E2open Parent Holdings Inc (ETWO) 2024 Q4 法說會逐字稿

Greetings. Welcome to the E2open Fourth Quarter and Fiscal Year 2024 earnings call. (Operator Instructions) Please know, this conference is being recorded. I will now turn the conference over to your host Dusty Buell, you may begin.

Good afternoon, everyone. At this time I would like to welcome you all to the E. two open Fiscal Fourth Quarter and Full Year 2024 earnings conference call. I am dusty veal, Head of Investor Relations here at E. two open.

Today's call will include recorded comments from our Chief Executive Officer, Andrew Appel; our Chief Commercial Officer, Gregory Randolph; and our Chief Financial Officer, Marje Armstrong. Following those comments, we'll open the call for a live Q&A session. A replay and transcript of this call will be available on the company's Investor Relations website at investors dot e. two. Open.com. Information to access this 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 first quarter and full year 2025. These forward-looking statements are subject to known and unknown risks and uncertainties. Easy-open cautions that these statements are not guarantees of future performance. We encourage you to review our most recent reports, including our 10-K and 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 dot e. two, open.com. And with that, we'll begin by turning the call over to our CEO, Andrew Appel.

Thank you, Dusty, and thanks to everyone for joining today's call. I'll begin with some thoughts on the state of the business and our strategy for returning E. two open to strong sustainable organic growth. I'll then ask Greg to update you on the work he is leading in our commercial organization. And finally, Maria will review our fiscal fourth quarter and full year '24 financial results and provide our fiscal '25 guidance. Then we will open up the call to questions.

Overall, our revenue results for the fiscal fourth quarter were solid and in line with expectations we had previously shared with you and we continue to perform well on profitability and cash flow. I'm pleased to say that the company has shown improved operational execution in a number of key areas, including client engagement and sales conversion.

And importantly, we've made progress implementing our plan to really reaccelerate organic growth that we previewed on last quarter's call, we are on the right track. And during the quarter, we saw tangible evidence of this in key areas. While we still have work to do over the coming quarters, we have identified the key issues and I'm confident we can address them in a reasonable timeframe as we move forward.

We have many reasons for optimism. Global Supply Chain volatilities providing a strong tailwind of demand for our highly differentiated supply chain solutions. This provides an attractive market opportunity for E. two open, which we are well positioned to capture. We have the privilege of working with the world's largest and most important companies on activities that are absolutely core of their operations, how they make move and sell their products. We are long-term partners to these industry leaders as they transform their supply chains to increase visibility, flexibility and efficiency.

Our mission is clear to use our platform to deliver enduring value and measurable impact to our client. To put it simply, our clients' success determines our success. What enables E. two open to serve our clients with distinction is our broad software capabilities accessible through a single interface powered by the industry's largest partner network and robust applications spanning the entire supply chain uniquely in our industry. Our platform links complex channel management to demand and supply planning and integrates those activities with multi-mode logistics and multi-tier manufacturing.

And we do this collaboratively in real time across a diverse set of channels, distributors, retailers, suppliers, logistics, service providers and trade and customs agencies. Industry analysts consistently recognize the strength of our software. In December, a two open was selected as a leader for the third consecutive time by IDC in the category of multi enterprise supply chain commerce network providers. And in April, Interwoven's cloud-based multi-tenant transportation management solution was again named a leader by Gartner. Our leadership is also apparent from the prominent role our platform plays in powering global supply chains for years into opens products have been deeply embedded across the Fortune 1,000 universe of companies that carry out a large share of global commerce.

Here are just a few of the metrics to illustrate this point. Our platform now has 480,000 connected parties and process is [16 billion] supply chain transactions annually. Our logistics ecosystem handles 21% of all ocean freight bookings. Our global trade solution provides trade compliance and import export capabilities and 230 global jurisdictions and performs 67 billion annual restricted party screening.

Our channel applications manage $14 billion of incentive payments a year for more than a million connected channel partners and resellers and our supplier collaboration software enables 155 million annual orders and 59 million annual shipments across multiple tiers of our customers' extended supply network. Given the scale of easy-open impact. It is clear why our platform is so well regarded. But as the CEO is passionate about client relationships, I believe the highest recognition is when a major global company selected us to provide mission critical software.

In the fourth quarter. We once again closed several large subscription deals with major companies in diverse areas such as consumer goods, manufacturing and retail electronic component distribution and health care. These wins often, if not always, in highly competitive situations, validate the strength and the uniqueness of our portfolio and the dedication of our people, they show that the world's leading companies continue to trust E. two open leads a complex supply chain project and deliver unmatched operational impact and value. And they demonstrate that when we go to market with distinctive solutions backed by a client-centric impact or an selling approach.

