Q2 2024 Manhattan Associates Inc Earnings Call
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Alicia: Good afternoon. My name is Alicia, and I'll be your conference facilitator today. At this time, I would like to welcome everyone to the Manhattan Associates Q2 2024 conference call. All lines have been placed on mute to prevent any background noise.
Alicia: Good afternoon. My name is Alicia and I'll be your conference facilitator today. At this time, I would like to welcome everyone to the Manhattan Associates Q2 2024 conference call.
Alicia: After the speaker's remarks, there will be a question and answer period. If you would like to ask a question during this time, simply press star, then the number one on your telephone keypad. If you would like to withdraw your question, press star, then the number two.
Alicia: All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer period. If you would like to ask a question during this time, simply press star, then the number 1 on your telephone keypad. If you would like to withdraw your question, press star, and then the number 2.
Alicia: As a reminder, ladies and gentlemen, this call is being recorded today, July 23, 2024. I would now like to introduce you to your host, Michael Baer, Head of Investor Relations at Manhattan Associates. Mr. Baer, you may begin your conference.
Michael Bauer: As a reminder, ladies and gentlemen, this call is being recorded today, July 23, 2024. I would now like to introduce you to your host, Michael Baer, Head of Investor Relations of Manhattan Associates. Mr. Baer, you may begin your conference.
Michael Bauer: Great. Thanks, Alicia. And good afternoon, everyone.
Michael Bauer: Great. Thanks, Alicia, and good afternoon, everyone. Welcome to Manhattan Associates' 2024 second quarter earnings call.
Michael Bauer: Welcome to Manhattan Associates' 2024 second 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, are not guarantees of future performance, and that actual results may differ materially from the projections we included in our forward-looking statements.
Michael Bauer: 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 the future events.
Michael Bauer: for the future financial performance of Manhattan Associates. We caution that these forward-looking statements about risk and uncertainties are not guarantees of future performance.
Michael Bauer: and that actual results may differ materially from the projections we contained in our follow-up statements.
Michael Bauer: I would 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 Form 10-K for fiscal year 2023 and the risk factor discussion in that report, as well as any risk factor updates we provide on subsequent Form 10-Qs. We note the turbulent global macro environment could impact our performance and cause actual results to differ materially from our projections.
Michael Bauer: I refer you to the reports, Manhattan Associates files of the SEC for important factors.
Michael Bauer: that could cause actual results to differ materially from those in our projections, particularly the annual report on Form 10-K for fiscal year 2023 and the risk factor discussion in that report, as well as any risk factor updates we provide on subsequent Form 10-Q s.
Michael Bauer: We note the turbulent global macro-environment could impact our performance and cause actual results to differ maturely from our projections. We are under no obligation to update these statements. In addition, our comments include certain non-GAAP financial measures to provide additional information to investors.
Michael Bauer: We are under no obligation to update these statements. 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.
Michael Bauer: 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.
Eddie Capel: Thanks, Mike. Well, good afternoon, everyone, and thanks for joining us as we review our second quarter results and discuss our increased full-year financial 2024 outlook. Manhattan delivered record Q2 and first half results. For the quarter, total revenue increased 15% to $265 million and adjusted earnings per share increased 34% to $1.18, both exceeding our expectations.
Eddie Capel: All right, thanks, Mike. Well, good afternoon, everyone, and thanks for joining us as we review our second quarter results and discuss our increased full-year financial 2024 outlook.
Eddie Capel: Manhattan delivered record Q2 and 1st half results.
Eddie Capel: For the quarter, total revenue increased 15% to $265 million, and adjusted earnings per share increased 34% to $1.18, both exceeding our expectations.
Eddie Capel: Driving the top-line outperformance in earnings leverage was 35% growth in cloud revenue and 10% growth in services revenue. And this encompasses double-digit top-line growth across all of our geographies, as our global teams continue to execute very well for us. While the global macro environment certainly remains volatile, Manhattan's business is solid.
