Q2 2020 Manhattan Associates Inc Earnings Call

[music].

Good afternoon. My name is curious and I'll be your conference facilitator today at this time I would like to welcome everyone to the Manhattan Associates Q2, 2020 earnings call well once infringed on mute to prevent any background knowledge. After the speaker's remarks, there will be a question and answer session.

He is a bunch wants to be question Dreamless time simply press Star then number one on more telephone keypad do a bunch of withdraw your question first HM as a reminder, ladies and gentlemen. This call is being recorded today July 20, Threerd 2020, I would now like introduced and capital C.L. King.

Storing CFO and now I'm pleased senior director of Investor Relations Mr. home page you can you call.

Thanks, Jason and good afternoon, everyone. Welcome to me that it does get second quarter 2020 earnings call.

You are cautionary language and then turn the call over 80 Capel our CEO.

During this call, including the question answer session. We may make forward looking statements regarding future events.

Sure financial performance of man It does get.

You are cautioned that these forward looking statements involve risk and uncertainties are not guarantees of future performance and actual results may differ materially from the projection contained in our forward looking statement.

I refer you to the reports.

As of yet you see 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 2019 interest after discussion in that report that's all it any risk factor updates, we provided or subsequent form 10-Q.

We know in particular that uncertainty regarding the impact to koby 19th endemic underperformance.

Could cause actual results to differ materially from our projection.

Under no obligation to update you statement.

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

All non-GAAP measures have been reconciled to the <unk> related gotten majors in accordance with FCC rules.

You'll find a reconciliation schedules in the form 8-K, we submit to the FCC earlier today and on our website at an age dot com.

Now I'll turn the call over to any.

Okay. Thanks, Matt well good afternoon, everyone and thank you for joining us as we review our second quarter Twentytwenty results and we discussed her I look for at the balance of the year.

Before we go into detail about had the business performed in the quarter wanted to take a step back for a moment and just make a couple of high level comments.

Now at Manhattan Associates, we're right we're committed each and every day to serving our customers frankly, I customers depend on us to execute every single day and deliver on that promises so they can deliver on their promises.

The customers consumers depend on that to deliver the goods and services they need to live.

I never as has been more critical than during this global pandemic.

And it's more apparent than ever that there was a growing market need for modern adaptable supply chain inventory, an omni channel solutions.

The criticality is that need is not lost on us and we believe that we're very well positioned at the intersection of this changing world.

And then back to the discussion of our results Manhattan reported a solid quarter. Despite the a visible effects. The covert 19 is having a cross the global economy.

Specifically, we reported total revenue of $136 million, an adjusted earnings per diluted share of 40 cents, both of which exceeded our expectations cloud license and services revenue combined with disciplined expense management drove solid earnings leverage delivering.

Adjusted operating margin of 25.3%, that's about 200 basis points higher than the same period last year.

What we've seen better than expected demand for our supply chain and omni channel products and services at the near term timing and continued pace of economic recovery is somewhat unclear, but but you know when I world there are signs that seem to be encouraging.

And as such we're raising our full year total revenue and adjusted EPS guidance to reflect our views for the balance of the year.

Now we continue to invest in the business to drive long term sustainable growth, while focusing on profitable execution and diligent capital allocation in order to capitalize on the evolving market trends and Furthermore, at <unk> dedication to innovation remains we expect to invest nearly $80 million.

As an R&D this year, even with this macro backdrop.

Now looking at a at current pipeline, we see a pretty healthy set of global opportunities, where that cloud pipeline trending favorably, giving us confidence and reinforcing our belief that the mission critical products that we offer a need it now more than ever.

Specifically over 60% about pipeline at the end of the quarter is comprised of cloud opportunities and that's compared with 40% a year ago.

And what we've seen some delays in closing pipeline opportunities, we haven't experienced any notable cancellations and a second half pipeline is trending somewhat favorably relative to at first half.

And Additionally, we're seeing a a broader and more diverse set of opportunities in that pipeline as interest grows from non retail verticals such as automotive third party logistics life Sciences, automotive and then all the way to manufacturing and wholesale.

And finally about 50% of that deal opportunities continue to be represented by net new logos globally.

Now turning to at services business, despite having the.

The restriction of limited face to face engagements with that customers are we remain active providing real time support and delivering a variety of project work well executing system go lives remotely in the second quarter. We conducted nearly 130 system go lives reflect reflecting.

