Executive Summary / Key Takeaways

• E2open has successfully navigated a period of operational challenges, particularly related to client retention and bookings, demonstrating significant progress in fiscal year 2025 through a renewed focus on client satisfaction and operational discipline.
• The company's core strength lies in its unique cloud-based, end-to-end supply chain management platform, leveraging a vast multi-enterprise network and embedded AI capabilities to provide differentiated visibility and orchestration for complex global supply chains.
• Fiscal year 2025 saw improvements in key metrics, including a 1% increase in gross and net retention rates to 91% and 99% respectively by year-end, sequential and year-over-year bookings growth in Q4, and stabilization in subscription revenue decline, positioning the business for a potential return to positive growth in FY26.
• Management has provided FY2026 guidance projecting subscription revenue between -1.0% and +1.0% growth and total revenue around 0.2% growth at the midpoint, reflecting cautious optimism based on expected continued improvements in retention and bookings, alongside planned strategic investments and macroeconomic uncertainty.
• While facing intense competition from large ERP vendors like SAP (SAP) and specialized players like Oracle (ORCL), and specialized players like Blue Yonder, E2open differentiates through its network scale, integrated platform, and targeted AI applications, aiming to leverage these strengths for future market share gains and profitability improvements, despite current margin pressures and debt levels.

The Foundation of a Connected Supply Chain

In the intricate web of global commerce, where goods traverse continents and supply chains span myriad partners, visibility and orchestration are not merely desirable – they are essential for survival and success. E2open Parent Holdings, Inc. positions itself at the heart of this complexity, offering a cloud-based, end-to-end supply chain management (SCM) and orchestration software platform designed to empower the world's largest companies. Formed through a business combination in early 2021 and subsequently augmented by strategic acquisitions like BluJay and Logistyx, E2open has built a platform intended to connect manufacturing, logistics, channel, and distribution partners into a single, multi-enterprise network. This network, processing over 18 billion transactions annually and connecting more than 500,000 enterprises as of fiscal year 2025, is the bedrock of E2open's value proposition, aiming to provide clients with the ability to optimize how they make, move, and sell goods.

The company's software suite spans critical areas including omni-channel, demand sensing, supply planning, global trade management, transportation and logistics, and manufacturing and supply management. This breadth is delivered through a single, connected SCM platform, a key differentiator in a market often characterized by fragmented point solutions. The core technological strength lies in combining this extensive network with proprietary algorithms that capture, cleanse, normalize, and harmonize data across ecosystems. This integrated data model feeds applications embedded with artificial intelligence (AI), enabling enhanced decision-making and automation across the value chain. E2open highlights its decades of experience in deploying AI at scale, applying technologies like supervised and unsupervised machine learning, and increasingly, generative AI with large language models. Specific AI applications are being integrated across product families, such as automated classification and natural language processing in Global Trade, and improved tendering decisions in Logistics. The strategic intent behind these AI investments is to increase automation, enable faster decision-making, and enhance the user experience, which management views as critical to remaining competitive. While specific quantifiable improvements from recent AI initiatives are still emerging, the stated goal is to unlock higher productivity, shorter cycle times, and greater compliance assurance for clients.

Navigating a Competitive Arena

The SCM software market is intensely competitive and fragmented, featuring a mix of large traditional enterprise resource planning (ERP) vendors, specialized cloud-based providers, and internal client solutions. E2open faces formidable competition from industry giants like SAP and Oracle, who leverage their extensive customer bases and broad software suites. These large players often boast greater name recognition, more varied offerings, larger marketing budgets, and deeper financial resources. Additionally, specialized competitors, such as Blue Yonder (now part of Panasonic) and others focusing on specific niches like transportation management or multi-tier collaboration, also vie for market share. Some private competitors may offer aggressive pricing due to lower overhead.

E2open positions itself against these rivals by emphasizing its unique network scale and end-to-end platform integration. While direct quantitative comparisons of all competitors' financial performance are not always publicly available, Oracle and SAP generally exhibit higher gross and operating margins (e.g., Oracle's FY2024 gross margins 75-80%, operating margins 30-35%; SAP's 2024 gross margins 70-75%, operating margins 25-30%) compared to E2open's fiscal year 2025 non-GAAP gross margin of 68.5% and adjusted EBITDA margin of 35.5%. E2open's lower margins reflect, in part, the costs associated with integrating acquired businesses and investing in its network infrastructure.

However, E2open argues its network provides a differentiated value proposition, enabling clients to orchestrate complex, multi-tier supply chains in a way that siloed or less connected solutions cannot. The company's focus on delivering measurable return on investment (ROI) and its deep experience with complex, blue-chip clients are key aspects of its competitive strategy. Recent competitive moves, such as Blue Yonder's acquisition of One Network, are viewed by E2open management as validation of the market's demand for multi-tier collaboration networks, though they see One Network as a distant competitor in their core segments. E2open believes its network's depth, spanning many tiers of supply chain partners, provides a distinct advantage in serving clients with the most complicated supply chain structures.

The Turnaround in Motion: FY2025 Performance and Operational Shifts

Fiscal year 2025 marked a period of intense focus on operational improvement and client relationship management for E2open. The company had experienced a slowdown in growth, significantly impacted by elevated churn and lower new bookings in the preceding periods. Subscription revenue in FY2025 was $528.0 million, a 1.6% decrease from FY2024, while professional services and other revenue saw a more substantial 18.4% decline to $79.7 million. Total revenue for FY2025 was $607.7 million, down 4.2% year-over-year. This performance reflected the lagging impact of earlier challenges, including lower new bookings and elevated churn experienced over the prior twelve months, as well as lower billable hours in professional services partly due to a strategic reallocation of resources.

