E2open (ETWO, Financial) shares plummeted by 20% following a disappointing Q2 performance and reduced FY25 guidance. As a cloud-based supply chain management software provider, ETWO competes with major tech firms like IBM (IBM, Financial) and SAP (SAP, Financial), alongside smaller companies.
ETWO is striving to return to positive revenue growth after six consecutive quarters of decline. The company relies heavily on subscription revenue, which remained down year-over-year in Q2. However, there were signs of improvement from Q1, and management believes the subscription business has stabilized, with potential for growth in the coming quarters.
- Large deals are taking longer to close, attributed to extended customer timelines. This challenge is common across the enterprise software industry, affecting firms like Endava (DAVA, Financial) and Accenture (ACN, Financial).
- The economic climate is slowing ETWO's organic growth plan, yet management remains optimistic about closing delayed Q2 deals soon due to high win rates at advanced stages.
- Despite this, ETWO has lowered its FY25 revenue outlook to $607-617 million, from $630-645 million, with adjusted EBITDA expected at the low end of the previous $215-225 million guidance.
ETWO's Q2 report reflects the challenging macroeconomic environment. While potential deal closures could boost future revenue, the prolonged struggle to regain growth momentum may keep shares near 2024 lows unless the company demonstrates successful top-line results.
