Q4 2023 Manhattan Associates Inc Earnings Call

These two gentlemen, thank you for your patience to conference you'll be starting in just a few moments.

Again, thank you for your patience till the beginning in just a few moments.

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Okay.

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Sherry: Good afternoon, My name is Sherry and I won't be your conference facilitator today at this time I would like to welcome everybody to Manhattan Associates fourth quarter 2023 conference call.

Sherry: 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 and then the number one on your telephone keypad, if you with a twist.

Sherry: Jim Press Star and then the number two as a reminder, ladies and gentlemen. This call is being recorded today January 30th 2024, I would now like to introduce your host Mr. Michael Bauer head of Investor Relations at Manhattan Associates. Mr. Baber, you may begin your conference.

Okay. Thank you Sherry and good afternoon, everyone welcome to Manhattan Associates 2023 fourth quarter earnings call I will review, our cautionary language and then turn the call over to Eddie Capel CEO. During this call, including the question and answer session. We may make forward looking statements regarding the future events or the future financial performance of Manhattan Associates.

Sherry: 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 the projections contained in our forward looking statements I refer 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.

Sherry: <unk> annual report on form.

Sherry: For fiscal year, 2022, 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 the turbulent global macro environment could impact outperformance and cause actual results to differ materially from our projections. We're under no obligation to update. These statements. In addition, our comments include certain.

Sherry: non-GAAP financial measures to provide additional information to investors, we have reconciled all non-GAAP measures to the related GAAP measures in accordance with SEC rules, you'll find reconciliation schedules in our form 8-K, we submitted to the SEC earlier today and on our website at M. A N H dot com now I will turn the call over to Eddie.

Operator: Science3Technology.ch> Good afternoon. My name is Sherry, and I will be your conference facilitator today. At this time, I would like to welcome everybody to Associates' 4th quarter 2023 conference call. All lines have been set up to prevent any background noise. After the speaker's remarks, there will be a question period. If you would like to ask a question during this time, simply press star and then the number one on your telephone keypad. If you would like to withdraw your question, press star and then the number zero.

Eddie: Thanks, Mike Good afternoon, everybody and a belated happy new year and thanks for joining us as we review our results for the fourth quarter and full year 2023, as well as provide our outlook for 2024.

So 2023 was a very successful year for Manhattan, setting New records in total revenue RP O operating profit free cash flow and earnings per share.

Eddie: And to drive future growth and innovation, we also invested record of mines in our people and in research and development.

Eddie: In 2023, we increased our head count by about 10% and our R&D investment.

Eddie: With over $125 million sniper perspective over the past five years, we've invested over a half a billion dollars in R&D across mission critical commerce and supply chain technology solutions.

And this level of consistent commitment is really unmatched in our industry and is one of the manhattans important differentiators.

Eddie: And given the size of the opportunity in growing demand, we're committed to increasing these investments in 2024 and beyond.

Eddie: These investments will also contribute to our industry, leading levels of customer satisfaction growing our addressable market and extending our position as the leading innovator in supply chain execution, omni channel and point of sale solutions.

Now, while we remain appropriately cautious regarding the global economy.

Eddie: <unk> fundamentals are solid and were optimistic about our long term market opportunity.

Eddie: Like prior years, we're entering 2024 with good visibility and benefiting from several growth drivers, which include the acquisition of new customers conversions of on premise customers to cloud and cross selling and growing unified product portfolio.

Operator: As a reminder, ladies and gentlemen, this call is being recorded today, January 30, 2024. I would now like to introduce your host, Mr. Michael Bauer, Head of Investor Relations for Manhattan, and Peter Bauer. Okay, thank you, Sherry, and good afternoon, everyone.

Eddie: So pivoting to our quarterly results Q4 was a record quarter that frankly exceeded our expectations revenue increased 20% as reported.

Eddie: $238 million highlighted by 38% growth in cloud, 19% growth in services and double digit revenue growth across all of our geographies.

Michael Bauer: Welcome to Manhattan Associates' 2023 fourth-quarter earnings call. I will review our cautionary language and then turn the call over to Eddie Capel, our CEO. 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 will caution that these forward-looking statements involve risk and uncertainties and are not guarantees of future performance, and that actual results may differ materially from the projections contained in our forward-looking statements.

Eddie: These strong results drove top line outperformance and solid earnings leverage in the quarter with adjusted earnings per diluted share increasing 27% to $1 three.

Eddie: R. P O the leading indicator of that growth increased 36% to $1 4 billion at the end of 2023.

Eddie: Satisfaction levels are high and win rates remain at about 75%.

Eddie: With demand for our cloud solutions, continuing to be solid across our product portfolio.

Eddie: From a vertical perspective retail manufacturing and wholesale continue to drive more than 80% of our bookings in the quarter and across our solutions. The sub verticals are pretty diverse in the following is just a sample of some of the cloud deals. We won this quarter in industrial automation and energy management conglomerate and.

Michael Bauer: I refer 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 functional decay for fiscal year 2022 and the risk factor discussion in that report, as well as any risk factor updates we provide in our subsequent Form 10Qs. We note the turbulent global macro environment could impact our performance and cause actual results to differ materially from our projections. We're under no obligation to update these statements.

Eddie: Airline a fast food restaurant chain, a sporting goods retailer health care and supplies company and a specialty retailer as well as a number of others.

Eddie: In this quarter.

Eddie: Quarters wins contributed to a healthy mix of bookings across sub verticals for the full year.

Michael Bauer: In addition, our comments include certain non-GAAP financial measures to provide additional information to investors. 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 8K we submitted to the SEC earlier today and on our website at manh.com. Now, I'll turn the call over to Eddie. Thanks, Mike. Good afternoon, everybody, and a belated Happy New Year.

Eddie: Additionally, aided by secular tailwind.

Eddie: And the clear benefit of resilient modern supply chains, roughly one third of our total bookings were generated from new logos.

Eddie: For the full year 2023.

Eddie: Our pipeline continues to be strong with solid demand across our product suites net new potential customers represent about 35% of that demand and we have significant conversion opportunity as we enter 2024 with over 85% of our on premise cut.

Eddie Capel: And thanks for joining us as we review our results for the fourth quarter and full year 2023, as well as provide our outlook for 2024. So 2023 was a very successful year for Manhattan, setting new records in total revenue, RPO, operating profit, free cash flow, and earnings per share. And to drive future growth and innovation, we also invested record amounts in our people and in research and development. In 2023, we increased our headcount by about 10%. And our R&D investment was over $125 million. And for perspective, over the past five years, we've invested over a half a billion dollars in R&D across mission critical commerce and supply chain technology solutions. And this level of consistent commitment is really unmatched in our industry and is one of Manhattan's important differentiators.

Eddie: <unk> yet to begin their migration to our cloud solutions.

Eddie: Yeah.

Eddie: For this quarter's brief product update I'd like to start with three exciting announcements that we made at the national feet at National Retail Federation Conference in mid January.

Eddie: Two of which have to do with a pretty large step forward with our Manhattan.

Eddie: On the applications and the third is an important new partnership for us so starting with the product announcements this quarter, we announced general availability of Iris. The next big step forward for our store associates App running on top of Manhattan active omni our iron Manhattan active omni platform Iris.

Offers unmatched transactional performance resiliency.

Eddie Capel: And given the size of the opportunity and growing demand, we're committed to increasing these investments in 2024 and beyond. These investments will also contribute to our industry-leading levels of customer satisfaction, growing our addressable market, and extending our position as the leading innovator in supply chain execution, omni-channel, and point-of-sale solutions. Now, while we remain appropriately cautious regarding the global economy, our business fundamentals are solid, and we're optimistic about a long-term market opportunity. Like prior years, we're entering 2024 with good visibility and benefiting from several growth drivers, which include the acquisition of new customers, conversions of on-premise customers to the cloud, and cross-selling a growing unified product portfolio. So pivoting to our quarterly results, Q4 was a record quarter that frankly exceeded our expectations.

Eddie: Purpose built for the connectivity issues inherent in store networks.

Eddie: Great New associate experience design and we believe the Iris is the first cloud native point of sale truly designed and built to offer the.

Eddie: Next best of both worlds continuous innovation in the former quarter releases and onboard resiliency to handle centralized cloud deployments at scale.

Many of our customers face ongoing battles to provide fast and reliable reliable network connectivity to every register in every store and Irish Insulates the store associates from the the whims of networks offering unmatched checkout performance, whether the devices.