Eddie Capel: Driving the top-line outperformance in earnings leverage was 35% growth in cloud revenue and 10% growth in services revenue.
Eddie Capel: And this encompasses double-digit, top-line growth across all of our geographies, as our global teams continue to execute very well for our customers.
Speaker Change: Well, the global macro environment certainly remains volatile. Manhattan's business is solid, and we're very optimistic about our business opportunity.
Eddie Capel: And we're very optimistic about our business opportunity. Demand for our solutions is robust, customer satisfaction is high, and investment in R&D and our associates continue to widen our technological leadership across our supply chain planning, execution, and omni-channel retail offerings. Now, RPO, the leading indicator of ag growth, increased 29% to just over $1.6 billion.
Speaker Change: Demand for our solutions are robust, customer satisfaction is high, and investment in R&D and our associates continue to widen our technological leadership across our supply chain planning, execution, and omni-channel retail offerings.
Speaker Change: Now, RPO, the leading indicator of our growth, increased 29% to just over $1.6 billion.
Eddie Capel: Demand for our mission-critical cloud solutions remains strong and resilient across all of our product portfolios. 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. For example, in the quarter, deals won include a global apparel and home fashions retailer, a global developer and manufacturer of construction equipment, a grocery chain, a global manufacturer of HVAC and refrigeration products, a global supply chain management company, a beauty and wellness retailer, as well as a number of others. Overall, competitive win rates remain solid at about 75%.
Speaker Change: Demand for our mission-critical cloud solutions remains strong and resilient across all of our product portfolio.
Speaker Change: From a vertical perspective, retail, manufacturing, and wholesale continue to drive more than 80% of our bookings in the quarter.
Speaker Change: And across our solutions, the sub-verticals are pretty diverse.
Speaker Change: For example, in the quarter...
Speaker Change: Deals won include a global apparel and home fashions retailer, a global developer and manufacturer of construction equipment, a grocery chain, a global manufacturer of HVAC and refrigeration products.
Speaker Change: a global supply chain management company, a beauty and wellness retailer, as well as a number of others.
Speaker Change: Overall, competitive win rates remain solid at about 75%.
Eddie Capel: Twenty percent of our Q2 new bookings were generated from net new logos, and we continue to have a healthy mix of conversions, upsells, and cross-sells. And while the timing of large deals and bookings will certainly vary on a quarterly basis, we believe that sales breadth exemplifies the many and varied opportunities for sustainable future growth. And the key to this growth and steady execution is an unparalleled combination of industry-leading solutions and world-class service that we provide to ac... At Best of Breed, cloud-native platform and solutions provide continuous access to innovation and are a key component of our customers' success.
Speaker Change: 20% of our Q2 new bookings were generated from net new logos and we continue to have a healthy mix of conversions, upsells, and cross-sells.
Speaker Change: And while the timing of large deals and bookings makes will certainly vary on a quarterly basis, we believe our sales breadth exemplifies the many and varied opportunities for sustainable future growth.
Speaker Change: And the key to this growth and steady execution is unparalleled combination of industry-leading solutions and world-class service that we provide to our customers.
Speaker Change: At best of breed, cloud-native platform and solutions provide continuous access to innovation and are a key component of our customers' success. These mission-critical solutions help our clients strengthen their relationships with their end customers, drive more revenue, and improve efficiency.
Eddie Capel: These mission-critical solutions help our clients strengthen their relationships with their end customers, drive more revenue, and improve efficiency. These powerful benefits are translating into a record pipeline for us, with new potential customers representing about 35% of the demand. A solid product demand is also fueling opportunities for growth of our internal services organization, as well as the growing roster of Manhattan value partners. Now, like the last few quarters, our global services team completed over 100 go-lies in Q2 and continues to perform very well for our customers. And while we remain appropriately cautious about the global economy, we continue to invest to drive growth from our numerous opportunities.
Speaker Change: These powerful benefits are translating into record solutions pipeline for us with new potential customers representing about 35% of the demand.