We make it very difficult for a customer not to select the two open for my entire career I've made client-centricity a top priority and I've brought the same approach to E. two open. Just last week, I took part in E. two opens annual Connect Europe event in Amsterdam, along with [175] of our most important clients and partners.

During a three-day event, I attended customer-led sessions that highlighted the pivotal role of E. two open software and addressing complex supply chain needs of some of the world's leading companies. I had the privilege of meeting with seven or eight of our larger clients and implementations in progress and I was pleased to come back with a view that we're doing distinctive work. We're talking about impact in value and that we're on track to deliver some terrific solutions and extend those relationships.

In fact, in conversations I've had with dozens of clients since becoming E. two opens Interim CEO seven months ago. What stands out most is the unique and distinctive value our products deliver in large part. This is what convinced me to accept a permanent CEO role in March of this year. For example, multiple customers of our planning solution have achieved a 30% reduction in inventory related working capital costs.

A major consumer goods client has used our global trade application to increase its utilization of free trade agreements by 600%. While a global parcel carrier uses this application to fully automate customs filings in 22 countries on a single interface, a leading transportation company using our logistics applications as reduced and process shipment times by more than a third and an iconic technology supplier using our supply solution has reduced expedite costs when fulfilling customer orders by 11%.

Clearly, E. two open is a highly valued partner to companies that use our products, communicating this distinctive value clearly and delivering it consistently in everything we do are the teams that I will personally drive as CEO. Meanwhile, we will continue to invest in our long-term product vision. Just last week, we announced our first major product launch in fiscal '25, which is a new supplier network discovery capability within our Supply family of applications. In addition, each quarter, we roll out new features across our platform, which we have done for six years following a predictable time, behavioural delivering innovations is highly valued by our clients.

Our global trade management solution is a prime example of this E. two open as global trade solution combines the best in class application with the industry's most complete proprietary trade content database and our worldwide staff of over 200 personnel monitors trade rules across 230 global trade jurisdictions and updates our global knowledge repository for any changes. This combination of an application and data as a major differentiator for E. two open and in the volatile arena of global trade real time data empowers our customers to take full advantage of free trade agreements and duty savings programs and stay compliant with ever stricter rules around forced labor sanctions and Dual Use controls.

Finally, I want to emphasize the importance of returning E. two open to best in class retention levels. We ended fiscal '24 with gross retention of approximately 90% and net retention of approximately 99%, which are down from a year ago. However, our in-depth analysis of the higher churn we experienced in fiscal '24 which I have personally led as shown that much of this is very controllable with tried and true management processes that we are quickly putting in place. Just in the last quarter, we have made progress in stabilizing churn and now have significantly improved visibility into its trajectory moving forward.

More broadly, the key to consistently high retention is instilling a client-centric mindset across our entire company. We will do this in a variety of ways, we will exceed our clients' expectations on implementations. We will deliver unique and measurable value. We will build client relationships for the long term and we will work closely with leading systems integrators and value added partners. With this approach, we can deliver transformational impact to our clients on every project, large or small, by putting clients first, every E. two open engagement can result in a delighted referenceable clients willing to advocate for E. two open, which will then help us win future business.

In conclusion, while our Growth Acceleration Plan touches many elements of our business. It is very achievable and has already generated positive results and momentum. We plan to build on our progress throughout fiscal '25 with clients at the core of everything we do, delivering client value with differentiated and distinctive solutions has been the cornerstone of the successful growth efforts that I've led at other major companies, and I am confident that this approach will return to open to the double digit organic growth rates that the Company enjoyed just a few years ago. While we still have work to do. We are moving in the right direction. And the changes we have made to our business are laying the groundwork for success who will ultimately benefit our employees. Our customers and our shareholders.

I'll now ask Greg to provide an update on our go-to-market activities.

Thank you, Andrew. During our fiscal fourth quarter, we continued to execute our organic growth playbook our entire commercial organization is now aligned on putting our customers first and building long-term value added relationships with them. We also continue to bring in new experienced talent. I'm very excited that Steve Baird has joined E. two open as North America's sector President reporting directly to me. Steve has an impressive background leading high-performance sales organizations and delivering ARR growth as software firms such as SAPFDO. and PTC.

