Q3 2019 Earnings Call

Excuse me, ladies and gentlemen, this is Eric conference operator.

Friends call is scheduled to begin momentarily until that time. Your line. So once again be placed kind of music cold.

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Good afternoon. My name is Kathryn and I will be a conference facilitator today at this time I'd like to welcome everyone to the Manhattan Associates third quarter 2019 earnings Conference call.

All lines have been placed on mute to prevent any background noise.

After the speaker's remarks, there will be a question and answer period. If you like to ask a question. During this time simply press star and the number one on your telephone keypad. If he would like to withdraw your question depressed. The town came as a reminder, ladies and gentlemen. This call is being recorded today, 22nd as October 2019, I've known.

To introduce Eddie capable CEO , Dennis story, CFL unmet Humphreys senior director of Investor Relations.

Mr. Handpiece you may begin your conference.

Thank you Catherine and good afternoon, everyone.

One of Manhattan Associates, 2019 third quarter earnings Conference call.

Review, our cautionary language.

During the call over to any Capel our CEO .

During this call, including the question answer session. You may make forward looking statements regarding future events were the future financial performance of Manhattan Associates.

Cautioned that these forward looking statements involve risk and uncertainties and are not guarantees of future performance.

Yeah that actual results may differ materially from the projections contained in our forward looking statements I refer you to the reports Manhattan Associates files with the FTC for important factors that could cause actual results to differ materially from those in our projection, particularly our annual report on Form 10-K for fiscal year 2018 in the risks.

After discussion in that report, we're under no obligation to update these statements.

In addition, our comments include certain non-GAAP financial measures in an effort to provide additional information to investors.

Oh non-GAAP measures have been reconciled to the related GAAP measures in accordance with FCC rules.

Find reconciliation schedules in the form 8-K, we submitted to the FCC earlier today and on our website a median age dot com.

Now I'll turn the call over to Eddie.

Thanks, Matt well good afternoon, everyone and thank you for joining us to review the Manhattan Associates 2019 third quarter results.

It is very positive quarter, posting all time record revenue on strong demand across all of that core solutions.

We delivered third quarter total revenue of 100 and to 60 $862 million.51 of adjusted earnings per diluted share.

Despite your name going door, a global market volatility third quarter revenue grew 14% compared with a year ago.

An adjusted earnings per share exceeded your expectations by 15 cents Clive license and services revenue all exceeded their targets driving strong operating results.

In our ongoing Clive transition.

Adjusted operating margin results exceeded your expectations on stronger than forecasted license revenue performance with several large future pipeline deals accelerating into the quarter, creating some near term and very near term variability in our operating margin performance.

A cloud transition continues to progress well, we set aggressive goals well strategically allocating capital towards investments to enable customer success and expand our addressable market and we expect those efforts just for the deliver on our long term growth and earnings objectives.

With that in mine, we remain optimistic on our outlook for the remainder of this year and into 2020 and as such we're raising our 2019 full year total revenue operating margin and earnings per share guidance.

And we continue to see positive momentum in our business driven by a ongoing five transition as well as a disciplined focus on the following four key growth areas.

Firstly, a market leading product innovation, we're investing aggressively in innovation with year to date R&D investment spend of $61 million.

21% versus 2018, and we're on pace to achieve over 80 million in R&D spend for the full year.

Development agility enables us to deliver new competitively differentiated products and technology solutions to the market much more rapidly leading to further pipeline growth competitive wins and customer success.

Secondly pipeline strike it remains solid global Lisa Clive license and services with better than expected trends in both Clive and license.

That transition to the cloud and increase in subscription revenues, we do expect a license revenue to continue decline year over year.

Well early Q3, Clyde WMS deal activities booking strength and pipeline activity indicates demand is gradually building for WMS in the class.

Overall, we continue to be very encouraged by a new customer signings and by the concentration of potential new customers in the global pipeline with over 50% of ideal opportunities represent in net new logos.

Thirdly at consulting services delivered 92 million in revenue grew 9% versus 2018 on strong demand for a market, leading Manhattan active omni channel inventory and supply chain solutions.

And Judah strengthening global demand for new product sales and system upgrades, we've increased that capacity, 13% year to date and continue to actively recruit global services consultants around the world to meet demand and to further drive customer satisfaction.

And lastly, sales and marketing a competitive win rates remain strongly about 70% against head to head competition with approximately 30% of license and cloud sales coming from new customers.

