our number of clients that are greener, you know, because they're more of them, you know, our 50% because that's how the portfolio looks like, but, you know, we're seeing a migration of shrinking at, you know, bad implementations.

Speaker Change: But in general, what we're seeing is those investments are for keeping, getting implementations of things we sold. Time, because what we found insurance, that we lose the cows because they've actually implemented this software, believe it or not.

Speaker Change: So, and we're seeing a material, you know, reasonable, like we track 100 clients.

Speaker Change: You know, our number of clients that are in green status, red status is down by 50%. Our number of clients that are green are, you know, because they're more of them. You know, our 50% because that's how the portfolio looks like. But, you know, we're seeing a migration of shrinking at, you know, bad implementations. And that is causing some resources.

Andrew Appel: And that is causing some resources.

Adam Hotchkiss: Great, thanks so much for taking my questions.

Speaker Change: Great, thanks so much for taking my questions.

Mark Schappel: The next question comes from Mark Shappel with Loop Capital. Mark, please proceed. Hi, thank you for taking my question.

Speaker Change: The next question comes from Mark Shappell with Loop Capital Mark Please proceed.

Mark Schappel: Greg, I want to build on an earlier question on the deal delays. I was wondering if it could just provide a digital color around these transactions, like whether you're seeing them and whether you're seeing a particular weakness in a certain vertical or a certain product category. Yeah, hey, Mark. Thanks for the fifth. Thanks for the question.

Mark Shappell: Hi, thank you for taking my question. Greg, I want to build on an earlier question on the deal delays. It's only if you could just provide a just for color around these transactions, like whether you're seeing them and whether you're seeing a particular weakness in a certain vertical or a certain product category.

Gregory Randolph: We're not really seeing patterns from an industry perspective or from a product perspective. I'll just reiterate the fact that, you know, the large projects that we're focused on are very strategic, and there's just been an elongated evaluation. These are CEO level approvals. And one of the large cross-cell wins that I referenced in my opening remarks was a situation where we got all the way through the approvals and we were ready to sign the agreement, and they went through another evaluation process, extending the timeline by almost a month. And the good news is we were able to close the deal.

Greg Randolph: Hey, Mark. Thanks for the question. We're not really seeing patterns from an industry perspective or from a product perspective, I'll just reiterate the fact that

Greg Randolph: You know, the large projects that we're focused on are very strategic and there's just been an elongated evaluation, these are CEO level approvals and one of the large cross-cell wins that I referenced in my opening remarks.

Greg Randolph: was a situation where we got all the way through the approvals.

Greg Randolph: and we were ready to sign the agreement and they went through another evaluation process, extended the timeline by almost a month and the good news is we were able to close the deal.

Gregory Randolph: And I think, you know, if you think about, you know, there've been a lot of things that we've been focusing on to really get this company a back-to-top-top-lying double-digit growth. As Andrew mentioned, from the very beginning, client satisfaction has been job one and the most important focus for us. And as we continue to improve our retention numbers, we can invest more and more of our sales capacity on focusing on new business more so than on retaining clients. And again, I mentioned that in my opening remarks as well. So I think a combination of those things, you know, have resulted in, you know, longer cell cycles.

Greg Randolph: You know, if you think about just, you know, there've been a lot of things that we've been focusing on to really get this company back to top line double digit growth. As Andrew mentioned, from the very beginning, client satisfaction has been job one and the most important focus for us.

Greg Randolph: and as we continue to improve our retention, numbers, we can invest more and more of our sales capacity on focusing on new business more so than on retaining clients. And again, I mentioned that in my opening remarks as well. So I think a combination of those things, you know, have resulted in, you know, longer sales cycles, but, you know, and I think the other point that Andrew made in his comments is we're still winning these deals and that gives me confidence and optimism for two reasons. Number one, the demand for our solutions, even in a difficult

Gregory Randolph: But you know, and I think the other point that Andrew made in his comments is we're still winning these deals.

Gregory Randolph: And that gives me confidence and optimism for two reasons. Number one, the demand for our solutions, even in a difficult evaluation scenario. We're still getting these deals across the line. It's just taking longer. And the fact that, you know, we have solutions that are.

Greg Randolph: A valuation scenario. We're still getting these deals across the line. It's just taking longer. And the fact that we have solutions that are valuable in a challenging situation.

