Taking Stock of E2open’s Risk Factors

E2open Parent Holdings (ETWO) provides a cloud-based, end-to-end supply chain management platform. In its second-quarter fiscal 2022 results, the company delivered better-than-expected revenue, but fell short on earnings.

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Let’s have a look at ETWO’s Q2 financials, as well as what has changed in its key risk factors that investors should know.

Revenue increased 12.8% year-over-year to $92.3 million, outperforming estimates of $90.4 million. The subscription revenue of the company jumped 10% during this period to $75.9 million.

Notably, EBITDA of the company jumped to $33.5 million from $26.2 million a year ago, indicating an EBITDA margin of 36.3% versus 32% a year ago. Net loss per share came in at $0.11. (See Insiders’ Hot Stocks on TipRanks)

Michael Farlekas, CEO of E2open commented, “We had a very strong second quarter where we exceeded our plan on revenue, gross margin, and EBITDA. Earlier this year, we announced that we would achieve double-digit organic growth in our fiscal third quarter. We are excited to have achieved this important milestone one quarter early.”

Looking ahead to Fiscal Year 2022, ETWO expects total revenue to be in the range of $470 million to $474 million. Adjusted EBITDA is expected to land between $161 million and $163 million, indicating a margin of ~34%.

Bank of America Securities’ Andrew Obin has a Hold rating on the stock, alongside a price target of $14. Obin believes as ETWO demonstrates consistency in the growth of organic platform revenue its valuation gap with peers will decrease.

Risk Factors

According to the new TipRanks Risk Factors tool, ETWO’s main risk category is Finance & Corporate, accounting for 49% of the total 49 risks identified. In the recent Q2 report, the company changed two key risk factors.

Under the Finance & Corporate risk category, ETWO noted that its ability to tap additional capital and to react to trends in the economy and industry may be affected due to its level of indebtedness. At the end of August, ETWO had $523.8 million in debt and further, pursuant to its acquisition of BluJay has taken on additional debt of $380 million. This level of leverage heightens the possibility that the company may not be able to generate sufficient cash to meet its debt obligations.

Under the Tech & Innovation risk category, ETWO also highlighted the dangers posed by cyberattacks and security vulnerabilities.

The sector average Finance & Corporate risk factor is 50%, ETWO’s is at 49%.