Q1 2020 Earnings Call
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Ladies and gentlemen, good fits the operator states coax, that's got to to get momentarily until that time, you're likely to place when it's cold. Thank you for your patience.
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And that will be a conference facilities.
Okay.
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Good question and answer period, if you like asked a question. During this time, we start and then the number one of your telephone keypad, if you'd like to try your question principles key.
A reminder, ladies and gentlemen, it's called being recorded today April 21st 2020.
I'd now like to trend I would now like to introduce 80 people CEO Dennis story, CFO and a healthy senior director Investor Relations Mr. Humphrey you may begin your conference.
Thank you Jesse and good afternoon, everyone welcome to Manhattan Associates first quarter 2020 earnings call.
I will review, our cautionary language and in turn call over to enable our CEO.
During this call, including the question answer session.
May make forward looking statements regarding future events.
Future financial performance.
You are cautioned that these forward looking statements involve risk and uncertainty and are not guarantees of future performance at actual results may differ materially from the projections contained in are forward looking statements.
For you to the reports Manhattan Associates filed the FCC for important factors that could cause actual results to differ materially moving our projection, particularly our annual report on form 10-K for fiscal year 2019 in the risk factor discussion that report.
Well, if any risk factor updates, we provide in or subsequent form 10-Q.
We know in particular that uncertainty regarding the impact in October 19 pandemic underperforming.
Actual results could differ materially from our projections.
We're under no obligation to update the season.
In addition, our comments include certain non-GAAP financial measures in an effort to provide additional information to investors.
Non-GAAP measures have been reconciled to the related GAAP measures in accordance with that Tc rules.
You'll find reconciliation schedules in the form 8-K, we submitted the FCC earlier today and on our website at any NH dot com.
I'd like to turn the call now over to Eddie.
Alright, Thank you, Matt well good afternoon, everyone before I begin my comments related to Manhattan Associates I want to take this opportunity to recognize and thank some of the heroes of that Cobot 19 world.
The healthcare workers first responders or appropriately receiving great commendations respect and thanks from every corner of the world and we have Manhattan associates, joining thanking them for their amazing dedication and the personal sacrifices that they're making to keep us healthy and also care for those that are run well.
So thank you.
But I can tell you from first hand experience both personally and professionally.
Hundreds of sizes, maybe millions.
Supply chain heroes working every day all around the globe domain to maintain the flow of life sustaining products.
Twod beverages pharmaceuticals, and yes toilet paper into the communities. They serve then we live in.
These heroes of putting themselves at risk every single day to keep critical supply chains moving so thank you. Thank you to the truck drivers the warehouse operators, the retail associates and all of supply chain professionals around the world, where humbled and tried to be working alongside you.
So thanks again for everything that you did.
So back to Manhattan Associates, and thank you again for joining us as we review at first quarter Twentytwenty results and cover in some due to the actions that we've taken any innovative approaches the we've employed to adapt to today's circumstances.
Additionally, we're going to be providing updates to our financial guidance bearing in mind the impact that covert 19 is having on that business globally.
[noise] Manhattan reported another record revenue quarter, despite business activity slowing in the last few weeks of March.
Specifically, we reported total revenue of $154 million, that's up 4% year over year, an adjusted earnings per diluted share of 40 cents.
Act cloud and license businesses combined with expense management drove our outperformance in the period.
Now, we've typically quotient investors by the impacts of global macro volatility volatility and the impacts that they may have on that business and that is certainly a fitting disclaimer in the light of events occurring as a result of covert 19.
And as such we've reflected expectations in this most in certain time into our full year guidance and Dennis will go into that in much more detailed in a moment, but we're taking what we feel is an appropriate level of conservatism into our forecast for the remainder of the year.
Reflecting what we know today as well as well as the visibility we haven't web business for the remainder of the year.
Well, though has to be said recovery timing certainly remains the wildcard.
As we outlined a few weeks ago, we've taken proactive steps to position that business in the face of today's uncertainty. These steps a precautionary in nature, enabling us to shoulder any near term disruptions will further investing in that business as we continue to be that pivot to becoming a cloud first company.
We view the actions we've taken is prudent I'm, we're approaching each and every day with a long term perspective in mind.
Furthermore.
We've also taken Swiss steps to ensure the health and safety of our employees globally, while considering the needs and demands for our customers, especially those on the front lines of delivering such needed supplies to local local communities at daily execution has evolved into a large leverage.
