Q3 2021 Manhattan Associates Inc Earnings Call

October 26, 2021

Excuse me, ladies and gentlemen, this is the operator today's conference is scheduled to begin momentarily. Please continue to standby. Thank you for your patience.

Again, ladies and gentlemen. This is your conference operator today's conference is scheduled to begin shortly please continue to standby. Thank you for your patience.

[music].

Good afternoon, My name is Leah and I will be your conference facilitator today.

This time I would like to welcome everyone to the Manhattan Associates third quarter 2021 earnings call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer period.

If you would like to ask a question. During this time simply press star one on your telephone keypad. If you would like to withdraw your question press the pound key.

As a reminder, ladies and gentlemen, this call is being recorded today October 27, I would now like to introduce Mr. Michael Bauer head of Investor Relations of Manhattan Associates. Mitsubishi You May begin your conference.

Thank you Leah and good afternoon, everyone welcome to Manhattan Associates 2021 third quarter earnings call I will review, our cautionary language and then turn the call over to Eddie Capel our CEO during.

During this call, including the question and answer session. We may make forward looking statements regarding future events or the future financial performance of Manhattan Associates. You are cautioned that these forward looking statements involve risks and uncertainties are not guarantees of future performance and that actual results may differ materially from projections contained in our forward looking statements I refer.

For you to the reports Manhattan Associates files with the SEC for important factors that could cause actual results to differ materially from those in our projections, particularly our annual report on Form 10-K for fiscal year 2020, and the risk factor discussion in that report as well as any risk factor updates we provide in our subsequent form 10 Qs.

We note in particular that uncertainty regarding the impact of the COVID-19 pandemic on our performance could cause actual results to differ materially from our projections. We are under no obligation to update. These statements. In addition, our comments include certain non-GAAP financial measures in an effort to provide additional information to investors we.

We have reconciled all non-GAAP measures to the related GAAP measures in accordance with SEC rules.

You'll find reconciliation schedules in the form 8-K, we submitted to the SEC earlier today and on our website at M. A N H dot com now I'll turn the call over to Eddie.

Thanks, Mike well good afternoon, everybody and thank you for joining us as we review our third quarter results discuss our updated full year 2021 I look and provide some very preliminary color on 2022 and beyond.

Q3 and year to year to date results were an all time record for Manhattan Associates.

Total revenue increased 13% to $169 million and adjusted earnings per diluted share a 71 cents.

Increased 39% both of these metrics exceeded our expectations.

Strong cloud and services demand continues to drive revenue outperformance fueling double digit topline growth and strong earnings leverage above rule, our investments in innovation are paying off.

Product differentiation between Manhattan, another supply chain software vendors continues to increase and Moreover, our global teams are performing exceptionally well with a laser focus on customer success.

We delivered third our record third quarter bookings with RP O, increasing a 123% year over year, and 17% sequentially to $574 million, providing us with excellent future revenue visibility.

Additionally, 40% of our Q3 contracted bookings were generated from net new customers in.

And that pipeline continues to be robust with solid demand across our product suites over 90% of the pipeline consists of client opportunities with net new potential customers, representing about 35% of that demand.

And with strong business momentum and our increased visibility, we're providing refreshed guidepost for our P O and cloud revenue through 2020 for.

Dennis will provide more color later in the fall, but this includes moving up by a milestone of reaching $1 billion in our P. O to 2022 from our original target of 2023.

On the sales front competitive win rates remained strong at about 75% is that our innovation is recognized.

Industry, leading.

From a vertical perspective retail manufacturing and wholesale drove more than 80% of our bookings for the quarter, but drilling into the sub verticals that pretty diverse including apparel department stores grocery food and beverage industrial.

Health services, as well as durable and non durable goods.

Our global services team continues to execute amazingly well conducting over a 100 go lives in Q3 and for the quarter services revenue was up 20% compared with the prior year period.

As we mentioned in our Q2 call the market is extremely competitive for services and technical talent.

And while we're well positioned for significant growth, we do expect demand for talent to continue to be strong.

With new and existing customers wanting to accomplish more with our solutions and at a faster pace. We're very mindful of the workload that we put on that teams and we're focused on attracting and retaining talent, which we continue to factor into our operational planning and guidance.

On the innovation front with our R&D spend approaching $90 million annually, we're focused on providing modern cloud native applications that are architected to unified commerce and supply chain experiences Manhattan is on the leading edge of removing removing numerous unnatural silos are at.

Official boundaries that really don't align with business workflows.

At technology is differentiating and industry, leading and in Manhattan active SaaS solutions are scalable version list and extensible and this enables our customers to quickly adapt to market changes. It can they can improve efficiency and leverage that data in more robust ways, including <unk>.

All the challenges that legacy and silo systems simply cannot.

And we believe that we're still very early in that cloud journey, but we couldnt be more pleased with the market's enthusiastic response to our Manhattan active solutions.

So it's been just a few minutes on specific updates on products and customers.

We're actually off to a great start with Manhattan active transportation management, the industry's fastest and smartest multi modal transportation optimization engine.

Hatton active T M.

The industry's first self configuring and self tuning system built on our industry, leading Manhattan application architecture.

Latin active T M.

Is joined with Manhattan active warehouse management to support Manhattan active supply chain, the industry's first unified cloud native.

Apply chain execution platform.

And since launch we've been we've been heartened by the by the accolades we've received from Manhattan active transportation management from analysts partners and customers.

Perhaps most encouragingly several of our Manhattan active transportation management customers are also deploying Manhattan active W. Yeah.

In other words, our supply chain unification message and strategy is really resonating with these joint solution customers. Realizing the clear benefits of unifying distribution transportation labor and automation within a single application.

Manhattan active wm, the other horror half of Manhattan active supply chain continues to experience pretty explosive growth consistent with prior quarters, we're seeing a very nice balance between net new customers and existing Manhattan WNS customers choosing to migrate to our next generation of Wm platform.

And just what is it 16 short months Manhattan active Wm as live or in the process of being implemented and is in 11 countries across 16 different industries are pretty good Testament to its cross vertical and international applicability.

A small sampling of either live or currently implementing Manhattan active Wm customers include a luxury retail department store and national beverage distributor distributor.

Tier zero national grocer outside of the U S and several industrial distributors across the globe.

Our competitive win rate with W. Message has always been pretty high.

Manhattan active Wm has helped us raise that already high bar.

Turning now to our omni channel applications, we continue to make strides with our Manhattan active point of sale application. This past quarter sort of a global apparel footwear brand activate and Manhattan active point of sale application into new flags flagship stores in New York and La.

Vegas. This particular customer also runs Manhattan active order management and they saw a clear advantage of deploying a unified omnichannel operating platform across the digital and bricks and mortar operations from a geographical point of view the plans call for deploying Manhattan active point of sale in order to manage them.

Across the Americas, Asia Pacific and Europe, and we believe that Manhattan active omni is unique in its ability to provide full featured order management contact Center and school systems as part of a unified platform across the globe.

And to close that Ive product and customer updates this quarter I'm happy to report that a couple of weeks ago, we were able to host to several small customer event in person for the first time in quite some time and we were pleased to host customers in the U K and the Netherlands, and finally in French for some.

Pretty intimate events to discuss their commerce and supply chain strategies and have Manhattan active solutions can help them progress their digital transformations and I got to tell you. It was such a pleasure to connect in person with a group of that strategic customers after such a long break.