He has a proven track record as a transformational sales executive, and he's a fantastic addition to our commercial leadership team. I'm equally pleased to announce that Mark Nordic has joined E. two open as our new SVP of Global Services reporting directly to me, Mark will lead our professional services business, bringing over 25 years of experience in leadership roles at Blue Yonder and IBM markets successfully built and led high-performance global teams in large and midsized SaaS and consulting services organizations in multiple regions of the world. I'm confident he's the right leader to make our PS organization a strategic differentiator for E. two open.

My initial focus is to open was quickly put in place key elements of a high-performing sales organization, ranging from new leadership to effective sales enablement and then establish a disciplined operational cadence to improve near term sales execution These efforts are already producing results in Q4 as we did in Q3, we drove in-quarter deal conversion rates at a much higher level than the first half of FY24 and one important deals across multiple product families with new and existing clients. With these basic building blocks in place, we are now pivoting to more targeted changes to our go-to-market model designed to position E to open for higher future growth.

A cornerstone of this effort is ensuring that our sales capacity and talent are optimally aligned to our highest growth opportunities, specifically we are creating account focused teams that are solely responsible for maximizing satisfaction and retention within our existing client base. These former teams will build a long-term client partnerships that are vital for a cross-sell focused growth strategy. In parallel, we are forming product, specialized Hunter.

These teams will consist of highly skilled, experienced sellers and will be responsible for driving product level growth in both new logo and existing client accounts. As we implement this new commercial alignment, our primary measure of success will be acceleration in bookings and returning retention to world-class levels to this end, we are executing a variety of proactive tailored measures in three critical areas, namely cross-selling our existing client base, leveraging our system integrator partners and expanding our new logo business given our large existing customer base, cross-selling is a critical growth vector for E. two open that we are now pursuing in a far more systematic fashion than in the past.

Our product team has led a deep dive into this opportunity, focusing on industry and product specific areas where we have deep successful penetration with key clients. We then use these insights to identify and quantify by size and product line, similar use cases with existing clients that present strong opportunities for cross-sell.

Based on this work, we now have detailed visibility into $2 billion of cross-sell opportunities with our current client base. And in addition, we have identified another 500 accounts with very modest solution penetration, low ARR, but significant upside potential. We are rolling out targeted product level campaigns to aggressively cross-sell in both areas.

We expect this to be a major source of future growth for E. two open to illustrate the power of well executed cross-sell. I would cite the example of a current client, one of the world's largest contract manufacturers and a user of E. two open supply applications. This client recently selected E. two opens global logistics orchestration for GLO solution to be the next stage in their supply chain journey. Glo uses real-time visibility into multimodal shipments to identify unexpected events and provide tools to resolve them by orchestrating corrective actions. We achieved this important cross-sell win by positioning E. two open as a long-term partner with industry leading solutions that met the clients' immediate and future needs to further enhance our growth capabilities.

In the fourth quarter, we realigned E. two opens marketing function, which has top of the funnel sales pipeline responsibility to report directly into the commercial organization. Under my leadership, this move will ensure that we have consistent inflow of new high-quality prospects. We have also scrubbed ourselves pipeline of early-stage deals, not meeting stringent criteria for strategic fit and win probabilities. With this result oriented approach to pipeline management, our pipeline is now moving in the right direction by combining a growing high-quality pipeline with the improved conversion rates we've already achieved. We now have the foundation in place to accelerate future growth.

Another promising growth vector for E. two open is proactive collaboration with systems integrators, Andrew and I have worked together closely to forge strong go-to-market partnerships with select SIs. Our goal is to jointly identify clients with supply chain needs that match well with E. two open product offerings and then bringing our sales teams to co-sell alongside the SI account team. This approach is working well. Our pipeline of SI related projects increase materially in the back half of FY24 and the services pipeline of our SI partners has grown as well. This is evidence that our SI strategy can become a major contributor to our future revenue growth.

We are also taking targeted steps to grow our new logo business in recent years. Competition for new logo deals has been weighted toward procurements of planning and transportation solutions. However, customers are recognizing the limitations inherent in stand-alone disconnected point applications. It did not support multimode multi-tier collaboration across increasingly complex supply chains.

This trend plays well to E. two open strengths and we are running specific sales and marketing plays to capitalize on. We recently scored our first major success by winning a highly competitive new logo deal in the planning space. The new client, a well-known consumer electronics supplier evaluated E. two opens planning application very highly, but the key to closing the deal was E2, opens unique ability to link planning and supply collaboration, a critical element of the client's supply chain vision.