In response, management under new leadership prioritized client satisfaction and retention. This involved implementing a disciplined management cadence around renewals, utilizing tools like risk prediction algorithms, and adopting an account-by-account approach to proactively address client concerns. Crucially, the company made targeted investments, including accelerating some unbilled professional services work in Q1, to improve client value realization and secure key relationships. These efforts began to yield tangible results throughout FY2025. Management reported that Q1 FY2025 likely represented the peak quarterly churn level. Retention metrics improved over the year, with gross retention reaching 91% and net retention 99% by the end of FY2025, each up approximately 1 percentage point from FY2024. Bookings also showed positive momentum, increasing sequentially and year-over-year in Q4 FY2025 and improving conversion rates in the second half of the year. While large deal closures continued to experience extended timelines, management expressed confidence in their win rates for late-stage opportunities.

Financially, the company demonstrated cost control capabilities. Non-GAAP gross profit margin remained relatively stable at 68.5% for FY2025. Adjusted EBITDA for FY2025 was $215.5 million, a modest 2.2% decrease from FY2024, resulting in an improved adjusted EBITDA margin of 35.5% (up from 34.7%). This margin performance was supported by lower general and administrative expenses, partly due to the absence of a significant legal settlement incurred in FY2024 and ongoing efforts to streamline corporate functions, as well as cost efficiencies in R&D and sales and marketing. The company also recognized substantial non-cash goodwill and indefinite-lived intangible asset impairment charges totaling $614.1 million and $18.5 million respectively in FY2025, triggered by declines in stock price and market capitalization, slowing growth, and macroeconomic impacts.

Liquidity remained a relative strength. As of February 28, 2025, E2open held $197.4 million in cash and cash equivalents and had $155.0 million available under its revolving credit facility (extended to February 2028 post-fiscal year end, with capacity adjusted to $123.8 million). Net cash provided by operating activities increased to $99.1 million in FY2025, driven by improved accounts receivable collections. Adjusted operating cash flow for the year was $111.4 million.

The company's substantial debt, with $1056.3 million principal outstanding on its term loan as of year-end, remains a key financial consideration, particularly given its variable interest rate nature (7.94% as of Feb 28, 2025). Interest rate collars are in place to mitigate some of this risk.

The Tax Receivable Agreement liability, valued at $63.4 million, also represents a significant future obligation, though payments are contingent on generating sufficient taxable income. Despite these obligations, the company expects its existing liquidity and cash generation to be sufficient for near-term needs and projects a decline in net leverage to approximately 3.8x adjusted EBITDA by the end of FY2026.

Outlook and the Path Ahead

Looking into fiscal year 2026, E2open's outlook reflects cautious optimism grounded in the operational improvements of the past year. Management projects FY2026 subscription revenue between $525 million and $535 million, representing a year-over-year change from -1.0% to +1.0%. Total revenue is guided to be between $600 million and $618 million, implying approximately 0.2% growth at the midpoint. This guidance incorporates expected continued year-over-year improvements in client retention and a build-up in bookings momentum throughout the year, which management believes will position the business to return to positive growth as FY2026 progresses. The wider-than-usual range for total revenue reflects ongoing tariff-led economic uncertainty.

Profitability is expected to remain solid, with FY2026 gross profit margin guided between 68% and 68.5% and adjusted EBITDA between $200 million and $210 million, implying a 33% to 34% margin. This outlook factors in planned, targeted investments in the commercial and product development organizations aimed at accelerating future growth, leveraging the efficiencies gained in prior periods. These investments are crucial for extending E2open's technological differentiation and enhancing its competitive position. Adjusted operating cash flow is expected to remain strong, roughly in line with FY2025 as a percentage of adjusted EBITDA, supporting the projected reduction in net leverage.

The investment thesis hinges on E2open's ability to translate the stabilization and operational improvements achieved in FY2025 into sustainable organic growth. The focus on client centricity and retention is critical, as happy clients are more likely to renew, expand their use of the platform (cross-sell), and serve as positive references, providing a valuable source of pipeline. Leveraging the unique network and continuously enhancing the AI-enabled platform are key to maintaining a competitive edge against rivals with broader suites or specialized point solutions. While macroeconomic headwinds, intense competition, and the burden of debt remain significant risks, the company's demonstrated ability to improve operational execution and generate cash flow provides a foundation for navigating these challenges. The ongoing strategic review adds a layer of potential uncertainty or opportunity, but the core operational turnaround story is independent of its outcome.

Conclusion

E2open has traversed a challenging period marked by integration complexities and growth deceleration. Fiscal year 2025 demonstrated tangible progress in stabilizing the core business, notably improving client retention and rebuilding bookings momentum through a deliberate focus on operational excellence and client satisfaction. The company's differentiated network-based platform and ongoing investments in AI position it to address the increasing complexity and volatility of global supply chains, offering a compelling value proposition to large enterprises. While the competitive landscape is fierce and macroeconomic conditions remain uncertain, the foundation laid in FY2025, coupled with a clear strategic roadmap and prudent investments, suggests a potential inflection point towards renewed growth in FY2026. For investors, the story is one of a turnaround in progress, betting on management's ability to fully capitalize on its unique assets and operational improvements to capture a larger share of the attractive SCM market, ultimately driving improved financial performance and creating long-term value.