Well that concludes my brief business update Dennis is going to provide.

Are you with an update on our financial performance and outlook and they're not close our prepared remarks with a brief summary, before we move to Q&A. So Dennis.

Thanks Eddie.

Nothing but accolades for Manhattan global teams top to bottom, we continue to raise the bar and a choppy macro delivering strong growth profitability cash flow and balance sheet metrics.

I'll start with a quick recap of the quarter with growth rates on a year over year basis, unless otherwise stated.

Total revenue was a record $169 million up 13%, excluding license and maintenance revenue, which removes the compression driven by our cloud transition our total revenue was up 27%.

Notably 70% of our total revenue is now driven by cloud and services.

Our Q3 operating profit was a record totaling $53 million up 20% with adjusted operating margin of 31, 3% and GAAP operating margin of 25, 1%.

Our performance was driven by strong cloud and services revenue combined with lower expenses driven by the Covid pandemic.

Compared to 2019, we estimate COVID-19 lowered our year to date 2021 expenses by about 425 basis points and year to date 2020 by about 325 basis points respectively.

Adjusting for Covid or put another way assuming these expenses remain unchanged from 2019 levels adjusted operating margin would be approximately 24% year to date up over 200 basis points compared to year to date 2020.

Earnings per share was a record 71 cents up 39%.

Our earnings per share. It did include 66 sets of nonrecurring tax benefit associated with expiring tax statutes. So normalized EPS was <unk> 65 cents up 27% either way of record.

Our Q3 and year to date operating cash flow performance was a record with Q3 totaling $60 million and year to date $145 million.

Both up 41% on record global cash collections.

How about our free cash flow margin. It continues to be strong at 35% for the quarter and 29% year to date.

EBITDA margin was 32% in the quarter and 29%.

Year to date.

Our balance sheet continues to be rock solid with $246 million in cash and zero debt, providing us excellent flexibility to invest for growth.

We invested $20 million in share buybacks in the quarter, resulting in $80 million $80 million in buybacks year to date.

And for the fourth quarter and full year, we estimate our diluted shares outstanding to be about $64 3 million shares which assumes no buyback activity.

Also our board has approved our customary $50 million share repurchase authority.

That covers the macros now, let's drill down a little bit into revenue.

Cloud revenue in the quarter totaled $32 million up 53%.

As our new annual contract value continues to accelerate on strong market demand.

For Q4, we expect cloud revenue of roughly $33 $5 million.

As Eddie mentioned Q3 was a record third quarter with RP, our remaining performance obligation or RP O bookings totaled $574 million up 123% year over year and 17% sequentially.

With RP O continuing to compound positively our visibility into future subscription revenue continues to strengthen giving us confidence in our forward visibility and got guideposts projections.

Services revenue was $88 million up 20% as our cloud momentum continues to fuel our services revenue growth.

Americas and Europe are running at double digit growth with APAC demand improving.

Q4 retail peak season is starting earlier than normal given supply chain constraints.

We are forecasting services revenue to be about $82 million with year over year growth of 16%.

As a reminder to most of you the sequential revenue decline from Q3 represents our traditional retail peak seasonality.

As customers slow implementations to meet their customers' demand.

Our consolidated subscription maintenance and services margin for the quarter was 56, 8% up over 380 basis points compared to the year ago period and was predominantly driven by our revenue performance in cloud operating leverage.

Accounting for retail peak season, and growth investments, we expect Q4 margin to be about 52%, resulting in full year 2021 margin of 53, 5% up 190 basis points over the prior year.

Yeah.

License revenue was $8 million down, 36% and maintenance revenue was $34 million down 8%, primarily on cash collection timing.

And one final revenue call, while our hardware team is in the double digit growth game up 25% year to date good job guys.

Transitioning to guidance.

Barring any major global macro setbacks, our full year 2021 guidance and preliminary 2022 outlook puts us on track to deliver consecutive record revenue years.

Our over arching objective, obviously is to deliver sustainable double digit top line growth and top quartile operating margins benchmarked annually against enterprise SaaS comps.

For 2021, we are raising our total revenue guidance to 653 million to $655 million up from our prior range of $643 million to $650 million.

Our underlying total 2021 revenue growth ex license and maintenance, which removes the revenue compression from our cloud transition is targeted to be 19% at the midpoint.

For Q4, we expect total revenue of 161 million to 163 million.

Full year operating margin is expected to be 25, 8% to 26% factoring in retail peak season revenue impact and including $10 million in special performance based compensation and retention investments.

We expect full year adjusted earnings per share to be $2 12 to $2.14 up from our prior range of $2 to $2 six minutes.

For GAAP EPS, our guidance range is $1 61 to $1 63, with a midpoint of $1 62 up 6% from our previous midpoint of $1 53.

And for Q4, we expect adjusted EPS to be in the range of 37 to 39 cents.

For full year 2021, our cloud revenue estimate is increasing to $121 million representing 51% growth.

Given our strong performance in Q3 and year to date. We are also increasing our RP O outlook to a range of $675 million to $700 million up from our prior outlook range of $550 million to $600 million.

The 688 million mid point is up over 75% from our initial RP O target provided on our Q3 2020 earnings call.

For full year 2021 license and maintenance revenue continues to positively a trip on increasing demand for our cloud solutions.

We expect license to be about $30 million $33 million in maintenance roughly $143 million.

For Q4, we expect license to be about seven and a half million dollars in maintenance roughly $35 million.

Our capex ex estimate for 2021 is $3 million to $4 million.

And for full year 2021, we expect an adjusted tax rate of about 19.5% and a GAAP tax rate of approximately 17, 5%.

So that covers the quarter and our 2021 outlook, let's cover some 2022 preliminary targets and guidepost.

We are in our budget cycle. Currently so we will firm up our parameters on our Q4 call. Please.

Please note, though to facilitate our review.

For you all we have added a supplemental schedule item number nine last page in todays earnings release, providing a comparison of our original guide post metrics and our current updated guidepost.

As the schedule shows we are moving all our guideposts for cloud revenue and RP O materially higher. In addition, our adjusted operating margins are improved from our initial color provided in February.

Please note.

Year over year growth rates are based on the midpoint of our 2021 guidance.

Our preliminary estimate of 2022 total revenue of 695 million to $715 million, excluding license and maintenance attrition at 16% growth.

All in our initial growth target is 8%.

Our full year 2022, adjusted EPS range is $1 90 to $2.10.

For 2022 cloud revenue, we are targeting $160 million to $165 million in rep revenue, representing 35% growth at the midpoint.

Exiting 2021, including ramp transactions, we expect to cheat achieve a three year 2022 to 2020 for compounded annual growth rate of 40% at the midpoint of our cloud revenue targets.

For RPI, we are targeting a three year CAGR of 35% at the midpoint of our targets of $1 billion in 2022 growing to $1 7 billion in 2024.

Those are big numbers.

In 2022, we are also targeting services revenue of $362 million to $370 million, which represents 9% growth.

License revenue of 13 million to $15 million and maintenance revenue of 137 million to $140 million as we continue to expect a longer attrition tail for maintenance.

Our consolidated subscription maintenance and services margin is expected to be about 54%.

And we are pegging 2022 operating margins at 22, 5% to 24% and are targeting an annual 75 to 125 basis point expansion annually starting in 2023.

The factors impacting the inherent leverage in our model and driving the 2022 year over decline in operating margin include license attrition of 57%.