Solid execution in the current environment.

And by the way build travel I wish is margin neutral, but does contribute to the overall services revenue is down significantly versus last year for obvious reasons and this represents about a 4% headwind to year over year services revenue growth.

While the lack of travel and face to face engagement is challenging the ability of that professional services team to continue to deliver high quality complex work remotely really underscores our ability to adapt and deliver and this dynamic.

And difficult time.

Now the sales and marketing front I competitive win rates remained strong at about 70% plus against a head to head competition with about 30% about license and cloud deals representing net new customers.

And here we are at the halfway point really about five year cloud transition and we're experiencing a significant shift in market demand for our cloud solutions across all of our verticals.

And verticals that collectively drove more than 50% of exercising license revenue in the quarter, where retail and consumer goods government and food beverage and grocery.

Within these verticals, we saw robust robust demand for specific capabilities within our active omni sweet such as buy online pickup in store curbside pickup and store inventory fulfillment with so many physical stores closed during Q2, the ability of retail and consumer Fracing Brad.

Ends to fulfill orders and creative ways was really in great demand and we were able to stand up these solutions really in a very short amount of time.

And the ability for these brands have flexible distribution in selling channels is really more critical than ever and the solutions that we offer have become a key enabler to these activities.

I'd like to.

Just for a minute pivot a bit and give you some updates on recent advancements across our product portfolio.

So let's start with maybe one of the most significant enhancements in that company's history.

During our online user conference in May momentum connect we unveiled Manhattan active warehouse management. The next generation of warehouse management re architected from the Grand floor up as cloud Native Microservices based on a version lists application.

At an active W and is a step change in agility and speed of innovation within the supply chain execution landscape.

Manhattan active WFM, we were able to deliver a new feature functionality every single quarter, while still offering full extensibility of the core application.

Wireless customers continue to be extremely satisfied using app based capability inside of warehouse management, we see that customer driven extensibility as a solution imperative with the ability for our customers to add there the secret sauce and innovation on.

All of our platform or taken advantage of new capabilities that we deliver every single quarter.

We believe this is a a really winning combination.

As well as the a first of its kind in the supply chick supply chain execution industry.

And the underlying technology, which makes this all possible is that Manhattan active application architecture that made its debut in 2017, when we launched Manhattan active on me.

Now relative to live customers, we had an early adopter customer live on Manhattan active Wm prior to our release announcement at Manhattan connect.

[noise] pet supply plus they went live in April and actually do the unforeseen events associated with the pandemic they've been shipping record volumes with Manhattan active WFM ever since and then add planning to roll that the remaining Pcs in the network and Additionally, we've also signed several other cut.

In summary implementations of Manhattan active W.M., they're underway, there with large tier one global brands and we close them inside the quarter.

Now in addition to its groundbreaking technology Manhattan active W.M. delivers a number of next generation.

Feature function enhancements, including consumer grade Configurable mobile applications for the associates inside the distribution center, a suite of inline analytical user interfaces built right into Manhattan active W.M., which we call that unified control screens and a next generation of algorithm.

I'm focused on taking operational optimization simply to the next level and finally, we've got a brand new set of capabilities that we call employee engagement, a whole new way for distribution center managers and associates to interact with one another throughout the day.

So in brief that's Manhattan active WMS and as you'd imagine we're very excited about the release of about this particular release and it's really being the largest product investment in the history of Manhattan associates, and whilst the timeframe and expensive the undertaking we're certainly so.

Significant we felt that it was undoubtedly the right path to position, both Manhattan and our customers to deliver best in class performance for the next decade.

And well Manhattan active W.M. was admittedly a focal point of our attention in recent times I am excited that we've been able to make significant strides in parallel across other applications within our portfolio. So.

I'll touch on just a couple of those first staying with that supply chains. We recently shipped an exciting new version of our transportation management solution and included an all new major update to add dispatch capability and a significant update about transportation model modeling solution.

Frac customers, who operate their own delivery fleets dispatch management is really an integral part of the transportation management operation and a number of our fleet operating customers were already signed up to move to this completely redesigned and rebuild solution and we're excited to help them power the ever growing last.

