E2open Parent Holdings: Buy Rated As Growth Slowdown Was Likely A One-Off Event

Core Viewpoint - The company maintains a buy rating for E2open Parent Holdings (ETWO), despite a disappointing growth slowdown in 1Q25, attributing it to timing issues rather than structural weaknesses [5][10]. Financial Performance - ETWO reported total GAAP revenue of $151.2 million, with subscription revenue at $131.4 million and professional services revenue at $19.8 million, missing consensus expectations of $155.1 million [6]. - Adjusted gross profit was $102.6 million, below the consensus of $107.9 million, leading to a decline in adjusted EBITDA by 5.8% to $50.7 million [6]. - Adjusted net income decreased from $15.9 million to $13 million, indicating a negative growth trend [6]. Growth Outlook - The growth slowdown in 1Q25 was primarily due to delayed deals and longer customer approval processes, with nearly half of the pushed-out deals already closed [6][10]. - Subscription billings remained stable at around $540 million over the last twelve months, and current deferred revenue grew by 390 basis points in 1Q25, suggesting a potential growth inflection point is near [7][8]. - The company has redirected resources to enhance implementations for existing customers, which is expected to facilitate faster revenue recognition [8]. Market Sentiment - Despite the market's negative reaction to the 1Q25 results, the company believes the growth outlook remains positive, with leading indicators suggesting a turnaround in growth soon [8][10]. - The company anticipates that ETWO's multiples could increase as growth turns positive, potentially returning to a trading level of 2.4x, with further recovery to 3x as growth accelerates [8].