Tool model and we continue to find innovative ways to engage with customers and prospects ensuring that they are fully supported as they navigate navigate their way through this period, while we're still ensuring to continue our focus on cash flow generation and profitable execution.
I would like to review some of these specific actions that will allow us to manage through this volatile period.
While we're ensuring we're positioned to capitalize on market opportunities. When we returned to a normal more normal operating environment.
Specifically, we reduced our board of directors season, the cheese, Chief Executive officer salaries by 25%, our Chief financial officer salary by 15% and the salaries of or other named executive officers certain global leaders and all U.S. employees by 10%.
We suspended for a one k. match program here in the U.S. [noise].
For the time being we suspended as share repurchase program.
You have instituted a hiring freeze, but only for non critical roles across the organization.
We've reduced planned at least for Dick discretionary spend across the organization and there's a natural extension, we've reduced travel and marketing spend as appropriate.
And these actions should allow us the flexibility in the near term to remain focused on the long term opportunities ahead. The steps, we're taking enable us to preserve at global workforce in order to remain agile while meeting customer demands as it returns.
Importantly, our market leading product innovation also remains a priority and despite global economic headwinds, we still expecting to invest $72 million to $74 million in research and development. This year.
No I global pipeline for customer opportunities remains healthy across both cloud and license with notable trends in exide pipeline specifically.
This is due to organic demand and a continued shift from our legacy license business and the appetite for WMS and the clad continuing to build.
Given current market volatility that we are seeing some shifts in pipeline opportunities from Q2 into Q3 and Q4.
This I have to say that was different from past challenging environments, where demand for software simply disappeared.
The challenge now is one of timing in fact, the rest of out your pipeline is over 20% higher than it was when we spoke last quarter, which is courses, notably positive specifically frac cloud business and in terms of opportunities we continue to see over 50% of ideal opportunities represent.
Rented by net new logos.
Now turning to a services business.
We're active without customers and we conducted about 100 customer go lives in Q1, that's about typical of our run rate.
But we've taken proactive steps to ensure a larger managed services work continues virtually from project Kickoffs and design, including initial build an implementation preparation and the go live aspects about services work has been shifted to a remote strategy for the most part although we are performing limited onsite work.
In certain controlled situations.
And we've seen project delays due to customers who are either so consumed by that high levels of business activities, such as grocers and distributors or those who are focused on managing their own business through this difficult.
Time period.
Now with the growth specifically to our retail end markets approximately 20% of our near term to medium term services revenue has been impacted and we've updated our financial guidance to reflect this.
And we Havent seen any notable project cancellations. However, we would expect to see demand pushed AG for some of these impacted projects.
And the proactive steps we've taken thus far we will allow us to continue moving forward with the majority of our services engagement and we'll continue to improvise adapt to changing environment in order to meet customer needs and market demand.
And finally on the sales and marketing front, a competitive win rates remained strong at 70 plus percent against head to head competition with nearly 30% about lies licensing type deals for me the net new customers or net new products into the existing customer base.
Verticals driving more than 50% of exercise and license revenue for the quarter were pretty diverse across retail consumer goods government food.
Average grocery and life Sciences.
No.
Turning to some of that long term opportunity as I mentioned earlier, what these recent events have brought to life not in an environment that we would have which do have seen but nonetheless. It is something that we felt and work toward for years and that is the supply chain is more a more.
Strategic part of our customers business than ever before.
And the software that we offer is absolutely mission critical to their success.
Whether in the normal course of business or in a highly volatile periods such as we see today.
We've got Cannolis examples of.
Our customers, who were able to quickly adapt a sales service and fulfillment approaches in response to the changing landscape the world living it.
These solutions go beyond streamlining and optimizing the supply chain, but are actively generating revenue in saving order volume through modern adaptive concepts. So let's walk through a few of those first let's start with demand forecasting inventory optimization. Our application this area deployed across a wide variety of.
In industries from pharmaceutical distribution to grocery to specialty retail and that customers can model the types of demand shocks that they're seeing from covert 19 quickly and easily that way their inventory planning process responds immediately to these new forecast models and does so.
Without damaging their underlying base forecasts and has been exceptionally important for many of our pharmaceutical and grocery distributors as they are seeing surging demand for certain product categories and this type of AI and ml driven forecasting an ordering solutions will certainly pay dividends as we move.
Through this uncertain period and trend back towards normal forecast and ordering patterns and as we turn to add supply chain solutions. When it comes to WMS. For example, the two areas. We're hearing I customers take particular advantage of or adaptability and scalability.