Eddie: Connected.

Eddie: Partially disconnected or completely offline.

Eddie: And I was also offers a great new visual experience for the store associates seamlessly blending the the three CS of a best in class point of sale system.

Eddie Capel: Revenue increased 20% as reported to $238 million, highlighted by 38% growth in cloud, 19% growth in services, and double-digit revenue growth across all of our geographies. These strong results for top line-out performance and solid earnings leverage in the quarter, with adjusted earnings per diluted share increasing 27% to $1.03. RPO, the leading indicator of that growth, increased 36% to $1.4 billion at the end of 2023.

Eddie: Card catalog and customer.

Eddie: This empowers store associates to maximize sales conversion rates in the store the ability to sell both what's in the physical store and what's in the broader supply chain in a single transaction, ensuring every possible sale is converted.

Eddie: Furthermore, the highly visual customer profile within Iris empires of store associate to truly deliver a personalized selling experience.

Eddie: Same with retail stores just for a moment.

Eddie Capel: Customer satisfaction levels are high, and win rates remain at about 75%, with demand for our cloud solutions continuing to be solid across our product portfolio. From a vertical perspective, retail, manufacturing, and wholesale continue to drive more than 80% of our bookings in the quarter, and across our solutions, the sub-verticals are pretty diverse. And the following is just a sample of some of the cloud deals we won this quarter: an industrial automation and energy management conglomerate, an airline, a fast food restaurant chain, a sporting goods retailer, a healthcare and supplies company, and a specialty retailer, as well as a number of others.

Our point of sale system performed incredibly well during this recent holiday selling period with about 30000 retail associates, using our solution and customer transaction volumes exceeding any other cloud native point of sale solution in the market.

Eddie: Now with <unk>, we also highlighted our fulfillment experience insight dashboard. This capability is unique to Manhattan active omni analyze our omnichannel customers to compare their fulfillment performance against their peers and competitors.

Eddie: A key omnichannel fulfillment experience metrics like click to deliver order rejection rates pick up in store penetration percentage and abandonment rates among others a display dynamically for each of our customers and we built this capability so that theyre Manhattan active omni.

Eddie Capel: And this quarter's wins contributed to a healthy mix of bookings across sub-verticals for the full year. Additionally, and aided by secular tailwinds and the clear benefit of resilient, modern supply chains, roughly one-third of our total bookings were generated from new logos for the full year 2023. Our pipeline continues to be strong, with solid demand across our product suites. Net new potential customers represent about 35% of that demand, and we have significant conversion opportunities. As we enter 2024, with over 85% of our on-premise customers yet to begin that migration to our client solution, for this quarter's brief product update, I'd like to start with three exciting announcements that we made at the National Retail Federation Conference in mid-January. Two of which have to do with a pretty large step forward with our Manhattan Active Omni applications, and the third is an important new partnership for us.

<unk> can understand exactly how they stack up against the field for.

Eddie: Fulfillment experience insights lays out these metrics for them in a clear and comprehensive manner.

Eddie: And frankly armed with this information at professional services team members comprised corresponding process and technology recommendations to help move these metrics forward in the right direction overtime.

Eddie: And we were finally, we were also excited to announce a new partnership with Shopify over the last several years, we've witnessed shopify surfacing more and more often in our Manhattan active omni prospect and customer base and we thought the time was right to team up with shopify to offer the market end to end.

Eddie: Omni channel Commerce solutions Shopify shares our vision of providing solution, which lower purchase friction increased conversion and improved transparency and reliability during the fulfillment process.

And for our customers, both Manhattan, and Shopify are focused on delivering functionality rich solutions, which can be implemented on time on budget and we start delivering value immediately for them.

Eddie Capel: So starting with the product announcements, this quarter we announced the general availability of Iris, the next big step forward for our store associate app. Running on top of our Manhattan Active Omni platform, Iris offers unmatched transactional performance, resiliency that's purpose-built for the connectivity issues inherent in store networks, and a great new associate experience design. And we believe that Iris is the first cloud-native point of sale truly designed and built to offer it.

Eddie: We believe that in the near to medium term the market will further emphasize total cost of ownership and lower project risk and the Manhattan active omni and Shopify partnership is well suited to deliver on both of these.

Eddie: Now speaking of partners I am proud to report that we finished 2023 by adding a record number of new partners to our Manhattan value partner or MVP program.

Eddie Capel: Next, the best of both worlds, continuous innovation in the form of quarterly releases and onboard resiliency to handle centralized cloud deployments at scale. Many of our customers face ongoing battles to provide fast and reliable network connectivity to every register in every store. An iris insulates the store associate from the whims of the network, offering unmatched checkout performance, whether the device is connected, partially disconnected, or completely offline.

Eddie: Whether it's SaaS providers like shopify or add in transportation visit visibility providers like for kites, Our project 44 should be O or material handling and robotics vendors for use within the four walls of the D. C. Manhattan active platform applications are easy to connect an offer at <unk>.

Eddie: <unk> access to our World class customer base, and we'll continue to we'll continue to to add and strengthen our relations with chips with Premier third party integration and advisory firms as well.

Eddie Capel: And Iris also offers a great new visual experience for the store associate, seamlessly blending the three C's of a best in class point of sale: Card, Catalog, and Customer. Iris empowers store associates to maximize sales conversion rates in the store, the ability to sell both what's in the physical store and what's in the broader supply chain in a single transaction, ensuring every possible sale is converted. Furthermore, the highly visual customer profile within Iris empowers a store associate to truly deliver a personalized selling experience. Staying with retail stores for just a moment.

Eddie: Our network of technology, and consulting partners help us connect with the broader market of target customers and improve the speed and success of our deployments.

Eddie: So next quarter I'll I'll likely focus my product updates within their Manhattan active supply chain execution suite.

Eddie: But for now I'll simply mention that we continue to see strong demand and deal activity for our market, leading unified supply chain execution, offering consisting basically of WNS and Tms. This demand is coming from across the globe and across industries.

Eddie: And finally throughout 'twenty 'twenty four will also continue to update you on the progress of our R&D team is making as we incorporate the latest latest generative AI technologies into our supply chain and Omnichannel retail solutions.

Eddie Capel: Our point-of-sale system performed incredibly well during this recent holiday selling period, with about 30,000 retail associates using our solution and customer transaction volumes exceeding any other cloud-native point-of-sale solution in the market. Now, at NRF, we also highlighted our Fulfillment Experience Insight Dashboard. This capability is unique to Manhattan Active Omni and allows our Omnichannel customers to compare their fulfillment performance against their peers and competitors. Key omni-channel fulfillment experience metrics like click-to-deliver, order rejection rates, pickup and store penetration percentage, and abandonment rates, among others, are displayed dynamically for each of our customers. And we built this capability, though, so that our Manhattan Active Omni customers can understand exactly how they stack up against the field. And experience insights lays out these metrics for them in a clear and comprehensive manner.

So in summary, 2023 was a terrific year for Manhattan.

Eddie: We're very excited for the numerous opportunities that lie ahead to deliver.

Eddie: World Class innovation into our growing customer base. So that concludes my business update.

Eddie: Dennis is going to provide you with an update of our financial performance for 2023, and our outlook for 2024, and then I'll close our prepared remarks with a brief summary, before we before we move on to Q&A. So Dennis Thanks, Thanks, Eddie as Ed highlighted in 2023, we set all time records in our Poe.

Dennis: Total revenue operating profit free cash flow and earnings per share. So a big shout out to 4600 team members across the globe great execution through the year.

Dennis: For both the quarter and the year, we delivered a strong balanced financial performance on topline growth and operating margin.

Eddie Capel: And frankly, armed with this information, our professional services team members can provide corresponding process and technology recommendations to help move these metrics forward in the right direction. And finally, we're also excited to announce our new partnership with Shopify. Over the last several years, we've witnessed Shopify appearing more and more often in our Manhattan Active Omni prospect and customer base, and we thought the time was right to team up with Shopify to offer the market end-to-end Omni-channel commerce solutions. Shopify shares our vision of providing solutions that lower purchase friction, increase conversion, and improve transparency and reliability during the fulfillment process.

Dennis: Both our Q4 and full year results exceeded expectations and compare favorably to the rule of 50%.

Dennis: And if our revenue growth is normalized for our cloud transition, which excludes license and maintenance attrition. Our performance is even stronger importantly, Manhattan continues to deliver strong consistent results across revenue growth profitability and cash flow.

