E2open Parent Holdings, Inc.

Good afternoon and welcome to the E2 Open Q1 FY 2023 earnings presentation. At this time, all participants are in a listen-only mode, but we will open the floor for your questions and comments after the presentation. If you would like to join the queue to ask a question, you may press star 1 on your keypad at any point. Should you wish to leave the queue, you may press star 2. It is now my pleasure to turn the floor over to your host, Adam Rogers. The floor is yours.

Good afternoon, everyone. At this time, I would like to welcome you all to the E2 Open Fiscal First Quarter 23 Earnings Conference Call. I am Adam Rogers, Head of Investor Relations here at E2 Open. Today's call will include recorded comments from our Chief Executive Officer, Michael Farlikas, followed by our Chief Financial Officer, Marie Armstrong, and then we'll open up the call for a live Q&A session. A replay of this call will be available on our website. Information to access the replay is listed in today's press release, which is available at e2open.com in the investor relations section. 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 fiscal second quarter and full year 2023. These forward-looking statements are subject to known and unknown risks and uncertainties. We do open cautions that these statements are not guarantees of future performance. We encourage you to review our most recent reports, including our 10-Q, or any applicable amendments for a complete discussion of these factors and other risks that may affect our future results or the market price of our stock. And finally, we are not obligating ourselves to revise our results or these forward-looking statements in light of new information or future events. Also on today's call, we'll refer to certain non-GAAP financial measures, reconciliations of non-GAAP to GAAP measures, and certain additional information are included in today's earnings press release, which can be viewed and downloaded from our Investor Relations website. And with that, we'll begin by turning the call over to our CEO, Michael Farlacus.