As you already know at WMS is the best in the industry is scaling up to support the exceptionally high fulfillment volumes that typically come along with E Commerce Flash sales and peak holiday seasons, and what we've seen the last month or so is the scalability being employed by businesses. The typically never expect.
There is these type of demand spikes, whether it be pharmaceutical companies grocers medical equipment companies. The Manhattan WMS has been helping these customers ship two three and four times that daily average volumes.
And as you can imagine channel shift has been very prevalent we actually saw one customer a well known retailer transform their entire DC operation from retail replenishment to direct to consumer Organise faced a six days.
And it saved 80% of their order volume that otherwise would have lost.
And what we typically see our customers use retail replenishment and direct to consumer capabilities. In tandem. This is the first time that we've seen this type of channel slip to direct to consumer in such a short timeframe.
And further on the supply chain front, we're hearing interesting stories about the adaptability and power by transportation management solution as well many of our customers are rapidly reconfiguring the supply network in store hours and that transportation optimization engine is helping many of our customers increase that they're shipment volumes.
To this doors by between 50, and 250% will also incorporating changes to the operating environment like hours of service and axle weight limitation changes that have been relaxed by the department of transportation.
Yes timing is a long way from perfect, but Gartner recently published its magic quadrant for transportation management system providers, and we were thrilled both again to be a a leader and a notably improve our position within the leaders quadrant and we believe our ongoing investment in this solution that success in expanding its one.
Option globally, a most of all the terrific customer satisfaction scores, we receive have helped us improve that position this year.
Closing my product remarks.
Let me some anecdotes about how we're seeing an omnichannel solutions leveraged in innovative ways to to to put forth entirely new fulfillment methods and processes all in a matter of days.
As a particular no is the expanded use of a store fulfillment solutions.
As most brick and mortar stores remain closed at the moment many of the same stores fulfilling 10 times the normal volume of E Commerce orders the desire to monetize the inventory. This in those stores the need to bleed workload off the distribution center and the ambition to improve speed of delivery for customers that drive.
And expanded use of us store fulfillment solution, we even saw one customer activate and role at the entire solution to all of that stores in less than a week.
Now with that I did want to remind you that next month, we'll be hosting our annual user conference momentum.
This year, it's going to be in a digital format and certainly while we'll miss seeing all of our customers our partners and our analysts in person we still plan some significant product enhancements that will continue advancing our vision of unified commerce.
So that covers the broader business update Dennis is going to provide you with an update of a financial performance and discuss at Twentytwenty full year guidance in further detail and then I'll close their prepared remarks with a brief summary.
Thanks, setting first quarter total revenue was $153.9 million up 4% organically over prior year, driven by our cloud and license revenue performance.
Our total revenue estimate for the second quarter as a range of 122, and a half to 132 and a half million dollars.
Adjusted earnings per share for Q1 was 40 cents GAAP earnings per share was 35 cents was stock based compensation accounting for the difference between adjusted and GAAP EPS.
Our adjusted earnings per share estimate for the second quarter is a range of 33 to 37 cents.
License revenue for Q1 was 9.7 million above our expectations, but down year over year as anticipated.
We signed three 1 million plus deal dollar deals in the quarter with roughly one third of all license deals coming from new customers.
For the second quarter, we are expecting approximately 4 million in license revenue as license revenue mix continues to transition to cloud subscriptions.
For the full year, we estimate license revenue will be between 23 million to $25 million.
Cloud revenue was a record 17.3 million in the quarter up 120% year over year, and 10% sequentially driven by continued customer demand for our cloud solutions across all of the verticals we serve.
Of note, we closed our largest Manhattan active omni order volume deal in the quarter.
Additionally, we continue to see strong demand for WMS in the cloud solutions with over 70% of our deals in the quarter coming from WMS and nearly 30% of our bookings coming from either net new customers or net new product sales into our existing installed base.
Yes.
For the second quarter, we are estimating our cloud revenue to be 18 to 18, and a half million dollars and for the full year, we estimate our cloud revenue to be in the range of $74 million to $78 million.
We estimate our cloud and license software mix to be approximately 75% cloud to 25% license for the full year with software performance totaling 97 million to $103 million a record for total software. Despite a 51.
Percent decline in license revenue versus 2019.
Turning to bookings as we have discussed remaining performance obligation or Rps, though 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 revs.