Dennis: Start with recapping, our financial performance for the quarter and year.

Dennis: Regarding FX. It was a one point tailwind to Q4 revenue growth and did not impact our full year revenue growth rate.

Dennis: For RPM.

Dennis: FX was a one point tailwind.

Eddie Capel: And for our customers, both Manhattan and Shopify are focused on delivering functionality-rich solutions that can be implemented on time, on budget, and we start delivering value immediately for them. We believe that in the near to medium term, the market will further emphasize total cost of ownership and lower project risk. And the Manhattan Active Omni and Shopify partnership is well-suited to deliver on both of these. Now, speaking of partners, I am proud to report that we finished 2023 by adding a record number of new partners to our Manhattan Value Partner or MVP program, whether it's SaaS providers like Shopify or Adyen, transportation visibility providers like Fork Heights or Project 44 or Shippeo, or material handling and robotics vendors for use within the four walls of the Manhattan Active Platform applications are easy to connect to and offer our partners access to a world-class customer base.

Dennis: Tailwind to both year over year and sequential growth.

Dennis: Now to our results our growth rates are on an as reported year over year basis, unless otherwise stated.

Dennis: For Q4 total revenue total revenue was up 238 or was $238 million up 20% and full year revenue totaled $929 million up 21%.

Dennis: Excluding license and maintenance revenue, which removes the revenue compression by our cloud transition Q4 revenue growth was 24% and full year, 28% some nice double digit returns here.

Q4 cloud revenue totaled $71 million up 38%.

Dennis: With full year revenue totaling $255 million up 44%.

Dennis: We closed out 2023, with RP O of $1 $4 billion growing 36% year over year, and 8% sequentially as we experienced strength from across our Manhattan active suite of products.

Eddie Capel: And we'll continue to add and strengthen our relationships with premier third-party integration and advisory firms as well. Our network of technology and consulting partners helps us connect with a broader market of target customers and improve the speed and success of our deployment. The next quarter, I'll likely focus my product updates within our Manhattan Active Supply Chain execution suite. But for now, I'll simply mention that we continue to see strong demand and deal activity for our market-leading unified supply chain execution offering, consisting basically of WMS and TMS. This demand is coming from across the globe and across the industry. And finally, throughout 2024, we'll also continue to update you on the progress that our R&D team is making as we incorporate the latest generative AI technologies into our supply chain and omni-channel retail solutions. So, in summary, 2023 was a terrific year for Manhattan.

Dennis: Excluding FX impacts <unk> exceeded the high end of our $1 4 billion outlook by $13 million, which was stronger than expected.

Dennis: Services had another fantastic year in great Great performance with Q4 revenue, increasing 19% to $119 million with full year services revenue up 24% to 400 $488 million as <unk>.

Dennis: Cloud sales continue to fuel services growth globally.

Q4, adjusted operating profit was $77 million with an operating margin of 32, 2%.

Dennis: Representing a 200 basis point year over year improvement.

Dennis: Full year adjusted operating profit totaled $281 million with a 33% operating margin and represents a 265 basis point improvement over 2022.

Dennis: Both Q4, and 2023 results were driven by strong cloud and services revenue growth combined with operating Leverages, our cloud business scales.

Eddie Capel: And we're very excited for the numerous opportunities that lie ahead to deliver simply world-class innovation to our growing customer base. So that concludes my business update. Dennis is going to provide you with an update of financial performance for 2023 and an outlook for 2024. And then I'll close our prepared remarks with a brief summary before we move on to Q&A.

Dennis: Q4 earnings per share increased 27% to $1 three and GAAP earnings per share increased 30% to 78.

Dennis: Full year adjusted earnings per share increased 36% to $3 74, and GAAP earnings per share increased 39% to $2 82.

Dennis B. Story: Thanks. Thanks, Eddie. As Eddie highlighted, in 2023, we set all-time records in RPO, total revenue, operating profit, free cash flow, and earnings per share. So a big shout out to 4,600 team members across the globe for great execution throughout the year.

Dennis: Q4, operating cash flow increased 60% to $88 million with a 36, 3% free cash flow margin and a 32, 9% adjusted EBITDA margin.

Dennis B. Story: For both the quarter and the year, we delivered a strong, balanced financial performance on top-line growth and operating margin. Both our Q4 and full-year results exceeded expectations and compare favorably to the rule of 50. And if our revenue growth is normalized for our cloud transition, which excludes license and maintenance attrition, our performance is even stronger. Importantly, Manhattan continues to deliver strong, consistent results across revenue growth, profitability, and cash flow.

Dennis: And our full year operating cash flow was $246 million, while generating 26% free cash flow margin and 39% adjusted EBITDA margin.

Dennis: So turning to the balance sheet or.

Dennis: Our deferred revenue increased 13% year over year to $239 million, we increased our cash position to $271 million with zero debt up from $182 million at the end of Q3.

Dennis B. Story: I'll start by recapping our financial performance for the quarter and year. Regarding FX, it was a one-point tailwind to Q4 revenue growth and did not impact our full-year revenue growth rate. For RPO, FX was a one-point tailwind to both year-over-year and sequential growth. Now to our results. All growth rates are on an as-reported year-over-year basis unless otherwise stated.

Dennis: In 2023, we invested $166 million in share repurchases.

Dennis: And we are entering 2024 with a board approved $75 million share repurchase authority.

Speaker Change: Moving to the outlook.

Speaker Change: As consistently mentioned our financial objective is to deliver sustainable double digit topline growth and top quartile operating margins benchmarked against.

Speaker Change: Any enterprise SaaS comps.

Dennis B. Story: For Q4 total revenue, total revenue was $238 million, up 20%, and full-year revenue totaled $929 million, up 21%, including license and maintenance revenue, which removes the revenue compression by our cloud transition. Q4 revenue growth was 24%, and full year revenue growth was 28%. Nice double-digit returns here.

Speaker Change: As noted on prior earnings calls our goal is to update our outlook on an annual basis. Additionally, as previously discussed our bookings performance is impacted by the number and relative value of large deals we close in any quarter, which can potentially cause lumpiness or non linear bookings.

Speaker Change: Throughout the year.

Speaker Change: With that we.

We are raising the midpoint of our preliminary 2020 for RP.

Dennis B. Story: Q4 cloud revenue totaled $71 million, up 38%, with full-year revenue totaling $255 million, up 44%. We closed out 2023 with RPO of $1.4 billion, growing 36% year-over-year and 8% sequentially as we experienced strength from across our Manhattan Active suite of products. Excluding FX impacts, RPO exceeded the high end of our $1.4 billion outlook by $13 million, which was stronger than expected. Services had another fantastic year and great performance, with Q4 revenue increasing 19% to $119 million, with full-year services revenue up 24% to $488 million, as cloud sales continue to fuel services growth globally. Q4 adjusted operating profit was $77 million, with an operating margin of 32.2%, representing a 200 basis point year-over-year improvement.

Speaker Change: Revenue operating margin and EPS targets that we provided last quarter.

Speaker Change: For <unk>, we are now targeting $1 75 to $1 8 billion.

Speaker Change: The $1 78 billion midpoint compares favorably to our prior midpoint of $1 75 billion and represents 25% growth.

Speaker Change: For full year 2024 guidance, we now expect total revenue of.

Speaker Change: One.

1.015 billion to a $1.0 billion to $5 billion with a 1.02 billion midpoint comparing favorably to our prior midpoint of roughly $1 billion a bunch of billions in there.

Speaker Change: Ah represents 16% growth, excluding license and maintenance attrition and all in our target is 10%.

Speaker Change: For Q1.

Speaker Change: We are targeting total revenue of $241 million to $245 million, which at the midpoint represents 16% growth, excluding license and maintenance attrition and 10% growth all in.

Speaker Change: For the rest of the year at the midpoint, we are targeting total revenue of about $255 million in Q2.

Dennis B. Story: Full Year Adjusted Operating Profit totaled $281 million with a 30.3% operating margin and represents a 265 basis point improvement over 2022. Both Q4 and 2023 results were driven by strong cloud and services revenue growth combined with operating leverage as our cloud business scales. Q4 earnings per share increased 27% to $1.03, and gap earnings per share increased 30% to $0.78. Full-year adjusted earnings per share increased 36% to $3.74, and gap earnings per share increased 39% to $2.82.

Speaker Change: $264 million in Q3, and accounting for retail peak seasonality $258 million in Q4.