To $14 million with maintenance revenue attrition at 4% as customers shift to cloud totaling about 200 basis points of margin impact.

Wage inflation in labor market trends accounting for about 200 basis points in margin investment as.

As we've previously previously discussed demand for technical talent is high and we expect the labor market continues to be very competitive through 2022.

Continued investment across our company fueled by customer demand, we are investing in R&D services and sales and marketing.

And the continued return of Covid impact expenses, such as travel our annual momentum customer conference employee appreciation events contractors et cetera, total about 100 basis points.

We also expect our effective tax rate to be approximately 22% and our diluted share count will be approximately $64 3 million shares which assumes no buyback activity.

So lastly, I'll summarize our 2023 and 2024 guideposts that should better assist investors assessment of our future cloud growth and earnings trajectory.

Remember comparison of our guideposts versus historical are located in our earnings release.

For 2023, we are targeting RP O of 1.25 billion to $1 4 billion, representing 33% growth at the midpoint.

Cloud revenue of $220 million to $240 million, representing 42% growth at the midpoint.

And introducing 2024 for RPI, we are targeting one six to one $8 billion, representing 28% growth at the midpoint.

Cloud revenue, we're targeting 310 million to $345 million, representing 42% growth at the midpoint.

So that covers the financial update thank you very much and back to Eddie for some closing remarks. Good report Dennis Thank you.

We're very pleased with our strong third quarter and year to date results.

While we continue to operate in a pretty turbulent global macro environment business momentum is very positive and of course, we're very encouraged by our accelerating our P O and associated revenue growth.

As we look forward, we're confident in our ability to deliver success for our customers and help them drive their digital transformation.

And as a result, we anticipate long term sustainable and profitable growth for Manhattan associates with that player we'd be happy to take a take any questions.

Alright, as a reminder to ask a question you will need to press star one on your telephone keypad again Thats star one on your telephone keypad and withdraw your question press the pound key.

Please standby will become part of the Q&A roster.

And your first question comes from the line of Terry Tillman from Jewish Securities. Please go ahead.

Yes, thanks for taking my questions and congrats exceptional result, I guess maybe.

Hi, Eddie Tennessee, like sorry, I Should've said that to begin with maybe.

Maybe Eddie I'll ask you the question and congrats on the hiring of a CMO.

Curious I know, it's probably still early days, but what kind of impact do you see her in terms of having on the branding marketing and just continuing to evolve go to market activities. Yeah, Yes, it's early Terry but.

Without putting too much pressure on pressure on and we're obviously very pleased to have her on board and at the end of the day, we think frankly as well as we've done we've still got some of the industry's best kept secrets, and we're anxious to be able to get that message out.

You know what I think we are we have the opportunity to share our stories with a with a broader community drive awareness, particularly for our newer products and.

Just overall frankly get the message out that Oh.

We are a we're here to do business and help our customers in the industry with digital transformation.

I understood well, maybe some healthy pressures get though Fran so maybe there's some were somewhere in the middle there, but okay. That's great.

It's great to see the 40% contracted bookings from new logos. So this is kind of like closes the loop because you've been building the pipeline in terms of bid activity had been picking up. So now you see the conversion going on but I'm curious about is it.

Is it something with certain of the active cloud products that is getting you into parts of the retail or the E. Commerce oriented markets that you haven't been before whether it's D to C or other types of kind of micro segments I'm, just kind of curious because it is a striking number.

Any more color you can provide there yeah I don't think it's I don't think there's any specific.

Are those in this case being cloud native very innovative.

Access to new innovation on a you don't want a regular basis. So we're definitely seeing some uptick there from customers that we haven't done business with before.

Fortunately seen some you know some nice takeaways are from some of the older competitors are out there, but it is but it's quite broad.

And not focused on any given any given industry.

Got it and just my final question and I appreciate Dennis and might be.

Figures are at the end that helps us a lot in terms of the guide post, but I had a question actually on cash flow Dennis the cash flow was strong in the quarter a lot stronger than expected.

Thinking about 2020 generally you don't usually guide on cash flow, but could we see a similar pattern whereby free cash flow margins are higher than operating margins, just anything else you'd call out on any onetime things or capex things into 'twenty, two and just thinking about free cash flow. Thank you.

Yeah, No no one time items are great quality of one quality of earnings and quality of cash flow. So I'd expect we're going to post up another record free cash flow year next year.

This upcoming year.

And yes definitely the potential to us.

Surpassing EBITDA margin and as well as potentially operating margin.

Got it thanks, Congrats thank you Terry.

Okay.

Yeah.

Hello, Operator, we'll take the next question please.

Yeah.

Anybody there.

Yep.

Operator.

Uh huh.

Okay.

Operator, we'll take the next question.

That's right.

Yeah.

Hello.

Yeah.

Yeah, you there.

Okay.

Yeah.

Oh.

Yeah can you can you hear us Leah.

Yeah.

Everybody on the call the operator.

Told us that she is having some technical issues cell.

Standby.

Yeah.

Once again, we have a question from Joel.

Baird. Please go ahead, Sir your line is open.

Great can you hear me.

Okay, we can Joe I apologize to everybody for the short break there appeared to be a.

Little technical challenge with the with the KOL service, but please please far away far away Joe.

Okay great.

I'm wondering when customers are making commitments to <unk> are you seeing any changes in interest going along with that WNS and integrating.

Other of your solutions with them the same engagement, so our WNS deals carrying over and order management or Tms in a bigger way and I'm curious if that's the case.

Are the deal sizes getting bigger so I'd imagine rps.

Hey, good quantity of activity, but it is the size of why youre, winning all the time.

Yeah, Great Great question.

Right.

Just overall clearly our strategy is to partner with our customers to develop.

Our digital transformation roadmap and frankly, whether it starts with transportation inventory warehouse management omni solutions and so forth, we really don't care, where we where we get started.

We certainly are seeing some multi product implementations, we launched Manhattan active transportation management, just a few months ago, and we've got several customers and half of them.

Is.

R R.

Implementing Manhattan active Wm as well so it's great to see Manhattan active T M and Manhattan active Wm coming together to provide that unified solution for you know for our customers.

But.

I think across the board when you look at our order management system.

Customers, our Wm customers.

And our transportation customers. They are all great prospects for the other solutions for Upselling and cross sell as well.

He said historically across the approximate 20 products that we that we have in our portfolio. The average number of products that anyone customer owns about three or four so we've got a.

A lot of cross sell and upsell potential as far as your question around larger RP O opportunities for for multi product.

Yes is the answer is the answer to that.

Do you just bear in mind, though that when you implement either at Wm program a T. M program in order to management program in India and inventory program, they are pretty big and customers can only buy it off so much at once so they tend to be a.

Bit more cereal then in parallel, but we certainly are seeing some joint unified programs.

That's great color.

And then Eddie I think the win rate disclosure you typically made that this quarter. It went up relative to what the win rates have been trending at.

I'm just wondering if you can kind of carve out where youre seeing the improved bad debt and maybe one of the things that was noticeable during the coronary.

Geographic breadth of where the announcements are coming from.

Hey, guys.

So much on Americas or Europe.

Global and you mentioned your global teams a number of times on the call. So I'm wondering if there is maybe anything new happening in the sales activity.

Can help explain kind of the improvement and what you're saying.

I think I think it's the continued investment in innovation, that's really driving the win rate Jo when it comes right down to it we will see that bounce around a little bit, but I think when we look at when we when we talk to our <unk>.