Verticals driving more than 50% about license and cloud revenue in the quarter, where retail consumer goods and food and beverage.

Sales and marketing investments are up about 9% year to date as we continue to drive broader market awareness, while expanding our marketing sales an account coverage, that's predominantly in Americas and across Europe .

Total software revenue was 29.7 million in the third quarter up 65% versus 2018 with the break down reflecting a continued revenue mix shift from perpetual license to a cloud first company.

This performance marks the fourth consecutive quarter of year over year combined total software revenue growth with cloud revenue expected to surpass license revenue in the fourth quarter of this year.

We recognized a 15.5 million in license revenue in the quarter significant deals included for $1 million plus transactions in the Americas that was even if they were evenly split between new and existing customers.

Although deal activity remains robust we expect the overall license performance will continue to be impacted by timing primarily related to the retail reconstitution by customers and prospects weighing the potential shift to the class.

Now turning to Clyde specifically at Q3 revenue totaled 14.2 million growing 120% over the prior year and 58% sequentially.

We continue to experience strong interest in subscription models for traditional supply chain management solutions.

Including WMS scale transportation inventory.

Cloud activity in that supply chain management segment was particularly strong in Q3.

Underpinned by a large long term government agency customer the transition several products from managed services model to a full plan deployment.

It lowered that services growth rate it as well, but in Turin positively impacted at Clyde run rate and Dennis will provide a little more details around the specifics of these units financial update.

Well early kind of doctors are impacting our license results. We continue to view this as positive for our long term subscription revenue growth.

And now we'd like to provide just a few updates on that product innovation. Some insight into recent successes with implementations of these innovative solutions within our customer base. So let's start with at point of sale solution in the past few weeks, we completed a highly successful and on schedule implementation about.

End of sale application and have a major multichannel lighting retailer in the U.S. and in collaboration with this customer we rolled at Manhattan point of sale application and cross the entire store fleet during the during the course of this this past summer.

That was a reminder, unlike any other point of sale application for the tier one market Manhattan's point of sale. These cloud native so its version lists and always up today.

So in this case at customers effectively done the very last implementation upgrade there will ever need to do for their stores and we're very proud of the worked at a research and development and professional services teams have done here working hand in hand, with the customers leadership I T and retail operations team.

It's a real success story for both the customer and Upsells and we believe it's a model what in store retail talking about technology is going to look like in the coming decade.

And Additionally, we've got a few more point of sale customers conducting initial implementation. We're in the process of rolling out have Pos solution across the fleet in stores and as we look at at POS sales pipeline, we're starting to see a healthy demand building and we believe that a multi year efforts to raise awareness press release.

And while establishing that brand within the store systems market.

Finally, beginning to pay off.

And we're being invited to participate into more competitive evaluations, both within and outside at current customer base.

Our point of sale solution is increasingly being noted is one of the key must consider next generation solutions for brick and mortar stores as we continue ambition to make the appeal of personal shopping accessible well beyond its traditional bankers of luxury retail.

As market data is telling us that exceptional personalized service is one of the primary factors separating retail winners and losers and were particularly committed to helping our customers win in this area.

Now one other quick note before Elfas some remarks within our supply chain area. Two weeks ago, we hosted our largest ever contingent of that customers at Manhattan exchange.

In Barcelona, Spain, similar structure to momentum at customer conferences that has attended primarily by U.S. customers exchange is principally focused on bringing together our community of European and middle Eastern customers. The event was the best we've ever had measure to across a number of dimensions.

Customer attendees partner participation the number of customer led presentations and participation in a user group meetings of particular note I thought was the wide variety of customer led presentations ranging from the ROE life that warehouse management system for a grocery in Europe to the ongoing global rollout of Manhattan store technique.

Algae for on the world's preeminent luxury brands.

We're proud to be at the nucleus of innovation for our customers across a wide landscape of commerce and supply chain projects.

And finally, I'll close that my product specific remarks, as an update on our transportation management business. The third quarter marked another very successful quarter. The Tms at Manhattan with the growing number of customers signed and projects in flight and what's particularly encouraging is that our ability to sign entirely new customers into oxide tier.

This offering meaning that we've added these customers who hadnt previously used any technology from Manhattan Associates.

These new customers represent the success that we're having with.

With establishing at brand in Tms for my first ever placement in the leaders quadrant of Gartners magic quadrant to sharpening our sales and marketing efforts around Tms Manhattan's Tms pipeline is certainly growing and what product innovation is always key to the type of uptick we've been seeing I think it is worth noting that.

