Good afternoon. My name is Gabriel and I’ll be your conference operator today. At this time, I’d like to welcome everyone to the E2open Fiscal Fourth Quarter and Fiscal Year 2021 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks there will be a question-and-answer session. Thank you.

Adam Rogers, Senior Director of Investor Relations, you may begin your conference..

Thank you, and good afternoon, everyone. Welcome to the E2open fiscal fourth quarter and fiscal year 2021 earnings conference call. Today’s call has been pre-recorded and will include comments from our President and Chief Executive Officer, Michael Farlekas, followed by our Chief Financial Officer, Jarett Janik.

And then, we’ll open the call for a live Q&A session..

Be prepared; build relationships on trust and respect; be direct and transparent; learn and operate with intensity; make and meet commitments reliably; always add value; and own the results. While these tenets are our operating principles, we believe they are equally applicable for our relationship with the investment community..

Thank you. As Michael mentioned, we’re pleased with our results for the fourth quarter and full fiscal year. I’d like to remind everyone that our fiscal year begins on March 1st. So, when we talk about fiscal year ‘21, we are referencing our financial year, which ended on February 28, 2021.

I’ll begin by reviewing our fiscal fourth quarter and fiscal year 2021 results, and then I’ll comment on our full fiscal year 2022 financial outlook. Thereafter, we’ll open the call to your questions. So, moving to our income statement. I’ll talk about our results on a non-GAAP basis.

We show a reconciliation to GAAP measures in the press release, which is available in the Investor Relations section of our website at e2open.com. For the fourth quarter, we generated total revenue of $88.8 million, representing an increase of 5.5% from the fiscal fourth quarter of 2020.

Broken down by reporting segments, subscription revenue was $72.6 million, up 7.6% over the prior year period. Our professional services revenue was $16.2 million, a 2.9% decrease from the fiscal fourth quarter in 2020.

The principal non-GAAP adjustments for revenue we are presenting relates to the fair market value reduction of our deferred revenue balance from the CCNB1 combination and its corresponding impact on our subscription revenue.

The decline in services revenue year-over-year was due primarily to the impact of COVID-19 where our customers delayed projects or projects were elongated, while our customers focused on reacting to remote work, and the immediate disruptions in their supply chains caused by the pandemic..

Thank you. Your first question comes from Chris Merwin of Goldman Sachs. Please go ahead..

Thanks so much for taking my question, and congrats to you on a great quarter. I wanted to ask you about the expansion opportunities. I think, you talked about $1 billion opportunity within the existing customer base.

Can you talk a bit about the things you’re doing to realize that, either from sales perspective, hiring up there to push more on expansion, and anything you can share about increases in deal sizes for the existing base? Thank you..

Yes. Thank you, Chris. I appreciate the question. We have a go-to-market, as we identified before, that is mostly built around focusing our existing clients and increasing our penetration.

So, when we look at that $1 billion opportunity, it’s really the current applications we have into what our penetration could be within our customer base, given reasonable expectations. So, today, we generate new sales, roughly about 80% of our new sales come from existing clients.

So, we have a fulsome or organic growth in terms of client base in that process. What we’re adding is a new logo team to that mix to increase the number of logos we have to then start that penetration over and over again. So, our growth rate today is largely because of that penetration we see into that space.

In terms of deal size, we sell both individual solutions and we have also platform sales. I can tell you, for the last 18 months, we’ve seen more and more larger transactions that look more like companies saying we’re going to go all in or a much larger set of applications at one time. So, the deal size is growing.

And as we get to a larger penetration with our customers, reach a tipping point, and then they tend to buy more. And that obviously increases our penetration stickiness. So, we think that model works really well and has been for the last four years..

Okay, great. Thank you. And maybe just a follow-up question. In terms of the drivers of accelerating organic growth, and except for the 10%, I know there is few, the new logo sales, new strategic partnerships, further monetizing the data network.

Can you talk a bit about, like, which of those are kind of furthest along in terms of where we might see the impact most imminently?.

Yes. I think, the partnership side, certainly, because we have two of those in place that are working, and we expect to see some revenue growth latter part of the year. The new logo sales stood up. It’s going to take a little while for that team to generate pipelines and close deals.

We have a long sales cycle, six months to nine months, in many cases for new logos especially. So, we think the partnerships is where we’ll see kind of the most immediate impact of that and kind of how we think about our partnership with Dun & Bradstreet in terms of how we can create new data products together with them.

So, those two areas I think will have more immediate impact. But, those four things are really meant to be implemented this year, to help us grow faster next year. So, our 10% organic growth is not predicated on any of those four initiatives for this -- we have large visibility into that 10% growth. .

Your next question comes from Taylor McGinnis of UBS. Please go ahead..