Respects that have turned into customers about why they chose us and so forth I mean, it tends to it tends to be.

Because of the innovation that we brought to the market and I certainly know the great experience, we brought across that teams as all the other things the attributes that we bring play it play a role but the innovation in our product delivery I think it is number one.

In terms of seeing.

Seeing improved.

Improvement in both EMEA and APAC. This quarter. There's no question, we've seen EMEA and APAC lag just a little bit in terms of the I guess, we'll call it the COVID-19 recovery.

And we're seeing a good bit more movement.

Momentum in <unk>.

Europe number one and then followed followed closely behind in you know in APAC, so feel good about bringing a bit of balance back too.

Back to the performance.

Yes, Joe.

We are having some nice cross sell upsell.

Deal closures as well about $60 million of bookings impact in the quarter.

Oh, okay.

Thanks Dennis.

Thank you okay very good thank you Joe.

And your next question comes from the line of Brian Peterson from Raymond James. Please go ahead Sir.

Hi, gentlemen, thanks for taking my question and congrats on a really strong quarter. So two for me.

Obviously, we're seeing the guidepost gets raised I'm curious if we had to think about it.

I guess nine to 12 months ago, obviously, you're outperforming your expectations, we had to kind of stack order rank what drove that from like a product or market perspective, what would you say are the top one or two key drivers.

I think.

I think we have been pleasantly surprised by the uptick of Manhattan active W. N.

Number one I.

I think certainly it's early days, but the momentum we're seeing around Manhattan active transportation management.

And then thirdly, the bounce back of Manhattan active omni we saw we saw some subdued shall we say activity in Manhattan active omni and that's back to pick them back up so that would be the top three I think on.

On my roster Brian.

Okay I'll follow up on all the WNS side, Eddie So we're 16 months into the active Wm.

Obviously, I think what we're hearing the win rates are good the performance everything sounds really encouraging but I'm curious the cloud or reference ability is that a friction point for some customers and to the extent that you have customers up and running does that actually make the next 16 months look like.

Like a lot brighter than the past 16 months I'm, just curious to get your thoughts there.

We hope so.

But we've certainly got great implementation activity going on good reference ability and so forth.

I will tell you that you know the the.

The friction of the resistance to being early or an early adopter of new whatever you want to call. It hasnt.

It Hasnt really been.

Hasn't really been there now.

As you know we had a we had a beta customer when we launched we already had a customer lie very successful already been through you know a bunch of kind of version updates and so forth. So we had a great reference point to to get it started and didn't see a lot of friction but.

No question success breeds success.

We continue to drive across verticals across geographies to get more reference ability across all those dimensions.

Thank you.

We certainly have the opportunity to continue to.

<unk> success.

Great. Thanks, Eddie Thank you Brian.

Yeah.

And your next question comes from the line of Mark Chappell from Loop capital. Your line is open.

Yeah.

Alright. Thank you for taking my questions I'm done good job on the quarter Congrats on that and just starting with you just want to revisit your prepared remarks around the hiring environment for professional services team.

And I just wonder if you could just give us a sense of.

Where are you at with respect to your hiring plan for this year are you on plan for most part.

But behind plan could you just give us a little color, yes, we're a little bit behind bark, where we where we'd like to be frankly.

It's tough sledding out there from a from a talent acquisition perspective, but we've obviously got a great success story here, we've got a fantastic culture in the company no question that people like to be associated with.

With a successful company that's doing the doing meaningful work for tier one companies aranda around the globe. So we're doing pretty good on that front, but if I could if I could.

Wave a magic wand Theres no question, we'd be a little further ahead with our hiring trajectory than where we are.

So primarily and obviously thats driven by driven by demand.

So thank you for that and with that said.

Given that demand is tight and as you said earlier, you're expecting to continue to be tight for talent.

Is that changing the way that maybe you're approaching R&D as far as priorities prioritizing certain projects in other words.

Maybe putting in some features and capabilities and your products, so just make them easier to install.

It doesn't require as much professional services time.

Yes.

Always focused on that Mark frankly, trying to make it we're trying to drive that and always the the total cost of ownership for our products. We want to be feature rich we wanted to be able to provide the greatest innovation to our customers, but by the same token we are going to continue to focus on total cost of ownership speed of implementation cost is.

Cost of support and so forth.

So we've always been focused on that I'll be honest I wouldn't say that we've taken any.

Particularly specific steps to focus on that.

Last six months or so.

But we remain focused on driving driving total cost of ownership Brian.

You bring up a corollary point, there and with such a tight labor market for distribution centers truck drivers and so forth certainly the capabilities that we bring to market focus and blend up we'll focus on blending automation robotics and people in the warehouse and so forth certainly is.

It's very helpful for you know for our customers.

Okay, Great and then.

Just going back to your earlier comments around the bounce back that youre seeing in your active omni business and product.

Maybe just talk a little bit about what you think is driving that that so called bounce back.

I mean, the stores were closed right for for a couple of quarters number one.

The acceleration of the digital transformation that we're all seeing personally and professionally and so we're seeing a combination of.

The stores reopening and the need for storage systems, and very strategic omni channel initiatives that are driving growth for retail and wholesale customers alike.

Great. Thank you that's all for me thanks.

Thank you Mark I appreciate it.

And your next question comes from the line of Matt Pfau from William Blair. Your line is open.

Hey, guys. Thanks for taking my questions.

Wanted to first start out on the supply chain challenges that I'm sure. Many of your customers are having how is that impacting your business if at all because I imagine it could drive demand as well as perhaps create some distractions with.

Customers are prospects yeah, yeah.

Honestly, it's it's dry I would say, it's going to a slight positive to it.

Matt We're obviously evolved largely in the finished good side. So you know on the import side of things and all of those all those boats sitting off the port of long beach and everywhere else.

We're not we're not necessarily managing that you know that.

That sequencing and so forth, but when the finished goods hit hit hit sure. There is a great need to accelerate the movement of that inventory have the inventory in the play in the right place at the right time, and then getting that inventory in the hands of the consumers in a timely time.

Fashion and of course, again AD solutions, creating that speed and that dexterity and that agility for our customers to be able to manage through these will help manage through these very very very tough times and the need to be able to manage inventory very very high.

Levels.

Yeah.

Got it great.

Any update on the point of sale solution.

I put it.

It was a few comments.

My prepared remarks about point of sale.

Yeah, we've seen a we've seen a couple of.

Terrific go lives in you know in recent recent weeks in recent months.

And in terms of closures in a couple of a couple of another nice.

Real real important wins for us in the in the quarter.

Continuing to see that that forward momentum frankly.

And looking forward to get more and more and more reference customers there.

And as one of as you know Brian from Ray Jay mentioned here.

The more reference customers that you've got the less friction less friction that might be in the in the sales cycle. So.

These couple of couple of go lives, we had the quarter important to us and as are the the new sales and new bookings that we've seen in a quarter or two.

Great and then last one for me just in terms of the dynamic of our growth in cloud revenue growth. Maybe you can just remind us again about the timing differences between the two and now that you've given US helpful. Multiyear outlook, we can kind of see how cloud revenue growth.

Salaries, and then ARPA growth.

It comes down a little bit off of its high but how do we sort of think about the timing differences and how long those discrepancies take to resolve.

Okay.

Well I mean.

I don't know you.