Speaker Change: Yeah, I can feel it, I can feel it.

Speaker Change: is that, because I think, great, you know, what gives us confidence is that, you know, most of the ones we get to lay.

Speaker Change: and a closing and very few end up losing.

Speaker Change: and so also I think this strategic review itself.

Speaker Change: You know, create the degree of uncertainty.

Speaker Change: that in a couple cases has caused us a deal, but often just ends up being like, look, we'll wait for that process to resolve itself before we make a decision. And that has went to...

Speaker Change: You know, again, a handful of clients, the ladies, but when you're talking about, you know, some of our bigger, more sophisticated clients, those handfuls are, you know.

Speaker Change: You're out.

Speaker Change: Great, that's helpful. And then one additional follow-up question. Andrew, you know, there's a fair amount of M&A in the space, in the supply chain space during the quarter. Right, we had quarter buying Mark Regate, Blue Yonder, closed one network. If you just talk a little about your view of the changes to the competitive environment here and also whether you think there's an opportunity to pick up business from just potential disruptions at these firms.

Speaker Change: Second one is a loaded question, but the first one I'd say is, um...

Speaker Change: is a specific situation, you know.

Speaker Change: You know, mine, right? You know, one network is a distant competitor in the collaboration space and Mercury Gain is a mid-market TMS. And we just don't see those.

Speaker Change: Players

Speaker Change: in our competitive fleet, right? There's that ones that we're right into. So that'd be 0.1, 0.2 is, um...

Speaker Change: You know, we'll probably get back to acquiring either synergistic players, like the Corb or Mercury Gate, or capability-based players to enhance.

Speaker Change: Our Solutions, where we aspire to be number one and number two in each of our spaces. But on the second question, the one that throws a loaded question.

Speaker Change: Bye!

Speaker Change: Let's just say that...

Speaker Change: You know, it also creates opportunity for us.

Speaker Change: Thank you because change of friendship, you know, these other people that reflect on who they want to work with.

Speaker Change: Okay, great, thank you.

Speaker Change: Once again, if there are any remaining questions, please press star 1. The next question comes from Andrew Ovin with Bank of America. Please proceed.

Speaker Change: and this is David Ridley Lane on for Andrew. What were those strongest areas of new bookings for you among the product portfolio?

Speaker Change: Wooden was game better.

Speaker Change: Yeah, hey, David, thanks for the question.

Speaker Change: You know, as I mentioned, I think in the opening remarks we had, you're two significant new logo wins

Andrew: that kind of reflect the market demand that we're seeing pick up and our competitive differentiation in those market. One is in logistics where we combine our traditional transportation management solution.

Andrew: with the last mile portal capability and include visibility. Those three capabilities are unique that...

Andrew: E2 Open has a unique value proposition and capability that

Andrew: that can be delivered through one company versus multiple-point providers. So it became crystal clear in that situation that the client saw value in that overall solution. The second piece is in our global trade, product portfolio. We see tremendous demand as supply chains become more and more global, the need to have a central way to manage.

Andrew: How they trade their goods and services across different markets is incredibly important. And we have a very compelling solution in that space. So we're seeing incredible demand in those two areas and we have a unique value proposition.

Speaker Change: and just want to check that I understand you're having the difficulties on the large deals. But in terms of getting back to normalized turn rates by the start of fiscal year 26, you're still tracking towards that.

Speaker Change: and in our on that girl.

Speaker Change: trajectory.

Speaker Change: The short answer is yes, whether you know what is normalized versus you know ultimate goal I would say.

Speaker Change: We'd like to turn a continue to lower even going into the year after that. How about that?

Speaker Change: So we are definitely tracking towards the annualized level for us, but that not a best and class level, which we think is achievable.

Speaker Change: Over the next 18 months.

Speaker Change: But yeah.

Speaker Change: Got it. I wish to thank you very much.

Speaker Change: We have no further questions in two and now I like to turn the floor back to management for any closing remarks.

Speaker Change: Yeah, thank you for that. Look, we, um...

Speaker Change: We as a team have an immense amount of confidence in like the direction we're taking the organization that's that's where I'd like to close so we I think we just you know we were just talking about retention right so we have put immense focus on retention and we are very confident that next year retention will move back to normalize levels and continue to decline.

Speaker Change: That will unlock.