The innovation that we've seen from my professional services team around Tms in a nutshell leveraging the advantages of Clyde, we're now able to get at customers life without Tms solution quicker and at lower cost than ever before and we certainly look forward to continuing to build up momentum in this line of business.

In the coming quarters.

So that covers that business update a dennis is going to provide us with the update on our financial performance in discuss it 2019 full year guidance in further detail and then I'll close our prepared remarks with a brief summary.

Thanks Eddie.

Overall, our growth profitability cash flow and balance sheet metrics continue to be solid in our business transition.

Third quarter total revenue was $162.3 million with 14% organic growth over prior year.

Excluding FX total revenue was up 15%.

Adjusted earnings per share was 51 cents GAAP earnings per share was 42 cents stock based compensation accounting for the difference between adjusted and GAAP EPS.

Since revenue for the quarter was $15.5 million nearly doubled the 8 million dollar target discussed in our Q2 call.

The driver of the large Q3 beat was primarily timing related as we sign new deals in the third quarter versus our expectations are the fourth quarter in early 2020.

For the fourth quarter of 2019, we're targeting approximately $7 million to $8 million as license revenue mix continues to transition to cloud subscriptions.

For full year 2019, we're raising our license estimate range to 47 to 48 million.

Our previous range was 38 to 42 million.

Q3 cloud revenue was $14.2 million up 121% versus Q3, 2018, driven by robust customer demand for our cloud solutions with 70% of our cloud deals and bookings driven by strong WMS demand.

And very positive in the quarter, 60% of the bookings generated came from a healthy combination of net new customers to Manhattan, and net new product sales to existing installed base customers.

As Eddie mentioned early in Q3, we successfully converted and large longstanding customer from a managed services contract to the cloud contract raising our quarterly cloud revenue run rate by approximately $3 million.

The impact lowers our services growth rate, but in turn positively impacts our cloud run rate, which we're a foot reflecting both in our go forward guidance.

For the fourth quarter of 2019, we're estimating our cloud revenue to be about $15 million up 121% over the prior year on solid demand for our cloud solutions for full year 2019 were raising our cloud revenue recognize range from our previous estimate at 42%.

$44 million to approximately $46 million.

Representing year over year growth of about 100%.

[noise] for total software representing cloud and license revenue combined we're raising our 2019 full year estimate to $93 million versus our previous estimate of $83 million, representing a year over year increase of approximately 36%.

Regarding bookings as we've discussed remaining performance obligation for RP no is the leading proxy of our cloud bookings performance and represents the value of contractual obligations required to be performed otherwise referred to as an earned revenue or bookings.

Our RP over the quarter totaled $152 million up 137%.

Over prior year and up 26% sequentially over Q2 2019.

This excludes the Q3 government contract conversion previously discussed.

For Manhattan. This disclose value represents our cloud bookings value of underwritten revenue under noncancelable contracts greater than one year.

Contracts with a cat and non Cancelable term of one year or less are excluded from the reported RPL amount.

One last point on license and cloud our performance continues to depend on the number and relative value of large deals we closed in any quarter as large license deals remain important [noise].

Our markets continue to shift towards subscription models. While this is positive deal sizes, maybe slightly smaller subscription revenue is recognized over time.

We also retain appropriate caution around slowed decision, making by some clients and prospects, particularly retailers and potential global macro and geopolitical events that could impact business investment cycles.

Shifting to maintenance.

Revenue for the quarter totaled $37.8 million up 2% versus the prior year on strong maintenance cash collections.

Retention rates remained strong at greater than 95 plus percent.

For 2019, we are estimating maintenance revenue to be about $147 million roughly flat versus 2018.

We estimate Q4, 2019 maintenance revenue to be about $36 million.

Overall, we expect that our maintenance results will be influenced by perpetual license deals closed during the year existing customer conversions to cloud retention rates and timing of cash collection.

Turning to services consulting revenue for the quarter totaled $91.6 million up 9% over Q3 2018 on persistent global demand.

For Q4, we are forecasting a 6% sequential services revenue decline from Q3 due to retail peak seasonality as customers idle implementation work.

We are targeting Q4 revenue growth of approximately 1% to 3% over prior year with a midpoint target of $86 million for the full year, we estimate services revenue to be about $360 million.