One of the reasons for providing those supplemental schedules and the guideposts and so forth.

So that you can see how that dynamic shakes shapes up if you were to kind of pin me down on how.

How long it takes for those things to normalize it would probably be the 18 to 24 months timeframe.

Timeframe I know of course by the same token we're going to continue to drive new ERP over they'll have the same dynamic that dynamic built into it so.

But I think 18 to 24 months before you see that kind of really normalize.

Okay, I guess, maybe another way to look at it is with the active Wm.

Implementations, which I think are the main things.

Driving driving that discrepancy with fee implementation rollouts.

What would the typical rollout for your your active wm deployments be because if I understand correctly that the <unk>.

Primary.

Driver of sort of the timing differences between those two items.

Well.

So the thing to be to really be aware of there is a lot of this ramp as we call. It is driven by multi site rollouts.

So the duration the average duration typical duration to get an active wm site up and running less.

Call it the six month kind of timeframe, but when you're dealing with.

Global.

10, 2030 distribution centers or more distribution centers around the globe, that's what takes time too.

To move through that they're moving through the moving through the snake.

Mhm.

Got it okay. Thanks, guys appreciate it.

Certainly Matt.

And your final question comes from the line of margins He got <unk> from Rosenblatt Securities.

I'm, sorry, but the question Westwood one please.

Please go ahead.

Okay very good if that's all of the questions for today, we'll say thank you very much for everybody's time your support and we'll look forward to seeing you or excuse me talking to you on our Q4 call in about 90 days or so.

Again bye bye.

And this concludes today's conference call. Thank you all for your participation you may now all disconnect have a great day everyone.

Yeah.

[music].

Yes.

Alright.

Okay.

[music].

Good afternoon, My name is Leah and I will be your conference facilitator today.

At this time I would like to welcome everyone to the Manhattan Associates third quarter 2021 earnings call all lines have been placed on mute to prevent any background noise.

After the speakers remarks, there will be a question and answer period. If you would like to ask a question. During this time simply press star one on your telephone keypad. If you would like to withdraw your question press the pound key.

A reminder, ladies and gentlemen, this call is being recorded today October 27, I would now like to introduce Mr. Michael Bauer head of Investor Relations of Manhattan Associates. Mr. Bowers, Jay you May begin your conference.

Thank you Leah and good afternoon, everyone welcome to Manhattan Associates 2021 third quarter earnings call I will review, our cautionary language and then turn the call over to Eddie Capel our CEO.

Are you to the reports Manhattan Associates files with the SEC for important factors that could cause actual results to differ materially from those in our projections, particularly our annual report on Form 10-K for fiscal year 2020, and the risk factor discussion in that report as well as any risk factor updates we provide in our subsequent form 10 Qs.

We note in particular that uncertainty regarding the impact of the COVID-19 pandemic on outperformance could cause actual results to differ materially from our projections. We are under no obligation to update. These statements. In addition, our comments include certain non-GAAP financial measures in an effort to provide additional information to investors, we have reconciled all of them.

Non-GAAP measures to the related GAAP measures in accordance with SEC rules.

You'll find reconciliation schedules in the form 8-K, we submitted to the SEC earlier today and on our website at M. A N H dot com now ill turn the call over to Eddie.

Thanks, Mike well good afternoon, everybody and thank you for joining us as we review our third quarter results discuss our updated full year 2021 outlook and provide some very preliminary color on 2022 and beyond.

Q3 and year to year to date results were an all time record for Manhattan Associates.

Revenue increased 13% to $169 million.

And adjusted earnings per diluted share of <unk> 71.

Increased 39% both of these metrics exceeded our expectations.

Strong cloud and services demand continues to drive revenue outperformance fueling double digit topline growth and strong earnings leverage of overall, our investments in innovation are paying off.

We delivered third record third quarter bookings with <unk>, increasing 123% year over year, and 17% sequentially to $574 million, providing us with excellent future revenue visibility. Additionally.

Additionally, 40% of our Q3 contracted bookings were generated from net new customers.

And with strong business momentum and our increased visibility, we are providing refreshed guidepost for our Po and cloud revenue through 2024.

Dennis will provide more color later in the fall, but this includes moving up our milestone of reaching $1 billion in <unk> to 2022 from our original target of 2023.

On the sales front competitive win rates remained strong at about 75% is that our innovation is recognized as industry leading.

Health services, as well as durable and non durable goods.

Our global services team continues to execute amazingly well conducting over a 100 go lives in Q3 and for the quarter services revenue was up 20% compared with the prior year period.

As we mentioned in our Q2 call the market is extremely competitive for services and technical talent.

And while we're well positioned for significant growth, we do expect demand for talent to continue to be strong.

With new and existing customers wanting to accomplish more with our solutions and at a faster pace. We're very mindful of the workload that we put on our teams and we're focused on attracting and retaining talent, which we continue to factor into our operational planning and guidance.

On the innovation front with our R&D spend approaching $90 million annually. We're focused on provide a modern cloud native applications that are architected to unified commerce and supply chain experiences Manhattan is on the leading edge of removing numerous unnatural silos are at.

Official boundaries that really don't align with business workflows.

As technology is differentiating and industry, leading in our Manhattan active SaaS solutions are scalable version lists and extensible and this enables our customers to quickly adapt to market changes. It can they can improve efficiency and leverage that data and more robust ways, including <unk>.

All the challenges that legacy and silo systems simply cannot.

And we believe that we're still very early in that cloud journey, but we couldnt be more pleased with the market's enthusiastic response to our Manhattan active solutions.

So it's been just a few minutes on specific updates on products and customers.

Were actually off to a great start with Manhattan active transportation management, the industry's fastest and smartest multimodal transportation optimization engine.

Patent active TM.

The industry's first self configuring and self tuning system built on our industry, leading Manhattan application architecture.

Latin active TM.

Is joined with Manhattan active warehouse management to Sephora Manhattan active supply chain, the industry's first unified cloud native supply chain execution platform.

Since launch we've been we've been heartened by the by the accolades we've received from Manhattan active transportation management from analysts partners and customers.

Perhaps most encouragingly several of our Manhattan active transportation management customers are also deploying Manhattan active wm.

Manhattan active wm, the other half of Manhattan active supply chain continues to experience pretty explosive growth consistent with prior quarters. We are seeing a very nice balance between net new customers and existing Manhattan WNS customers choosing to migrate to our next generation of Wm platform.

And just what is it 16 short months Manhattan active Wm as live or in the process of being implemented.

In 11 countries across 16 different industries are pretty good Testament to its cross vertical and international applicability.

A small sampling of either live or currently implementing Manhattan active Wm customers include luxury retail department store and national beverage distributor distributor.

<unk> zero national grocer outside of the U S and several industrial distributors across the globe.

Our competitive win rate with WNS has always been pretty high.

Manhattan active Wm has helped us raise that already high bar.

That turning now to our omni channel applications, we continue to make strides with that Manhattan active point of sale application. This past quarter saw a global apparel footwear brand activate and Manhattan active point of sale application in two new flagship flagship stores in New York and La.

Vegas. This particular customer also runs Manhattan active order management and they saw a clear advantage of deploying a unified omnichannel operating platform across the digital and bricks and mortar operations and from a geographical point of view that plans call for deploying Manhattan active point of sale and order management.

Across the Americas, Asia Pacific and Europe, and we believe that Manhattan active omni is unique in its ability to provide full featured order management contact center and store systems as part of a unified platform across the globe.