Finally, I want to provide some commentary around churn. While our large customer retention metrics remain healthy, we have seen elevated churn within our long tail of smaller contracts. We are now implementing a detailed account by account plan to stabilize churn and improve retention was the top priority in the commercial teams weekly operational cadence, and we are seeing positive signs of progress. For example, over the last two quarters, we had several at-risk renewals where as a result of proactive engagement with the client return potential down-sell into successful upsells in one case, tripling the ARR value. These success stories show that we can bend the curve on retention by driving a culture of long-term partnerships with our clients and instilling the operational discipline for early engagement on renewals.

In summary, I'm very proud of the way that our commercial organization has embraced the growth oriented client centric changes that we have made over the last six months. We have a clear view of what we need to do to return E to open to double digit growth rates and we expect to drive improved performance as we move through FY25, laying the foundation for a return to accelerating growth in FY26 and beyond.

At this time, I'll turn the call over to Marje for a discussion of our financial results and guidance.

Thank you, Greg. Today I will review our fiscal fourth quarter and full year 2024 results and then close with a discussion of our FY25 guidance. But first, I want to express my sincere thanks to all E. two open employees for the dedication and energy you've shown this fiscal year. While this has clearly been a year of transition, I know that you all share my enthusiasm for the positive changes we're making at E. two open by continuing to move us one, we can realize our company's tremendous potential and also have a fantastic team experience along the way. So thank you all.

Now turning to results subscription revenue in the fiscal fourth quarter 2024 was $134.4 million above the high end of our $131 million to $134 million guidance. While this represented a 1.8% decline on a year-over-year basis, subscription revenue increased sequentially for the first time in four quarters. As Andrew noted, we also closed several large subscription deals during Q4 following up on the improved bookings quarter we had in Q3.

This marks two quarters in a row of improved in-quarter deal conversion as compared to the first half of FY24 and is a positive sign that the growth oriented changes we have made at E. two open are on track and generating momentum. I would note that in line with our expectations, Q4 revenue was negatively impacted by elevated churn. As Greg and Andrew outlined, we have made progress on stabilizing churn and we're confident in our roadmap to return retention to normal historical levels as we get through this year.

For full fiscal year 2024, subscription revenue was $536.8 million and grew 0.7%. Full-year growth performance reflected a two opened ongoing transition from an M&A focused company to one with strong consistent organic growth we now have new commercial leadership with relevant experience to undertake a comprehensive growth reacceleration plan in close collaboration with our long-standing product and R&D teams. We see this plan is very achievable, given our attractive TAM, large existing customer whitespace focused by strategy and significant opportunity for new logo business.

Professional services and other revenue in the fiscal fourth quarter was $24.1 million, reflecting a decline of 18.0% sequentially PS revenue was down slightly. But as a reminder, the fourth quarter has fewer workable service hours due to holidays. Our PS business saw improved bookings in Q4 following a good Q3 performance and the business ended the fiscal year with higher backlog.

Overall, the organizational changes we have made to our PS business have led to better sales execution and stronger collaboration with a broader commercial team. These improvements provide a solid foundation for our new PS leader to build on during FY25 and beyond.

Given the progress we've made, we now believe we have reversed the sharp decline in our services business and that it will return to modest revenue growth in FY25. Total revenue for the fiscal fourth quarter was $158.5 million, reflecting a decline of 4.7% over the prior year quarter.

For full fiscal year 2024, total revenue was $634.6 million, reflecting a decline of 2.7% year over year turning to gross profit in the fiscal fourth quarter of 2024, our non-GAAP gross profit was $110.9 million, reflecting a 4.9% decline year over year. Non-GAAP gross margin was 70.0% in the fourth quarter compared to 70.2% in the prior year quarter.

Non-GAAP gross margin for full fiscal year 2024 was 69.4% compared to 68.7% for the prior year. The improvement in full year gross margin, even in a year, where our revenue performance was well below. Our potential was driven by a higher mix of subscription versus PS revenue as well as proactive efforts to drive operational efficiencies.

Turning to EBITDA. Our fourth quarter EBITDA was $55.1 million on a 34.8% margin compared to $61.2 million on a 36.8% margin in the prior year quarter. For full fiscal year 2024, adjusted EBITDA was $220.3 million compared to $217.1 million versus the prior fiscal year, an increase of 1.5%. Adjusted EBITDA margin for the full fiscal 2024 was 34.7%, up from 33.3% in the prior fiscal year as we remained focused on our commitment to operational efficiency and profitability.

