E2open Parent Holdings, Inc.

Greetings. Welcome to the E2 Open first quarter fiscal year 2024 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 First Quarter 2024 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 second 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 10Q, 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'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'll begin by turning the call over to our CEO, Michael Farlikas.

Thank you, Dusty, and thanks to everyone for joining us today. I'll begin with some high-level remarks on our fiscal first quarter performance. as well as an update on our key strategic focus areas. I'll highlight a few important client success stories and provide my perspective on what they indicate to our strategic market position and our go-forward growth potential. Finally, Marie will review our first quarter financial results and provide our second quarter guidance. We'll then open up the call for your questions. Let's begin with our first quarter performance. Overall, we had a solid quarter led by our subscription business. Subscription revenue for the first quarter was $135 million, representing 84% of our total revenue and above the high end of our quarterly guidance. Although we beat guidance, our Q1 subscription growth rate of 4%, in my view, is below our potential. Despite the slower growth period we are experiencing FY24, during the quarter, we maintained high profit margins, drove strong cash flow, and continue to build operating leverage in our business as we grow at Justity without faster than revenue. As we communicated on our Q4 earnings call, the softer subscription revenue growth we are experiencing this year is primarily a function of two factors. The first is the delay in large deal closings as clients continue to scrutinize their spend on long range strategic projects due to the current macro environment. The second is a timing of churn being more heavily weighted than Q4 of 23 and the first half of 24. So far in FY24, as we had expected, the overall macro trends have remained similar to the second half of 23. It is still taking longer to close new deals. However, during the first quarter, we were able to close several deals that were delayed in FY23. I'll describe one of those for you in more detail in a few moments. Our professional services business continues to be impacted by weaker spending by some of our larger technology clients on ongoing services projects. That said, our professional services results also reflect the early signs of success in building a robust ecosystem of system integrators as part of our broader growth strategy. As a reminder, our system integrator strategy, as well as our addition of new subscription products that have little to no attached services revenue, will cause our services growth rate to be lower than our subscription growth rate as we transition a portion of the commission services work to the SI ecosystem. This is consistent with our bedrock principle of profitable growth as we focus our attention on driving very high margin subscription revenue. As I emphasized on last quarter's call, a top priority for E2Open is transitioning from an acquisition-oriented company to one that can drive rapid and sustainable organic growth at scale. Over the last year, we have taken multiple actions to strengthen our go-to-market capabilities, including a brand refresh, hiring our first regional immediate president, and bringing in new leadership in professional services and sales operations. During Q1, we made changes to our sales model to increase sales coverage ratios for high potential clients and reallocate spend for account-based marketing. Today, we took another important step in this process with our announcement that Greg Randolph will join EDA Open in the newly created role of Chief Commercial Officer. In this new role, Greg will lead our commercial organization with a keen focus on increasing our subscription growth rate. Greg is a highly accomplished executive who has led high-performing sales teams and go-to-market transformation at leading software enterprises such as Quest Software and CA Technologies. He has significant hands-on experience in selling motions that are similar at E2Open, including managing complex sales cycles with large enterprise clients, marketing and selling a platform that consists of diverse solutions, and utilizing CrossSell to expand existing clients' use of our platform. Greg is a great fit for our organization and for the new role of Chief Commercial Officer. he and I will work closely over the coming quarters to enhance and further build out our repeatable sales model to drive the organic phase of Eat Open's growth. Before concluding my remarks and turning the call over to Marie, I want to describe for you some exciting business highlights from the first quarter. In the first quarter, we closed a large project with Ford Motor Company that builds on Eat Open's prior success and strength in the automotive industry transformations. We believe this win demonstrates our ability to deliver on multiple levers of E2Open's strategy. It advances E2Open's path to become the SaaS supply chain platform provider of choice, the largest network enabling multi-tier supplier collaboration across the automotive industry. It exemplifies the need for multiple solutions across our connected supply chain platform for business operations. It also proves our ability to engage our clients for cross-sell opportunities and demonstrates that system integrators are integral strategic partners, particularly on large projects. This new project deserves special attention because it highlights the value and potential we see in our platform in areas such as technology leadership, strategic partnerships, and organic growth. Our prior work with this iconic client allowed us to build deep collaborative relationships and provide a strong basis for engaging them on additional areas of their business. The automotive industry is undergoing a major technology shift from traditional internal combustion engine vehicles to smart electric vehicles that heavily rely on microchips and sensors. These critical components are globally constrained. There are simply not enough of them to meet the diverse needs of a global economy. As a result, the auto industry has been challenged to meet customer demand for cars and is now adapting to manage constrained supply much in the same way that the high-tech industry adapted over the past 20 years. Our network and applications were built specifically for this purpose and are ideally positioned to help the auto sector adapt to an increasingly complex manufacturing process. Drawing on Eat Open's deep experience in executing transformative projects with automotive leaders, this win demonstrates Eat Open's ability to expand client relationships and implement multiple solutions across our connected supply chain platform. A key ingredient to this success, especially for supplier collaboration, is it opens reusable network of over 420,000 connected parties. This win and several other transformational wins in the quarter highlight our primary competitive advantages, namely the unique nature of our network-centric software platform, and our deep experience serving large customers with complex global supply chains. We also had several other success stories from our first quarter. During the quarter, a leading provider of IoT services for transportation and logistics applications selected EatOpen's advanced supply chain planning and collaboration solutions to manage demand, supply, and inventory across its operations. The client will now be able to automate more tools and communications across its supply chain network. stay ahead of potential disruptions, and respond more quickly to changes in customer demand. Our technology leadership also received a major recognition during the first quarter. For the first time, Eta Open was named a leader in the 2023 Gardner Magic Quadrant for transportation management systems. We believe that combining key aspects of our global network and platform with the highly scalable multi-mode and multi-regional transportation management system we acquired as a blue-deck combination, helped us achieve this improved position. During the quarter, we completed multiple go-lives across a number of product suites, industries, and geographies. This includes deploying ETO's global trade management solution for Rio Tinto, the world's second-largest metals and mining company operating in 35 countries. Each quarter, we add new functionality to our software platform to better serve the supply chain needs of our diverse client base. As just one example, during the first quarter, we released enhancements to our Global Logistics Orchestration Solution, or GLO, that further automates and reduces risk associated with global shipments. These enhancements automate previously time-consuming manual tasks, such as rebooking all legs of committed shipments and screening against government lists of denied or restricted parties. Speaking more broadly about software innovation, I also want to comment on our company's approach to artificial intelligence. While the world is now paying close attention to how AI can be commercialized more fully, I want to make clear that EatOpen has used artificial intelligence and machine learning to enhance our software offerings for nearly two decades. AI is a core element of our demand sensing and inventory optimization solutions that support the global operations of some of the world's largest companies. We also rely heavily on AI to process the billions of transactions that flow through our network and perform critical functions such as data anomaly detection. AI is and will remain very important to our product innovation strategy. As we make further investments in our software platform, we will continue to look for ways to further leverage the power of AI for the benefit of all of our clients and our company. Before closing, I want to express my many thanks to EDA Open's 4,000 talented team members around the world for demonstrating our company's operating principles and values every day. Your commitment to build stronger client relationships, to innovate, and to operate efficiently are key to our company's success and to the unique value proposition we provide to our clients. And now I'd like to hand the call over to Marie to review our first quarter financial results. Marie?