And to close that our product and customer updates this quarter I'm happy to report that a couple of weeks ago, we were able to host.

Several small customer event in person for the first time in quite some time and we were pleased to host customers in the UK and the Netherlands, and finally in France for some pretty intimate events to discuss their commerce and supply chain strategies and had Manhattan active solutions can help them progress that digital transformation.

Nations and I got to tell you it was such a pleasure to connect in person with a group of strategic customers after such a long break.

Well that concludes my brief business update Dennis is going to provide.

You with an update on our financial performance and outlook and then I'll close our prepared remarks with a brief summary, before we move to Q&A. So Dennis.

Thanks Eddie.

Nothing but accolades for our Manhattan global teams top to bottom we continue to raise the bar and a choppy macro delivering strong growth profitability cash flow and balance sheet metrics.

I'll start with a quick recap of the quarter with growth rates on a year over year basis, unless otherwise stated.

Total revenue was a record $169 million up 13%, excluding license and maintenance revenue, which removes the compression driven by our cloud transition our total revenue was up 27%.

Notably 70% of our total revenue is now driven by cloud and services.

Our Q3 operating profit was a record totaling $53 million up 20% with adjusted operating margin of 31, 3% and GAAP operating margin of 25, 1%.

Our performance was driven by strong cloud and services revenue combined with lower expenses driven by the Covid pandemic.

Compared to 2019, we estimate COVID-19 lowered our year to date 2021 expenses by about 425 basis points and year to date 2020 by about 325 basis points respectively.

Earnings per share was a record 71 cents up 39% our earnings per share. It did include 66.

Of nonrecurring tax benefit associated with expiring tax statutes. So normalized EPS was <unk> 65 up 27% either way of record.

Our Q3 and year to date operating cash flow performance was a record with Q3 totaling $60 million and year to date $145 million, both up 41% on record global cash collections how.

How about our free cash flow margin. It continues to be strong at 35% for the quarter and 29% year to date.

EBITDA margin was 32% in the quarter and 29% year to date.

Our balance sheet continues to be rock solid with $246 million in cash and zero debt, providing us excellent flexibility to invest for growth.

We invested $20 million in share buybacks in the quarter, resulting in $80 million $80 million in buybacks year to date.

For the fourth quarter and full year, we estimate our diluted shares outstanding to be about $64 3 million shares which assumes no buyback activity.

Also our board has approved our customary $50 million share repurchase authority.

That covers the macros now, let's drill down a little bit into revenue.

Cloud revenue in the quarter totaled $32 million up 53%.

As our new annual contract value continues to accelerate on strong market demand.

For Q4, we expect cloud revenue of roughly $33 $5 million.

As Eddie mentioned Q3 was a record third quarter with RP, our remaining performance obligation or <unk> bookings totaled $574 million up 123% year over year and 17% sequentially.

With RP O continuing to compound positively our visibility into future subscription revenue continues to strengthen giving us confidence in our forward visibility and guide guidepost projections.

Services revenue was $88 million up 20% as our cloud momentum continues to fuel our services revenue growth <unk>.

Americas and Europe are running at double digit growth with APAC demand improving.

For Q4 retail peak season is starting earlier than normal given supply chain constraints. We are forecasting services revenue to be about $82 million with year over year growth of 16%.

As a reminder to most of you the sequential revenue decline from Q3 represents our traditional retail peak seasonality.

As customers slow implementations to meet their customers' demand.

Accounting for retail peak season, and growth investments, we expect Q4 margin to be about 52%, resulting in full year 2021 margin of 53, 5% up 190 basis points over the prior year.

Yeah.

License revenue was $8 million down, 36% and maintenance revenue was $34 million down 8%, primarily on cash collection timing.

And one final revenue call out our hardware team is in the double digit growth game up 25% year to date good job guys.

Transitioning to guidance.

Barring any major global macro setbacks, our full year 2021 guidance and preliminary 2022 outlook puts us on track to deliver consecutive record revenue years.

Our over arching objective, obviously is to deliver sustainable double digit topline growth and top quartile operating margins benchmarked annually against enterprise SaaS comps.

For 2021, we are raising our total revenue guidance to 653 million to $655 million.

From our prior range of $643 million to $650 million.

Our underlying total 2021 revenue growth ex license and maintenance, which removes the revenue compression from our cloud transition is targeted to be 19% at the midpoint.

For Q4, we expect total revenue of 161 million to 163 million.

Yes.

We expect full year adjusted earnings per share to be $2 12 to $2 14 up from our prior range of $2 to $2 60.

For GAAP EPS, our guidance range is $1 61 to $1 63, with a midpoint of $1 62 up 6% from our previous midpoint of $1 53.

And for Q4, we expect adjusted EPS to be in the range of 37 to 39 cents.

For full year 2021, our cloud revenue estimate is increasing to $121 million representing 51% growth.

Given our strong performance in Q3 and year to date, we are also increasing our <unk> outlook to a range of $675 million to $700 million.

Up from our prior outlook range of $550 million to $600 million.

The $688 million midpoint is up over 75% from our initial Rps target provided on our Q3 2020 earnings call.

For full year 2021 license and maintenance revenue continues to positively a trip on increasing demand for our cloud solutions.

We expect license to be about $30 million $33 million in maintenance roughly $143 million.

For Q4, we expect license to be about $7 $5 million in maintenance roughly $35 million.

Our capex ex estimate for 2021 is $3 million to $4 million.

And for full year 2021, we expect an adjusted tax rate of about 19, 5% and a GAAP tax rate of approximately 17, 5%.

So that covers the quarter and our 2020 outlook, let's cover some 2022 preliminary targets and guidepost.

We are in our budget cycle. Currently so we will firm up our parameters on our Q4 call.

Please note, though to facilitate our review.

For you all we have added a supplemental schedule II.

Adam number nine last page in todays earnings release, providing a comparison of our original guide post metrics and our current updated guidepost.

Please note.

Year over year growth rates are based on the midpoint of our 2021 guidance.

Our preliminary estimate of 2022 total revenue of 695 million to $715 million, excluding license and maintenance attrition at 16% growth.

All in our initial growth target is 8%.

Our full year 2022, adjusted EPS range is $1 90 to $2 10.

For 2022 cloud revenue, we are targeting $160 million to $165 million in rep revenue, representing 35% growth at the midpoint.

Exiting 2021, including ramp transactions, we expect to achieve achieve a three year 2022 to 2020 for compounded annual growth rate of 40% at the midpoint of our cloud revenue targets.

For <unk>, we are targeting a three year CAGR of 35% at the midpoint of our targets of $1 billion in 2022 growing to $1 7 billion in 2024.

Those are big numbers.

In 2022, we are also targeting services revenue of 362 million to $370 million, which represents 9% growth.

License revenue of 13 million to $15 million and maintenance revenue of $137 million to a $140 million as we continue to expect a longer attrition tail for maintenance.

Our consolidated subscription maintenance and services margin is expected to be about 54%.

And we are pegging 2022 operating margins at 22, 5% to 24% and are targeting an annual 75 to 125 basis point expansion annually starting in 2023.

The factors impacting the inherent leverage in our model and driving the 2022 year over decline in operating margin include license attrition of 57%.

To $14 million with maintenance revenue attrition at 4% as customers shift to cloud totaling about 200 basis points of margin impact.