Hi. Congrats on the first quarter. And thanks for taking my question. First, I just want to talk through the guide a little bit. Can you maybe walk through some of the assumptions that are embedded in that 10% organic growth guide? So, it sounds like that new logo growth might come later on as some of the sales reps ramp.

But, just in terms of the existing install base, I know that you guys have been historically given, like this dollar-based net retention rate.

So, can you provide like any color in terms of like a potential range of that going forward or just how we should think about the opportunity that’s embedded in the guide?.

Yes. I’m going to start and ask Jarett to chime in. We have 95% visibility into our revenue plan for FY22. So, we feel very confident on our guide on the revenue side. Mostly from what we see in our pipeline, what we see is contracts already under contract and our renewal rates that we have high visibility into.

So, those three things give us a tremendous amount of confidence into our FY22 revenue guide. We feel very comfortable in that 10% growth rate.

I mean, Jarett anything you’d add to that?.

I think, Taylor, we’re still doing what we’ve historically done, and that’s being very successful at the cross-sell, upsell opportunities that represent $1 billion in whitespace that Michael just spoke to with Chris’s question. That has historically represented about 80% of our new sales activity. And we anticipate that will diminish over time.

But for this year, I think we get to that 10% really largely doing what we’ve done in the past. And then, as we layer on these other growth initiatives, that helps us transform the business closer to the long-term growth projections that we provided..

Got it. And then, my next question is just on the 10% or so customers that make up the large majority of your revenue. So, clearly, that demonstrates the potential for these large average deal sizes.

But, I’m just wondering if you could provide a little bit more color on the key characteristics that create deals of that magnitude, and if there’s anything specific with those customers, and the applicability for the remaining 90% of the installed base?.

Yes. So there are some metrics around that. Our top 100 customers generate something like 77% of our subscription revenue. And of those customers, the kind of median subscription is around $8,000. Our top 10 customers, median is around $7 million.

And the top 10 are only different, that’s 100, and that we’ve been with them longer, and they were further penetrated. So, we think all of those top 100 have potential to be multimillion dollar clients. And that’s kind of the growth we’ve seen.

And our -- a normal pattern for us will be to sign a new logo in the order of magnitude of $300,000 to $400,000 for new logos, kind of our average. And then, that grows over, say, three to four-year periods as something looks like $2 million to $3 million. And then beyond that, it can be even larger.

So, that’s kind of growth pattern we see within our installed base..

Your next question comes from Mark Schappel with Benchmark. Please go ahead..

Michael with respect to the different supply chain segments that you compete in, which ones are you currently seeing that the highest demand for? So, for example, would it be, like ocean shipping or global trade?.

Yes. I’d say, three categories. Demand sensing for us has always been a very strong category and has been for the last five years and continues to be. So, demand sensing is a machine learning algorithm that takes external data and creates a very accurate forecast at the item store level.

We have a range of examples of that being demand, forecasting in the world. So, that’s always very, something very strong for us. More immediately, global logistics visibility has been extremely important and a big part of our pipeline, as well as global trade management. Those two things go in tandem.

So, we’re really glad both of those in one platform. But those are the three areas that we see right now as really driving our pipeline, and actually our subscription sales..

And then, a question or two on your recently announced partnerships with the NeoNav solution that you’re coming out with, how does that differ or complement your current intra-ocean shipping solution?.

So, Maersk obviously is a great company, the world’s largest ocean shipping company in the world. We do a lot of bookings with them through our intra platform as you’re aware. They also have great operational capabilities. And they have 4PL services.

So, think of this as having a combination of their great teams, using our platform more fulsomely to help their clients manage that very complex, global transportation problem around the world. So, think of it as using their people and expertise and our platform to drive a differentiated value for our combined customers..

And then, on the Dun & Bradstreet partnership, analytics has been -- supply chain analytics has been something that organizations have talked about doing for years, but rarely implemented or they struggled to implement it.

I was wondering what changes you’re seeing there in the supply chain analytics space? Are you starting to see customers move beyond just kicking the tires?.

Yes, for sure. I mean, it’s really one of the most important places. And with our partnership with Dun & Bradstreet, we’re making an investment with them, they’re making investment also. But we -- they have really great sets of data. And then, we have data on our network as well.

And we really think about that as finding those data sources, integrating new insights and then having two distinct distribution channels. D&B, most every company in the world is D&B customers.

So, they have huge distribution to take some of our combined data elements and then make them available for their clients, as well as embed some of the data that they have available back into our platform itself. So, we think that distribution channel works both ways. And we’re super excited about it.

It’s our first step, kind of into thinking about how we go really much more robust and mature in the analytics space, and they’re one of the best, if not the best companies in the world. So, we’re extremely excited and humbled to be partnering with them..

Your next question comes from Yun Kim of Loop Capital. Please go ahead..

Hi, Yun..