Speaker Change: Driven by our revenue growth and the inherent leverage in our business model. We continue to track ahead of our original margin expectations as such we are raising our 2024 adjusted operating margin guidance range to 28, 75% to $29 two 5%.

Speaker Change: With the 29% mid point comparing favorably to our prior midpoint that we provided last quarter of $28 two 5%.

Speaker Change: Additionally.

Speaker Change: Included in our outlook is 175 basis points of headwind from our license and maintenance revenue attrition to cloud.

Dennis B. Story: Q4 operating cash flow increased 60% to $88 million with a 36.3% free cash flow margin and a 32.9% adjusted EBITDA margin. Our full-year operating cash flow was $246 million while generating 26% free cash flow margin and a 30.9% adjusted EBITDA margin. So turning to the balance sheet, our deferred revenue increased 13% year-over-year to $239 million.

Speaker Change: At the mid point adjusted operating margin on a quarterly basis is expected to be about 28% in Q1.

Speaker Change: 28, 5% in Q2, 30% in Q3 and accounting for retail peak seasonality 29, 5% in Q4.

Speaker Change: The results and our full year adjusted EPS guidance range of three <unk>.

Speaker Change: Six nine cents.

Speaker Change: And $3 79.

Dennis B. Story: We increased our cash position to $271 million with zero debt, up from $182 million at the end of Q3. In 2023, we invested $166 million in share repurchases. And we are entering 2024 with a board-approved 75 million share repurchase authority. Moving on to the Outlook. As consistently mentioned, our financial objective is to deliver sustainable double-digit top-line growth in top quartile operating margins, benchmarked against Any Enterprise SAS Comp. As noted on prior earnings calls, our goal is to update our RPO outlook on an annual basis. Additionally, as previously discussed, our bookings performance is impacted by the number and relative value of large deals we close in any quarter, which can potentially cause lumpiness or nonlinear bookings throughout the year. With that said,

Speaker Change: And a GAAP EPS range of $2 81.

Speaker Change: To $2 91.

Speaker Change: For comparison purposes, our 2024 adjusted tax rate is nearly 350 basis points higher than our 2023 adjusted tax rate.

Speaker Change: For Q1, we are targeting adjusted EPS of <unk> 85 to 87.

Speaker Change: And GAAP EPS of <unk> 71 to 73.

Speaker Change: For Q2 through Q4, we expect GAAP EPS to be about 25, lower than adjusted EPS per quarter, which accounts for our investment in equity based compensation.

Speaker Change: Okay.

Speaker Change: Here are some additional details on our 2020 for outlook.

Speaker Change: For full year 2024, we continue to expect cloud revenue of $326 million to $330 million.

Speaker Change: At the midpoint. This represents 29% growth and assumes roughly $75 million in Q1 $79 million in Q2 $85 million in Q3 and $89 million in Q4.

Dennis B. Story: We are raising the midpoint of our preliminary 2024 RPO revenue, operating margin, and EPS targets that we provided last quarter. For RPO, we are now targeting $1.75 to $1.8 billion. The $1.78 billion midpoint compares favorably to our prior midpoint of $1.75 billion and represents 25% growth. For full year 2024 guidance, we now expect total revenue of $1.015 billion to $1.025 billion with a $1.02 billion midpoint comparing favorably to our prior midpoint of roughly $1 billion, a bunch of billions in there, representing 16% growth excluding license and maintenance attrition and all in, our target is 10% We are targeting total revenue of $241 to $245 million, which, at the midpoint, represents 16% growth, excluding license and maintenance attrition, and 10% growth all in. For the rest of the year, at the midpoint, we are targeting total revenue of about $255 million in Q2. $264 million in Q3 and, accounting for retail peak seasonality, $258 million in Q4.

Speaker Change: Yeah.

Speaker Change: For services revenue, we are increasing our forecast of 532% to $542 million, representing 10% growth at the midpoint.

Speaker Change: On a quarterly basis, we expect Q1 services revenue of roughly $128 million $137 million in Q2 $141 million in Q3, and accounting for retail peak seasonality $131 million in Q4.

Speaker Change: On attrition to cloud, we expect maintenance and license to represent about a six point headwind.

Speaker Change: So total revenue growth in 2024.

Speaker Change: For maintenance, we expect a range.

Speaker Change: Q2, $31 million Q3, $29 $5 million in Q4 $29 million.

Speaker Change: We expect license revenue to be roughly $6 million or less than 1% of 2020 for total revenue and hardware to be between $5 million to $7 million per quarter.

Speaker Change: Our consolidated subscription maintenance and services margin, we are targeting about 100 basis points of year over year improvement for 2024 and Q1.

Speaker Change: We expect our effective tax rate to be 21, 5% and our diluted share count to be $62 8 million shares which assumes no buyback activity.

Dennis B. Story: Driven by our revenue growth and the inherent leverage in our business model, we continue to track ahead of our original margin expectations. As such, we are raising our 2024 Adjusted Operating Margin Guidance range to 28.75 percent to 29.25 percent, with the 29 percent midpoint comparing favorably to our prior midpoint that we provided last quarter of 28.25 percent. Additionally...

Speaker Change: And finally in summary, 2023 was a great year, and we expect 2024 to be another year of balanced performance across revenue growth profitability and cash flow.

Speaker Change: Thank you and back to Eddie for some closing remarks. Thanks, Dennis for Indeed, 2023 was a very successful year for Manhattan.

Speaker Change: And.

Eddie: While we remain appropriately cautious given the volatile macro conditions that are out there our.

Dennis B. Story: Included in our outlook is 175 basis points of headwind from our license and maintenance revenue attrition to cloud. At the midpoint, adjusted operating margin on a quarterly basis is expected to be about 28% in Q1. 28.5% in Q2, 30% in Q3, and accounting for retail peak seasonality, 29.5% in Q4. This results in a full year adjusted EPS guidance range of 3. $3.79 and a gap EPS range of $2.81 to $2.91. For comparison purposes, our 2024 adjusted tax rate is nearly 350 basis points higher than our 2023 adjusted tax rate.

Eddie: Our business fundamentals and momentum are very solid.

Eddie: Brian Manhattan enters 2024, as the industry leader with World Class technology with record levels of R&D investment this contributing to our 75% plus win rates in the field with industry, leading levels of customer satisfaction and a strong pipeline.

Eddie: With numerous drivers for sustainable long term growth.

Eddie: So in closing I'd, just like to Echo <unk> comments and thank all of the Manhattan team members around the world for a fantastic 2023, your dedication and commitment to our growing customer basis.

Is unparalleled and clearly one of our key differentiators.

So sherry that to prepare that concludes our prepared remarks, and we'd be happy to take any questions. At this point, okay. Thank you and Steve I'd like to ask a question. Please press star one on your telephone keypad confirmation tone will indicate your line is in the question queue. You May Press Star two if you would like to remove your question from the queue.

Dennis B. Story: For Q1, we are targeting adjusted EPS of $0.85 to $0.87 and GAAP EPS of $0.71 to $0.73. For Q2 through Q4, we expect GAAP EPS to be about 25 cents lower than adjusted EPS per quarter, which accounts for our investment in equity-based compensation. Here are some additional details on our 2024 outlook. For full year 2024, we continue to expect cloud revenue of $326 to $330 million.

Eddie: For participants using speaker equipment, it may be necessary to pick up your handset before pressing you start he is one.

Eddie: One moment, while we poll for questions.

Eddie: And our first question comes from Terry Tillman with true with Securities. Please proceed.

Terry Tillman: Hey, good afternoon, Eddie or Dennis and Mike and it's great.

Terry Tillman: Great to hear all the talk about the $1 billion.

Maybe adding a question for you and then I had a couple of follow ups for IDEXX.

Dennis B. Story: At the midpoint, this represents 29% growth and assumes roughly $75 million in Q1, $79 million in Q2, $85 million in Q3, and $89 million in Q4. For services revenue, we are increasing our forecast to $532 to $542 million, representing 10% growth at the midpoint. On a quarterly basis, we expect Q1 services revenue of roughly $128 million; $137 million in Q2, $141 million in Q3, and, accounting for retail peak seasonality, $131 million in Q4.

Terry Tillman: Because we just get further along in kind of the monetizing Liberty cloud innovation cycles that you have I'm curious are you starting to see customers, whether its existing customers and prospects kind of look at all of the things you have from a platform perspective so.

Supply chain unified Commerce, and starting to think about Hey, we want to go get more aggressive initially with more like a platform deal or it's a couple of major kind of.

