Earnings In Reverse, But E2open Gears Up For A U-Turn

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E2open's recent performance missed expectations, but its strong SAP integration and industry positioning offer potential for long-term recovery despite current revenue struggles.Subscription growth, ...

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(NYSE:ETWO) posted an EPS of -$0.10, which missed expectations by $0.02, and their revenue came in at $152.19 million - also falling short by $2.62 million and down 3.97% year-over-year. Not exactly a banner performance, but I believe there's more to the story. E2open has a tight integration with SAP and is well-positioned in big industries like logistics and manufacturing - this, in my view, gives them a fighting chance to regain their footing. Even though they've struggled with declining revenue and some delays in closing big deals, if you squint a little, you can spot a few glimmers of hope: subscription growth is moving in the right direction, customer retention is on the mend, and they've managed to reel in some notable client wins. These small but hopeful signs suggest that E2open may be steadying itself, if only just. So, for anyone willing to look past the current rough patch, the company's valuation might be worth a second glance for the long haul. About E2open E2open Parent Holdings, Inc., a not-so-recognizable name, is one of those quietly sprawling giants in the world of cloud-based supply chain management software. Since 2000, the company has been on a steady diet of acquisitions, gobbling up other firms to expand its powers. Two particularly large mouthfuls were BluJay Solutions in 2021 and Logistyx Technologies in 2022, which added a set of skills like demand sensing (that's predicting what you'll want to buy before you even know it), global trade management, and logistics (aka moving things from point A to point B without disaster). E2open went public in February 2021 by hitching a ride on the trendy vehicle of the time - a SPAC, or special-purpose acquisition company. Based in Austin, Texas, this company offers a cloud-based software service (SaaS) that helps industries like consumer goods, manufacturing, retail, automotive, and aerospace improve their supply chains. SaaS works like renting software online instead of installing it on your computer, much like streaming a TV show. You just log in and everything's ready-no need to worry about updates or storage because the provider handles it. E2open connects over 480,000 factories and logistics companies, processing 16 billion transactions annually, making supply chain operations smoother for businesses like Jabil, Renault Group, and Michelin. ETWO's Performance FAST Graphs But even with all its prestigious clients and its unquestionable client value proposition, the company's performance metrics are, well, bleak: ETWO's annualized ROR is -33.06%, which, if you're an investor looking for dividend growth or even some modest growth, is as good as a flat tire in the rain. FAST Graphs The SPY's ROR of 11.92%, meanwhile, underscores that ETWO has not only trailed in capital appreciation but also missed the rest of the market's momentum, leaving investors with a lot of nothing. Optimistic Signs in Q2 2025 E2open's Q2 2025 results gave a few reasons for cautious optimism about the company's future: the second quarter actually showed some improvement, with bookings up and fewer cancellations compared to the first quarter. Things were moving in the right direction, but, as always, there was a catch: the progress wasn't exactly breakneck. Key Integration with SAP A major reason E2open has been on the rise is its cozy relationship with SAP, a system that, rather astonishingly, about 80% of its customers also happen to use. SAP, short for Systems, Applications, and Products, is a type of software businesses use to run their daily operations that's a bit like the Swiss Army knife of business software and helps companies keep track of everything - managing finances, ordering supplies, processing customer orders, and even handling payroll. ERP Opportunities Ironically, new markets have been created with SAP's endless ERP upgrade cycle, including the logistics industry, where E2open secured two significant deals during Q2. ERP, or Enterprise Resource Planning, software helps organizations track all of their core operations in one place. Imagine a mega company as a machine with a load of cogs, such as accounting, sales, manufacturing, and HR. Without an ERP, each department usually has its own tools, making it challenging to collaborate. ERP addresses that by bringing all of that together as a single application, where everyone is in sync and can operate efficiently. Subscription Growth and Client Wins This synchronization of processes increases efficiency and financial outcomes, as E2open's recent subscription revenue growth illustrates. Subscribers generated $131.6 million, which was at the peak of expectations, suggesting stabilization, and was moderately up from the prior three quarters. Orders increased, and subscription orders grew year-over-year and quarter-over-quarter, with high interest in E2open's supply chain software. This was followed by several large client wins, including a large manufacturer and a membership retail chain. Strategic Partnerships The company has decided to double down on partnerships, especially with system integrators, to give a bit of extra oomph to client supply chain