Thank you, Adam, and thank you all for taking the time to join us for our first quarter earnings call for fiscal 2023. First, I would like to thank our nearly 3,800 team members for another great quarter. We are very proud to have achieved strong results in the first quarter that positioned us very well for the remainder of our fiscal year. During today's call, I'll cover our first quarter highlights, an update on market trends impacting global supply chains and our business, our progress on the long-term strategy we previously outlined, an update on our investments and growth, our brand relaunch, and our efforts in ESG. And after those updates, I'll turn the call over to our CFO, Marie Armstrong, to provide further details on our Q1 financial results. Let's start with the first quarter. In Q1, we generated over $160 million in total revenue, $130 million of which was subscription revenue. For those new to our business, Subscription revenue represents over 80% of our total revenue and produces approximately 80% gross margin. For Q1, organic subscription revenue grew over 12% on a constant currency basis compared to last year. Notably, we have delivered organic subscription growth acceleration in this quarter, as well as for five of the six quarters we have been a publicly traded company. We also continued our strong track record of generating high margins and high free cash flow. Our Q1 adjusted EBITDA was $51 million, up 12% year-over-year, and represented a 31% EBITDA margin. Furthermore, we generated over $41 million of unleveraged free cash flow. This is equal to 80% of our EBITDA and 25% of our total revenue. We have built this business with a balanced approach to top line growth and profitability. This remains our focus. In summary, we're off to a great start of the year. We are especially proud of our first quarter results in light of the macroeconomic and geopolitical turbulence that has been impacting virtually every business in the world in one way or the other. Given the quickly changing broader macro backdrop, I wanted to provide my perspective on how EDA opened its position in these evolving market conditions. The economy is slowing. We can clearly see this in our data from both international and domestic transportation volumes, which are clearly trending lower. What's making the overall demand slowdown more complex is that supply chain constraints continue to exist for many physical goods due to the remnants of COVID disruptions, the war in Ukraine, and other geopolitical volatility. Global inflation is very real, given the lingering supply-side disruptions and geopolitical instability, which is further adding pressure to companies across the world. So what does this mean for Eta Open? Eta Open's unique position as the largest cloud supply chain software platform makes us more essential than ever for our clients at a time when navigating complex and ever-changing demand and supply problems requires more than just point solutions. Eta Open is uniquely positioned to capitalize on the broader focus of supply chains given the breadth of our solutions we offer on the platform. My conversations with our client executives continue to focus on them building more agility and resiliency into their supply chain infrastructure so they can be prepared for continued rapid market changes. We continue to hear from our clients that they are managing two significant trends. The continued transition from an on-premise siloed technology infrastructure to an end-to-end cloud-based infrastructure. Supply chains are obviously connected. Much of the software and data companies currently use is not largely connected. A strategic shift within our clients from building very lean but static supply and demand networks to to building very agile and dynamic supply and demand networks. This shift further increases our client's operational complexity, which in turn drives demand for better data and more connected applications. This is exactly what our platform was built to solve. These are long-term trends measured in years. Eat Open is well-positioned to capitalize on these trends, given our platform provides the accurate and timely data our clients need, along with highly integrated end-to-end applications. The legacy approach of companies acquiring multiple-point solutions and having to integrate them on their own simply costs more and obviously adds less value. We see demand growing for our pipeline data, and we continue to see consistent and even improving win rates. That said, we are not totally immune to a global slowdown, and we are seeing some examples of decision delays and project slowdowns primarily from Europe and a few of our large technology clients. In addition, the strengthening U.S. dollar creates an incremental currency headwind for our top line. Given the backdrop of changing economic conditions, I thought it would be valuable to provide some data on why these macroeconomic conditions affect us only on the margin. It did not change our short or medium-term growth and profitability targets. We are profitable. We are in a better position to take market share in a down environment because of our size and our ability to continue a balanced approach to growth and profitability. Where others may need to pull back, we can lean in. Our subscription revenue is very predictable and is not generally tied to transactional volume. So while we did not see a great uplift of revenue when rates and volumes rose through the pandemic, likewise, we do not expect to see a significant reduction in subscription revenue as shipping volumes decline. Marie will provide some more details on this topic in a few minutes. We grow subscription revenue mostly through expanding client relationships. Seventy percent of our bookings are from existing clients. it is always easier and more reliable to expand with existing clients and to win new clients. That is even more true in a challenged macro environment. While we are seeing great results in our new logo sales team, existing client expansion is our primary growth lever. Our client base is made up the largest and most well-known brands in the world. Our clients provide a rock-solid foundation and a reliable path to continued growth. For those reasons, we are extremely well positioned for these changing market conditions. Now to update you on our progress against our growth strategy. The supply chain software market is hyper-fragmented. Our competition is mostly smaller, singular point solution companies, many of which are transitioning from their legacy on-premise applications to the cloud. This is in stark contrast to EatOpen, as we are a network-based platform, cloud-native, and provide an end-to-end solution. As brand owners strive to improve their end-to-end supply chains, deploying multiple niche solutions from many small providers not only costs more, but it also provides inferior results as compared to deploying an integrated end-to-end platform. In summary, we have a differentiated solution built for what the world needs now. Given the opportunity we see, we articulated a growth strategy that is simple and efficient and informed by decades-long relationships with a very rich client base. It has three critical elements. First, organic subscription growth by expanding within our client base while adding new logos to create more expansion opportunities. Second, expand strategic partnerships that further accelerate our subscription growth rate by leveraging channel partners and the integrator ecosystems. Third, organic and inorganic product extensions to increase our TAM, or total addressable market, providing continuous growth opportunities. To expand on point one, about 70% of our new contracts are within our existing clients. This is our primary growth lever. It has proven reliable and effective. Given that our top clients pay us over $10 million per year for our software, And the average enterprise client pays us a little over $1 million. We see nearly a 10X expansion