Finishing up on profitability. Net loss for the fiscal fourth quarter of 2024 was $45.5 million and full fiscal year 2024 net loss was [$1.2 billion]. The full year net loss figure included noncash goodwill impairment of $1.1 billion that reflected charges we took earlier in the year.

Now turning to cash flow during the fiscal fourth quarter and full 2024 fiscal year, we generated $36.9 million and $116.0 million of adjusted operating cash flow, respectively. We view strong consistent cash flow as a key performance metric and as an important indicator of our financial strength. And so we're pleased with our fiscal year cash generation and our rising level of cash conversion as a result of this strong cash performance, we ended FY24 with $134.5 million of cash and cash equivalents. This represents a year-over-year increase of $41.5 million, even with the impact of certain nonrecurring cash costs during the fiscal year.

This completes my remarks on our fiscal Q4 and full year FY24 financial results. At this point, I'd like to introduce our FY25 and first quarter fiscal guidance and provide our thoughts around key drivers of our forecasted performance. We expect FY25 subscription revenue in the range of $532 million to $542 million, representing year-over-year growth of 1% at the high end and the decline of 1% at the low end.

In terms of key performance drivers, we expect bookings momentum to build as we move through FY25 with the revenue impact becoming stronger in the second half of the year. In addition, given the timing of previous customer retention decisions, we expect churn to remain elevated in early FY25 but to improve steadily after midyear, given all the actions we're taking now together, these FY25 trends should position the business well as we exit the fiscal year for higher subscription revenue growth going forward.

For the first quarter of FY25, we expect subscription revenue in the range of $130 million to $133 million, representing a decline of 3.6% to 1.4% as compared to the prior year fiscal first quarter. Q1 growth rate is consistent with the earlier comments around the timing impacts of our FY25 performance drivers. We expect FY25 total revenue to be within the range of $630 million to $645 million in FY25, representing year-over-year growth of 2.0% at the high end and a decline of 1.0% at the low end.

Our total revenue forecast includes our professional services business. We expect our PS business to build on improved bookings over the last two quarters and higher backlog by generating mid-single digit revenue growth in FY25 back towards the PS. businesses prior baseline, we expect FY25 gross profit margin to be within the range of 68% to 70%. The midpoint of this range is roughly flat to what we achieved last year.

Overall, our gross margin targets for the new fiscal year reflect the strong underlying fundamentals of our core subscription software business finishing up on profitability. We expect FY25 adjusted EBITDA to be within the range of $215 million to $225 million. This represents growth of 2.0%, the high end and a decline of 2.0% at the low end and implies an adjusted EBITDA margin of 34% to 35% for FY25.

This is consistent with last year's performance and reflects our commitment to maintain profitability as we do the work necessary to reaccelerate growth. We will continue to focus on driving operational efficiencies in order to free up resources for investment in client focused areas such as product innovation, flawless implementation, customer experience and sales productivity. Given the importance we place on generating strong cash flow. I want to provide some comments around our FY25 cash generation expectations.

Overall, we expect adjusted operating cash flow to grow in FY25 as compared to FY24 a couple of cash flow drivers to consider, we expect CapEx to be at approximately 5% of revenue in FY25 consistent with prior year, we plan to drive working capital improvements and expect FY25 working capital to be a modest use of cash.

Cash interest expense, net of interest income and the impact of our interest rate collars is expected to be in the range of $90 million to $95 million. This outlook assumes that silver follows the current forward curve that we meet our internal forecasts regarding in the investment of excess cash and that term loan repayments are limited to required amortization of around $2.7 million per quarter finally, we expect nonrecurring cash costs in FY25 to decline significantly as compared to prior year. Based on our guidance for FY25 adjusted EBITDA as well as our outlook for cash generation during the fiscal year. We now expect year end FY25 net leverage to be below four times.

In conclusion, FY24 marked an important inflection point in a two opens transition from an M&A focused company to one that is positioned to deliver sustainable double digit organic growth while our revenue performance this fiscal year was far below our potential. We delivered strong profitability and cash flow, again, demonstrating the high quality of our underlying business model. Moreover, during FY24, we brought new experienced leadership into the company to support our teams and implementing a client-centric plan to reaccelerate growth, building on the strength and industry experience of the long tenured talent across the organization, we should clear signs of progress and momentum in the second half of the year.

And as we make these growth-oriented changes to our business, major customers continue to place their trust in E. two open by selecting us for large strategically important software engagements. We look forward to building on these successes in FY25 as we lay a strong foundation for E. two opens return to double digit growth.