transformations. One particularly noteworthy example is a collaboration with one of the top 10 consumer packaged goods companies, which - if all goes well-could save the client $100 million. This focus on teaming up has helped E2open carve out a nice little spot for itself as a big player in global trade and logistics. Demand is strong, largely because of the company's one-of-a-kind transportation management solution and its impressive knack for last-mile parcel and visibility management. Churn Reduction and Client Retention Churn reduction was a highlight, with Q2 showing a clear drop compared to Q1. It looks like the company has gotten past the peak churn phase, which is great for holding on to customers. E2open has made client retention a major priority, and management notes that retention rates are climbing as users begin to see the real value of its solutions that creates opportunities for upselling and cross-selling to loyal customers. Outlook for 2026 Looking to the future, the company seems quite confident that it will see some nice growth in its net bookings as it trots into fiscal year 2026. If all goes to plan, revenue should follow suit. Meanwhile, E2open's non-GAAP gross margin held steady at 69%, proving that, if nothing else, they've got a good handle on keeping costs in check. On the brighter side of things, the adjusted EBITDA margin made a small but respectable climb to 36.1%, compared to last year's 35.4%, thanks to cost-cutting moves and the ever-reliable offshore workforce. Cash Flow and Market Expansion On the cash flow front, E2open's adjusted operating cash flow came in at $33.6 million so far this year. They're aiming for even stronger cash generation in the second half of FY25. Along with that, the company has made headway dipping its toes into new markets with very high-level chats with potential clients in industries like automotive, consumer packaged goods, and high-tech. All of this, they tell us, could help fuel future growth. ETWO's Valuation FAST Graphs ETWO's blended P/E ratio of 16.42x tells me that it's fairly priced based on earnings, but keep in mind, the story behind the numbers isn't great. ETWO's earnings growth is negative at -0.96%, a reflection of its struggles. Debt could be considered another factor here, as ETWO has a long-term debt-to-capital ratio of 41.74%, which limits its ability to invest in big projects. That means if the earnings trend stays negative, the debt could become a problem. And historically, looking at ETWO's normal P/E ratio of 28.16x, the current drop to 16.42x tells me that investors have been losing faith (perhaps management too, as a few insider sales took place this August). ETWO insider sales (Nasdaq) Overall, the current price says the market seems to think ETWO's struggles will continue. For the pessimists, with the stock's fair value ratio at 15.00x, it could still be overvalued. Operational and Revenue Struggles These valuation concerns crop up again when you look at E2open's operational performance, where the company appears to be having quite an uphill battle. Revenue growth, it seems, has decided to take an extended vacation. Subscription revenue dipped by 2.3% year-over-year, a rather clear sign that the company is still struggling to turn things around. Worse yet, total revenue for Q2 fell by 4%, showing that the issue isn't confined to one area, it's a broader problem. And then there's the professional services segment, which took a nosedive, down 13.1%, largely because of delayed bookings and the completion of big projects. E2open's revenue woes were made even worse by a few big deals that just wouldn't close on time. In particular, those deals needing the all-important CEO stamp of approval got held up, stretching the sales cycles by as much as a month. Naturally, this did no favors for the company's results. The delays were enough to force a revision of E2open's full-year revenue forecast, cutting about $17 million from the original estimate. Most of the shortfall came from stalled professional services projects, the very ones that typically generate significant revenue for the company. Impact of Deal Delays On top of everything else, customer delays in closing those big deals put a damper on E2open's ability to pick up the pace in bookings and revenue growth. This slowdown meant the much-hoped-for recovery in organic growth is moving at a snail's pace. As a result, the company had to lower its FY25 forecast. They're now expecting subscription revenue to slip by 1%-2% and total revenue to drop by 3%-4% for the full year. Not exactly the trajectory they were hoping for. Final Takeaway Despite everything, I have to say, E2open might just be worth a look. The stock has taken quite a tumble-nearly 30% in the last month, which suggests to me that most of the bad news, provided there aren't any more skeletons lurking in the closet, is already baked into the price.  That said, there are some risks. Revenue is down, and deal delays have slowed growth. Debt is another factor to watch. But with the stock trading at lower valuations, it looks like a good opportunity for those (higher-risk investors) willing to look past the short-term bumps and bet on the company's recovery.","kind":null,"is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"analysis","news_rank":0,"symbols":[],"gpt_button":1},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.29.0","shortVersion":"4.29.0","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2475994446"}