Newer bookings.
Our ARPU for the quarter totaled $203 million up 102% over the prior year and 18% sequentially.
We continue to estimate that our year end ARPO will fall within the range of 265 million to $275 million.
For Manhattan. This disclose value represents our cloud bookings value of unearned revenue under noncancelable contracts greater than one year.
Contracts with a non cancelable term of one year or less are excluded from this reported amount.
And one last point on license and cloud.
As you know our performance continues to depend on the number and relative value of large deals we closed in any quarter, while large license deals historically have been important our markets continue to shift towards subscription models. While this is positive deal sizes mace may be slightly smaller as subscription revenue is recognized.
Guys over time.
Further some customers have longer implementation cycles associated with large distribution footprints, requiring a ramp subscription model, which can impact sequential and year over year revenue growth.
We also retain appropriate caution around slow decision, making by some clients and prospects, particularly retailers in light of ongoing macro events related to covert 19.
Shifting to maintenance revenue for the quarter totaled $35.7 million roughly flat versus prior year and as you would expect in this environment. We're purposely focused on ensuring our clients have the support they need to navigate current market uncertainty.
Our customer retention rates remained strong at greater than 95 plus percent.
For the second quarter, we estimate our maintenance revenue to be between 34 million and $35 million.
Our full year maintenance revenue is estimated to be 143 million to 144 million.
Nice broad range there.
Turning to services.
Consulting revenue for the quarter totaled $87.4 million down 1% year over year.
Services revenue trends in the near term will be dictated by the pace and degree.
The normalization of business activities impacted by Cobot 19.
Our estimate for second quarter services revenue is between 65 million to 72 million at the midpoint of 68 million. This represents a sequential decline of 22% over Q1 2020.
We estimate our full year services revenue to be 289 million to $306 million.
Our consolidated subscription maintenance and services margin for the quarter.
It was 48.7% largely driven by continued investment in cloud and consulting services as well as slightly lower services revenue.
Our second quarter estimate is for a range of 51.6% to 52.4% approximately 80 basis points higher than 2019.
Our full year estimate is approximately 51.3% up around 40 basis points versus 2019.
Turning to operating income margin Q1, adjusted operating income totaled $31.9 million with an adjusted operating margin of 20.7%.
For the second quarter, we estimate our adjusted operating margin to fall within a range of 22.2% to 23.2%.
Another tight range.
Our Q4 adjusted effective income tax rate was 23.1%, we estimate our second quarter and full year tax rate to be approximately 24%.
Regarding our capital structure in Q1, 2020, we repurchased approximately 337000 shares worth $25 million.
While we have suspended our share repurchase activity for the time being last week, our board of depressed directors did approve replenishing our repurchase authority limit to $50 million.
As such we will assess ongoing market conditions and internal financial performance in determining when to reinstate our share repurchase program.
This program remains a core part of our capital allocation strategy.
For the second quarter and full year, we estimate our diluted shares outstanding to be approximately 64 million shares.
Turning to cash we closed the quarter with cash and investments $75.3 million and zero debt.
Our current deferred revenue balance totaled $105.5 million up 12% sequentially.
On maintenance and cloud buildings.
Q1 cash flow from operations totaled $12 million, primarily due to performance based compensation stemming from our 2019 financial performance.
Finally capital expenditures totaled 1.2 million in Q1.
We had some.
My full year capex to be about $5 million.
So that closes the book on Q1 2020.
Turning to our updated annual guidance.
We've run multiple scenarios in order to build out the appropriate framework for giving investors the best possible forward looking view of the business.
As we know it today.
However, as a caveat we acknowledge that the assumptions, we are making are subject to future actions taken by local.
Hey, federal and international governments as well as the broader impacts of covert 19 may or may not have on the global economy.
We've revised our 2020 full year revenue outlook lowering our total revenue.
Forecast from a mid to a midpoint of 553 million downturn and a half percent over 2019, driven by 17% decline and our services revenue forecast.
We feel our services revenue forecast has an appropriate imprudent amount of conservatism built into our outlook.
Considering all these exhaustion us factors as Eddie mentioned earlier, we've taken aggressive expense for reduction measures to protect our earnings.
Without.
Materially impair.
Sure.
And our competitive positioning.
With our strong track record of managing expenses from the midpoint of our annual guidance, we've reduced total expenses by about $45 million.
For the balance of 2020 in terms of quarterly progression. We view Q2 is likely being our weakest quarter of the year.