Mile delivery network of today and Tomorrow and next to quick update on Manhattan active Ami as I mentioned in Q1 at Manhattan active Ami customers are really innovating at record pace to adapt their order fulfillment delivery and pickup methods in light of the changing regulations associated with that.

Endemic the volumes were seeing so far.

For BOPUS orders and buy online pickup in store are really off the charts frankly with some of that customers experience in 10 fold increases in volume and Additionally in Q2, we accelerated the release for curbside pickup and to both our digital self service.

Okay and store fulfillment modules as consumer research indicates that curbside pickup is one of those fulfillment methods likely to persist even after the pandemic and having an industrial strength process and technology in place is really a must have for omnichannel retailers because of.

And because of the Manhattan active architecture, we were able to make curbside pickup support available to all of that Manhattan active omni customers in really record time.

And last but not least on the product side, we launched a completely new application with it within that inventory sweet momentum connect this quarter, it's called Manhattan active allocation and its purpose built for a fashion and apparel retail customers because well we've had best in class forecasting and replenishment.

Applications for our customers, who manage relatively static product assortment Manhattan active allocation is the first time, we'll have a sophisticated inventory optimization offering for asked fast fashion customers, who manage their inventory using a completely different process and Manhattan active allocate.

And launches with really two major differentiating features.

On the channel is built right into the core of its design and it also resides on the Manhattan active application architecture, which we talked about before and we think this is really a game changer for the soft lines allocation space and we Matt we plan to make it generally available a little bit later in the year.

So hopefully you'll agree it was a pretty big quarter for the evolution of our product portfolio and we're excited to work with our customers to light up all of these new capabilities.

So that covers my broader business update and Dennis is going to provide you with an update on our financial performance discuss that twentytwenty full year guidance and I'll close with a few prepared remarks and a brief summary, so Dennis.

Thanks, Eddie also for second quarter total revenue was up $135.6 million down 12% over the prior year solely related to kind of at 19 impacts.

Our total revenue estimate for the third quarter is a range of $136 million to $140 million.

Adjusted earnings per share was 40 cents GAAP earnings per share was 30 cents will stock based compensation accounting for the difference between adjusted and GAAP bps.

Our adjusted earnings per share target for third quarter is 39 cents within a range of 38 to 40 cents.

License revenue was $5.7 million in the quarter above our expectations, but down year over year as demand for our solutions continues to shift the cloud.

We signed two 1 million plus dollar deals in the quarter with roughly 20% of all license deals coming from new customers.

For the third quarter, we expect between $5 million to $7 million and license revenue.

For the full year, we now estimate license revenue will be approximately $28 million to $31 million.

Of course.

Course, as we pointed out in our release in earlier in the call uncertainty about the cobot 19 pandemic could affect our performance against our estimates.

Cloud revenue was a record $18.5 million up a 105% year over year and 7% sequentially driven by continued customer demand for our cloud solutions across all of the verticals we serve.

Of note, we signed two new Manhattan active warehouse management deals in the quarter, both global tier one customers.

No question WMS in the cloud momentum continues to build.

Over 70% of our deals in the quarter came from WMS and approximately 45% of our bookings were from either net new customers or net new product sales to existing customers within our install base.

With a diverse set of opportunities to continue to sell into our existing customer base.

For Q3, we estimate our cloud revenue will be 19, and a half to $20 million, which represents about 40% growth year over year against a very strong comp driven by our FEMA deal we signed last year.

Extreme or the year over year growth rate is about 50% and for the full year. We estimate our cloud revenue will be 76 million to 78 million up about 65% at the midpoint.

We estimate our cloud and license software mix will be approximately 70% cloud to 30% license for the full year with total software revenue in the range of $104 million to $109 million.

At the midpoint of 106, and a half million dollars total software revenue revenue is up 11%, representing a record software year, while staring down of the debt a pandemic and absorbing a 40% decline in license revenue versus 2019.

Turning to bookings as we have discussed remaining performance obligation or Rps, though is the leading proxy for our cloud bookings performance and represents the value of contractual obligations required to be performed otherwise referred to as on earned revenue or bookings.

Our ARPU for the quarter totaled $225 million up 80, 87% over prior year and 11% sequentially.

We continue to estimate that our year end RFP will fall within a range of $265 million to $275 million.

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

Contracts with a non cancelable term of one year or less are excluded from the reported amount.