Our consolidated subscription maintenance and services margin for the quarter was 50.4% driven by increased head count investment in cloud and consulting services.

For 2019, we expect Q4 subscription maintenance and services margin to be about 49% due to the combination of onboarding of new hires customers idling implementations during the retail holiday peak season, and higher cost of compute reflecting the seasonality impact of retail peak disease.

Season as well.

We are targeting full year subscription maintenance and services margin to be about 50%, which reflects our investment in cloud operations performance based compensation and increase services capacity to meet demand.

Turning to operating income in margin Q3, adjusted operating income totaled $43.1 million with an adjusted operating margin of 26.6%.

For Q4, 2019, we're estimating adjusted operating income of $26 million to $27 million and adjusted operating margin of 17.8% to 18.4%.

Our license to cloud revenue transition combined with continued hiring across the organization customers idling implementations as I mentioned previously for Q4 retail peak and seasonal impact of cloud compute cost for retail customers are included in our operating margin estimates.

For full year 2019, our adjusted operating income estimate is $141 million to $142 million up from our previous estimate of $125 million to $129 million.

For the full year two net 2019, we estimate that our adjusted operating margin will be in a range of 23% to 23.2%.

Our Q3 adjusted effective income tax rate was 24.5%.

And we are estimating a 24.5% effective tax rate for both Q4 and full year 2019.

Regarding our capital structure and Q3 2019, we repurchased approximately 430000 shares were $36 million.

Last week, our board approved replenishing, our repurchase authority limit to a total of $50 million and for Q4 and full year 2019, we are estimating 65.3 million diluted shares outstanding which assumes no buyback activity.

Turning to cash.

Yeah, we closed the quarter with cash investments of 114 million and zero debt. Our current deferred revenue balance totaled 97 million up 19% from December 31, 2018 on maintenance and club buildings.

Q3 cash flow from operations totaled $40 million and year to date operating cash flow is $112 million up 9% over prior year.

Year to date capital expenditures totaled $11.4 million, reflecting significant facilities investment to accommodate business growth.

For full year 2019, we estimate capital expenditures to be approximately $14 million to $15 million.

Now I'll wrap up with our updated 2019 guidance and a preliminary look at 2020, then turn it back to Eddie for closing comments. So for revenue, we're raising our 2019 total revenue guidance from our previous range of $598 million to $604 million to 600.

$10 million to $614 million targeting total revenue growth of 9% to 10%.

Our previous guidance targeted year over year growth at seven day percent.

We expect Q4 2019 total revenue growth in the range of approximately 1% to 3% versus the prior year, reflecting retail peak seasonality impact.

[noise] for earnings per share, we're raising our 2019 adjusted EPS guidance to $1.63 to $1.65, our previous range was $1.46 to $1.50.

Our GAAP EPS guidance is $1.26 to $1.27. Additionally, we estimate our Q4 2019 adjusted EPS to be approximately 31 cents.

For operating margin, we're targeting a full year adjusted operating margin range of 23% to 23.2% and GAAP operating margin range of 17.7% to 17.9%.

Our margin objectives reflect our business transition to cloud continuing to ramp in 2019, including related incremental investments with the objective of driving long term sustainable growth.

As we look towards next year and beyond our focus remains on sustainably growing our subscription base, while making organic investments to position ourselves for long term growth and profitability.

Well, we're in our annual planning phase, we're going to provide some preliminary targets for 2020.

Bearing in mind, our ongoing revenue mix shift as we transition to a cloud first company.

Coupled with the growth investments, we continue to make across R&D sales and marketing in facilities.

Furthermore, as is customary we expect to provide 2020 guidance during our fourth quarter call and full year 2019 earnings call.

For our preliminary 2020 targets all year over year growth rates are pegged to the midpoint of our full year 2019 guidance for the relevant target.

For total revenue from the midpoint of our 2019 total revenue guidance of approximately $612 million. Our estimated range for 2020 total revenue is $643 million to $658 million, representing topline growth of 5% to 7.5%.

For adjusted earnings per share our estimated range for 2020 is $1.50 to $1.57.

On a total software basis again license plus cloud, we're targeting 102 $110 million revenue range, representing 7% to 18% year over year growth.

We expect our 2020 software revenue mix of license and cloud to shift from about 50 50 to about 30% license 70% cloud.

As we've noted license revenue will continue to decline as customer demand for our cloud solutions increase.