Which sequentially from Q1, 2020 reflects a $24 million or 20% reduction in total expense run rate.
With Q3 in Q4, showing some incremental revenue improvement as we move into a more normal business environment.
Now specifically for annual guidance, our full year revenue range is now expected to be within the range of $541 million to 565 million.
Our full year adjusted operating margin is expected to fall within a range of 22.9% to 23.1% up about 300 basis points from our previous guidance of 20% to 20.5%.
Our full year adjusted earnings polluted deluded not diluted share range is expected to be between a $1.50 to $1.58 with a midpoint of $1.54 compared to our previous guidance midpoint of $1.57.
And our full year GAAP earnings per diluted share range is expected to be a $1.16 to $1.24, where the midpoint of $1.20 versus our dollar 16 previous guidance.
Thank you that covers the financial updates fact, Eddie for some closing comment okay. Thanks, Dennis and to close that today's call I want to step back just for a moment, let everybody know that despite the global uncertainty that were all experiencing we're acutely focused on the things that we can control.
We're taking an innovative and proactive approach is to customer engagements wells, we're continuing to invest significantly in innovation. So that we can expand at total addressable market and drive long term sustainable growth.
Our sales and services team remain engaged in the all kinds of stages of business and project development and as we look forward to returning to normal course of business in the future.
These actions that we've taken will set us up for continued success as we've moved through this choppy period and as we exit we would expect to see solid demand for our mission critical supply chain and omni Omni channel commerce products all around the globe.
And we're ensuring that we're positioned to capitalize on these opportunities.
While the world moves rapidly around us I can tell you, we're not sitting sitting still.
We continue to push possible as we move our vision of unified Commerce forward.
So thank you. Thank you to all of our employees at customers partners and shareholders globally.
We realize this is an extraordinary difficult time for many and we want to continue to emphasize that we're doing our part to rise to the occasion.
And meet these challenges head on.
Jesse and we're not ready to take any questions.
Thank you at this time I would like to remind everyone to nor to ask a question. Please press Star then one on your telephone keypad.
First question comes from Terry Tillman with Suntrust. Your line is open.
Hey, good afternoon, gentlemen, can you hear me, okay, and nobody tearing up I look choppy, but we can area.
Okay slides then cover so yes, so I'll start off with my preamble.
As a lot of in finding color I appreciate all that.
It's great to see how you guys are helping drive somebody said critical supply chain.
Well missing your.
The conference.
That's out of light. So my first question just relates to conservativism.
As we think about services projects kind of putting out like what happened to in terms of timing of medium to get those projects going before we get into this critical window of holiday season and brand a great holiday activity from the transaction volume, but are you assuming that actually the window. So narrow that there's a fair amount of that retail oriented kind of holiday stuff.
Got to get up and running actually just moves into next year, because we just don't have enough time to install up the first question.
Yes, it's a mix of both series, so we're move which still moving a lot of project forward.
I talked about a 100 go lives in Q1, which is around about that typical typical run rate, we put a bite at the same number of gun.
Go lives planned for Q2.
They moved to a lot of remote support and so forth. The there's a lot of go lives still moving forward again, a lot of a lot of the strategic projects still still moving forward.
There are some you know the non essential says the popular termed a non essential non critical that I think a likely to push you know post peak, but we're still planning and our customers are still telling us that there is criticality around getting asked systems lies before the retail peak.
Okay, and it's interesting because if we look back in like global financial crisis, and no not you will highlight $4 million license quarter get a couple ultimate a road I know you don't have really remember that that pretty dead into twoq here, you're all talking about over $20 million, what the total software.
Revenue, including out subscription so I just wanted to point that out but what's interesting is you're talking about a 20% increase in pipeline.
You also talked about the business still a lot different than in past cycles. I'm. Just curious on that pipeline build what is driving that other than like the digital kind of transformation stop the omni channel.
The more diverse customer activity the maybe in the last crisis, which with anodyne. Thank you I think I think it's a mixture of all of those things obviously, we feel like it's you know the and the innovation that we're driving into the field. There's a lot of interested in WMS in the Clive Manhattan active omni is a large.
Portion of that add continued glow add continued kind of global global expansion and a and vertical expansion as I mentioned the challenge here. I think is you know is one of a timing and when we see those things come to come to fruition, but from a.
Overall I look in a strategic perspective, we're obviously, we're encouraged by pipeline build such as that.
And maybe just last question for Dennis.