Speaker Change: That solid product demand is also fueling opportunities for growth of our internal services organization as well as the growing roster of Manhattan value partners.
Speaker Change: Now like the last few quarters, our global services team completed over 100 go-lies in Q2 and continue to perform very well for our customers.
Speaker Change: And while we remain appropriately cautious on the global economy, we continue to invest to drive growth from our numerous opportunities.
Eddie Capel: This includes monetizing strategic investments in industry-leading innovation, further enabling our customer success, and the expansion of our addressable market. From a hiring perspective, we've hired just over a hundred new team members year-to-date and plan on continuing to hire for the remainder of the year. Turning now to just a few updates on our products, but before I cover the important new product announcements we made in May at our Momentum Customer Conference.
Speaker Change: This includes monetizing strategic investments in industry-leading innovation, further enablement of our customer success, and the expansion of our addressable market.
Speaker Change: From a hiring perspective, we've hired just over 100 new team members here today and plan on continuing our hiring posture for the remainder of the year.
Speaker Change: Turning now to just a few updates on our products, but before I cover the important new product announcements we made in May at a Momentum customer conference, I'd like to highlight some recent external validation of the innovation that we've been delivering within applications.
Eddie Capel: I'd like to highlight some recent external validation of the innovation that we've been delivering within applications. And certainly, while the most important validation we get is from our customers, it is also gratifying to see our product recognized by some of these third parties. So, first, we had two of our applications named Innovation of the Year by two industry publications.
Speaker Change: And certainly, while the most important validation we get is from our customers, it is also gratifying to see our product recognized by some of these third parties. So first, we had two of our applications named Innovation of the Year by two industry publications.
Eddie Capel: The first recipient was our recently released Fulfillment Experience Insight Dashboard, part of Manhattan Active Omni. This new capability allows our Manhattan Active Omni customers to benchmark their omni-channel fulfillment performance against a group of peers, and Manhattan Yard Management was also recognized as an Innovation of the Year. This is part of our Manhattan Active Supply Chain execution platform, and the solution unifies distribution and logistics where they come together in the physical world. And a quick mention of the recently published Gartner Magic Quadrants for warehouse management and transportation. For the 16th consecutive year, Manhattan was the definitive leader in the WMS Magic Quadrant.
Speaker Change: The first recipient was our recently released Fulfillment Experience Insight Dashboard, part of Manhattan Active Omni. This new capability allows our Manhattan Active Omni customers to benchmark their omni-channel fulfillment performance against a group of peers.
Speaker Change: And Manhattan Yard Management was also recognized as an Innovation of the Year.
Speaker Change: This is part of our Manhattan Active Supply Chain execution platform, and the solution unifies distribution and logistics where they come together in the physical world. And a quick mention of the most recently published Gartner Magic Quadrants for warehouse management and transportation management.
Speaker Change: For the 16th consecutive year, Manhattan was the definitive leader in the WMS Magic Quadrant. And for the 6th consecutive year, Manhattan was amongst a small group of vendors in the leaders category in the TMS Magic Quadrant. And we're certainly very appreciative of Gartner's recognition of our serial investment.
Eddie Capel: And for the 6th consecutive year, Manhattan was amongst a small group of vendors in the leaders category in the TMS Magic Quadrant. And we're certainly very appreciative of Gartner's recognition of our serial investment in innovation. Now, let's turn to a couple of important product updates. First, let's talk about generative AI.
Speaker Change: and Innovation.
Speaker Change: Now let's turn to a couple of important product updates.
Eddie Capel: As I've mentioned on prior calls, since the initial availability of generative AI models, our engineers have been hard at work designing, building, and testing, of course, generative AI-based capabilities. At Momentum, we announced the first of these capabilities in the form of a new product called Manhattan Active Maven, part of our Manhattan Active Omni platform. The Manhattan Active Maven is a Gen-AI powered application that provides both best-in-class consumer-facing chatbots and a powerful set of capabilities to assist contact center agents. AI Technologies, provided they've been trained on the right underlying data, are particularly well suited to automating customer service tasks because of their ability to answer a very wide range of questions, and leveraging the underlying data is where the Manhattan Active Platform really shines. Because, Literally everything in our applications, and everything our applications do, is available via an API.