opportunity within our own client base with the products we have today. Throughout fiscal 22, we ramped up our new logo sales and marketing teams. Our success has been more rapid than we expected. In fiscal 21, roughly 15% of new bookings were from new logos. This percentage has increased each quarter significantly. and is now over 30% on a much larger base of bookings. New logos are important not only for our current year's revenue contribution, but they typically expand significantly in the following years. In a few moments, I'll provide an example of a recent new logo win. The first pillar of our growth strategy is progressing very well. Our traction in building partnerships also continues with the recent agreements with Accenture and Uber Freight. We expanded it to a strategic partnership with Accenture, Eta Open's second strategic partnership with the integrated ecosystem in two quarters. A major step in our objective of expanding our ecosystem to include three to four strategic integration partners. We also expanded our partnership with Uber Freight, which will leverage Eta Open's network to provide our clients with real-time rate options for domestic transportation during the shipment planning process. thereby providing access to capacity and also lower our client's transportation spend. This represents EDA opened six partnerships in six quarters, nearly all of which are currently producing revenue. We're making great traction in developing our channel partners and our ecosystem. The next pillar of our growth strategy is inorganic product expansion through M&A. We continue to be able to scale our business further with opportunities that are both strategically and financially accretive to shareholders. When we combine with another company, our organic subscription growth rate increases, as we have more products to sell to more clients. M&A also increases our profitability by reducing duplicative costs like G&A that do not add value to our clients. Our M&A strategy and criteria are also quite simple, focused on cloud companies that extend our platform of mission-critical solutions that our current client base needs and uses. We have executed the strategy 14 times in the past seven years. Let me provide you an example of how valuable the strategy is to Eat Open and our shareholders. A North American food and beverage manufacturer, a new logo client, purchased a subscription worth $1.6 million per year on a three-year committed contract for supply and demand planning, transportation management, and inventory optimization. They will utilize nearly 50% of our connected supply chain platform, including solutions from our recent combination with Bluejack. We won this client because of the breadth of our integrated platform that uniquely solves their connected supply chain problems. This win would not have been possible had it not been for our strategy to extend our platform organically and inorganically. It also demonstrates how quickly we can integrate acquisitions into our platform. One last word on our M&A strategy, and it has to do with our technology. E2Open is nearly 10 times larger than we were seven years ago. We accomplished this. because of our innovation and our technology. Specifically, over the 20 years of our existence, Data Open has built powerful technology and software that integrates data from our very large network and integrates distinct capabilities onto one connected platform. We do this without the need to create a data standard and without the need to have a common technology code base. The software we developed for over 20 years is how we solve the most difficult challenge of any software-related M&A, and that is how to make the software and data work together seamlessly, natively, and quickly. This is our unique value and our innovation. To provide some perspectives, Less than 10 months ago, we acquired BlueJ. A company that was 40% of our size, that combination complemented our platform with significant logistics capabilities. Five months from the date we joined forces, we completed our first joint release of BlueJ's TMF and other capabilities on our platform. In seven months, we sold our first multimillion dollar transaction of a combined solution and have deployed our solutions together several times now. This process of rapid and successful integration has been repeated 14 times in the past seven years. We integrate fully, organizationally, culturally, and technically, and we do it rapidly. We have a process and a method to successfully use M&A to extend our platform's capability. Eat Open is a platform technology company It generates profitable organic growth with the ability to scale quickly. Let me continue with our progress on the growth investments we outlined during our last call. On that call, we outlined our further investment in 2023 to accelerate our growth in FY24 and beyond. The investments are to add more salespeople, invest in our brand and lead generation, and and intensify our work to build an integrator partner ecosystem. We're on track with all three. As an example, last month, E2Open launched its brand refresh, including a new E2Open logo, brand identity, and tagline, moving as one. The strategic brand refresh is designed to increase awareness and help assert E2Open as a platform of choice for the world's leading companies and brands. With recent disruptions exposing the areas ripe for improvement, now more than ever, we're forging the path forward to a more connected, flexible, sustainable, and cost-effective supply chain that moves together as one. The brand refresh and associated digital advertising efforts are part of the growth investments. We are very pleased with the early results these efforts are having on pipeline creation and on brand awareness. We are ramping our hiring plan of new and existing logo sales teams. We now have two strategic partnerships with integrators, well ahead of schedule. We continue to lean into our growth plans and investments we outlined previously, but we'll, of course, monitor the macro environment closely and are prepared to adjust if necessary. We're also proud of our continued recognition that Eat Open receives from industry analysts. Eat to Open was named by Gartner. as a leader in the 2022 Magic Quadrant for Multi-Enterprise Supply Chain Business Networks. If you haven't seen the report, please visit our website. Our position on this Magic Quadrant is pretty remarkable. We are excited about the future for Environmental, Social, and Governance, or ESG. Eat Open Solutions help our clients reduce costs and improve service. which also impacts ESG across all areas of the supply chain. For example, our transportation management system's ability to track emissions can support our clients' reporting of Scope 3 emissions. That reporting is material, and the SEC and other regulatory agencies are looking to implement this on a larger scale in a very short timeframe. In summary, our first quarter was strong. We were excited about the multiple growth opportunities in front of us, and remain focused on executing our strategy. Having lived through several macroeconomic shifts in my career, I am confident in our ability to profitably grow this business in this rapidly changing environment. In fact, I am more excited about our prospects now than I joined the company seven years ago. At that time, we were nearly 10 times smaller than we are today, and where I saw a once-in-a-generation opportunity. Now I would like to introduce Marie Armstrong, our new CFO. Marie is an accomplished leader and brings over 20 years of experience, a strong combination of driving growth at enterprise SaaS companies, plus a well-rounded capital and corporate finance background. Marie joined us less than two months ago, and she's fantastic. She has already added tremendous value to our business, and I'm looking forward to partnering with her as she gets fully integrated to drive the next leg of our growth for our company. Welcome, Marie.