I think from a capital perspective, I don't know if you said anything for the full year, but is there any kind of guide post to think about castle, maybe in relationship to net income or.
Great topic, or just any kind of puts and takes to think about as we look at our cash flow. Thank you.
Nothing different than we've put out put out there before Terry probably a ratio of about 1.1 to 1.2 of net income.
Thanks.
Thank you Terry.
[noise], let's open.
Map out with William Blair. Your line is open.
Hey, guys. Thanks for taking my questions.
First anyone to extrapolate a little bit more on those comments about the current situation that you are seeing being different than than what you've seen during past slowdowns when when demand dissipated and maybe just expand on what factors you believe our deriving the situation to be different than past slowdowns and then.
Is it possible, we're just in a situation where it's too early to tell if demand will will drop off.
Well I think there is uncertainty there's no question about that and.
You know the.
The depth and the size of the you know the Crystal ball.
You know is is certainly ever in everybody's hands yours, as you know as well as mine.
I think the.
The commentary just from the conversations we're having and the feel that we have is the.
You know we've got it we've got a shorter runway to recovery or attempt to become back to normal course of course of business. So the so investments.
You know that are being made or plan to being made a you know we can we can still see the finish line for those both both us and our customers. We can see the finish line of when those things.
Get finished when they get on when they get executed versus you know in prior situations, whether it be 2001 or a eight nine a I don't think the finish line could be could be seen there now.
The other thing that I think as those will you know a little different for us.
We've done a lot of ground work building demand for our cloud solutions and that is continuing to it to pay off the other you know the other factor kind of mentioned this back 50% of our pipeline is coming from net new logos. So that is.
I think representatives the type of innovation that we're bringing to the marketplace and the type of innovation the under the new operating models going to you know going to need Anda and you know and then and then finally compared with.
Certainly 2001, but even 2008 in 2009, we have both a broader product footprint and a greater global reach so that you know although those are the things like major things that I think are different this time around.
Got it and then just longer term coming out of this I mean, it seems like your product portfolio is pretty well aligned to the direction that that's a market needs to go or adapt to at least so any any changes in terms of how you guys are or thinking about future and investment.
I already is within your within your product portfolio or what areas do you expect to be.
Robust coming out of this yet so that's a great question Matt.
Look I think you know I mentioned in my comments.
Yeah, I do think that.
You know little bit selfishly, we've we've wondered for a couple of decades, maybe maybe why supply chain wasn't as a popular conversation in the C suite in the board room as we always thought it should have been boy I think it is it is front and center of all conversations today. So.
The strategic nature supply chain when we come out of this I think we'll be it will be front in front and center for sure I finish I think it is recognized that supply chain and supply chain systems are absolutely mission critical were right at the middle of that I think aside for from you know sort of getting back to businesses.
As usual number one driving innovation into the into the marketplace I think we're going to see a good deal more focus on supply chain resilience.
Is needed to be put in and additional supply chain contingencies that people are customers in the market is going to want to build whether that be geographically or you know or locally.
Now as you as we think a bag.
So the shifts clearly we're seeing during this time a shift at grew even greater shift toward kind of director direct to consumer. So we think our app products are on point, whether it'd be WMS, Tms Manhattan active omni and AD demand forecasting in the.
Our Mason optimization solutions.
In terms of you know product strategy not much change there are some sort of adjustments that we that we will be making.
Absolutely in the near term these are.
Super near term adjustments that were making so that you know things like particularly curbside right. Curbside pickup is has become very very helpful. Very popular you lose some of the or or or a lot of the opportunity to cross sell.
An upsell if you're a retailer when you do in curbside, So we're going to introduce in a matter of days.
That's interesting and innovative solutions that will at least give the.
Retail customers the opportunity the.
Some cross sell Upsale, even in a curbside environment. So we will bring some new creativity to bear obviously, we can we can do that because we've got a.
Set of version lists.
Native cloud native solutions.
But.
The the overall product strategy remains intact.
Great. That's all I had things like guys very good thank you Matt.
Your next question comes from Brian Peterson with Raymond James Your line is open.
Hi, growing thanks for taking the questions. So Dennis I I think the recurring gross margins you had that up a bit so the full year.
Overall, we're seeing on the services side, a little surprised but margins wouldn't come down a bit as well I remember some other moving parts there, but any color that you can add on what's helping the margins and I'm also curious the shift towards virtual services deployments, how does that impact the overall margin structure.