Speaker Change: First, let's talk about generative AI. As I've mentioned on prior calls, since the initial availability of generative AI models, our engineers have been hard at work designing and building and testing, of course, generative AI-based capabilities. To learn more about generative AI, please visit our website at www.generative-ai.org.
Speaker Change: At Momentum, we announced the first of these capabilities in the form of a new product called Manhattan Active Maven.
Speaker Change: Part of our Manhattan Active Omni platform, the Manhattan Active Maven is a Gen AI powered application which provides both best-in-class consumer-facing chatbots and the powerful set of capabilities to assist contact center agents.
Speaker Change: Generative AI technologies, provided they've been trained on the right underlying data, are particularly well suited to automating customer service tasks because of their ability to answer a very wide range of questions.
Speaker Change: And leveraging on the underlying data is where the Manhattan Active Platform really shines. Because, you know, from day one, we've built the Manhattan Active Platform applications as API first.
Speaker Change: Literally everything in our applications and everything our applications do is available via an API.
Eddie Capel: And this approach gives Manhattan a major advantage when it comes to leveraging generative AI. Our API-first approach is one of the key reasons why Manhattan Active Maven is proving to be so very powerful. Going far beyond answering the basic questions of, you know, where's my order, Maven can answer detailed questions about payments, check inventory at local stores, or even change delivery methods for orders that are already being processed. Manhattan Active Maven also provides power efficiency and efficiency enhancing capabilities for call center agents as well. Manhattan Active Maven makes its debut this month.
Speaker Change: And this approach gives Manhattan a major advantage when it comes to leveraging Charities.ai.
Speaker Change: Our API-first approach is one of the key reasons Manhattan Active Maven is proving to be so very powerful, going far beyond answering the basic questions of, you know, where's my order?
Speaker Change: Maven can answer detailed questions about payments, check inventory at local stores, or even change delivery methods for orders that are already being processed.
Speaker Change: Manhattan ActiveMaven also provides power efficiency enhancing capabilities for call center agents as well.
Eddie Capel: Like all Manhattan Active platform applications, we'll get better and better and better each quarter thereafter, at the moment, and we also announced Manhattan, a Gen AI-powered feature available across all Manhattan Active applications. Manhattan Assist's first set of capabilities focus on helping our customers get maximum value from their investments in our platform applications. Our users can now ask Assist detailed questions about the best way to achieve a particular business objective, how to configure a specific behavior, and then be guided directly to the relevant configuration. And last but certainly not least, though, I'd like to spend a few minutes talking about the biggest announcement that we made a few months ago about momentum.
Speaker Change: Manhattan Active Maven makes its debut this month, and like all Manhattan Active platform applications, will get better and better and better each quarter thereafter.
Speaker Change: At the moment, and we also announced Manhattan Associates.
Speaker Change: and Gen AI-powered feature available across all Manhattan Active applications.
Speaker Change: Manhattan Assist's first set of capabilities focus on helping our customers get maximum value from their investments in our platform applications. Our users can now ask Assist detailed questions about the best way to achieve a particular business objective.
Speaker Change: how to configure a specific behavior, and then be guided directly to the relevant configuration screens.
Speaker Change: And last, but certainly not least though, I'd like to spend a few minutes talking about the biggest announcement that we made a few months back of Momentum.
Eddie Capel: Coming this fall, we'll be releasing Manhattan Active Supply Chain Planning, the culmination of about a decade of investment to move our enterprise applications to an industry-leading cloud-native platform. The release of Manhattan Active Supply Chain Planning will complete our work to fully transform our solution portfolio to be cloud-first. And just as importantly, we'll be the first and only vendor to enable a unified cloud-native offering spanning both supply chain planning and supply chain execution.