Thank you, Michael, and good afternoon, everyone. It is a pleasure speaking to you today as the new CFO of E2Open. I'm incredibly excited to join the talented team Michael has built, and I look forward to building on the strong trajectory E2Open is on and helping scale the business. I have already had the privilege to meet many of you on the line and I look forward to connecting with everyone in the future. Now on to today's business. First, I will review our fiscal first quarter results. Then I will update you on our progress with the recent acquisitions of Blue Jay Solutions and Logistics Technologies. And finally, I will finish the call with an update to our guidance. Thereafter, we'll open the call to your questions. As a quick note, I will talk about our results on a non-GAAP basis. We show our reconciliation to gap measures in the press release, which is available in the investor relations section of our website at e2open.com. In addition, I will be referring to foreign exchange rate impacts on our results, as well as constant currency growth rates. Approximately 15% of our revenues are in non-U.S. dollar denominated currencies. The main currencies we have revenue exposure to are the euro and the British pound. SX exposure has not had a significant impact on E2Open's results in the past, since prior to the acquisition of BlueJ and Logistics, only 4% to 5% of our revenues came from non-US dollar-denominated currencies. Considering our increased revenue exposure to foreign currencies, as well as the unprecedented volatility in the foreign exchange markets, with the euro down 50% in a year and 7% in the last three months alone, we find it relevant to disclose our exposures to foreign exchange rates. Given the continued strengthening of the dollar against many currencies, including the euro and the British pound, we face the headwind to our Q1 total revenues on a year-over-year basis, and we are also expecting FX headwinds for the balance of the year. However, in terms of order of magnitude, the year-over-year FX impact on our revenues is less than 2% for the current fiscal year. Furthermore, we have natural hedges, as a portion of our costs are also in non-US dollar-denominated currencies. As a result, FX was a slight benefit to our EBITDA line in Q1, and we expect that trend to continue for the balance of the year. Moving on to our first quarter results. we're very pleased with our first quarter results that achieved strong organic subscription revenue growth, profitability, and free cash flow generation. In the fiscal first quarter of 23, we reported subscription revenue of $129.5 million, reflecting an organic revenue growth rate of 10.7% on pro forma basis, or 12.1% on a constant currency basis, when adjusting for the negative $1.7 million year-over-year impact from foreign exchange fluctuations. Our strong year-over-year subscription revenue growth in Q1 was a result of seeing a full run rate on fiscal year 22 record bookings growth and continued momentum from both new logos as well as cross-sell upsell across our client portfolio. As a reminder, we introduced the new logo strategy last year and the Q1 new logos as a percentage of total is now approaching a third of our bookings. Professional services and other revenue was $30.8 million, reflecting an organic growth rate of 6.3% on a pro forma basis or 8.2% on a constant currency basis when adjusting for a $600,000 year-over-year impact from foreign exchange fluctuations. Our subscription revenues are growing faster than our services revenues by design. As Michael has mentioned previously, we are strategically shifting our services revenues to new partnerships with system integrators as part of the planned expansion of our channel ecosystem in order to aid our future subscription revenue growth acceleration. We reported total revenue in the fiscal first quarter of $160.4 million, reflecting a total organic revenue growth rate of 9.8% on a pro forma basis or 11.4% on a constant currency basis when adjusting for a negative $2.3 million impact from foreign exchange fluctuations. Our gross profit was $111.3 million in the fiscal first quarter, reflecting a 9.3% increase on a pro forma basis or 10.3% increase on a constant currency basis. Gross margin was 69.4%, or 69.1% on a constant currency basis for the first quarter of fiscal 23, compared to 69.7% in the comparable period in fiscal 22. Adjusted EBITDA was 51.4 million, reflecting a pro forma growth rate of 12.4%, or 10.7% on a constant currency basis. The adjusted EBITDA margin was 31.6% or 31.1% on a constant currency basis for the first quarter of fiscal 23 as compared to EBITDA margin of 31.3% during Q1 of fiscal 22 on a pro forma basis. As mentioned before, natural cost hedges offset the negative FX impact to top line and lead to a slight FX benefit to the EBITDA line. Unlevered free cash flow for the first quarter adjusted for M&A was 41.3 million, which represents a flow through of 80.3% of adjusted EBITDA. Adjusted earnings per share for the first quarter of 23 were 7 cents. Driving bottom line profitability and free cash flow continue to be important priorities for us In summary, we're proud of our first quarter results and the continued momentum we see in our business. We plan to maintain a similar focus and balanced approach of driving top line growth as well as profitability and free cash flow going forward. I also want to provide a brief update on our recent acquisition. We're nearly complete with the execution phase of our integration of BlueJ Solutions that closed on September 1st, 2021. Total synergies related to the recent Blue Jay combination are projected to be more than 25 million, and we have actioned over 93% of these synergies as of the end of our fiscal first quarter. Total synergies related to the recent logistics combination were projected to be just over 10 million. We expect to achieve between 75% and 85% of run rate savings by the end of fiscal 23. Now on to guidance. We are maintaining our initial guidance ranges on a constant currency basis for fiscal 23 and are only adjusting our guidance to account for foreign exchange movements since our initial guidance was set. Given the FX volatility discussed earlier, we're adjusting our full-year revenue and gross margin guidance to account for the FX impact we're seeing. As mentioned, approximately 15% of our revenues are from non-U.S. dollar-denominated currencies, with majority of the exposure to the euro and the British pound. We're using euro 1.03 and British pound 1.20 rates for our updated guidance versus euro 1.14 and British pound 1.32 used in the initial guidance. which for the full year is having an approximately 7 million impact on our subscription revenue and 9 million for the total revenue. We're also incorporating an approximate 50 basis point FX headwind into our gross margin guidance. We're not adjusting our EBITDA guidance as we have natural cost hedges and we continue to be committed to a balanced approach to revenue growth and profitability. As a result, we are reaffirming our prior EBITDA guidance range. Our GAAP subscription revenue for fiscal 23 is now expected to be in the range of $538 million to $546 million due to an