E2open Parent Holdings, Inc.

Welcome to the E2 Open Earnings Call for Fiscal Third Quarter 2023 Conference Call. At this time, all participants are in a listen-only mode. 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. I will now turn the conference over to your host, Adam Rogers. You may begin.

Good afternoon, everyone. At this time, I'd like to welcome you all to the E2 Open fiscal third quarter 2023 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 Farlacus, followed by our chief financial officer, Marie Armstrong. And then we'll open 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 our fiscal fourth quarter and full fiscal year 2023. These forward-looking statements are subject to known and unknown risks and uncertainties. E2 open cautions at 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 during today's call, we will 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 thanks to everyone for joining our fiscal third quarter earnings call. We had a strong third quarter against the continued backdrop of a challenging macro environment. We exceeded our guidance for subscription revenue, our primary focus, while expanding profitability and free cash flow. We look forward to sharing our results with you and providing an update about our business. During the call, I'll discuss our third quarter highlights, how our clients are using our networking platform, and an update on the FY23 strategic investment areas we discussed previously. Marie will cover the third quarter financial results in more detail. And lastly, we will open up the call for Q&A. Let's begin with the third quarter. We had a strong quarter. We exceeded our subscription revenue guidance, generating a record $135 million in subscription revenue, which represents 82% of our total revenue. We continue our track record of being highly profitable, delivering record adjusted EBITDA of over $56 million. This translates to a 34% EBITDA margin. The organic growth rate of subscription revenue, our primary focus, was over 10% for Q3 on a constant currency basis. In the nearly two years as a public company, we have consistently grown subscription and total revenue while maintaining very strong profitability. Our consistent subscription revenue growth in the double digits for the last six quarters is the result of our breadth of product offerings, the diversity of markets from an industry and geographic perspective, and the value our innovations unlock for our clients who leverage our mission-critical applications. Stated more simply, we have multiple ways of winning. Let me provide you with some examples of what I mean by multiple ways to win, illustrated by how our clients are using the platform and our network. We recently signed an expansive contract with global retail leader Hugo Boss. The agreement covers a range of our solutions, from supplier collaboration to logistics, providing end-to-end supply chain visibility and control. Specifically, Hugo Boss will leverage our network and applications to optimize and manage internal and outsourced manufacturing. The solution enables collaborative capacity and forecast visibility, a robust, secure-to-pay solution, and agile transportation management capabilities. This project will give them full visibility and significant reduced cycle times, ensuring exceptional on-time delivery, which are the key performance indicators for any fashion company. It's a significant new logo win and brought to us specifically because of the marketing investment we initiated earlier this year. Our network and product breadth were the primary factors in winning this large multi-year contract. On the other end of the industry spectrum, we also signed a contract that includes multiple solutions for a global agribusiness innovator. That contract, along with Hugo Boss, helps demonstrate that our end-to-end supply chain platform works well across a wide range of industries. Like all quarters, Q3 brought many go-lives for new and existing clients. with a few I'd like to highlight. We recently went live with the first phase of Amazon Kuiper's satellite project, which will enable high-speed internet access to unserved and underserved parts of the world. We have been working with Kuiper for the past year to help them build their supply chain focused on manufacturing collaboration and planning. Cloud network leader Extreme Networks went live with E2Open's partner performance incentives application. paying to their distributors over $66 million using our application within the first week of Go Live. We don't always discuss our channel business on these calls, but our solutions are a value add to the entire network, helping facilitate payments and rebates while offering greater pricing visibility. An international mining and metals company is using Eat Open for global trade management. They now have a single platform for global regulation, a centralized product classification repository, automatic export and import controls on all shipments, and more, with eyes towards future logistics capabilities. One of the world's largest consumer goods companies went live on e2open and Maersk's NeoNav platform, a collaborative next-generation solution that offers complete logistics visibility, control, and decision-making through the integration of all trading partners and data in one closed-loop system. The system provides predictive visibility and traceability throughout the supply chain in real time. This project delivers on multiple strategic objectives for the company, a single operational process, a control of inventory both upstream and downstream, reduced costs through purchase order collaboration, and increased customer service levels. In addition to new logo wins and expanding client opportunities, network innovation is also a strategic priority for us. In November, we introduced EtoOpen's Carrier Marketplace as part of EtoOpen's broader strategy to expand the network ecosystem. The Carrier Marketplace offers carrier partners and shippers powerful new capabilities, including access to more data that allows both carriers and shippers to make better proactive decisions. Over 8,000 carriers leverage this network today, and we believe our new marketplace will help unlock more value for the entire ecosystem. Now I'd like to update you on our progress against the stated strategic investment areas we laid out at the beginning of the year. Investing in sales and marketing, increasing brand awareness, and our work with strategic partners and our initiative to build systems integrator ecosystems. We've seen good progress in our sales and marketing and brand investments, as evidenced in top of funnel pipeline growth since initiating these investments, and as noted earlier, opportunities specifically generated by this investment that are now flowing through as new client wins. Our brand awareness metrics have dramatically improved, as measured by share of voice, where we are now consistently number one or number two in share of voice for our cohorts. Even though our investments in this area have been relatively modest, we've seen great success. On the strategic partnership front, this work continues with both our strategic partners and building our integrator ecosystem. This is long-term work that does not happen overnight. That said, we are making solid progress in both areas and are hitting our internal marks. Both initiatives will have the effect of decoupling our services growth rate from our subscription growth rate with our primary focus on growing subscription revenue. By enabling the SIs, such as our partners Accenture and KPMG, to build their own practice and business on our platform, we're unlocking the extraordinary influence and capacity these global partners bring to our business. This means that services will continue to decouple from subscriptions and be a shorter-term drag on overall growth. by design to support long-term subscription revenue growth. Finally, I'd like to mention a few other corporate highlights. We continue to build on our ESG initiatives. E2Open released its second annual environmental, social, and governance report in the third quarter. Our software can have an enormous effect by reducing the environmental impact of our clients as they produce, transport, and distribute their products. And to this end, ESG is part of our roadmap development. As a company, Eat Open held an enterprise-wide employee giving campaign supporting Water for People. Water for People facilitates the development of clean water, improved sanitation and health, and hygiene in nine countries across Latin America, Africa, and India. We ran this campaign through the end of 2022, and Eat Open provided matching donations to this amazing organization. Lastly, we were named the top enterprise SaaS solution of the year in the 2022 Best in Biz Awards, along with honors for most innovative SaaS solutions. EatOpen remains focused on our clients. We have multiple ways to win, and despite the macro environment, we continue to deliver consistent subscription revenue growth while being highly profitable. Our performance in Q3 and our outlook for the year are evidence of our focus on profitable growth and disciplined operations. This focus allows us to maintain our EBITDA and free cash flow targets, even while our total revenue expectations for the year have come down due to FX, economic, and business reasons that Marie will discuss in more detail. We delivered adjusted EBITDA margins of over 30%, as reported, for the last seven quarters. Eat Open is a reliable growth company that generates high margins and significant free cash flow. We are a mission critical software company with durable revenue, consistent growth, long tenure clients, and also highly profitable. We are laying the foundation to become the world's preeminent supply chain software company. We have work to do, but therein lies the opportunity as we are clear on the mission and our strategic path forward. Lastly, I'd like to thank our nearly 4,000 team members for their continued work and dedication to excellence for our clients, our communities, and our company. Marie will now review our financial performance in greater detail. Marie?