E2open Parent Holdings, Inc.

Greetings. Welcome to the E2 Open fourth quarter and fiscal year 2023 earnings 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, Dusty Beal. You may begin.

Good afternoon, everyone. At this time, I would like to welcome you all to the E2 Open Fiscal Fourth Quarter and Full Year 2023 Earnings Conference Call. I am Dusty Buell, Head of Investor Relations here at E2 Open. Today's call will include recorded comments from our Chief Executive Officer, Michael Farlacus, and our Chief Financial Officer, Marie Armstrong. After those comments, we'll open the call for a live Q&A session. A replay of this call will be available on the company's investor relations website at investors.e2open.com. Information to access the replay is listed in today's press release, which is also available on our investor relations website. Before we begin, I'd like to remind everyone that during today's call, we will be making forward-looking statements regarding future events and financial performance, including guidance for our fiscal first quarter and full year 2024. These forward-looking statements are subject to known and unknown risks and uncertainties. E2 Open cautions that these statements are not guarantees of future performance. We encourage you to review our most recent reports, including our 10-K and 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 stocks. 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'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 at investors.e2open.com. And with that, we will begin by turning the call over to our CEO, Michael Farlikos.

Thank you, Dusty, and good afternoon. Welcome to our report of fiscal fourth quarter and full year 2023 results. I'll share my thoughts on our broader performance last year, including what went well and what didn't go as well as we would have liked. Offensive time discussing how we arrived as one of the largest purely SaaS-based supply chain software companies. scaling our business nearly 10x in seven years. I'll outline how we have begun our pivot from a company optimized for rapid scaling through acquisition to being optimized to deliver very high margins and double-digit organic sufficient revenue growth. I'll close with a discussion of our strategic focus for FY24 and share some recent highlights that demonstrate the value the platform creates for our clients. Finally, Our CFO, Marie Armstrong, will provide detailed discussion of our fourth quarter and full year results, as well as our guidance for fiscal 2024. While we continue to perform well from a margin perspective and deliver solid organic growth in FY23, economic uncertainty, lower shipment volumes, and in particular, cautious spending by high-tech companies, which generate a quarter of our revenue, are combining to prove a headwind for us at the moment. Our current FY24 forecasted growth rates are below our potential given our unique and differentiated competitive position. Embedded in our discussion is how we are building our business to realize the potential we've created over the past seven years while delivering significant margin and free cash flow. I'm proud of what we accomplished in the two investment areas we outlined at the beginning of FY23. We began the year determined to build two functions at Eat Open that were less important when we were scaling through acquisition, but are foundational to drive repeatable and expanding organic growth, namely a strong marketing organization and robust network of system integrators. These are long-term efforts, and I'm very pleased with our progress. Having made the important additions to our organization, we can now leverage these critical functions as part of a broader pivot to organic growth. marketing was simply not a prime focus for Eat Open during the rapid scaling phase of our business. Last year, we completed a wholesale refresh of our brand and increased our position for care of voice from last in our category to top three, reaching a number two position for several months. We now have an effective organization to target high quality prospects and execute sophisticated account-based marketing programs to increase adoption within our client base. On the partner front, We have built a dedicated network of system integrators to access the critical role they play in supply chain technology purchases. Over time, these partnerships are necessary to increase our growth rate as they help write in our specifications early in the client-finding process. Building this ecosystem is critical to seeing more large-scale opportunities that were previously not on our radar screen. Partners clearly see the benefits of working with Eat Open, and we are seeing this work pay off in pipeline and client wins. These initiatives will take time to materialize as bookings, and even more time to flow through to our revenue line. In particular, building a partner ecosystem is a two to three year process. That said, we have made significant progress, and the large upfront investment is now behind us. We previously communicated that these investments could generate incremental bookings in the second half of FY24 and into FY25. Based on the growth of our SI activated pipeline and a meaningful pickup in plus $1 million opportunities, we are now on track to meet or exceed this timeline. I also want to remind our investors that our SI strategy requires us to gradually transition portions of our services revenue to the integrated community. The SIs simply cannot build a practice around our solution if we retain all of the implementation services work. Over the long term, this is a good trade for Eat Open, given the relative margin profiles of these two business lines and the long-duration recurring nature of software subscription. This trade-off has and will negatively impact near-term services revenue growth and therefore total revenue growth. The decoupling of subscription growth and services growth has begun, and going forward, we will increasingly communicate our financial performance on the basis of organic subscription growth, profit margins, and free cash flow. While we are pleased with the progress of our two initiatives in FY23, like many companies, we did have our challenges. Most importantly, we did not carry the momentum of bookings we saw exiting FY22 into FY23. A key issue here was the macro environment. What we saw during FY23, particularly in the second half of the year, was that in a volatile and uncertain economy, customers scrutinized large commitments and spend lines more than small ones. Our second half results show this clearly. The pace of small run rate bookings came in as expected, flat and slightly up. While large deal closings over $1 million were down year over year, they did not go away. And a pipeline of these large transactions has grown nicely, from equally pushing to the right and also from engagement with RSI. While it is our job to adjust to changing business conditions, the slower deal closures will negatively impact our FY24 growth, keeping it below our potential for the next fiscal year. While the macro environment was a headwind for us, we must also take responsibility for below commercial performance. We were aware that integrating two businesses at the same time