Terry Tillman: Sets of products as opposed to maybe WNS or <unk> or <unk>. So I'm, just kind of curious about buying behavior, if they're starting to feel like hey, we want to go bigger faster or does it still feel like now.

Terry Tillman: There is the initial wedge and then over time they add the other products kind of curious about the buying behavior around just probably you to whoever with the platform.

Dennis B. Story: On attrition to cloud, we expect maintenance and license to represent about a six-point headwind to total revenue growth in 2024. For maintenance, we expect a range of Q2, $31 million, Q3, $29.5 million, and Q4, $29 million. We expect license revenue to be roughly $6 million, or less than 1% of 2024 total revenue, and hardware revenue to be between $5 to $7 million per quarter. For the consolidated subscription maintenance and services margin, we are targeting about 100 basis points of year-over-year improvement for 2024 and Q1. We expect our effective tax rate to be 21.5%, and our diluted share count to be 62.8 million shares, which assumes no buyback activity.

Speaker Change: Yeah sure it's a great question Terry.

Terry Tillman: Yes, it's really the latter primarily if you think about it because these are pretty big initiatives, let's just say.

Terry Tillman: WNS.

Speaker Change: And order management or something.

Terry Tillman: Any two of the major products they are pretty big initiatives in themselves and usually at customers can only digest one of them at a time.

Terry Tillman: Theyre unlikely, but let's take that example to bite.

Terry Tillman: By WNS and Oems, knowing that they've got to pay <unk> SaaS fees, whilst not beginning an implementation for six nine maybe even 12 months. So I think they have a vision to be able to build on the platform.

Terry Tillman: Acquire additional products down the road, but just practically speaking it doesn't make a ton of sense frankly to pay.

Terry Tillman: <unk> feeds for products that you can't get to the implementation.

Speaker Change: Okay understood on that and I guess, maybe just a follow up in terms of the cloud bookings strength in the quarter was great to see and the upside I'm curious.

Speaker Change: If you could talk a little bit double click and then to that in terms of was there just some greater large deal exposure or benefits in the quarter or was there a larger number of just actual kind of units are customers signed up just kind of curious if there was anything that was interesting or different versus the prior couple of quarters, and then I have a follow up.

Dennis B. Story: Finally, in summary, 2023 was a great year, and we expect 2024 to be another year of balanced performance across revenue, growth, profitability, and cash flow. Thank you, and back to Eddie for some closing remarks. Thanks Dennis.

Eddie Capel: So indeed, 2023 was a very successful year for Manhattan. And, you know, while we remain appropriately cautious given the volatile macro conditions that are out there, our business fundamentals and momentum are very solid. Right, Manhattan enters 2024 as the industry leader with world-class technology, with record levels of R&D investment that's contributing to our 75% plus win rates in the field, with industry-leading levels of customer satisfaction, and a strong pipeline with numerous drivers for sustainable long-term growth. So, in closing, I'd just like to echo Dennis's comments and thank all of the Manhattan team members around the world for a fantastic 2023. Your dedication and commitment to our growing customer base is unparalleled and clearly one of our key differentiators. So, Sherry, that concludes our prepared remarks, and we'd be happy to take any questions at this time. Okay, thanks. If you would like to ask a question, please press star 1 on your telephone. We'll indicate your line is in the question queue. Press star 2 if you would like to remove your..., for participants using speaker equipment, to pick up your handset before pressing your start button.

Speaker Change: I don't know about interesting or different I thought it was pretty consistent kind of across the board Terry Yes, I would agree with that Dennis.

Speaker Change: I'll tell you we had no record size deals.

Speaker Change: In the quarter, we always like those that we had no record sized deals in the quarter.

Terry Tillman: I would say from a geographic perspective, we had a very good and very nice sort of balanced contribution from both the Americas EMEA and.

Terry Tillman: And APAC.

Speaker Change: That was enjoyable.

Speaker Change: Yeah, Yeah, no. It sounds enjoyable I guess just a follow up question for Dennis already for Mike is just related to you all did move up the <unk> balance a little bit. So that was nice to see just given that we're still in the beginning of the year.

Speaker Change: One thing I'm curious about is it does look like <unk> and <unk> were the biggest ARPA or the bookings quarters in 2023, and not trying to pin you down a quarterly kind of guidance, but as they're starting to be a common buying pattern with these cloud deals maybe it's at the very beginning of the year very end of the year with budget plus I'm just trying to get a sense on if you could kind of foretell how.

Speaker Change: Like there is a pattern recognition now around bookings, thank you and great job.

Speaker Change: Thank you Terry.

Speaker Change: Not really so.

Speaker Change: I would say definitely no budget flush at the end of the year given that obviously there are annual <unk>.

Speaker Change: Subscription fees. So there is no.

Speaker Change: License buys right at the end of the year or anything like that in terms of budget flush Q.

Operator: One moment while we pull for questions. And our first question comes from Terry Tillman: what is security? Hey, good afternoon, Eddie, Dennis, and Mike. And it's great to hear all the talk about the billions. Maybe Eddie, I have a question for you.

Speaker Change: Q1, I can see maybe thank you for saying you're not going to finish the analyst but.

Speaker Change: But I think in Q1, we sometimes see a little bit of a stronger buying pattern, because there's still time to get systems in.

Terry Tillman: And then I had a couple of follow-up questions for Dennis. You know, as we just get further along in kind of the monetizing the cloud innovation cycles that you have, I'm curious, are you starting to see customers, whether it's existing customers or prospects, kind of look at all the things you have from a platform perspective? So, you know, supply chain, unified commerce, and starting to think about, hey, we want to get more aggressive initially with more like a platform deal, or it's a couple of major set products as opposed to maybe WMS or OMS or PS. I'm just kind of curious about the buying behavior, if they're starting to feel like, hey, yeah, we want to go bigger, faster, or does it still feel like Kind of curious about the buying behavior around just the way you deliver it with the platform. Yeah, sure. It's a great question, Terry, and it's really the latter.

Speaker Change: For peak, if you kind of by early in Q1 so.

Speaker Change: That is definitely an opportunity there for us, but no budget flush at the end of Q4.

Speaker Change: Thank you.

Speaker Change: Thank you Terry.

Speaker Change: Our next question is from Brian Peterson with Raymond James. Please proceed.

Brian Peterson: Thanks, gentlemen, and congrats on the strong quarter, So Eddie I'd Love to give me an update I know in the past you've shared some detail on the number of booked customers are implemented customer customers for act PWM any updated perspective that you can share there.

Eddie: Yes, I think I can.

We're at somewhere.

Eddie: I don't have the exact number frankly off the top of my head, but were 120 plus of contracted customers.

Eddie Capel: You know, primarily, if you think about it, because these are pretty big initiatives, let's just say, you know, WMS and order management or something, or any two of the major products, they're pretty big initiatives in themselves. And usually, our customers can only digest one of them. So they're unlikely, let's take that example, to buy WMS and OMS knowing that they've got to pay OMS SAS fees while not beginning an implementation for 6, 9, maybe even 12 months. So I think they have a vision to be able to build on the platform and acquire additional products down the road, but just practically speaking, it doesn't make a ton of sense, frankly, to pay SAS fees for products that you can't get to the implementation.

Eddie: Live customers again don't quote me to the exact we're about 75 live customers and right at 200, just over 200 facilities live around the globe. So.

Eddie: And some of those of course are very large.

Eddie: A very large facilities highly automated and so forth so.

Eddie: Call. It 125, 75, and 200 I mean this is a rock solid proven solution now.

Eddie: Went through of course, the peak season of 2022 with Manhattan.

Eddie: <unk> Manhattan active wm customers, but as you can tell we had hundreds of facilities that went through peak of 2023. So I think it's sort of take it to the bank bulletproof solution of its proven.

Top end of the market now.

Eddie Capel: Okay, understood on that. And I guess maybe Dennis just wants to follow up in terms of the cloud booking strengths in the quarter. It's great to see on the upside. I'm curious, If you could talk a little bit, double click into that in terms of was there just some great or large deal exposure or benefits in the quarter, or was there a larger number of just actual units or customers signed up? Just kind of curious if there was anything that was interesting or different versus the prior couple quarters, and then I had a follow-up. I don't know about interesting or different.

Eddie: It's great to see that progress and maybe just a follow up on services hiring in anything on productivity.

Speaker Change: Obviously, we've got the guide for the margins, but love to understand how you guys are thinking about services capacity in 2024, thanks guys.