Hey. Thanks, guys. Congrats on the first earnings report as a public company, although it was a non-event with your pre-announcement.

But, can you talk about the momentum that you’re seeing with your supply chain applications versus maybe the core platform? First, how much of your revenue mix is really driven by these supply chain applications? And if you can comment on which areas or which applications are your top revenue generating? Obviously, it sounds like the demand sensing is one of them.

Thanks..

We have seven product categories, application categories. And we market and sell subscription agreements for applications. So, that’s the agreements we sign. Our clients leverage our network and our connections to get data from the network to fund, if you will, or present to our application. So, we sell applications.

That’s the primary go-to-market driver. And we sell, as we have mentioned, three-year contracts that are committed. In terms of the product families that are -- in terms of revenue mix, it’s actually quite balanced across all seven product families. But, the ones that are showing up more and more in our pipeline are build visibility.

Global trade management and demand sensing are the ones that are really kind of showing up more and more at this point..

And then, obviously, there was an announcement in your press release about the formation of a new account logo sales team. I know you talked about it a little bit earlier in the call.

But, can you give us a little more detail regarding how big that group will be versus your existing sales group? And is this something that we can expect to ramp this year or even more likely fiscal year ‘23? And then, just a -- question’s around that, will you be targeting global 2,000s or more of your stuff, exiting opportunities around new customers with the existing supply chain network? Could you just kind of give us a little more insight into exactly what the opportunity will look like, how logo sales team will be focusing on?.

Yes, absolutely. So, for the past four years, as we build our platform, we identified that we had a lot of penetration we could do within our existing customer base.

So, strategically and thoughtfully, we really focused on building a really well-run operation around cross-sell, upsell into our client base, because that was the most important thing to do first. And we really focused on that area. And in that case, we have I’d say, 55 or so quota carrying reps that focus on our existing clients.

And just to give you some scale, each sales person would have four to six accounts in that existing client management organization. And their job is to give that customer insight now. Their job is to not show up when there’s a project but to actually work with them to expand our platform into their supply chain operations.

And that’s where roughly 80% of our subscription comes from today. And 20% of that we get, we just get because it will come to us. Now, that work having been done which is driving our growth rate to 10% this year, we now are in a position to scale to build a new logo sales team to further increase the number of existing clients we have.

So, in terms of ramping that up, many of those people have been with us in training for about 9 to 12 months. So, we put them in the field and they’re ready to go. It will take time. So, we don’t have much in the way of incremental revenue building to our plan from that team.

Right now, we have 8 and that would likely ramp to something in the mid-teens as we kind of get through the rest of this year. And so, that’s how we think about it. And in terms of what this generates for us is that our average new logo sale is around $250,000 to $300,000.

Every one of those new logo sales to us represents a $3 million to $5 million opportunity over the course of three to five years. So, that’s how we think about new logo sales team. So, in terms of the focus area, we focus on super Tier 1 and Tier 1 clients with the most complex global supply chains. And that’s really where their focus will be.

So, we think there is lot more opportunity out there. And now, we have the scale and size to be able to put together a thoughtful plan, build an operation around it, and have a permanent additional growth lever for us..

Jarett, so deferred revenues is -- trying to get a better grasp and understanding of how that deferred revenue dynamic will happen for the year? It looks like -- in Q4, it looks like there was some write down in there, the flood is a little bit lower.

But how should we think about how the deferred revenue should trend this year? Assuming you 10% organic growth rate assumption and then 95% visibility that you have, should we see that number incrementally decline over the next three quarters and pick up in Q4 or how should we think about that deferred revenue dynamic?.

Yes. So, Yun, the adjustment that we’re making to revenue represents the 20 some days subsequent to the business combination and our year-end, and then solely purchase accounting concepts where we effectively revalued the remaining deferred revenue to be recognized down to this liability, fair value and purchase accounting.

So, we’re showing that as an add-back on the P&L. And that’ll be a material amount for the first year where the impact is biggest, but actually last -- for a couple of years, until all of that has rolled off of the life of the contracts in our RPO.

Effectively, it’s deferred revenue that we collected at the operating company, but the technical accounting viewed us as being the company being acquired in the SPAC transaction, which is why we had to do the fair value as almost as if we bought ourselves. Our deferred revenue with our growth in bookings and new sales will continue to grow over time.

And as we replace, what’s left of that deferred revenue adjustment with renewals within our customer base, that’ll subsequently just go away. So, the deferred revenue will grow. And as we move forward, that adjustment will decline.

Does that get your question, Yun?.

Yes. Purchase accounting stuff really makes things a little bit more complicated. But, that does explain things. So, thanks for that, Jarett. Thanks..

Absolutely..

Those are all the questions we have today. This will conclude today’s conference call. Thank you all very much for joining. You may now disconnect..