We're currently targeting approximately $25 million to $30 million in license revenue in 2020.

For cloud revenue recognize we're estimating approximately $75 million to $80 million, representing 62% to 72% growth.

As we scale our cloud business. Our view is that the more success, we have which is subscription adoption the impact of the revenue mix shift from license to cloud on our near term income statement results will be effectively masking a significant level of under underlying value creation.

For maintenance, we're targeting to be flat to down 2% year over year on lower license revenue in cloud conversions, resulting in a range of $144 million to $146 million.

For services.

Against record 2019 comps, we're estimating 385 to 389.

Million in revenue or 7% to 8% growth with a midpoint value a 387 million.

Regarding adjusted operating margin with our ongoing transition to cloud, we're targeting and adjusted operating margin of 20 Dot zero percent 20, Dot 520 dot 0.5%.

We expect our adjusted operating margin to trough at around 20% in 2020 subject to timing of business investment.

And finally, our effective tax rate is expected to remain the same at approximately 24.5% subject the U.S. federal state and foreign tax legislation changes.

And for diluted shares were projecting 65.3 million shares per quarter, which of course assumes no buyback activity in Q4 2019 or for the full year 2020 that covers the financial update back to Eddie for some closing comments. Thank you Dennis.

In summary, we look we're very pleased with our performance in the quarter and with that continued cloud transition progress.

Underlying business fundamentals remain sign and we continue to focus on extending our market leading position in supply chain and omni channel Commerce solutions.

Momentum and success continues to be underpinned by delivering innovation the anticipates the needs of an evolving market as well is focusing on a customer success and leveraging at deep domain expertise our year to date performance continues to increase that confidence in the significant expanded business opportunities within.

That core markets, our competitive position remains strong and we continue to invest in innovation to extend our addressable market, while expanding our market leadership and product differentiation.

Our all go and feedback from our customers and as strong competitive win rates continue to serve as guide posts for investment strategy and capital allocation decisions.

And as always we remain absolutely committed to a customer success, while driving long term sustainable growth for our shareholders with the world's most talented and knowledgeable omnichannel and supply chain Commerce employees. The best software solutions in the market dynamics, requiring customer investments in innovation, we believe we have a market.

Leading position are able to succeed in the long term.

And with that Kathryn we're ready to take any questions.

Yes, Sir ladies and gentlemen, just as a reminder, if he'd like to ask a question that star and then the number one on your telephone keypad.

Your first question comes from the line of Terry Tillman with Suntrust.

Hey, good afternoon, gentlemen, can you hear me, Okay. We can sorry, yes, good afternoon.

For now well congratulations first of all high at a high Dennis and welcome Matt.

Yeah. The first question I wanted to ask and Dennis you touched on this a little bit I want to make sure I had this right, but it's kind of a multipart question on ARPU.

The net add was strong in terms of the RPL figure first did you say that this federal agency that migrated from managed services, there's not much or any impact in that ARPO addition, in the quarter and then secondly, maybe all could have hone in on what was the real drivers of the strength that ARPU on the not a follow up thank you.

Hey, Terry Yes. It is not included in the Arpino that deal is not.

And the strength of.

The quarter in terms of driving bookings.

Is really across all the solutions, but W.M. had a very strong showing.

[noise], which is very encouraging in terms of early early demand signals for WMS in the cloud.

Okay and that's my follow up question, and then I'll rest as a as it relates to investments for 2020.

You gave us a specific guidance on margins. So when we look at increased investments in 20.

How would you stock rank investments incremental dollar investments in sales and marketing and R&D going into next year. Thank you.

Yes, good question, we'll talk or and our annual budgeting cycle and we'll talk about that in the Q4 earnings call, but they will be the talk to investment categories Terry for sure.

And thank you.

Your next question comes from the line of Mark Schappel with benchmark.

Hi, good evening.

Congratulations on the quarter. Thank you Mark appreciate it had just a any real quick I was wondering if you could just provide some additional details around the government agency customer that decided to go to for cloud deployment.

Maybe a little bit of color around what drove the change and whether you think.

Yes.

What do you expect further some more changes with other customers.

Well I you know, we do think that it's frankly inevitable mark that everything that we do and frankly I customers do I will move to the cloud over time.

Really it's just a question a prioritization and you know in timing. This is this particular client is FEMA they've been a customer for over a decade.

And as you probably know there is a frankly, a pretty large initiative within the federal government.