Yes, so I'll add adding answer the shift the virtual but on the.
Overall margin profile the reason.
It's it's going up Brian is one the denominator significant hair cut on revenue and the aggressive expense management actions that we took so we've taken about $45 million.
Over the last three quarters of expats across the organization out of the business and obviously services as a large component of that.
Yeah from a virtual perspective, I mean, we're I think if I got to save the teams are executing very well.
The customer organizations are adapting incredibly well like you know it was all kinds of creative solutions that are being you know there being employed.
And honestly, there's there's very little falloff. There is there is some but there's very little fall off in product.
Activity and you know inefficiency.
Understood and maybe I I think of I heard this rate odd that you were able to kind of hit it with one customer and in terms of their ecommerce functionality in six days and as we think about customers really adjusting in real time to the supply chain needs are you able to really move that services capacity around and.
Kind of help them within days in months, because they kind of struggled with the second yeah. We are we are yeah.
A couple in the those that six day week situation no two of them. One of them was a you know with a distribution center that was moved from being a retail replenishment so ship to store.
DC to a direct to consumer facility in the space of weak and we had one other customer that was sort of interesting.
Names I'll leave the name offset of the charter here, but but to the distribution center was close by the local government I only have one distribution center and it was closed I said my goodness, what do we do we said why don't you start shipping from store you got inventory there. The stores were closed you can put they were able to put staff in the store.
So the pivoted from using WMS to distribute product to actually using at Manhattan active Ami solution to ship product out of the at the store oil in the space a six days.
Pretty amazing.
That's right here thanks Eddie.
My pleasure, Brian Thank you.
Your next question comes from young Kenworth growth somebody your line is open.
Thank you Hi, Eddie and Dennis.
I have a quick question in reference to your comment about 20% improvement in commenting on sales pipeline.
Just curious how much of that pipeline implement did you see let's say Aptar go March.
It was pretty consistent across the across the quarter you naturally.
I know it might be surprising, but I think the.
I can't count.
Across the quarter.
I suppose one hypothesis could be as some businesses are you know sort of idling.
The taking the opportunity to focus on strategic projects that could be that could be one reason, but but it was spread pretty equally across the quarter.
That's that's good to hear.
And then also can you just talk about some of the trends that you are seeing out there in the midst of over 19 I know you mentioned in your prepared remarks, but.
Isn't that greater motivation for customers to the cloud sooner than later and I know you said that the cloud deployments tend to be more gradual.
But are you seeing customers or hope, maybe seeing customers, perhaps thinking about heading out faster deployment cycle wants to environment spending environment.
Returns to normal.
I would say that that is true independent of anything else that's going on with you know with Cove. It you know in the last shall.
We call it 75 days or so.
Uh huh.
Oh.
Say that we've seen.
Any types the.
Sure of that.
You know the the hasn't.
Beyond.
[noise] focused on either.
Dealing with the incredibly high volumes.
In velocities, they've got a coming at them or a creative solutions to be able to keep that businesses moving forward such as the ones that we've talked about a little bit or adapting their strategies and we havent really got to any particular trends around.
Infrastructure deployment, but I would tell you that has been the trend again, regardless, particularly for us over the last.
12 to 24 months.
Okay, Great and then for Dennis.
I just how should we think about the margin for the services business and also.
Is that.
And just business.
Potentially see I see an immediate immediate uplift once the current travel restrictions.
Again, that's good.
I don't you know one we're not splitting out the.
The services margin profile.
Got you, yes, so could we get in can we could we get an uplift.
If demand just snaps back sure probably.
Bob.
From a revenue perspective for sure I would say the units from from I mean like our rural seeing this is not a unique to us. It appears that business is going to open and the economy is going to open it gradually it's going to be regional if not state specific so.
I'm not sure that we're going to see no real fast snap back and any size sort of immediacy I think will I think we'll see it be gradual now you know as I said, though we'd be in pretty effective.
Operating in a in a virtual environment, which also in a way would so the dole that snap back alive.
A bit because we're already operating reasonably effectively.
Okay, great. Thank you so much.
Our pleasure unit. Thank you.
Your next question comes from March Paul with Benchmark. Your line is open.
Hi, Thank you for taking my question and let me first thing good job, bringing in the quarter.
Are you starting with you in your prepared remarks, you mentioned that your symbol or color channel show, becoming more important to some of your customers I was wondering if you just going home.
Deeper with respect your comments.
For example.