approximate $7 million negative impact from foreign exchange rate fluctuations versus prior guidance, which remains the same on a constant currency basis. Our prior subscription revenue guidance for fiscal year 23 was 545 million to 553 million. Total GAAP revenue for fiscal 23 is now expected to be in the range of 672 million to 680 million due to an approximate 9 million negative impact from foreign exchange rate fluctuations versus prior guidance of 681 million to 689 million. Non-GAAP gross profit margin is expected to be in the range of 68% to 70% versus prior guidance of 69% to 71% due to an approximate 50 basis point negative impact from foreign exchange rate fluctuations. Adjusted EBITDA guidance is reaffirmed in the range of $217 million to $223 million. Now, to give you a little more detail behind our full-year guidance, We're only adjusting our subscription revenue guidance to account for the FX impact at this time. We're not making any changes to our constant currency subscription revenue guidance for fiscal 23. Our subscription revenue base is durable and predictable due to the long-term contracts we have in place with our customers. The average contract length is three years, but furthermore, the average life of our top 100 customer is 15 years. We continue to see demand building as evidenced by record levels of net pipeline growth, a good leading indicator. That said, our growth is a function of pipeline size, close rate, and the length of our sales cycle. And as Macron geopolitical uncertainty evolves, we are closely monitoring these three variables. We have seen select delays in some deal closings, specifically in the euro area, as well as the tech sector, where our customers have been distracted by macro events. However, nothing that we can call a trend at this point. I would also note that our subscription revenue does not generally fluctuate with our client's transactional volume. There are some components of our subscription revenue that have a variable component, specifically overages and stripping volumes. However, less than 5% of our subscription revenue is subject to some volume-based variability. Historically, that annual variability has been in the less than $1 million range. But again, we're closely watching all the different dynamics in this unprecedented macro environment. While we do not specifically guide the services revenue line item, it does impact our total revenue line. A couple of points to make around our services revenues. First, we have been de-emphasizing the services revenue line item as part of a broader strategy shift to move those revenue streams over to system integrators, such as our most recently announced strategic partnership with Accenture and the partnership announced with KPMG earlier in the year. As a result, our services revenue growth is decoupling from our organic subscription revenue growth a bit faster than we anticipated. We believe the strategic partnership will help us further accelerate our organic subscription revenue growth in the coming years. Second, we're starting to execute on incremental data subscription sales. Still early days, but we see potential for data subscription sales to become an increasingly material part of our strategy going forward. Data sales come with lower service attach rates, which leads to lower services revenue growth. Finally, I would also note that we are seeing some incremental pressure on the services line item, as select customers are looking to postpone spend in light of broader macro uncertainty. We do not see this dynamic with our subscription revenue line, given the long-term contracts and customer tenure, along with the fact that our software platform is essential for operations for our customers. However, we do see some incremental services spend slowdown with select customers. We're still early in our fiscal year, but we are closely watching these impacts on our service revenues. When you look at our full year total revenue line, these services revenue headwinds may weigh the total revenue line towards the lower end of the FX adjusted range. In terms of gross margin guidance, while we have some natural cost hedges for our cost of revenue line items, they are not enough to offset the FX impact on revenues, which is why we are lowering our gross margin guidance to 68% to 70%. Finally, for our adjusted EBITDA, we are reiterating our prior guidance range of $217 million to $223 million. We have additional natural cost hedges in our operating expenses, as many of our expenses are also non-U.S. dollar denominated. In addition, we are committed to driving a balanced approach to top-line growth and profitability along with cash flow generation. Now I would like to quickly touch on Q2 guidance. GAAP subscription revenue for the fiscal second quarter of 23 is expected to be in the range of $129 million to $132 million, including an approximate $3 million negative year-over-year impact from foreign exchange rate fluctuation. This guidance range represents a 7.8% organic growth rate at the midpoint, or 10.2% on a constant currency basis. The year-over-year growth rate of our subscription revenues will fluctuate from quarter to quarter depending on the timing of large deal closings and churn. As Michael has mentioned before, our growth rates should be looked at on a 12-month basis. Small dollar fluctuations can have a large impact on year-over-year growth rates. While we do not guide to quarterly services revenue, the annual dynamics described previously, including FX, Our SI strategy, data sales, and macro impact hold also for Q2. I also wanted to highlight that there is some quarterly variability to our cost base and some one-time items we need to call out for Q2 fiscal year 23 specifically. This year, merit increases for our employees took place in the current Q2 versus in Q3 for the last fiscal year. So there is a cost step-up from merit increases in Q2 this year versus Q3 last year. In addition, the current fiscal year 23 Q2 has one-time costs from our brand relaunch that took place in the quarter, as well as additional marketing spend step-ups per the plans communicated previously. These costs are incremental to the Q2 cost base versus last year. Finally, we also had large in-person customer events, including the Gartner Symposium that we were not able to have last year due to COVID. These Q2 cost items are included in our full year plan and EBITDA guidance that we have reiterated today. In summary, we are very pleased with our strong first quarter results. While there is certainly some turbulence in the global macro environment, we're entering the remainder of our fiscal year very well positioned. Our business momentum is strong, and we continue to deliver market-leading innovation that drives our customers' digital transformation. Our growth algorithm and long-term outlook remain the same. We remain focused on executing our growth strategies to capitalize on the multi-billion dollar market opportunity that lies in front of us and continue to do that in a way that also balances our profitability and free cash flow. With that, Michael and I would now like to take your questions. Operator, we're ready to begin the Q&A session.