Speaker Change: Coming this fall, we'll be releasing Manhattan Active Supply Chain Planning, the culmination of...
Speaker Change: about a decade of investment to move our enterprise applications to an industry-leading cloud-native platform. The release of Manhattan Active Supply Chain Planning will complete our work to fully transform our solution portfolio to being cloud-first.
Speaker Change: And just as importantly, we'll be the first and only vendor to enable a unified cloud-nating offering, spanning both supply chain planning and supply chain execution.
Eddie Capel: And consistent with the vision that we brought to market with Manhattan Active Omni and Manhattan Active Supply Chain execution, Manhattan Active Supply Chain planning customers will benefit substantially from the power of unification. Now, in this case, unification works at several levels. First, via a composable set of APIs we use to unify demand forecasting, allocation, and replenishment all into a single application. The vast majority of businesses you see distribute and sell both allocated and replenished products. And today, this dual inventory flow method really necessitates either using two disparate systems with the enterprise or planning one pool of items without systemic support for all of them.
Speaker Change: And consistent with the vision that we brought to market with Manhattan Active Omni and Manhattan Active Supply Chain execution, Manhattan Active Supply Chain planning customers will benefit substantially from the power of unification.
Speaker Change: Now in this case, unification works at several levels.
Speaker Change: First, via a composable set of APIs we use to unify demand forecasting, allocation, and replenishment all into a single application.
Speaker Change: The vast majority of businesses you see distribute
Speaker Change: and sell both allocated and replenished products.
Speaker Change: And today, this dual inventory flow method really necessitates either using two disparate systems with the enterprise, or planning one pool of items.
Eddie Capel: And now, for the first time, customers are going to be able to use a single demand forecast to drive both allocated and replenished products. But it's actually the second and larger form of unification that is proving to be the most exciting and interesting to our customers so far. We call this next level of unification unified business planning because it enables our customers to drive their inventory, labor, and transportation forecasts all from a single demand forecast in order to project.
Speaker Change: without systemic support for all of them. And now for the first time, customers are going to be able to use a single demand forecast to drive both allocated and replenished products.
Speaker Change: But it's actually the second and larger form of unification which is proving to be the most exciting and interesting to our customers so far.
Speaker Change: We call this next level of unification Unified Business Planning because it enables our customers to drive their inventory, labor, and transportation forecasts all from a single demand forecast in order projection.
Eddie Capel: Now our supply chain practitioners are going to be able to see everything from a transportation forecast on a particular outbound transit lane six months out to a required picking associate forecast for 26 hours, and everything in between. And this detailed operational forecast enables much more effective labor planning and ensures that adequate labor capacity to meet customer demand and orders is driven without expensive overhead. On the transportation front, the ability for our customers to collaborate with their strategic carriers using detailed transportation capacity forecasts ensures that they've got the exact capacity they need at the best of available rates, limiting how often they have to go out to the spot market.
Speaker Change: Now, our supply chain practitioners are going to be able to see everything from a transportation forecast on a particular outbound transit lane six months out to a required picking associate forecast 26 hours out, and everything in between.
Speaker Change: And this detailed operational forecast enables much more effective labor planning and ensuring that adequate labor capacity to meet customer demand and orders is driven without expensive overtime.
Speaker Change: On the transportation front, the ability for our customers to collaborate with their strategic carriers using detailed transportation capacity forecasts, ensure that they've got the exact capacity they need at the best of available rates, limiting how often they have to go out to the spot market.
Eddie Capel: But beyond forecast visibility, Manhattan Active Supply Chain planning is going to enable dynamic collaboration between planning and execution, whether it's changing an inbound purchase order quantity to enable more efficient transportation or dynamically changing the quantities of in-flight store replenishment orders based upon the very latest sales data. Manhattan Active Supply Chain planning uses dynamic, always-on optimization to process and adjust the plan in real time based on sales and operating data. It's truly the first of a kind, and we're very excited to debut it in the fall of this year.