Before closing, I want to acknowledge our announcement in March that E. two open is conducting a strategic review. The review is proceeding as planned, but we will not comment further until doing so is appropriate.

Meanwhile, I can assure you that our entire management team and experienced employee base are keenly focused on serving our customers and executing our growth plan.

That concludes our prepared remarks. I want to thank everyone for joining us today, and we look forward to connecting with you as we proceed through the fiscal year. Operator, please open up the line and begin the Q&A session.

(Operator Instructions) Chris Quintero, Morgan Stanley.

Hey, everyone.

Thanks for taking our questions and then great to be on the call with you today.

I've got I've got two questions. Andrew And Greg, you both have been onboard for a few months now and clearly are prioritizing and gotten a better hold the churn. I want to ask around the product set to open house today. So from your perspective, what product areas are really leaning into and taking gain meaningful market share? And on the flip side, are there any that you are looking to deemphasize it?

And second question, I'm really great to hear about the new tailored measures for higher growth between the three that you outlined. Where do you expect more of the growth come from? Is it the cross-selling, the SI partners or new logos greater close that would be very helpful.

Thank you.

Yes, hey, Chris, great to hear from you on. Yes, great questions. So on the first topic, our product platform, I've been at this now for eight months with the company. And what I've told my team and the people that are recruiting into the organization is that this is a sales person's dream. We have the capabilities, the breadth of products that we have and the competitiveness with each product category that we take to market. We can literally win in each of our five key product families across multiple industries. And we have this vision of being an end to end supply chain provider, and we have a product to back it up. And so it's an incredibly marketable platform, but we can go toe-to-toe and we've proven it. I make in my opening remarks that we can go toe-to-toe with the best point solution providers in the marketplace and win so that quite frankly, every product category has strengths, and we're able to drive growth with each of them.

And if you think about if you think about the growth vectors, first of all, with our SI partnerships, we really ramped up over the last six months and establish a deeper relationship with the with those core partners. And we're starting to see a significant improvement and momentum around pipeline energy, helping drive significant new logo. So that has certainly of all of the all three of them we're driving improvements and will contribute to growth. But the SI partnerships driving new logos is clearly have been the most of the most effective.

Excellent. Thank you so much.

(Operator Instructions) Adam Hotchkiss, Goldman Sachs.

Great.

Thanks for taking the questions. Andrew And Greg, I'm curious how you think about the path to normalized churn for the business. You mentioned 90% was where you exited the year on gross retention and I think it's been 95% historically. Is it just a function of getting through a full renewal cycle with some of these at-risk accounts and being more proactive? Or are there more immediate ways you think you can improve here that the business was just missing before? I'm just curious if you think there's anything structural that makes us a bit more challenging based on the the challenges of being in the longer tail of the business or if this is something that you can fully remediate through execution?

Yes, I think the answer is pretty straightforward. Actually. I think we are, as I said in my intro, right, we need to become a client-centric organization become client-centric that and get ahead of the virtuous cycle. Scotland's hovering talked about or Greg talked about it. You know, the retention rates are lower for some of the long-tail churn for the enterprise churn but for the enterprise churn, it's just about basically being client-centric and took that. And there's I guess I'd say so there's nothing systemic because now they have looked at many, many many situations. It is about just we're not managing it more normally at this advertising.

Onto your question in terms of the long tail risk, it's a different approach on and Greg has also talked about really as segmenting and the way we are structuring the go-to-market organization and quite frankly, on customer care and all the support functions as well as to look at the enterprise versus the long tail in a tailored way, that should help us. As you know, we do reduce churn for both both cohorts in a very effective way.

Okay. That's really useful. And then Greg and Maria, I'm curious how you think about investment in sales capacity and achieving some of the changes you mentioned around the go-to-market teams and the targeted SI. investment. Is this all just a function of resource reallocation given the guidance here? And then, Greg, I'd be curious what sales attrition has looked like relative to history as some of these changes have been implemented and what you've had to do on the talent acquisition and retention side as part of this? Thanks.

Thanks, Adam. That we did not have essentially a capacity problem in sales. We have a productivity issue six and we lack the number of quota-carrying sellers. It is a reasonable attainment to drive the necessary productivity level that will sustain long-term growth. And so that's why we've invested heavily in sales enablement. We've obviously top rated talent and we've set very clear performance standards for the sales organization and measuring those standards on a weekly basis. And so yes, we do not need to invest in more sales capacity.