And one last point on license and cloud our performance does continue to depend on the number and relative value of large deals we closed in any quarter. While this is positive deal sizes may be slightly smaller as subscription revenue is recognized over time.

Further some customers have longer implementation cycles associated with large distribution footprints, requiring a wrap 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 cobot 19.

So moving on to maintenance revenue for the quarter totaled $35.9 million down 4% versus the prior year, our customer retention rates remained strong at greater than 95 plus percent for the third quarter. We estimate our maintenance revenue for Q3 will be approximately 36 and ahead.

Path to $37 million and for full year 2020, our estimate is $145 million.

Turning to services consulting revenue for the quarter totaled $71.8 million down 24% year over year as expected in solely driven by coven.

Again, I'd like to point out that excluding build travel we're down about 20% year over year.

We expect near term services revenue trends will continue to be governed by the pace and degree of the normalization of economic activity impacted by Cobot 19.

We estimate our services revenue for Q3 will be approximately $72 million to $73 million and our full year 2020 services revenue will be in a range of $292 million to $303 million.

At the midpoint of 297, and a half million dollars services will be down about 17% versus 2019, excluding build travel services revenue was down 14% and includes our expected seasonal fourth quarter declined due to retail peak season.

Our consolidated subscription maintenance and services margin for the quarter was 52.4% driven by operating Leverages, our cloud revenue begins to scale.

Our third quarter estimate is approximately 52.4% approximately 270 basis points higher than 2019, our full year estimate is approximately 51.2%.

Moving to operating income in margin Q2, adjusted operating income totaled $34.3 million with an adjusted operating margin of 25.3%.

For the third quarter.

We estimate our adjusted operating margin to be within a range of 24% to 24.2% nice tight range there.

Our Q2 adjusted effective income tax rate was 24% and guess, what our third quarter and full year tax rate will be approximately 24% as well.

Regarding our capital structure.

We suspended our share repurchase program effective April one 2020 as previously discussed.

Our repurchase authority love it remains a $50 million and this program continues to be an important part of our long term capital allocation strategy.

We will continue to evaluate the appropriate time for a resumption of our buyback program.

For the for the third quarter and full year, we estimate our diluted shares outstanding will be approximately 64.5 million.

Turning to cash.

We closed the quarter with cash and investments of $124 million and zero debt.

Our current deferred revenue balance totaled $119 million up 13% sequentially on maintenance and cloud billings.

Due to cash flow from operations totaled $49 million capex for the quarter totaled a half a million dollars.

We estimate full year capital expenditures to be in the range of $5 million to $7 million.

Now I'll turn to our updated annual guidance.

We continue to model and review multiple scenarios in order to provide the investment community with our best estimate of financial performance for the remainder of the year. While these estimates have been rigorous rigorous fully vetted. There are certain external factors that are out of our control and may produce results.

At our different from what Weve model.

Specifically for annual guidance.

Our full year total revenue range is now expected to be between 554 million to $570 million.

Our target objective is to achieve $562 million in total revenue.

Our full year adjusted earnings per share diluted rent diluted per share range is expected to be between a $1.53 to $1.59. Our target objective is $1.56 compared to our previous guidance midpoint of $1.54.

And our full year GAAP earnings per diluted share range is expected to be a $1.17 to $1.23 with a midpoint of $1.20.

And our full year adjusted operating margin is expected to fall within a range of 22.9% to 23.1%.

So that covers my financial update I'll turn the call back over Daddy. Okay. Thank you Dennis but as we close that today's call. We recognized that the world is evolving fast from changing cultural norms to diverging consumer tastes and behaviors, there's never been a more crucial time.

To have a modern adaptive and flexible supply chain and omni channel commerce set of solutions.

To win today means investing in the future and we recognize this and we continue to see at customers adapt to this paradigm and as a leader leader in the digital Commerce base that goal is to enable our customers to succeed and to be resilient.

Through continued innovation and by investing in a talented global workforce, we believe that we're well positioned to capitalize on these trends and see no shortage of opportunities as we progress on our path of long term sustainable growth fresh stakeholders.

[noise] at Manhattan, we never settle even in these difficult times, we remain focused on delivering on our commitments advancing our product portfolio through market, leading innovation and ensuring that customers are equipped to succeed in this challenging macro dynamic we've experienced challenges like this before we'll do.

This one is a bit different admittedly and we've consistently emerge stronger and better position and we see no reason as to why this time is any different.