Speaker Change: But beyond forecast visibility, Manhattan Act and supply chain planning is going to enable dynamic collaboration between planning and execution.
Speaker Change: whether it's turning an inbound purchase order quantity to enable the more efficient transportation or dynamically changing the quantities of in-flight store replenishment orders based upon the very latest sales data.
Speaker Change: Manhattan Active Supply Chain Planning uses dynamic, always-on optimization to process and adjust the plan in real time based on sales and operating data. It's truly the first of a kind and we're very excited to debut this in the fall of this year.
Eddie Capel: Now, this concludes my business update. Dennis is going to provide you with an update on our financial performance and outlook, and then I'll close off prepared remarks with a brief summary before we move to Q&A. So, Dennis? Thanks.
Speaker Change: Now this concludes my business update. Dennis is going to provide you with an update on a financial performance and outlook and then I'll close our prepared remarks with a brief summary before we move to Q&A. So Dennis.
Dennis B. Story: Thanks, Eddie. Our Manhattan Global teams continue to execute well in a challenging macro environment. For the quarter, we delivered a strong, balanced financial performance across top-line growth, operating margin, and cash flow. This included posting record results across RPO, revenue, operating income, and adjusted earnings per share. On an as-reported basis, our Q2 results came in at the rule of 50, and if our revenue growth is normalized for our cloud transition, which excludes license and maintenance revenue, our results exceeded the rule of 50. FX did not have a meaningful impact on RPO or revenue in the quarter.
Dennis: Thanks, Eddie. Our Manhattan Global teams continue to execute well in a challenging macro environment.
Dennis: For the quarter, we delivered a strong, balanced financial performance across top-line growth, operating margin, and cash flow.
Dennis: This includes posting record results across RPO, revenue, operating income, and adjusted earnings per share.
Dennis: On an as-reported basis, our Q2 results came in at the rule of 50, and if our revenue growth is normalized for our cloud transition, which excludes license and maintenance revenue, our results exceeded the rule of 50.
Dennis: FX did not have a meaningful impact to RPO or revenue in the quarter. Also in reviewing our financial performance, growth rates are on a year-over-year basis unless otherwise stated.
Dennis B. Story: Also, in reviewing our financial performance, growth rates are on a year-over-year basis unless otherwise stated. So, for the quarter, total revenue was $265 million, up 15%. That's a double-digit increase.
Dennis: So, for the quarter, total revenue was $265 million, up 15%. That's a double digit. Excluding license and maintenance revenue, which removes the compression driven by our cloud transition, our total revenue was up 19%.
Dennis B. Story: Excluding license and maintenance revenue, which removes the compression driven by our cloud transition, our total revenue was up 19%; cloud revenue totaled $82 million, up 35%. We ended the quarter with RPO of $1.6 billion, up 29% compared to the prior year and up 6% sequentially. This solid performance was driven by a healthy mix of sales from both new and existing customers and transactions from across our Manhattan Active suite of products. However, growth was partially offset by some deals pushing into future periods at quarter end.
Dennis: Cloud revenue totaled $82 million up 35%. We ended the quarter with RPO of 1.6 billion up 29% compared to the prior year and up 6% sequentially.
Dennis: This solid performance was driven by a healthy mix of sales from both new and existing customers and transactions from across our Manhattan active suite of products.
Dennis: Growth was partially offset by some deals pushing into future periods at quarter end.
Dennis B. Story: On an FX-adjusted basis, our first half RPO results track towards the high end of our RPO guidance. And, as Eddie highlighted, we are entering the second half of 2024 with a record pipeline and are confident in our ability to hit our bookings goals.
Dennis: On an FX-adjusted basis, our first half RPO results track towards the high end of our RPO guidance.
Dennis: And as Eddie highlighted, we are entering the second half of 2024 with a record pipeline and are confident in our ability to hit our bookings goals.