would put a strain on us. We have done this in the past, where we drove high performance as we integrated acquisitions. It is fair to say, however, that the size and complexity of these integrations, the speed at which we accomplished them, against the backdrop of a challenging economic environment, proved a greater challenge to our commercial organization than I anticipated. This had an impact to our net bookings performance in FY23 and is a primary reason why we expect FY24 to be a lower subscription revenue growth year for us. Even with lower growth rates, we are expanding our EBITDA margin as we continue to build our business. It is useful to remember how Eat Open arrived to where we are today in a short amount of time. Over the past seven years, we increased the size of our network from 40,000 to over 20,000 executive companies. we've grown revenue nearly 10x and increased our EBITDA from negative 13 million to nearly 220 million. A key driver of this growth was our rapid acquisition and integration. There were 14 strategic assets into one cohesive integrated supply chain platform. A one of one in our market. Our strategy was informed by the knowledge that point solution companies have a natural limit to their growth and many see their growth rates and profitability decline as they reach the natural limits of their single solution orientation. We saw Lane to scale rapidly by using our unique ability to integrate to create a highly differentiated network business that drives extraordinary value for our clients, produces very long durations of significant, excellent unit economics with very high operating margins. Over the last 18 months, We scale our business by 50% with the acquisitions of BlueJ and Logistics. We are now the largest pure SaaS company in the supply chain space. We are built upon the largest supply chain network, and our platform serves as a core operational backbone for many of the largest and well-known brands in the world. While M&A will remain an element of our value creation engine going forward, as we enter FY24, with the heavy lift of integrations largely behind us, Our primary focus now is to calibrate our business from one built for rapid scaling through acquisition to a business focused on robust and reliable organic growth. In this respect, our largest and most important organic growth opportunity is to increase adoption within our 650 enterprise clients. Our ability to cross-sell and up-sell is fundamental to our organic growth model. we have clearly demonstrated we can execute this strategy on a repeatable basis. We have proven we can grow a client relationship from several hundred thousand dollars per year to several million in a few years. While we have proven our ability to scale adoption within a client, we now need to scale that activity across our much larger organization, which is our primary focus for FY24. To build a scaled growth engine is a company-wide effort that is now well underway. Our team has spent considerable time analyzing our business. We've evaluated the factors we can control and have agreed on the changes we need to make to position ourselves for strong, consistent organic growth and high profitability for the years ahead. In doing so, we will be guided by four strategic pillars. Client engagement, client experience, product excellence, and operational efficiency. More specifically, We are taking concrete steps now to reaccelerate our growth. We are increasing our sales takeout so we can support better sales coverage and build closer client relationships, especially with core enterprise clients. We are refining our go-to-market processes to become more repeatable and scalable. We remain disciplined and have proven we can consistently produce high margins and generate extraordinary free cash flow. We are able and willing to make the hard choices to balance costs, investment opportunities, and realistic revenue assumptions to maintain our commitment to strong profitability and high free cash flow in all economic environments. In short, over the past seven years, we have created enormous potential through rapid scaling through acquisition. This strategy yielded a large business with durable competitive advantage and high free cash flow. We are committed now to building the capabilities needed to realize our potential of robust and reliable growth at scale, built on best-in-class unit economics and a very efficient translation of gross profit to the bottom line. We are energized by the opportunity we have created for ourselves. We know it won't be easy. We will have our fair share of setbacks. We will overcome each of them to build a truly special business that produces double-digit sufficient growth while driving very high operating margins and free cash flow. Our drive and focus are immutable. I'll close by highlighting some recent customer engagement. Starting with the demand side of our platform, a publicly traded global company is utilizing E2Open's channel application to visualize sales trends and inventory positions for better decision-making. On a supply side, one of the world's largest consumer packaged goods companies has deployed Eat Open Supplier Collaboration Suite. This long-time client purchased an additional solution to manage the supply side of their business, adding their original solution on the demand side. The additional solution connects their supplier community digitally to manage their entire order delivery to production cycle on our platform. In this supplier collaboration category, we are seeing an uptick in adoption in the automotive and process industries. Eat Open was founded on delivering this very solution to the high-tech industry over 20 years ago. In logistics, one of the largest North American retailers and a new customer for us will deploy our transition management solution. As a result of adopting our solution, this client estimated savings over eight times the annual cost of our subscription. Before I turn the call over to Marie for a detailed review of our financials, allow me to share a large scale solution we are delivering for a major automotive client. I recently met with them to review our seven-year relationship. They started with a planning solution from a company we acquired. We worked with them to address the very real challenges they faced with semiconductor shortages, which we all witnessed in the auto sector. 18 months ago, we expanded our partnership to grow our planning solution to the supply side, deploy our supplier collaboration solution, and also our logistics solution. They are now connected in real time to hundreds of their suppliers, can manage their constrained supply, and can see both inbound and outbound products as they ship around the world. This product is being delivered with one of our strategic SI partners. It is a clear example of our ability to execute a five-fold expansion within an existing client. We are now quite literally integral and embedded as part of a global manufacturing process. These capabilities delivered in one connected platform is unique to E2Open and represents the durable competitive advantage and massive potential we see. At this time, I'd like to turn the call over to Marie to review our financial results and discuss our guidance.