People Act innovation and that culture, or the heart and soul of our organization and that's why I'm. Just so excited about what the future holds for all of US here at Manhattan Associates.

So Jason I'm ready now to take any questions.

Excellent Advil sinus you would like to ask your question. Please press star one of the number one on more telephone keep ahead, we'll pause for just a moment model the tumor roster.

Your first question comes from Milan of Terry Tillman from Suntrust Robinson. Your line is open.

Yes, Hi, gentlemen, good afternoon.

Any it's nice to see the early traction with the cloud WMS product and calling out since tier one wins, what I'm curious about the two part question and then I'll hop.

A follow up per se, but on the tier one wins are they going enterprise wide with the rollout of the cloud native W. mouse or is it more isolated tight.

And how do you see the sub kind of rate of adoption of the cloud WMS versus other cloud products in the past not a couple of follow ups.

Yes, so it so both of the deals are definitely with tier one global customers. They have very nice substantial deals, but there is still a lot of upside behind them.

For the global the global rollout for sure.

With regard to kind of adoption in well enthusiasm or adoption and momentum.

I would say.

It's early of course, given that we just announced and we've made in mid May.

But but it but it feels it feels very strong a great enthusiasm from really across the board customers prospects industry analysts and so forth a pretty excited about the about the solution and as we've mentioned pipeline seems pretty strong engagement with both.

Prospects and customers is as high as so the the prospect of pretty good.

That's good to hear two follow ups the first on the non retail strength.

What we see a lot is is new business models from wholesalers and manufacturers really starting to do direct to consumers that are earned customers. So the building web sites. The sell I'm, assuming that had big implications on the fulfillment side and supply chain pipe or what are you seeing and non retail segments going forward do you see a growing kind of Tam around.

And that that heretofore, we weren't really serving.

As well so there's two pieces you know you've made the point about the branded guys who are going you know kind of direct to consumer. There are also you know industries that historically to go direct to consumer that we maybe would have not sort of expected to before a hadn't maybe seen as retailers. Just one example order.

Motive spare parts for example, typically.

Captive to the deal to the dealer network and so forth you're starting to see those.

Secondary markets look like direct to consumer which is a great opportunity for us number one as we as we release on new solutions.

Particularly WFM cloud native.

Innovation that we're delivering on a quarterly basis.

We certainly do see the opportunity for penetrating and verticals that we may not have being the strongest in in the past CP is one that set us brings to mind, what we're seeing some some good early interest so opening up some some additional time certainly.

Yeah, just my last question. Thanks, Eddie so far for the answers is on the services side I thought I had my note that you all we're looking for about 100 or maybe a little under a 100 go lives I think Dennis said 130. So it seems like you beat expectations you did right services for the year I guess, what's driving that could be ahead of expectations just given that the pandemic.

Our people are you more efficient and the service is doing a virtual than you thought or they're just more projects moving forward than you thought that that for me. Thank you yes.

A few most projects done we than we thought Terry I mean look honestly, we where we were onshore.

Coming into the quarter as to exactly how things would you know would pan AG and frankly, they firmed up you know they firmed up a little bit as a as the quarter went on and and I think.

All of US personally and professionally were where this will ensure on there's still a great deal of uncertainty going moving forward. There's no question about that but but things firmed up for US yeah. So we're pleased about that and very pleased with the ability of of the team here to be either executed pretty.

The unusual circumstances, but thanks for your question.

Thank you.

Your next question comes from along not fall from William Blair. Your line is open.

Hey, guys. Thanks for taking my questions. One the first start up with a follow up on the active and product active w. on product and maybe just talk about the interest you're seeing there in the pipeline is that more weighted.

Towards new customers or is that existing W.W.M. customers that are looking to move their on premise deployment to a cloud. One you had that's it that's an interesting question Matt. It is just about smack that in the Middle 50 50.

Existing customers and a new logos.

I mean.

The Big give you give you some others to the commentary around that just it is it is a surprising maybe it's smack down the middle of the 50 50. So we're very encouraged by that.

Got it and you will you talked about the the higher volumes and inactive omni.

Some of your your retailer customers can you just remind us how are you able to monetize those from a revenue perspective or how did those contracts work. When you see customers that are doing sort attacks the either store fulfillment or other activities that there were previously doing yes, there's definitely upside for us there most of our contracts.