Speaker Change: We plan on increasing capacity, obviously to help.

Speaker Change: With customer satisfaction, and so forth as we've talked about before.

Speaker Change: Hiring came in a little lower in 2023 than we had originally projected at the beginning of the year only because we saw attrition very low frankly, so we modulate that hiring accordingly.

Dennis B. Story: I thought it was pretty consistent, kind of across the board, Terry. Yeah. I would agree with that, Dennis. I mean, I'll tell you, we had no record-sized deals, you know, in the quarter. We always liked those, but we didn't have any record-sized deals in the quarter.

Speaker Change: On boarding in the productivity of the team members that we brought on has been outstanding frankly, and Thats a combination to.

Eddie Capel: I would say from a geographic perspective, we had a very good and very nice sort of balanced contribution from both the Americas, EMEA, and APAC. You know, that was enjoyable. Yeah, yeah, it sounds like fun.

Speaker Change: It kind of services operations team all of the training programs to center of excellence, we have and so forth is very focused on making those individuals productive as soon as we as soon as we possibly can but certainly.

Terry Tillman: I guess just a follow-up question for Dennis or Eddie or Mike, is just related to, you guys did move up the RPO balance a little bit, so that was nice to see, just given that we're still in the beginning of the year. One thing I'm curious about is, it does look like 1Q and 4Q were the biggest RPO or bookings quarters in 2023. I'm not trying to pin you down to quarterly kinds of guidance, but is there starting to be a common buying pattern with these cloud deals? Maybe it's at the very beginning of the year or the very end of the year with the budget flush?

Speaker Change: Expect <unk>.

Speaker Change: Several hundred.

Speaker Change: Hires this year as well.

Speaker Change: Thank you.

Speaker Change: Pleasant pleasure, Brian Thank you.

Speaker Change: Our next question is from Joe <unk> with Baird. Please proceed.

Great. Thanks for taking my questions I wanted to start with.

Joe: Shopify Alliance such sounds pretty interesting.

Joe: There are some existing customer overlap can you maybe quantify that or.

Joe: You see the most synergies in the customer base today and then.

Eddie Capel: I'm just trying to get a sense of if you could kind of foretell how there is a pattern recognition now around bookings. Thank you, great job. No, thank you, Terry. No, not really.

Joe: Obviously, when you think about the global Shopify merchant count that's a massive number I would imagine thats not all addressable by kind of your enterprise grade technology, but what sort of expansion in audience. Do you think this could ultimately mean for Manhattan.

Operator: So, I would definitely say no budget flush at the end of the year, given that obviously they have annual subscription fees, so there's no license buys right at the end of the year or anything like that in terms of budget flush. Q1, I can see maybe, thank you for saying you're not going to pin a stand on this, but I think in Q1, we sometimes see a little bit of a stronger buying pattern because there's still time to get systems in before peak if you kind of buy early in Q1. So, that is definitely an opportunity for us, but no budget flush at the end. Thank you. Thank you, Terry. Our next question is from Brian Peterson with Raymond. Thanks, gentlemen. Congratulations on a strong quarter. So, Eddie, I'd love to get an update.

Speaker Change: Yes, so let's see great great great question.

Speaker Change: Look this is this is driven probably a little more to be perfectly honest.

Speaker Change: Joe with Shopify, obviously is a fabulous history are really great technology platform and have been doing exceptionally well and I hope they won't be offended by this but in the SMB space and have gradually been coming up the stack towards the enterprise, where we play so that's why we started.

Speaker Change: To see a lot more cross fertilization of prospects and customers as they come up into kind of a real enterprise enterprise class versus us going down so much into interest SMB, we've had that conversation. Many many many many times about our focus on both.

Speaker Change: Tier one tier one and tier two but we really do think the combination of our advanced technology and platform and Shopify advanced technology and platform can really deliver some substantial and a very effective and efficient results for our customer base.

Brian Peterson: I know in the past, you've shared some details on the number of booked customers or implemented customers for active WM. Any updated perspective that you can share there? Yes, I think I can.

Speaker Change: And so forth and one of them.

Speaker Change: Beauty is and I mentioned this in my prepared remarks.

Eddie Capel: We're somewhere, I don't have the exact number, frankly, off the top of my head, but we're a hundred and twenty plus contracted customers. Live customers, again, don't quote me to the exact number, we're about 75 live customers and right at 200, just over 200 facilities live around the globe. So you know, and some of those, of course, are very large, you know, very large facilities, highly automated and so forth. So you know, we've called them 125, 75, and 200.

Speaker Change: Both they and we are very focused on essentially speed to value.

Speaker Change: You've become they are experts at this for the smaller merchants and so forth.

Speaker Change: And we think together we can bring that.

Speaker Change: Cost efficient effective enablement up into the enterprise.

Speaker Change: Yeah.

Speaker Change: Okay, that's great and then.

Speaker Change: Then maybe one for Dan.

Just the maintenance revenues.

Dan: <unk> been exceeding plan still growing here in <unk>.

Speaker Change: Obviously I appreciate that the 2020 for outlook and maybe the pace of attrition picking up I'm wondering if you just have any updated thoughts on Canada, the migration timeline and those existing on Prem customers you mentioned at the beginning.

Eddie Capel: I mean this is a rock-solid proven solution now. You know we went through, of course, the peak season of 2022 with live Manhattan Active WM customers, but as you can tell, we had hundreds of facilities that went through the peak season of 2023. So I think it's sort of a take it to the bank, you know, a bulletproof solution that's proven itself at the top end of the market now. No, it's great to see that progress and maybe just to follow up on services hiring in anything on productivity is, you know, obviously we have the guide for the margins, but I would love to understand how you guys are thinking about services capacity. Thanks, guys. Yeah, well, you know, we plan on increasing capacity, obviously, to help with customer satisfaction and so forth. But, as we've talked about before, hiring came in a little lower in 2023 than we had originally projected at the beginning of the year, only because we saw attrition very low, frankly.

Speaker Change: What started out as <unk>.

Speaker Change: Duration might you expect or the majority it's ultimately choose one of your cloud offerings.

Speaker Change: Yes.

Speaker Change: I've been saying it for a pretty long time, I think it's a six to seven year run now it would be fair of you to say, but Eddie you said six to seven years at the beginning of the year and now you're saying six to seven years at the beginning of this year as well yeah.

Eddie: It's still in that range and that range Joe would be.

Eddie: My estimate to get through the bulk of the transitions that my guess is there'll still be.

5%, 10%.

Eddie: At the end of that period of time, there'll be sort of laggards and so forth, but it's a six to seven year journey in my view.

Eddie: Okay.

Speaker Change: Good I'll leave it there. Thank you I'm sorry, but the one thing ill mention just so just a reminder, that Joe we essentially offer no incentives.

Speaker Change: For either our customers or for our sales guys and our sales team to.

Speaker Change: Promote.

Eddie Capel: So we, you know, we modulated our hiring accordingly. You know, the onboarding and the productivity of the team members that we brought on have been outstanding, frankly, and that's a combination of our... kind of services operations team, all of the training programs, the center of excellence we have, and so forth that is very focused on making those individuals, you know, productive as soon as we possibly can, but certainly, you know, expect several hundred hires this year as well. Thank you. Pleasure. Pleasure, Brian.

Speaker Change: Our strategy is when the time is right. We're there for you so theres no.

Speaker Change: No incentive and frankly, there is no.

Speaker Change: Got to the gun to the head. Thank you I was going to try and looking for a better nicer expression in that book, but there is no no threats of lack of support or anything else.

Speaker Change: Yes, okay understood. Thank you.

Speaker Change: Joe.

Speaker Change: Our next question is from Mark Chapell with loop capital markets. Please proceed.

Mark W. Schappel: Thank you for taking my question and nice job on the quarter guys.

Mark W. Schappel: With respect to your point of sale business I was wondering if you could just.

Operator: Thank you. Our next question is from Joe Vruwink with Baird. Great. Thanks for taking my questions.

Mark W. Schappel: A highlight or point out some of the biggest opportunities you face and also some of the challenges youre facing right. Now. So for instance are you facing challenge wise are you facing more more so on the marketing side or maybe on the product side.

Joseph Vruwink: I wanted to start with the Shopify Alliance, which sounds pretty interesting. You mentioned there's some existing customer overlap. Can you maybe quantify that or where you see the most synergies in the customer base today? And then, obviously, when you think about the global Shopify merchant count, that's a massive number.