Wage inflation in labor market trends accounting for about 200 basis points in margin investment as.

As we've previously previously discussed demand for technical talent is high and we expect the labor market to continue to be very competitive through 2022.

Continued investment across our company fueled by customer demand, we are investing in R&D services and sales and marketing.

And the continued return of Covid impact expenses, such as travel our annual momentum customer conference employee appreciation events contractors et cetera, total about 100 basis points.

We also expect our effective tax rate to be approximately 22% and our diluted share count will be approximately $64 3 million shares which assumes no buyback activity.

So lastly, I will summarize our 2023 and 2024 guideposts that should better assist investors assessment of our future cloud growth and earnings trajectory.

Remember comparison of our guide does versus historical are located in our earnings release.

For 2023, we are targeting RP O of 125 billion to $1 4 billion, representing 33% growth at the midpoint.

Cloud revenue of $220 million to $240 million, representing 42% growth at the midpoint.

And introducing 2024 for RPI, we are targeting one six to one $8 billion, representing 28% growth at the midpoint.

Cloud revenue, we're targeting 310 million to $345 million, representing 42% growth at the midpoint.

So that covers the financial update thank you very much and back to Eddie for some closing remarks. Good report Dennis Thank you.

We're very pleased with our strong third quarter and year to date results and.

While we continue to operate in a pretty turbulent global macro environment business momentum is very positive and of course, we're very encouraged by our accelerating <unk> and associated revenue growth.

As we look forward, we're confident in our ability to deliver success for our customers and help them drive their digital transformation.

And as a result, we anticipate long term sustainable and profitable growth for Manhattan Associates.

That player we'd be happy to take take any questions.

Alright, as a reminder to ask a question you will need to press star one on your telephone keypad.

Thats Star one on your telephone keypad and withdraw your question press the pound key.

While we compile the Q&A roster.

And your first question comes from the line of Terry Tillman from Shaw with Securities. Please go ahead.

Yes, thanks for taking my questions and congrats exceptional results.

I guess maybe higher.

Hi, Eddie tenants alike.

To begin with.

Maybe Eddie I'll ask you a question congrats on the hiring of a new CMO.

Without putting too much pressure on pressure on and we're obviously very pleased.

We are on board and at the end of the day, we think frankly as well as we've done we've still got some of the industry's best kept secrets and we're anxious to be able to get that message out so.

We have the opportunity to share our stories with a broader community drive awareness, particularly for our newer products and.

Just overall frankly get the message out that.

We're here to do business and help our customers in the industry with digital transformation.

I understood well, maybe some healthy pressures get though Fran so maybe there's some more somewhere in the middle there, but okay. That's great.

It was great to see the 40% contracted bookings from new logos. So this kind of like closes the loop because you've been building the pipeline in terms of the ball where activity has been picking up. So now you see the conversion going on but I'm curious about is is it something with certain of the active cloud products that is getting you into parts of the retail or the e-commerce.

Oriented markets that you haven't been before whether it's D to C or other types of kind of micro segments I'm, just kind of curious because it is a striking number.

Any more color you can provide there yet I don't think its I don't think theres any specific.

Micro verticals or sub verticals, Terry, but I do think that the.

There has been some some a little bit a little bit of pent up demand with the industry waiting for the real next generation of cloud native or next generation of solutions to emerge in this case being cloud native very innovative.

Access to new innovation on a you don't want a regular basis. So we're definitely seeing some uptick there from customers that we haven't done business with before.

Fortunately seen some some nice takeaways.

Some of the older competitors are out there, but it is but it is quite broad.

Not not focused on any given any given industry.

Got it and just my final question and I appreciate Dennis and Mike.

The figures are at the end that helps us a lot in terms of the guidepost, but I had a question actually on cash flow Dennis the cash flow was strong in the quarter a lot stronger than I expected you know as you think about 2020 General you don't usually guide on cash flow, but could we see a similar pattern whereby free cash flow margins are higher than operating margins just anything else you can call out on any onetime things or.

Capex things into 'twenty, two and just thinking about free cash flow. Thank you.

Yes, no no onetime items.

Great quality of one quality of earnings and quality of cash flow. So I'd expect we're going to post up another record free cash flow year next year.

This upcoming year.

And yes definitely the potential to serve.

Opacity, EBITDA margin and as well as potentially operating margin.

Got it. Thanks, Congrats thank you Terry once again, we have a question from Joe.

Baird. Please go ahead, Sir your line is open.

Great can you hear me, Okay, we can Joe I apologize to everybody for the short break there appeared to be.

Technical challenge with the with the KOL service, but please please far away far away Joe.

Okay great.

I'm wondering when customers are making a commitment to WNS.

Are you seeing any changes in interest going along with that WNS and integrating.

Other of your solutions with them the same engagement.

So our WNS deals carrying over and order management enter Tms in a bigger way and I'm curious if that's the case.

Are the deal sizes getting bigger so I'd imagine RPI.

A good quantity of activity, but is the size of why youre, winning all also going up.

Yeah, Great Great question.

Right.

Just overall clearly our strategy is to partner with our customers to develop.

Our digital transformation roadmap and frankly, whether it starts with transportation inventory warehouse management omni solutions and so forth, we really don't care, where we get started.

We certainly are seeing some multi product implementations, we launched Manhattan active transportation management, just a few months ago now we've got several customers and half of them.

Is.

R R.

Implementing Manhattan active Wm as well so it's great to see Manhattan active TM and Manhattan active Wm coming together to provide that unified solution for for our customers.

But.

I think across the board when you look at our order management system customers, our Wm customers.

Our transportation customers. They are all great prospects for the other solutions for Upselling and cross sell as we've said historically.

Across the approximate 20 products that we that we have in our portfolio. The average number of products that anyone customer owns about three or four so we've got.

A lot of cross sell and upsell potential as far as your question around larger <unk> opportunities for for multi product.

Yes is the answer is the answer to that.

Just bear in mind, though that when you implement either of Wm program of TM program in order to management program in India and inventory program. They are pretty big and customers can only buy it off so much at once so they tend to be a bit more cereal then in parallel, but we certainly are seeing some.

Unified programs.

That's good color.

And then Eddie.

Thanks.

Win rate disclosure.

This quarter it went up relative to what the win rates have been trending at.

I'm just wondering if you can kind of carve out where you're seeing the improvement and maybe one of the things that was noticeable during the coronary is.

The geographic breadth of where the announcements are coming from.

It's not so much the Americas or Europe, it's global.

Mentioned your global teams a number of times on the call. So I'm wondering if there is maybe anything new.

And the sales activity that that can help explain kind of the improvement and what you're saying.

Prospects that have turned into customers, who buy why they chose us and so forth I mean, it tends to it tends to be.

Because of the innovation that we brought to the market and I certainly the great experience, we brought across that teams as all the other things the attributes that we bring.

Play a role, but the innovation in our product delivery I think is number one in terms of.

Seeing.

Improvement in both EMEA and APAC. This quarter. There's no question, we've seen EMEA and APAC lagged just a little bit in terms of I guess, we'll call it the COVID-19 recovery.

And we're seeing a good bit more movement.

Momentum in Europe number one and then followed followed closely behind in in APAC. So feel good about.

Bringing a bit of balance back too.

Back to the performance.

Yes, Joe.

We are having some nice cross sell upsell.

Deal closures as well about $60 million of bookings impact in the quarter.

Oh, okay.

Thanks Dennis.