Our annual volumes. So when you see a short term pickup in volume there is no immediate impact for us.

It's really gets reconciled kind of at the end of the end of the year, but but certainly a positive for sure.

Got it and last one from me and I'll pass it on yeah. So you talked about some of the changes that were seen by bank of at 19, and obviously, there's a few tough to tell everything will play out, but theres, a few sort of long term trends at that seem obvious ones the much faster.

Shift to E Commerce and were previously seen and others probably.

Smaller physical footprint or some of these stores that are that are multi purpose. When you think about your positioning and your product Road map. How do you think that that aligns with some of these long term changes. So I guess long term are these changes driven by covert 19.

Headwinds or tailwinds to to Manhattan, well so.

So I think the simple headline answer is.

It's very very positive for US now you know obviously the impact of Cove. It on the global macro macro and so forth.

Put that aside and to your point talk about the shift in the dynamics of retail and so forth. We've been on the front end of course of servicing direct <unk> direct to consumer omni channel customers really for more than a more than a decade, it's a strength of ours.

We've we've always predicted continued shift from bricks and mortar to digital and this acceleration is really just.

Very very helpful for us I mean, I think that there's going to be some kind of pull back of today's numbers when we get back into a.

Based on where bricks and mortar a fully open but but I do think there's clearly some of these initiatives curbside, particularly buy online pickup in store that.

They are going to remain just simply because of that the convenience that people have now really realize is there so right in the sweet spot of where we've been operating and where we're going.

Yep.

Great. Thanks for taking my questions guys I pleasure, Matt. Thank you.

Your next question comes from the line of Joe wrong from more of your line is open.

[noise] a great. Good afternoon, everyone I wanted to go back at it to the interest active beyond that it's been seeing from a new logos, yes, and just thinking out loud at some of your peers and the WMS space that I've had a cloud offering the way they have talked about it is that the answer.

Yes. The originally came from smaller customers, maybe more SMB and more recently they've started to see the interest from the enterprise segment, you're kind of yeah, not not the gold standard and the enterprise segment and so are the new logos still similar to your traditional customers.

Whereas this actually broadening your audience and you're starting to get them find out maybe that type of organization that hasn't been a target of Manhattan in the past, but just given the virtues of cloud and some of the different than economics, maybe I thought it might make sense. Yes. Good question, Joe So so I would say that.

The early interest is certainly being with what we would consider tier one tier one customers I think that there's been a low sort of a shift a little bit of of change.

Some of the cloud solutions that have been at their for awhile.

A really candidly on premise solutions that are hosted in the Clive.

Which is great if you're trying to not be in the datacenter business and so forth you can kind of move yourself off to the CLEC and that's being attractive too.

The the lower tier customers, but but when you build a true native cloud application have the ability to be able to deliver real first class a world class innovation every 90 days that sure becomes appealing to tier one customers.

You know around the world. So I think that's really the differences.

We've seen tier one customers naturally embracing Clyde W.M. versus just being sort of a simple lift and shift hey, I don't have a big IP organization through all puppet up popping up in the class so that would be sort of answer number number one in terms of.

Our ability to be able to now have a broader geographic reach a broader reach into you know into all tiers that is certainly something that is an objective of hours.

It is a well aligned with the true Clyde strategy, but.

The early interest is largely being with tier one.

Okay, Great Hot and then the other half of where the interest as coming from thinking about your existing installed base.

Do you have a way of thinking about I I think there is north of 1200 Manhattan customers at this point not all WMS, probably but theres a lot out there.

What's kind of the migration timeline might looks like typically five years has been a normal upgrade cycle is maybe 20% tells the installed base thinking about an upgrade every year just how would you kind of conceptualize within your existing sites Yeah I.

I mean, I think it's a fair way to look at it.

There are those natural natural upgrade cycles that we're going to be able to kind of latch latch onto view. It to use that is that expression. I think there is the opportunity for some folks that will accelerate those upgrade discussions because they can get their hands on a brand new.

[music] innovation that delivers real ROI faster and we're going to certainly help them with you know with those with those business cases, we're going to see clearly we're going to see some customers as we always do with technology transitions have a pretty long tail on the on the on the migration and up but the great.

Who is the great news is they can do it their own pace. They can migrated their own pace. There's no particular acceleration required they get to do it to their own basin, and frankly will be there for them when they're ready.