Yes, sure I mean is simply put markets. It's a move away from any bricks and more you know any bricks and mortar selling direct to consumer and that's with the exception of course of the central businesses, you know the home improvement and the grocery and the pharmacy folks that are open and seeing surging volumes, but just I bet ever.
Nobody else has to have through necessity shipped to shift to direct to consumer.
The other factor there is that some of our customers with seasonal products are moving to some pretty aggressive sales strategies online sales strategy is because they don't want to get stuck with seasonal inventory that they can do they can't move and that's actually driving some pretty high.
Volumes of director of direct to consumer business. So that really is the type of shifted I'm referring to.
Great. Thank you and then.
Morning, just a question here.
As you're aware supply chain solutions require numbers.
In terms of higher money from customers. It often takes a thanks to this means of course of deal over the goal line I'm just wondering if you could.
Just give us an idea a little bit more details on how the company is managing through the current disruptions without conducting see onsite pilots or holding face to face me, yes, well I mean look.
Suffice to say no there are no face to face sales meetings product demonstrations and so forth theyre all being conducted virtually I mean, one of the things that we've been very pleased with these you know that frankly our.
Tech infrastructure for at 3500, you know people up around the world is not just held up.
Performed flawlessly and that's for all of our 900 people or so in research and development as well as professional services a customer support organization, we've actually put enough.
Little track hereby, we put in a especial customer support program for those to the shipping.
Important an essential commodities into at community is to make sure that we're giving them you know 24 seven support.
You know for all these these very high volumes that seeing of essential essential product, but then as we shipped a shift to sales and marketing all those meetings are happening virtually.
I think the world is getting more comfortable frankly with virtual meetings with video meetings and you know webex teams.
Zoom in and everything else and so far.
The market as being pretty receptive to those types of meetings NAV. There's no question that we would in more ways than one be prefer to be back in front of our customers and prospects, but you know in in the meantime, now we've got some great technology.
It really gets us.
Pretty close.
Great. Thank you that's all for me.
Thank you Mark.
[laughter].
Please press Star one your next question.
Hi can you hear me.
Yes, Sir.
Hi, Joe Rightside Hello, everyone I wanted to go back to this idea of Manhattan outside that beneficiary coming out of that and.
On the thing that came to mind, the 20% sequential and creates and in the pipeline.
Is that a result, that's actually better than seasonally it might be the case for at this point in the area are you already starting to see kind of a lead gen uplift that you well odd, but given the current environment.
No no really Joe to be perfectly honest with you because you know the first couple of months of the year, we were honestly seem really no impact from.
From the cobot situation.
Lets call it the last months, even less a little bit less than that of the quarter. We started to see some you know some impacts.
So I don't think its seeing a surge because of that we are seeing as I mentioned before.
A.
Positively disproportion a level of interest in.
Glad solutions and supply chain solutions move into moving to the cloud. So that I think is is part of it again at broader product footprint. I think is driving some of the pipeline growth and you know and add to your expansion to a lesser extent, but our geographic expansion as well.
No WMS as a as demand for WMS and the cloud pipeline has been a bit of an accelerant as well. So we continue to see the pipeline strengthen on the WMS side.
Okay. That's great and then I just wanted to clarify a or I guess nature I heard something correctly.
Hi.
Any in your prepared remarks, I think you said that 20% of near term to mid term service rather new is impacted by if I heard this right the retail vertical and I just wanted to check that because you know your brain aim that serve as full year guide down by.
About 20%.
I don't know if that's a coincidence I was at the same numbers, but it would actually imply that maybe outside of the retail vertical a lot of project activity is still happening and I would imagine the grocery food and beverage life science, maybe you'd actually gotten a little bit up lot of so just any thoughts there yeah. That's it that's.
By the right analysis that you put into that Joe you know, there's no question that kind of specialty retail department stores and so forth are being you know were seem to have been impacted disproportionately that's why we're seeing that.
That shift, but we are seeing certainly the life sciences space grocery threepl.
You know move move up a little bit.
Okay, Great I'll leave it there thanks, everyone very good thank you Joe.
[noise] and there are no further questions at this time.
Okay very good thank you Jesse and thank you everybody for joining the call. Thank you as always have for your support of things.
You'll see US we'll look forward to speaking with you again in about 90 days and we certainly hope that everybody add there is stay safe remained stay safe and is.
We are all in a in a better spot 90 days from that.
Good afternoon.
[noise] This concludes too.
Well.
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Oh.
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