Thank you okay very good thank you Joe.

And your next question comes from the line of Brian Peterson from Raymond James. Please go ahead Sir.

Hi, gentlemen, thanks for taking my question and congrats on a really strong quarter substitute for me.

Obviously, we're seeing the guideposts gets raised I'm curious if we had to think about.

I guess nine to 12 months ago. Obviously, you are outperforming your expectations. If we had to kind of stack order rank what drove that from like a product or market perspective, what would you say are the top one or two key drivers.

I think.

I think we have been pleasantly surprised by the uptick of Manhattan active Wm.

Number one I.

I think certainly it's early days, but the momentum we're seeing around Manhattan active transportation management.

And then thirdly, the bounce back of Manhattan active omni.

So we saw some subdued shall we say activity in Manhattan active omni and that's back to pick them back up so that would be the top three I think on.

On my roster Brian.

Okay I'll follow up then on the WNS side, Eddie So we're 16 months into the active Wm.

Obviously I think we're hearing the win rates are good the performance everything sounds really encouraging but I'm curious the cloud or reference ability is that a friction point for some customers into the extent that you have customers up and running does that actually make the next 16 months look like a lot brighter than the first 16 months I'm just curious to get your thoughts there.

We hope so.

But we've certainly got great implementation activity going on good reference ability and so forth.

I will tell you that the.

The friction of the resistance to being early or an early adopter renewal whatever you want to call. It.

It Hasnt really been.

Hasn't really been there now.

As you know we had a we had a beta customer when we launched we already had a customer lie very successful already been through a bunch of kind of version updates and so forth. So we had a great reference point to to get it started and didn't see a lot of friction but.

Question success breeds success, and as we continue to drive across verticals across geographies and get more reference ability across all those dimensions.

<unk>.

We certainly have the opportunity to continue to see success.

Great. Thanks, Eddie Thank you Brian.

And your next question comes from the line of Mark Chappell from Loop capital. Your line is open.

Alright, Thank you for taking my questions.

Good job on the quarter congrats on that.

Just starting with you.

I just want to revisit your prepared remarks around the hiring environment for your professional services team.

Just wondering if you could just give us a sense of.

Where you're at with respect to your hiring plan for this year are you on plan for the most part.

But behind plan, but can you just give us a little little corner, yes, we're a little bit behind bark, where we where we'd like to be frankly.

Meaningful work for tier one companies aranda around the globe. So we're doing pretty good on that front, but.

If I could.

Wave My Magic Wand. There is no question, we'd be a little further ahead with our hiring trajectory than where we are.

So primarily and obviously thats driven by driven by demand.

So thank you for that and with that said.

Given that demand is tight and as you said earlier, you're expecting to continue to be tight for talent is.

Is that changing the way that maybe you're approaching R&D as far as priorities prioritizing certain projects in other words.

Maybe putting in some features and capabilities and your products, so just make them easier to install.

It doesn't require as much professional services time.

Yes.

Cost of support and so forth.

So we've always been focused on that I'll be honest I wouldn't say that we've taken any.

Particularly specific steps to focus on that.

Six months or so.

But we remain focused on driving driving total cost of ownership brand.

Obviously, you bring up a corollary point, there and with such a tight labor market for distribution centers truck drivers and so forth certainly the capabilities that we bring to market focus and blend will focus on blending automation robotics and people in the warehouses and so forth.

<unk> is very helpful for you know for our customers.

Okay, Great and then.

Just going back to your earlier comments around the bounce back that youre seeing in her active omni business and product.

Maybe just talk a little bit about what you think is driving that so called bounce back.

I mean look.

Stores were closed right for for a couple of quarters number one.

The acceleration of the digital transformation that we're all seeing personally and professionally and so we're seeing a combination of.

The stores reopening and the need for storage systems, and very strategic omni channel initiatives that are driving growth for our retail and wholesale customers alike.

Great. Thank you that's all for me thanks.

Thank you Mark I appreciate it.

And your next question comes from the line of Matt Pfau from William Blair. Your line is open.

Hey, guys. Thanks for taking my questions.

Wanted to first start out on the supply chain challenges that Im sure. Many of your customers are having how is that impacting your business if at all because I imagine it could drive demand as well as perhaps create some distractions with.

Customers are prospects yeah, yeah.

Honestly, it's it's dry.

I would say, it's got a slight positive to it.

Matt.

Obviously evolved largely in the finished good side so on the import side of things and all those all those boats sitting off the port of long beach and everywhere else.

We're not we're not necessarily managing that.

That sequencing and so forth, but when the finished goods hit hit hit sure. There is a great need to accelerate the movement of that inventory have the inventory in the right place at the right time, and then get that inventory in the hands of the consumers in a timely time.

Fashion and of course, again AD solutions Cree.

Creating that speed and that dexterity and agility for our customers to be able to manage through these will help manage through these very very very tough times and the need to be able to manage inventory.

Very very high levels.

Yes.

Got it great and.

And any update on the point of sale solution.

I put it.

A few comments.

In my prepared remarks about point of sale, but yes, we've seen.

We've seen a couple of <unk>.

Terrific go lives in.

Recent recent weeks in recent months.

Terms of closures in a couple a couple another nice real real important wins for us in the.

Quarter.

Continuing to see that that forward momentum frankly.

And looking forward to get more and more and more reference customers there.

And as one of as you know Brian from Ray Jay mentioned here.

The more reference customers that you've got the less friction less friction that might be in the in the sales cycle. So.

Couple of couple of go lives, we had the quarter important to us and as are the the new sales or new bookings that we've seen in the quarter too.

Great and last one for me just in terms of the dynamic of our growth in cloud revenue growth. Maybe you can just remind us again about the timing differences between the two and now that you've given us just helpful. Multiyear outlook, we can kind of see how cloud revenue growth access.

<unk> and then our <unk> growth.

It comes down a little bit off of its high but how do we sort of think about the timing differences and how long those discrepancies take to resolve.

Well I mean.

I don't know.

One of the reasons for providing those supplemental schedules and the guideposts and so forth.

So that you can see how that dynamic shakes shapes up if you were to kind of pin me down on.

How long it takes for those things to normalize it would probably be the 18 to 24 months.

Timeframe.

Of course by the same token we're going to continue to drive new <unk> will have the same dynamic dynamic built into it so.

But I think 18 to 24 months before you see that kind of really normalize.

Okay, I guess, maybe another way to look at it is with the active Wm.

Implementations, which I think are the main things.

Driving driving that discrepancy with fee implementation rollouts.

What would the typical rollout for your active wm deployments be because if I understand correctly that the <unk>.

Primary.

Driver of sort of the timing differences between those two items.

Yes, well.

So the thing to be.

Be aware of there is a lot of this ramp as we call. It is driven by multi site rollouts.

So the duration the average duration typical duration to get an active wm site up and running well, let's let's call. It the six month kind of timeframe, but when you're dealing with.

Global.

10, 2030 distribution centers or more distribution centers around the globe, that's what takes time too.

To move through that Deere moving through the moving through the snake.

Got it okay. Thanks, guys appreciate it.

Certainly Matt.

And your final question comes from the line of Martin <unk> from Rosenblatt Securities.

I'm sorry, but the question was withdrawn.

Please go ahead Ms Angela.

And this concludes today's conference call. Thank you all for your participation you may now all disconnect have a great day everyone.

Q3 2021 Manhattan Associates Inc Earnings Call

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