And then just one more quick one for me I it looks like.

Abroad Die I think 7 million dollar is worth of R&D back into the 2020 forecast.

That dedicated to any particular area or is that kind of broadly indicate indicative of the different products such as I'm talking about so far on the call Yeah really really across the board. Joe you know, there's always based upon product lifecycle and so forth.

The R&D investment moves a little bit from product a product, but there's no specific focus of bringing that back in its across the portfolio.

Okay very good. Thank you terrific. Thank you Joe.

Your next question comes from Milan, Brian Peterson from Raymond James Your line is open.

Hi, Thanks, everyone. It's already I'll also start with the active W.M., but just trying to gauge the results there versus your expectations or frankly, I think two tier one wins are pretty impressive in the first quarter, that's faster than I would've expected.

But I am also seeing the license number be in kind of move higher for the year. So I'm just trying to understand maybe where you saw the upside this quarter versus your expectations on the on the WMS side yeah.

You know were bought or what do we were six weeks in essentially from from release date. We had one early adopter the went like pre pre release and.

And so forth into tier one wins in in the six week period. The bounced up the course, so we're we're pretty darn excited about that I got to say.

The activity continues to be continues to be pretty pretty solid for sure.

You know the license activity was a little stronger than than we anticipated not by orders of magnitude, but it was brought stronger you know we're pleased that we're pleased to buy that they frankly, it wasn't one big deal or anything just a just a an aggregation of of smaller.

Deals.

The brought us a nice license nice license quarter.

Understood and maybe pivoting to to active on the air or Omnichannel.

We've been talking about this for a while and I think a lot of us think that omnichannel and a lot of the things that you offer our table Stakes, but we obviously with coded we're seeing that you know a lot of these retailers are various writers don't have these systems in place. So I'm curious you know versus where we stand now if we use the baseball analogy what inning are we in terms of this.

The channel adoption or we are we still early innings or late innings like how would you help us think about that yeah, I think there's still plenty of runway.

Where we were past batting practice that's for sure.

I think I I, you know I would I would say, we're probably in the second or third inning I I really do think there's a there's a lot of runway to go here. We are going to I think we're we've been seeing store dislocation and transformation going on you know for.

A couple of years now I think we are going to see that accelerate through this through this pan pandemic, which which is going to drive yet more.

Omnichannel strategies, the need for omni strategies channel strategies, the need facility, you because ubiquity because they have across those across those channels.

You know and and so we're excited about the you know the opportunity given the investments we've made over the last decade plus.

Understood. Thanks that it yes, thank you Brian Sia.

Your next question comes from a lot of 1 billion Waps Group. Your line is open.

Alright, Thank you Hey, Andy in regard to that migration of an on Prem WMS to act MWM, winning new installed base do you think that connects that down faster adoption of active W.M. among your active omni and still base or he's dot money not a factor.

I don't think it's much of a factor you and frankly I mean, I think will you know we will see active only customers adopt active WMS sort of makes sense for them frankly, they're already running the platform. It is the exact same technology underpinnings and you know and so forth. So there is a combination.

Of confidence familiarity and common sense, you noted two to consolidate on a common platform. So I think we'll we'll see some of that what is.

Great about where we are in terms of our Manhattan active WFM release is we have a three year plus highly proven technology platform that we released on sit so whilst it is a newer newer solution, we've been running Manhattan active omni.

This technology platform for three plus years now tier one super high Super high volumes and so forth. So I think we're in we're in a good we're in a good spot there and.

As we've talked about the enthusiasm for Manhattan active W.M. across our customer base and the profit base to but particularly in AG customer rates as being very encouraging in the six or seven weeks since since the announcement.

Okay, Great obviously, a lot of focus on active adult again ask but sometimes we forget about your main cloud business.

Driving your IPO Duff active on omni I believe a active on the business, maybe a little bit more driven by the retail vertical and the WMS by your IPO growth remains pretty solid.

Any particular trends that youre seeing such as between new and existing or any kind of changes that you made in terms of go to market around active on omni says t. onsite since emergence of quoted.

Any particular vertical enough adopting.

Active omnipod ER or planning to adopt the out to the omni product because of the equivalent yes.

So I would say no no major shifts.

If I were to fight to think of bag.