Speaker Change: Yes, great great Great question, Mark So, let's start with the challenges get those out of the way I just think we still got a little bit of an awareness channel.

Speaker Change: Alan Challenge at this we are beating the drums and tell our neighbors friends and aunts and uncles as best as we as vessels Republic, possibly can about this world class solution that we have number one no.

Eddie Capel: I would imagine that's not all addressable by kind of your enterprise-grade technology. But what sort of expansion in audience do you think this could ultimately mean for Manhattan? Yeah, so let's see. Great, great, great question. Look, this is driven probably a little more, to be perfectly honest.

At the National Retail Federation show Conference I should say a couple of weeks ago and I mentioned in my prepared comments, we launched the next generation. So so we still have got the most revolutionary.

Speaker Change: Cloud native point of sale in the industry, but we updated it yet again.

Eddie Capel: Joe with Shopify obviously has a fabulous history, a really great technology platform, and they've been doing exceptionally well in, I hope they won't be offended by this, the SMB space, and have gradually been coming up the stack toward the enterprise, where we play. So that's why we've started to see a lot more cross-fertilization of prospects and customers as they come up into the real enterprise class, versus us going down so much into SMB. We've had that conversation many, many times about our focus on both tier one and tier two. But we really do think the combination of our advanced technology and platform and Shopify's advanced technology and platform can really deliver some substantial and very effective and efficient results for our customer base and so forth. And one of the beauties, and I mentioned this in my prepared remarks, both they and we are very focused on essentially speed to value. They've become experts at this for the smaller merchants and so forth. And we think together we can bring that fast, efficient, effective enablement into the enterprise. Okay, that's great.

Speaker Change: Next generation and launched it at and RF and very very well very well received.

So I think awareness is still kind of kind of that challenge.

Speaker Change: You and others have heard me talk about the goal by the end of the year was to have a buy 10 live customers.

Speaker Change: Got that we've got about 10, because I think that sort of gets you over the hump in terms of okay. This is not a little early cycle product anymore.

Speaker Change: Fact of the matter is we went through the.

Speaker Change: Holiday peak season here with 10 live customers therapy.

Speaker Change: 30000 store associates using as system every penny of revenue. If you think about the customers that run both Manhattan active omni and point of sale right.

Speaker Change: All of the wholesale business if they have it that direct to consumer business is all running through Manhattan active omni all of their foot traffic revenue is running through point of sale. So every single penny of their revenue is running through the Manhattan solutions 30000 associates.

Speaker Change: And.

Speaker Change: Right around 1500, more Nab, but right around 1500 stores live on point of sale.

Speaker Change: Through the peak season.

Eddie Capel: And then maybe one for you and Dennis, just the maintenance revenues, they have been exceeding plan, you know, still growing here in 4Q. Obviously, I appreciate the 2024 outlook and maybe the pace of attrition picking up. I'm wondering if you just have any updated thoughts on the kind of migration timeline and those existing on-prem customers you mentioned at the beginning. What sort of duration might you expect for the majority to ultimately choose one of your cloud offerings? Yes, I mean, look, I've been saying it for a pretty long time. You know, I think it's a six to seven year run.

Speaker Change: Transaction volumes that.

Speaker Change: Our substantial let's just call it that and certainly exceed any other <unk>.

<unk> native point of sale system out there so feel really good about kind of where we are with the.

Speaker Change: Product.

Speaker Change: We've noted.

Speaker Change: Long answer here, but we noted some of the wins, we've had against best of breed point of sale companies head to head with no other solutions for Manhattan, and no previous experience with Manhattan. So clearly we can we can go head to head and now I mean, if there was ever any question about scalability.

Speaker Change: And so forth.

Speaker Change: Sales through Q4, with again 30500 stores very high transaction volume. So feel like we are there we just got to beat the drum get the get the word out.

That's helpful. Thanks, and then shifting gears a little bit here with respect to your sales motion could you just give us a sense of what percentage of bookings were cross sell upsell during the quarter or actually during the year.

Eddie Capel: Now, it would be fair of you to say, but Eddie, you said six to seven years at the beginning of the year, and now you're saying six to seven years at the beginning of this year as well. Yeah, you know, it's still in that range. In that range, Joe, would be my estimate to get through the bulk of the transitions.

Speaker Change: I think let's see we're right around give me or give me or give me a percentage here and there, but we were just under 30% for the quarter and I think for the year, we were right in the 26, 27%.

Eddie Capel: My guess is they'll still be, you know, five, 10% at the end of that period of time; there will be sort of laggards and so forth, but it's a six or seven year journey, in my view. Okay, very good. I'll leave it there. Thank you. I'm sorry, the one thing I'll mention, just a reminder there, Joe, we essentially offer no incentives for either our customers or for our sales guys on the sales team, you know, to promote it. Our strategy is, when the time is right, we're there for you. So there's no, you know, no, no incentive. And frankly, the, you know, there's no, Gun to the head.

Speaker Change: Perfect Great. Thank you that's all for me.

Speaker Change: Okay. Thank you Mark.

Our next question is from Matt Pfau with William Blair. Please proceed.

Matthew Pfau: Yeah, Hey, great. Thanks.

Matthew Pfau: Nice quarter guys I wanted to ask on the <unk> partnership is that just a product integration partnership or is there a go to market motion there as well with them.

Matthew Pfau: Both I mean as is.

Matthew Pfau: Obviously, we've announced the partnership as is customary with us and I think simplify too.

Matthew Pfau: We're going to make sure that.

Matthew Pfau: We've got all of the.

Matthew Pfau: Technical aspects of the product integration end to end.

Eddie Capel: Thank you. I was going to try and look for a better, nicer expression than that, but you know, there's no threats of lack of support or anything else. Yes. Okay. I understood. Thank you. Thank you, Joe.

Matthew Pfau: From end to end integration and process flows completely ironed out.

Matthew Pfau: Before we do anything anything more but.

Matthew Pfau: At the moment. It is we're working on a certified integration. We've got joint clients that are active implementation, we expect to be live in Q2.

Operator: Our next question is from Mark Schappel with Loop Capital Markets. Thank you for taking my question and nice job on the quarter, guys. Eddie, with respect to your point of sale business, I was wondering if you could just, you know, highlight or point out some of the biggest opportunities you face and also some of the challenges you're facing right now. So, for instance, are you facing challenges more so on the marketing side or maybe on the product side? Yeah, great, great, great question, Mark. So let's start with the challenges, get those out of the way.

Speaker Change: Got it great.

And then I wanted to ask on the margins.

I understand that I think the.

Speaker Change: Margin.

Speaker Change: Slight margin decline operating margin decline youre guiding for in 'twenty four is.

Speaker Change: Secondly, all driven by revenue mix with the run off of maintenance and license.

Speaker Change: As we think longer term about the cloud gross margin, which you don't break out specifically, but is that still ramping is there still upside to that as you scale, how do we think about that.

Speaker Change: Yes, there is.

Speaker Change: We're effectively.

Speaker Change: Continuing to increase operating margins if you take out if you would.

Speaker Change: Take out the drag.

Speaker Change: We still think this scale opportunity in China operations and.

Mark W. Schappel: I just think we've still got a little bit of an awareness challenge here. We are beating the drums and telling neighbors, friends, aunts, and uncles as best as we possibly can about this world-class solution that we have, number one. Now, at the National Retail Federation show conference, I should say, a couple of weeks ago, and I mentioned in my prepared comments, we launched the next generation. So we still have got the most revolutionary flag-native point of sale in the industry, but we updated it yet again, the next generation, and launched it at NRF, and it was very, very well received. So I think awareness is still kind of a challenge.

Speaker Change: And up and down the P&L frankly.

Speaker Change: Okay, great. Thanks, guys.

Speaker Change: Thank you Matt.

Speaker Change: And our final question comes from Blair Abernethy with Rosenblatt Securities. Please proceed.

Blair Abernethy: Thanks, very much and nice quarter guys.

Blair Abernethy: Dennis just wondering on the professional services side of the business.

Blair Abernethy: If you look at your overall hiring your total employee head count was up around 10% in the year.

Blair Abernethy: But your professional services revenues were up around 24% can you just help reconcile sort of.

Blair Abernethy: Capacity in that professional services.

Blair Abernethy: Business in pricing in the market how that how that's how that performed in 'twenty three and sort of what you are looking at for 2004.