Thank you, ladies and gentlemen. The floor is now open for questions. If you have any questions or comments, please indicate so by pressing star 1 on your touchtone phone. Pressing star 2 will remove you from the queue should your question be answered. And lastly, while posing your question, please pick up your handset if listening on speakerphone to provide optimum sound quality. Please hold while we poll for questions. Once again, that's star one if you have a question or comment. And the first question is coming from Taylor McGinnis with UBS. Taylor, your line is live.

Yeah, hi. Thanks so much for taking my question. My first one is just one question. Marie, if you don't mind giving for the full year guide for subscription revenue and total revenue, I think you just gave the constant currency adjustments, if I'm understanding that correctly relative to the last guide. So what exactly is the constant currency guide that, you know, is embedded for the full year? And then as the second part to this question, you know, you talked about decision delays and a slowdown, you know, this past quarter. I'm curious if that impacted bookings and billings at all and if you're able to quantify that and then we'll think about the full year guide and the reaffirm if that had any influence there. Thanks so much.

Thank you so much. In terms of the updated guidance, as we mentioned in the press release as well as in my prepared remarks, the impact from FX, is the only adjustment that we're making to our guidance ranges. And when you're looking on full-year basis, it is $7 million for the subscription revenues and $9 million for the total revenues. Now, when you're thinking about full-year growth rates, I would say that the year-over-year impact is slightly larger, just given the effects effects fluctuations already happened prior to us setting the guidance. So when you're looking at full-year guidance growth rates, the year-over-year impact for the subscription revenues is probably, you know, $9 million impact on year-over-year basis and closer to $11 million on a year-over-year basis, if that makes sense. So the guidance range adjustments were versus the prior initial guidance and the effects embedded in there, and I just gave you a couple of other pieces of information to understand how the year-over-year impact works as well.