I think the other piece is that, you know that you heard my opening remarks, we are shifting reallocating capacity to highly specialized product sellers that focus both on new logo and cross-sells to bring what I've experienced. And in the eight months that I've been here is that when we are engaged with the right salespeople positioning the products with value, you heard Andrew on the in his remarks, talking about the quantifiable business value. When we're positioning those capabilities, we get a lot of attention and tend to win a lot more than enough. And so that's where we're focused.

Okay. All really helpful. Thanks, everyone.

(Operator Instructions) Taylor McGinnis, UBS.

Yes, hi. Thanks so much for taking my question. Maybe first one is just on the sales productivity piece so could you maybe just given all the changes that you guys have made recently, can you give us an idea of what sales productivity has trended more recently? And I would imagine it's going to take some time to ramp the sales force. So when do you expect to see more stability productivity and like a potential uptick there could materialize on those.

Hey, Taylor. Thanks for the question. Yes, I think you know, look, I implemented an operating model that I did as of two previous companies that was very execution focused on that with data is data driven. And so we've got tremendous visibility into the metrics that we're measuring the business. And so if you look at the two key components that I'm driving super hard right now. Number one is as in quarter conversion, and we've seen measurable improvements in both Q3 and Q4 in our in-quarter conversion rates.

The second component is pipeline and my philosophy has always been quality over quantity. First, clearly, pipeline sufficiency is important, but it should be first of all, measured on on the quality of the pipeline. So we went through a significant US pipeline scrubbing process, and we saw a pipeline decline to a certain extent. And we've been able to through the initiatives that we rolled out in partnership with marketing, accelerate our pipeline. So we're seeing momentum in pipeline again, but it's highly inspected pipeline. So the notion is that our conversion rates will continue to improve.

Great. Thanks. And then my second question is just and maybe before it would be partly tied to what you just said. But if I look at the 1Q subscription guide and implies a sequential decline after a sequential increase in 4Q. And on the back of some of the improvements that you guys talked about, can you just maybe touch on what's driving that whether that's weakness as a macro, some of the sales productivity softness.

And then as a follow-up, if we look at the full year revenue guide, so it implies an acceleration throughout the year. So can you just provide some color on the level of NRR churn that's embedded in that guide?

Yes, Taylor, and thanks for the question. So as Andrew and Greg already mentioned during the prepared remarks, our Q1 churn remains elevated due to due to the customer decisions made over a year ago, and that's really what's impacting Q1. But again, as discussed at length here. We understand the issues and we put in place very, very clear management practices to reduce debt, and that is just taking more than a more than a quarter, just given how long these decisions are made in advance.

And that's really what you're seeing now in terms of the guidance and when you think about just progress in executing our growth. We exploration plan and they're building blocks to it. And depending on the different metrics that were bending, it takes some time to gain traction and specifically to show up in revenue. But when you look at really our as we talked about, the conversion rates in what our conversion rate pipeline growth and our overall improved execution and really even some of the churn accounts that we've already impacted for near term. That's really what's giving us the confidence in the trajectory and really what's underlying the guidance.

Great. Thank you so much.

As well.

(Operator Instructions) Mark Schappel, Loop Capital Markets.

Hi.

Thank you for taking my question. Greg, I appreciate the update and the color on the sales organization on that front?

No, sales turnover has been an issue at the company over the past 12 to 18 months. Could you just address that the pace of sales turnover that you've seen over the last the last quarter and maybe just discuss some plans you have with respect to to keep that churn low in the coming year?

Yes, hey, Mark, thanks for the question. We have not seen retention issue issued media attrition issues over the last eight months since I've been here. In fact, we've hired several people that left to greener pastures. And it's been really encouraging to see some of those folks come from the Darling kind of have modern point solution providers come back to us in the organization because they see the opportunity and they see what's happening in the market. So and now we are like any U.S. effectively managed sales organization. We have set very high performance standards and so we are improving our overall quality of the sales organization through a top rating, but we have not seen any attrition outside of than normal industry standards.

Great. Thanks.

And then building on an earlier question, Andrew, with respect to the various product groups, what product categories your groups did you see the most interest from customers during the quarter? Was it like TMS. or global trade and demand centers?

Yes. So I would say when we look at like the portfolio of our products, whether it be on sales or store churn, I don't really see a material variation across the products. So they're all, you know, equally in demand, we've looked at it very carefully. I think we take a client approach not a product approach or I will that's where we're headed and hitting. And in that capacity, we continue to see a lot of demand for a lot of the solutions that were we have forward.

Thank you.

(Operator Instructions) Chad Bennett, Craig-Hallum.