Eddie Capel: Now, you and others have heard me talk about the goal by the end of the year being to have about 10 live customers. Well, we've got that. We've got about 10 because I think that sort of gets you over the hump in terms of, okay, this is not a little early cycle product anymore. And the fact of the matter is we went through the holiday peak season here with 10 live customers. 30,000 store associates using our system. Every penny of revenue, if you think about the customers that run both Manhattan Active, Omni, and Point of Sale, all of their wholesale business, if they have it, their direct-to-consumer business is all running through Manhattan Active, Omni. All of their foot traffic revenue is running through Point of Sale. So every single penny of their revenue is running through the Manhattan solutions. 30,000 associates, and right around 1,500 more now, but right around 1,500 stores live on Point of Sale through the peak season, with transaction volumes that are substantial, let's just call them that, and certainly exceed any other cloud-native Point of Sale system out there.

Speaker Change: Well Eddie here, just a couple of points I mean, obviously.

Speaker Change: We have seen a little bit not a ton, but we have passed on a little bit of wage inflation and so forth to that customer. So you have seen hourly rates tick up a little bit but most of the leverage comes from the efficiency of the organization for sure.

Speaker Change: Particularly as we continue to focus on the center of Excellences that I talked about the training and the on boarding of the new resources.

The other thing that I mentioned, we had we had forecasted.

Speaker Change: A little bit higher headcount acquisition in 2023, then we needed because attrition was lower than we expected that helps efficiency for sure.

Speaker Change: Yeah.

Speaker Change: Okay, Great and is there with shopify.

Speaker Change: The relationship will that also drive some professional services I guess it would be for larger customers.

Speaker Change: Adopt your solution.

Speaker Change: Yeah sure sure yes.

Speaker Change: No doubt it will now part of our objective there just to be clear is to take out any of the.

Eddie Capel: So I feel really good about where we are with the product. We've noted some of the wins we've had against best-of-breed point-of-sale companies, head-to-head, with no other solutions from Manhattan and no previous experience with Manhattan. So clearly, we can go head-to-head.

Speaker Change: The base integration work that's needed to be done well.

Speaker Change: Between us we will carry that carry that cost. So the idea is to speed up implementation reduce the total cost of ownership and so forth, but nonetheless is still professional services fees associated.

Eddie Capel: And now, if there was ever any question about scalability and so forth, we sailed through Q4 with, again, 30,000, 1,500 stores, very high transaction volume. So I feel like we're there. We just have to beat the drum, get the word out.

Speaker Change: With.

Speaker Change: We are implementing that joint solution.

Speaker Change: Okay, Great Great and then my next question was just really around just maybe a little more.

Speaker Change: Color on the guidance the revenue guidance for fiscal 'twenty, four sort of 10% on the top line needed to 21% in.

Mark W. Schappel: That's helpful. Thanks. And then, shifting gears a little bit here, with respect to your sales motion, could you just give us a sense of what percentage of bookings were cross-sell and up-sell during the quarter or actually during the year? I think, let's see, we're right around, give me a percentage here and there, but we were just under 30% for the quarter, and I think for the year we were right in the 26, 27%. Perfect, Okay, thank you, Mark. Our next question is from Matt Pfau with William Blair. Nice quarter, guys. Wanted to ask about the Shopify partnership: is that just a product integration partnership, or is there a go-to-market motion there as well? Yeah, both. I mean, obviously, we've announced the partnership, as is customary with us. And I think Shopify, too.

Speaker Change: 23% to 15% and 22.

Speaker Change: Just wanted to get your sense of sort of how you came to your 2024 revenue view.

Speaker Change: Well we are.

Speaker Change: R R.

Speaker Change: Gross revenue growth guidance coming into 2024 is roughly the same as it was coming into 2023.

Speaker Change: Slightly higher actually.

Speaker Change: Okay.

Speaker Change: Is the environment.

Speaker Change: Feeling about the same as 23 at the end of last year.

Speaker Change: Yes.

Speaker Change: In the same ballpark, obviously, there is a few things going on around the world.

Speaker Change: That are happening that werent happening at the beginning of 2023 2024 is an election year et cetera et cetera. So the things that you know about but aside from those things everything feels.

Eddie Capel: We're going to make sure that we've got all of the technical aspects of the product integration end to end, end-to-end integration, and process flows completely ironed out before we do anything, anything more, but now it's, at the moment, we're working on the certified integration. We've got joint clients that are in active implementation. We expect to be live in, you know, in Q2. Got it. And then wanted to ask, you know, on the margins, understand that I think the slight margin decline, operating margin decline, you're guiding for 24. It's effectively all driven by revenue mix with the runoff of maintenance and lighting. Now as we think longer term about the cloud gross margin, you don't break it out specifically, but is that still ramping? Is there still upside to that as you scale?

Speaker Change: At the same.

Speaker Change: Okay, great. Thanks very much.

Speaker Change: Our pleasure Blair. Thank you.

Speaker Change: We have reached the end of our question and answer session I would like to turn the conference back over to Eddie for closing remarks, Okay terrific Sherry well thanks, everybody for.

Eddie: Attending the call today again, we're pleased with 2023 looking forward to a fabulous 2024, and we look forward.

To updating you on the Q1 results and are back to about 90 days. Thank you.

Speaker Change: Thank you. This will conclude today's conference you may disconnect. Your lines at this time and thank you for your participation.

Eddie: Okay.

Matthew Pfau: How do we think about that? Yeah, yeah, there is, you know, I mean, we're effectively continuing to increase operating margins if you take out the, you know, if you take out the drag. And, you know, we still think there's, you know, scale opportunity in cloud operations, and, you know, and up and down the P&L, frankly. Okay, great. Thanks, guys. Thank you, Matt. And our final question is from Blair Abernethy with Roseblood Security. Thank you very much. Nice quarter, guys.

Eddie: Okay.

Eddie: Sure.

Yeah.

Eddie: Yes.

Eddie Capel: Dennis, just wondering on the professional services side of the business. If you look at your overall hiring, your total employee headcount was up around 10% in the year, but your professional services revenues were up around 24%. Can you just help reconcile sort of, you know, capacity in that professional services business, business, and pricing in the market, how that performed in 23 and sort of what you're looking at for 24. Well, to Eddie here, just a couple of points. I mean, obviously, we have seen a little bit, not a ton, but we have passed on a little bit of the wage inflation and so forth to our customers. So you've seen hourly rates take up a little bit, but most of the leverage comes from the efficiency of the organization, for sure, particularly as we continue to focus on the centers of excellence that I talked about, the training and the onboarding of the new resources. Now, the other thing that I mentioned. We had forecasted a little bit higher headcount acquisition in 2023 than we needed because attrition was lower than we expected. That helps efficiency, for sure.

Eddie Capel: Okay, great. And with the Shopify relationship, will that also drive some professional services? I guess it would if larger customers adopted your solution. Uh, yeah, sure, sure. Yeah, no, no, no, no, no, no doubt it will. Now, you know, part of our objective there, just to be clear, is to take out any of the, uh, uh, base integration work that's needed to be done will, you know, between us, will carry that, you know, carry that cost. So the idea is to speed up implementations, reduce the total cost of ownership, and so forth.

Eddie Capel: But nonetheless, there's still professional services fees associated with, you know, implementing that joint solution. Okay, great, great. And then my next question was just really around, just maybe a little more color on the guidance, the revenue guidance for fiscal 24, so 10% on the top line. You did 21% in 23, you did 15% in 22, and is there a, I just want to get your sense of sort of how you came to your 2024 revenue. Well, we're, Growth Revenue Growth guidance coming into 2024 is roughly the same as it was coming into 2023, slightly higher. Okay, is the environment... feeling about the same as 23 at the end of last year. Yes, in the same ballpark.

Blair Abernethy: Obviously, there are a few things going on around the world that weren't happening at the beginning of 2023. 2024 is an election year, etc, etc. So the things that you know about, but aside from those things, everything feels, you know, about the same.

Eddie Capel: Okay, great. Thanks very much. Our pleasure, Blair. Thank you. We have reached the end of our question and answer session. I would like to turn the conference back over to Eddie for. Okay, terrific, Sherry. Well, thanks, everybody, for attending the call today. Again, we're pleased with 2023, looking forward to a fabulous 2024, and we'll look forward to updating you on the Q1 results in about 90 days. Thank you. Thank you. This will conclude today's conference. You may disconnect your lines at this time, and thank you for your participation. I'm,..................?? n, http://www.youtube.com.au