Does that answer your question? Yes, that's perfect. That's really helpful. And then, yeah, just curious on the second part of my question, just if there was, you know, some of the macro that you talked about, if that did have any impact relative to your expectations on bookings and, you know, billings, and if that influenced the reaffirm revenue constant currency guide at all.

Yeah, absolutely. So as we were trying to be very transparent with what we're seeing in the broader market, broader macro environment just given all the different dynamics as we mentioned we did see select deals closing slower especially in the euro area as well as the tech sector however these are very select we wouldn't you know call it a trend by any means at this point but we are watching it really closely and to specifically answer your question as well this these impacts and potential volatility is all within our guidance range. So when you're looking at our guidance, all these new dynamics are factored in to our guidance.

Great. Thank you so much for answering my questions. Absolutely.

The next question is coming from Chad Bennett with Craig Hallam. Chad, your line's live.

Great. Thanks for taking my questions. Maybe for Marie, first of all, good to Dan Mansoor- kind of meet you formally here on the on the call and and welcome to the to eat to um. Dan Mansoor- I guess I don't know if you had it in the script, but you did you indicate how much logistics contributed in the quarter, and if your view on that business implied in the guide has changed, I think, last quarter, they talked about 40 million.

total revenue contribution for the year and then I think 28 million to subscription is can you give any kind of update their kind of contribution in the quarter and how you're thinking about it for the year if anything changed yeah absolutely nothing has changed at the moment we're still very very early on logistics and we're working through the sort of initial phases of the integration we will definitely come back and update you as we have more information and But at this current time, you know, everything that we are seeing is factored into our guidance, and we do not have anything specific to note. But, again, as we are getting deeper and deeper into integrating that business and have any sort of changes to update you, we will certainly do that.

Okay. And then just contribution for the quarter?

Yeah, Chad, we, as you know, we are – We generally don't, as we integrate these companies fully, we don't really think about the problem in that way in terms of breaking out contributions for the quarter. But we do give a complete pro forma in our tables so you can understand the organic growth rate of our overall business.

Okay. And then just kind of curious on the FX, and I understand for everybody, rates have moved dramatically against the dollar. But if I think about, and again, not that Marie, you were kind of here, so to speak, but, you know, the FX impact in the quarter is pretty dramatic considering, you know, the company reported at the end of April and we didn't really hear about FX impact. And then I think in May, actually, and it's a one-off probably, well, it is year to date. the Euro actually appreciated versus the dollar in May somewhat. Um, so I've just like, did the FX impact in the quarter? Was that, um, I don't know how to say it. I mean, was that surprising or, or because it seemed like the data was there leading up to it?

Yeah, I think, um, as you noted, you know, I've been here for less than two months, but, um, I would say, you know, obviously I've dug into all this in great detail. And what I would say is there is always a question of how much does FX can we absorb and at what point do we start disclosing impacts. And given that the FX moves had not been as dramatic, it did not seem like it was something that should have been specifically disclosed at the time. However, the combination of these historical moves in FX rates, when you're looking at the last three months, rates are down seven percent and you know just kind of taking a fresh look at the business where the fx exposure has increased uh post the acquisitions from uh you know prior you know last year prior to the last two acquisitions it was closer to 45 and now around 15 the combination of these drastic moves with fx markets as well as increased exposure it just seems prudent to disclose and really give you more detail around what the FX impact is on our business going forward. Now, in terms of how often we'll update our guidance, we will update that as FX rates move. I would also note that in terms of the business, when you get to the EBITDA line, you can see that in the press release disclosures, we actually have a slight benefit. So as you walk all the way down the P&L, It is actually a slight net benefit. We're lucky to have natural hedges in the business. So in a way, these moves, although they have an impact on our top line at the current time, they are neutralized. And so the overall impact on the business is muted thanks to the natural cost hedges. Got it. Does that help?

Yeah, no, absolutely. And then maybe one last one, if I could. Just Michael, you obviously touched on M&A and kind of how successful you've been in integrating these acquisitions and cross-sell upsell over the last seven years and 14 of them and you think you have a 10x opportunity just in the base you have today just you know maybe for both of you just kind of how you think about capital allocation today and and maybe appetite for M&A in in these times and you know versus kind of de-levering and so forth. Has your view changed on capital allocation versus maybe six or nine months ago?