To move to move to the cloud and really this was just part and parcel of that you know that program. It happened kind of reasonably swiftly and certainly very efficiently from a product and implementation perspective, but.

I think that we'll see certainly more about customers going that direction overtime.

Great. Thank you and then.

It's a much commentary around or your Tms solution I was wondering if you could just go into some of the demand drivers that are a.

Pushing customers to kind of upgrade this the software category Yeah. Yeah. So you know look it's the capacity constraints are certainly a factor.

The continued.

Desire for better and better and better visibility is because we all his consumers want better visibility into at packages, though in turn.

Seeing transportation providers and shippers provide that capability to you know to their customers and ER and the other the other.

General factor is you're seeing.

Many more frequent yet smaller shipments across transportation network, which requires.

Better optimization and more advanced optimization to be able to make those moves at least in a marginally if not wholly profitable way.

Great. Thank you and then finally also some favorable commentary around the cloud WMS solution.

I think also in the past quarter to there's been nothing real commentary around that solution I was wondering if you could.

Sketch out for us other customer profile that is considering moving to a subscription model for WMS.

Typically smaller customers or is it your newer customers, maybe just give us some some details there yes.

The as we as we mentioned in the prepared comments you know that the momentum there an appetite is you know is gradually building I would say it is interesting that we are seeing really the full gambit of customers.

Again, it's early days, but the full gamut of customers looking and executing on site deployments. So when I say full gamut of customers.

Moeller single distribution center customers to tier one multi DC customers I'd also third party logistics providers kind of in the in the middle there so the drivers.

Can be a little different certainly for the third party religious these customers.

<unk> costs it cost advantages one but also the speed to deploy it was the as third party logistics guys bring on new customers they need to be able to stand up a solution very very quickly for them.

Obviously kind of technology offers that are that capability and facility for them.

Great. Thank you that's all for me.

Okay. Thank you Mark.

Your next question comes from the line of not tell with William Blair.

Hey, guys. Thanks for taking my question.

First wanted to de ask a follow up on on your commentary around the cloud WMS. So my understanding was that the current subscription version of WMS was more or less hosted version.

And there wasn't really a sort of true version list.

Are you on that product like you have with the active omni products. Yet is is that not the case is it similar to active omni where updates are automatically pushed cross or is it more of a hosted version of the WMS product as well. So included in the subscription or updates to you know to the WMS products.

Sure well, obviously, when we're reporting AG from a financial perspective.

WMS in the cloud.

It is the economic model that we are we're referring to remove from the license line to the subscription line, but included in that subscription line our.

Updates.

Frequent updates to the WMS product.

Got it Okay, and then wanted to ask on the on the license beat So is all that's included in the license now is does that all related to WMS and you still brought up even though you commented that some was called for would you still brought up the license expectation for the full year. So so obviously there's your.

Seeing some strong demand there so maybe some commentary on on what's driving some of those license sales.

Yes, strategic strategic supply chain transformation for customers the still want to run.

On on premise I mean.

Again, we're still.

Convinced that eventually there is an it's inevitable the ever the moves to the class, but that's timing related a under the long tail on that so.

There are some customers that still one still an on premise solutions and were more than happy to execute and deploy you know in that.

Not mode as far as.

Overall license for the quarter, it was driven kind of largely by by WMS for sure given the.

Manhattan active omni is 100% you know.

Deployed into cloud and not all but almost all of that Tms solutions or you know were up in the up at attractive.

Okay got it and then last one for me just on the on the point of sale solution. The commentary there about now being included in and in more.

RSP is maybe just what's the sort of feedback been on how your product now after making improvements on over the past several years and having a few referenceable customers stacks up to the competition and I guess where are the main.

Pushbacks, you're seeing as to why somebody would choose sound like competing Oscar and over years, Yeah, Yeah, great question.

So the feedback on the solution its capability and frankly, especially the technology architecture is being.

Almost overwhelming in terms of hi positive had positive is you know the implementations that we've done have been swift they've been on time.

A very very effective so that's I think the reason that we're seeing this very very strong momentum that up just a quick reminder, here well.

Point of sale and the financial transaction is consummated in the retail store is very important you know as solution spans the entire.

Retail suite of solutions inside the stores of sort of execution.

Customer engagement customer service point of sale across all channels make ensuring that we can sell anything to anybody you know from any anywhere which is.

Big leap forward in technology and capability from.

You know frankly.

