E2open Inc (EOPN)’s Third Quarter Fiscal 2015 Financial Results Conference Call Transcript

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We continue to experience good traction in our go to market activities with our side partners. This quarter, 2 out of 5 new customers we added involved in our side partners. To properly support the pipeline deal that we are managing with our side partners we’ve increased the capacity with the sales organization dedicated to managing partner activity.
As part of our marketing activities we are very active in the industry conference circuit in the recent periods. Speaking of events like the 2014 Consumer Goods Business and Technology Leadership Conference, The Oracle Open Applications Blue Plenary Meeting and American Supply Chain and Logistics Summit. To wrap up, we are obviously disappointed by the inconsistency in our execution. However, we feel these issues are temporary and well within our ability to control. We’ve taken the necessary steps to address these matters and remain confident in the opportunity in front of us.
With that, let me turn the call over to Peter for more detail on the financials.

Peter Baloney, E2Opens, Chief Executive Officer
Thanks Mark. Please note, I will be reviewing non-GAAP results in my discussion of our third fiscal quarter financials. A full reconciliation between GAAP and non-GAAP results can be found in our earnings press release. For the third quarter non-GAAP total revenue was 20.8 million. At the upper end of our guidance of 20.1 to 20.9 million. This compares to the 18.9 million for Q3 of last year. Non-GAAP subscriptions and support revenue was 16.9 million, up 15% year-over-year, but down 1% sequentially. The growth in our non-GAAP subscription system for revenue was impacted by the three non-renewals and one delayed deal, discussed in our Q2 call. Non-GAAP professional services and other revenue was 3.9 million, up sequentially but down year-over-year.
Non-GAAP gross margin for the quarter was 68%, this is up from 65% for Q3 of last year and flat sequentially.

Our subscriptions and support gross margin was 81%, comparable to the prior quarter and down slightly from 82% for Q3 of last year. Professional sGAAP operating loss is $4 million, for the quarter. Ahead of our guidance of the loss of 6 to 5.2 million. The upside was driven by continued actions to restrain the growth of our cost structure, as we work through the lost and delayed deals from Q2, and the sales execution issues Mark discussed, a moment ago. This compares to a loss of 3.9 million for Q3 of last year and 3.3 million for Q2. Non-GAAP EPS was negative 15 cents ahead of our guidance of negative $.20-$.17 this compares the $-.16 for Q3 of last year and $-.11 for Q2 of this year. Just beneath that was a loss of 3.3 million. Ahead of our guidance of a loss of 5.4 to 4.6 million, this compares to a loss of 3.3 million for Q3 of last year at a loss of 2.7 million for Q2. Cash pay operation was -9.2 million for the quarter. After taking into account capital expenditures and the cash pay for acquisition expenses, free cash flow was -9 million.

We ended the quarter with $25.1 million of cash and investments. We remain confident that we can maintain an adequate level of cash, based on our current operating model. We are providing guidance for Q4 and updating fiscal year guidance as follows, all of which is non-GAAP. For the fourth quarter of fiscal 2015 we expect revenue of 19.3 to 19.8 million. As you consider this figure, please recall that we have reached the end of the original adjustment period for the room contract amendment, from Q2 of fiscal 2013 and therefore will no longer be adding any revenue related to this event, to our non-GAAP revenue.


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