Little bit of a sort of a phenomenon, we are seeing whether it be existing customers or new customers frankly look for those quick wins right that those customers that.

I'm prospects excuse me.

Simply did not have a by only buy online pickup from store strategy or curbside pickup strategy or picking up the red foam right and we need something quickly. So we are seeing.

And we'll take them all day long.

Instead of a little bit smaller little bit faster quick hit high value initiatives.

The market is asking for and that is inside of retail inside of retail.

You know since the since the onset of of covert.

Okay and then just.

Stepping back obviously a lot has happened.

To your target markets.

Since the covered.

Can you update us on your latest thoughts on maybe on the strategic acquisitions, especially given like I said, Tom how fundamental fundamentals of your target market have them evolved rather quickly here due to climate do you feel that you may or may need to like the up on Sir.

Capabilities like I don't know much more traditional forecasting kind of side of the business to better target to manufacturers made any more closely oriented solutions out there are or even once you take on supply chain stuff. Yeah. So so always interested in you know in M&A is.

Once the fit strategically within the footprint number one number two the as you point exited increase at total addressable market, but as we've always said and you know this we're not going to buy more of what we've already got well, we're not going to buy aging technology was going to be a solid hurdle rate and those kinds of things, but but.

Maybe the most important I think is that I mean, we are right in the middle of.

What's going on from a supply chain transformation perspective supply chain never be more important than it is today I think we would all agree with that kind of personally and professionally the need for.

Contingency is being built into the supply chain strategically strategic resilience being built into the supply chain and the the the shift the continued shift from traditional bricks and mortar to digital digital commerce and we've been right in the middle of that we've got.

A lot of work still to be done we've got a long road map in front of us and I think the our opportunity going forward is significant nat.

So what that leaves US too is we have our vision is to deliver brand new innovation to the market because the mortgage changing and it needs new capabilities.

Old capabilities Repackage brand new capabilities. So the opportunity for US is to continue to invest in brand new innovation and delivered to the marketplace and the great thing about this active platform that we've got we can we can develop brand new innovation and we can deliver it.

Every 90 days.

Every 90 days and so in summary, always looking for great acquisition.

Targets, but.

Principally focused on investing in brand new white space innovation.

Okay, great. Thanks, so much put on any yes my pleasure. Thank you.

I don't think about you asked the question install strong well number one or more telephone keypad. More next question comes from the line of Mark small from benchmark. Your line is open.

Hi, good afternoon, and does not stop on the quarter.

Most of my questions answered just a couple any with respect to act of W. W.

With respect to the pipeline professionalization are you seeing any customer and interest from a particular industry.

I know, it's early but at this point in this game are you seeing any particular industry thats latching on to that or so no there.

Actually the great thing Mark is really it is across industry. You know from you know from retail to wholesale Threepl you know.

Life Sciences pharma, it's really you know widespread so you know one on one hand, you know.

Concentration of of interest would be would be great, but even better of course is broad interest and and by the way. The you know the interest is also a global.

As well as cross cross vertical so that's a created again the extra little bit of enthusiasm for us.

Great. That's that's good to hear and I'm, just a follow up last quarter.

You noted that selling your customers such as like grocers are distributors were delaying some progress just because there were just to swap and they're focusing on managing real business. Yeah. I assume that this has subsided somewhat because it just just comment on that a little bit yeah.

Well, it's subsided a little.

It's still pretty busy but it's a comp.

You're right there is a combination of some of that.

Frankly, panic buying and so forth is has eased a little number one and then number two of course, the grocers pet supply retailers and so forth have adapted to these higher volumes and there you know a managing and not being sort of surprised on a day by day to day by day basis anymore. So NAV.

You know, we're certainly starting to see those guys refocus look at some of strategic initiatives and and think about opening up those programs again.

Great Thats good to hear thank you that's all for me Okay. Good. Thank you Mark appreciate it.

There are no further questions isn't so much on the called out to the presenters okay very good Jason. Thank you well. Thank you everybody for joining us on our Q2 coal as always we appreciate your support an interest in Manhattan Associates I will look forward to updating you again in about 90 days or so and in the meantime.

Can I. Please everybody make sure that you stay healthy as stay safe and well again, we'll look forward to speaking to you again in about 90 days. Thank you.

Oh.

That concludes today's conference call you may now disconnect.

[music].