Great thanks for taking my question. I'm just curious, I think you had a bullet point in your press release about the growth in the E. two open network. And I'm just curious on. I don't think I've heard in the last couple of quarters of how you're thinking about, you know, potentially monetizing that network and what the opportunity could be there.

Yeah, I think I know, Tom, I'll answer it a little broader than your past, which is that and I am a believer that when you have distinctive contents or capabilities that you have to live. And we live in a very open cooperative co offer page co-op petition based world.

So you can expect every client to want to access your distinctive content through your solution. And so power and I talk all the time about the fact that as we move forward where we have distinctive content, e.g., the network, TG., our global trade business, and we're going to be open to, you know, having it be sold by us through our front end or having it be sold somebody else to their front end as long as we get the value of resident to that content.

And I think that crop multichannel strategy is not dissimilar to the SI strategy in the sense that we partner with strategics to help them grow their business and help us grow our business and that if there are situations where they can leverage our content to grow their business as long as we're properly compensated for the content, which is the bulk of the value that it really doesn't matter whether it's through the front end, Harmony or finance or whatever.

Got it. And then maybe just I think maybe a different way of asking the prior question is just on maybe from a cross-sell upsell standpoint, not necessarily just a point product demand standpoint, are there are there a couple of the products two or three, the products or suites that maybe early in the pipeline rebuild you're seeing are naturally on or should be cross-sold or upsold more frequently? And you're seeing early demand for two or three products that that fit together?

Yes. Thanks for the question, Chad. Who was our supplier multi-tier supplier collaboration capabilities, as you know, very, it's very distinctive in the market and what we've noticed here, but I joined the company. There was a somewhat of a hesitation for the field sales force to go compete head to head from stand-alone planning deals. And what we realized when we started positioning the combination of planning and execution from a multi-tier perspective that it was super clear that the market responded really well.

So we've made a huge focus on not on taking that to market. I think the other pieces as we think about just from a logistics perspective, we have the global trade capability and our transportation management system. We're seeing a unique opportunity to cross sell. If a TMS customer doesn't have global trade obviously taking global trade to market and conversely, a global trade customer that doesn't have a TMS taking those our combination solutions to market.

Got it.

And you talked about the sort of $2 billion or whitespace analysis that as you know, we undertook as a company really led by our product team in close cooperation with our commercial and finance. And that kind of ties back to what Andrew said, which is we have a clear plan by industry by product now in terms of how to reactivate the cross-sell motion and really utilize our wide product portfolio instead of just focusing on a few products as well and sort of have a and that's the path to growth from all the products, especially making it very very detailed through this $2 billion whitespace analysis that we now have and are really operationalizing and holding people accountable for internally.

Got it. Great color. Thank you.

(Operator Instructions) Andrew Obin, Bank of America.

Hi, this is David Ridley-Lane on for Andrew.

On before the blue BlueBay acquisition to open this gross retention was 95%. Is that the right goal for the Company as it is today.

And I'll just start and maybe Andrew can add some color on admission. But I would say that the we don't provide specific guidance, obviously on on our retention metrics or anything like that. But we have stated we're committed to getting back to double-digit top line growth, and that will be by reducing churn as well as getting bookings back to our potential and where we were previously and above.

But I would say that we have very detailed working plans again by phone or by product kind of think about churn and retention. And you know that and the goal is to get it to get it to well below where we historically were and the overall client centric, you know, and no change in mindset is really what I would say, Andrew has brought to the table and it's operationalizing throughout the organization. And I think it's really felt and the accountabilities to a building all around, and it's a very, very important driver for our growth going forward.

Yes. I mean, look, the only thing I would add is having spent a lot of time moving mature and mix.

Yes, in my mindset is, you know, no clients should ever want to share. And the only logical thought that reason they do is they either get bought or they disappear and the rest is under our own control as well. So So what that means in terms of a number you know, I don't know. I said yes, I've seen it. I've where I led the company for nine years to basically that's what we lost lives when they disappear. They are Boston why sort of local.

I've got it. And then as a very quick follow-up, I guess, and given your commentary on churn continuing to be elevated in the first half or and then improving in the second half. Are you expecting full year churn to be about similar with last year? And because you were kind of seeing churn get worse as you went through fiscal '24.

And thank you for the question. You know, we don't specifically report churn or guide to it, but I would say value to directionally how to think about it is that we plan to route to lower churn and year over year when you're looking at this year.

Thank you very much.

Thank you. We have reached the end of the question and answer session. This concludes today's conference and you may disconnect your lines at this time. Thank you for your participation.