End of sales solutions from from today's gone days gone by.

In answer to your question, where do we get where do we get pushed back clearly, we do not have hundreds and hundreds and hundreds of implementations around the world. So if there is a question that were asked.

And it is around.

I may deployments, how many countries have any and all of those kinds of things things that you know you can overcome overnight you overcome one successful implementation of the time and that's really what we're focused on that.

And suffice to say Matt pipeline is.

Looking very solid with respect to Pos opportunities.

Great.

Thats, all I had things like US okay. Thank you Matt.

Your next question comes from the line of Brian Peterson with Raymond James.

Hi, Thanks, gentlemen, and congrats on the strong results. So one of the follow up on the point of sale.

And he did I hear you correctly that you talked about opportunities with new customers that are not currently Manhattan Manhattan customers and I'm curious if that's happened a little bit quicker than you would've expected in should we be hearing about any standalone customer wins in the next few years I'm on the point of sale side, but we certainly hope so.

I don't know that it's happening.

Faster, Brian , but so we are we are certainly picking up some you know some momentum and you did hear right that some of the inquiries and sales cycles that were in our with.

New logos as the.

As is generally.

It is generally generally noted.

I think you know the to we're excited we're excited about that we're we're focused on those you know just as much of courses. We are on implementations of potential implementations with their existing contracts. So exciting times from a point of sale perspective for sure.

Got it maybe one for Dennis just on the margin side as we're thinking about the upside that you posted this year in the guidance for 2020 anything that you can say in terms of timing related to the hiring in the gross growth investments are that happened this year and did any of those shift into 2020.

Yeah, we're continuing to higher were just based on a business demand.

So.

It's a pretty.

Full employment market out there Brian so the hiring you know, we're doing pretty well, but it's taken a little bit longer is that he said on the services side of the business.

We've increased our capacity year to date, 13% last quarter. It was 10%. So we're definitely growing but there are lot more heads. We you know we need to pull into the business to meet customer demand.

And then you know the the investment cycles around the sales organization were quite active there were really active across the entire organization because growth is pressing the business, so investment and facilities investment in 80.

Continued investment in cloud ups.

Thanks, guys.

Thank you Brian .

And your last question comes from the line of Hannah Kim with Rosenblatt Securities.

Thank you Hi, Eddie and Dennis and welcome that congrats on a strong quarter heady I'm very strong license saving in the quarter. You mentioned some of those were Q4 and first half 2020 deals.

You mentioned, what drove customers pulling those deals into Q3.

I think it was just.

There was.

Well, let me just say for from from my perspective.

It was not any kind of financial management. It was the desire to get started with the supply chain transformation, you know and begin to see the value from the solution faster.

I I do have reasonably first hand experience and knowledge of those you know the number of those particularly deals and just customers who saw the value and wanted to you know wanted to get crack and frankly.

That's great and then just on the MSP customer I'm, just kind of curious.

Or any other opportunity for any other large current MSP customers to transition to the cloud in the near term or was that just a onetime event within your current MSP installed base yeah.

The certainly our additional opportunities you and again, we think that.

Cloud deployments isn't inevitability for at least most of our customers frankly, maybe even all of them all of them overtime. So we're working hard to make sure that I customers I understand the value and the benefit of food glad deployment, but I would say the we're not a back to do anything unnatural to encourage them to go.

They're willing we're letting them make that decision make the right decision from a timing perspective for their business.

It's not.

It's not a large for some percentage of our overall revenue either.

Okay, Great and then just last one on for you Eddie on the point of sales business momentum on how big are those point of sales deals typically.

Just kind of curious.

Well, we're not going that we obviously, we don't close to don't disclose the.

As a specific deal size you I'll say that they are they are there a nice deals and deals that were very that we're very interested in you know in closing or they are large a medium to large footprint stores. So you know deals that feels that matter for sure.

Sure.

And.

Dennis.

One of two yet.

The contract length of a new subscription deals that you signed in the quarter.

Turning to our appeal has that changed much in the corner.

Okay great.

Congratulations on a strong quarter. Thanks, guys very good. Thank you welcome back.

Yes.

Thanks, Chad.

And there are no further questions at this time.

Very good Catherine Thank you well. Thank you everybody for joining us on the Q3 coal where again excited about the progress that we've made and I look forward to another strong quarter on reporting that out to you in about 90 days or so in the meantime have a wonderful holiday season. Thank you.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation you may now disconnect.