Well, certainly the capital markets have changed pretty dramatically in the past four or five months. So obviously we take a close look at that. The reason we think about M&A is because it's strategically accretive for the business and financially accretive for our shareholders. And that's really the fundamental capital allocation model we deploy. So as obviously software evaluations have come down, we believe over time there will be a lot of opportunities for growing companies that are profitable to be able to exercise M&A in the future. So fair to say that we are watching the markets very closely. We also understand our leverage position, and that will all be baked into our capital allocation model going forward. But in these times, we're a large company, and we have a lot of profitability, and we're growing. So that puts us in a very good position organically and also a very good position inorganically.

Got it. Thanks for taking my questions.

Up next, we have Mark Scappell with Loop Capital. Mark, your line is live.

Hi, Mark. Hi, good evening. Thanks for taking my question. Michael, I appreciate your macro comments and what you're seeing in your transportation volumes and your prepared remarks. But given the fact that you are seeing the beginning of a slowdown in your business, why not use this opportunity to trim your total revenue guidance for more than just what you're doing for FX?

Yeah, it's a great question. I mean, we kind of talked about it, and I think the answer is we didn't really see a need to. given the resiliency and durability we have in our revenue model and obviously our bookings performance and pipeline performance. So we think our guidance is appropriate for what we see in the market, and we take very close attention to it. Again, we're not that affected by transportation volumes or transactional volumes in our clients' business. So that's a pretty important thing for us to really focus on. is that even though volumes go up or down, our customers generally don't pay us based on that. So we think our revenue model is durable, and we're very comfortable with the guidance we set.

Okay, great. Thanks. And then given the decision delays that you noted in your prepared remarks, just walk us through one more time why the company is still ramping up its go-to-market hiring and investments.

Yeah, I mean, it's the same kind of answer, which is, we are balancing profitability and growth. We always have. And every dollar we make in an investment or business is against a very specific capital allocation market. At this moment, we see enough evidence of our progression to continue. But obviously, we have a lot of control over that spend. And if there was a point in time where we thought that we needed to balance more profitability over future growth, we would certainly do so. And I'll say one last comment is, You know, if we had seen enough activity that, you know, caught the trend, we would say so. And I think, you know, right now, everybody is trying to deal with a lot of changes in the marketplace. And obviously, we're not immune to that. But overall, we have a very durable business. We are growing at double digits, and we're very profitable. That puts us in a great position to, as I said, grow organically in this market and lean in where others really have to lean out. Okay, great. Thank you. That's all for me.

Okay, we have one remaining question coming from David Ridley Lane with Bank of America. David, your line's live.

Hi, this is David Ridley Lane on for Andrew Oban. Quick question. Do you have trend data around competitive win-loss rates? I know you've made investments in new logos, sales, headcount. It's great to see that you're getting a return on that with the mix there going up. But I'm wondering, are you also seeing this broader E2 open platform result in better win rates in competitive situations?

We track our win rates very closely, and the most important data point we really track is our yield on our pipeline. As Marina noted, our pipeline continues to grow on a net basis, meaning we grow it in excess of what we close. And we track very closely what our yield is within each quarter. And that data says the trend is continuing that we've seen over the past really two or three years now, except for COVID. that our pipeline is growing and our yield in that pipeline has been extremely consistent. It bounces around a little bit quarter to quarter, but very consistent. So we feel pretty bullish on our ability to build pipeline and close pipeline. In terms of win rates, what we really see is where we can articulate a broad need for our platform, like I talked about, our win rates are extraordinarily high. So We are seeing our ability to get higher in an organization earlier. And I think I've said in the past, that's because more C-level people are taking really ownership of the supply chain problem versus in the past, it was much more the divisional level or functional level leader. We think that's contributing to our overall success.

Got it. And then you did call out growth and data-related sales. Are you starting to see some of the earlier partnerships like with Dun & Bradstreet start to yield more meaningful incremental revenue?

We are, and many of those come with revenue from the very start. So we are starting to see incremental revenue from those partnerships. And we do have the ability to, you know, think about our network and, you know, charge for access to our network in other ways. So we think, you know, we're very early days, but we think that's an important piece of our story, which is we have a very, very large network, and we can think about, you know, different ways to add value to the ecosystem and then be able to monetize that to some degree.

All right.

Thank you very much.

Thank you.

Okay, we have no further questions in queue. Thank you, ladies and gentlemen. This does conclude today's conference call. You may disconnect your phone lines at this time and have a wonderful day. Thank you for your participation.