Dennis B. Story: Our global services teams delivered record revenue totaling $137 million, up 10%. This was in line with our expectations as cloud sales continue to fuel services revenue growth for Manhattan. Adjusted operating profit was $93 million, up 36%, with adjusted operating margin of 35%. This is up 540 basis points year over year. Our performance was driven by strong cloud and services revenue growth combined with operating leverage as our cloud business continues to scale.
Eddie Capel: Our global services teams delivered record revenue, totaling $137 million, up 10%.
Eddie Capel: This was in line with our expectations as cloud sales continue to fuel services.
Eddie Capel: Revenue growth for Manhattan.
Eddie Capel: Adjusted operating profit was $93 million, up 36%, with adjusted operating margin of 35%.
Eddie Capel: This is up 540 basis points year over year. Our performance was driven by strong cloud and services revenue growth, combined with operating leverage as our cloud business continues to scale.
Dennis B. Story: Importantly, as Eddie discussed, we are very optimistic about our business opportunity and continue to invest in innovation to drive sustainable, long-term growth. Turning to earnings per share, we delivered Q2 adjusted earnings per share of $1.18, up 34%, and GAAP earnings per share of 85 cents, up 35%. Moving the cash. Q2 operating cash flow increased 81% to a solid $73 million. This resulted in a 27% free cash flow margin and a 36% adjusted EBITDA margin. The difference is due to $35 million in cash taxes paid in the quarter.
Eddie Capel: Importantly, as Eddie discussed, we are very optimistic on our business opportunity and continue to invest in innovation to drive sustainable long-term growth.
Eddie Capel: Turning to Earnings Per Share, we delivered Q2 Adjusted Earnings Per Share of $1.18, up 34%, and GAAP Earnings Per Share of the $.85, up 35%.
Eddie Capel: Moving to cash.
Eddie Capel: Q2 operating cash flow increased 81% to a solid $73 million.
Eddie Capel: This resulted in 27% free cash flow margin and 36% adjusted EBITDA margin. The difference is due to $35 million in cash taxes stayed in the quarter.
Dennis B. Story: Year-to-date, our operating cash flow is up 29% to $128 million. Regarding the balance sheet, total deferred revenue increased 14% to $260 million. We ended the quarter with $203 million in cash and zero debt. Accordingly, we leveraged our strong cash position and invested $75 million in share repurchases in the quarter, resulting in $148 million in buybacks year-to-date. Also, our board has approved the replenishment of our $75 million share of repurchase authority.
Eddie Capel: Year-to-date, our operating cash flow is up 29% to $128 million.
Eddie Capel: Regarding the balance sheet, total deferred revenue increased 14% to $260 million.
Eddie Capel: We ended the quarter with $203 million in cash and zero debt.
Eddie Capel: Accordingly, we leveraged our strong cash position and invested $75 million in share repurchases in the quarter, resulting in $148 million in buybacks year-to-date.
Eddie Capel: Also, our board has approved the replenishment of our $75 million share of repurchase authority.
Dennis B. Story: So that covers the Q2 summary, in which our associates delivered 13 double-digit returns on key metrics in the quarter. Now on to our updated 2024 guide. As consistently mentioned, our financial objective is to deliver sustainable double-digit top-line growth and top quartile operating margins benchmarked against enterprise SAS comps. These are important drivers of our best-in-class return on invested capital as we maintain a balanced investment approach to growth and profitability. With our solid first half performance, we are again raising our 2024 revenue, operating margin, and earnings per share guidance, which can be found in today's earnings release.
Eddie Capel: So that covers the Q2 summary, which our associates delivered 13 double-digit returns on key metrics in the quarter.
Eddie Capel: Now on to our updated 2024 guidance.
Eddie Capel: As consistently mentioned, our financial objective is to deliver sustainable double-digit top-line growth and top quartile operating margins benchmarked against enterprise SAS comps.
Eddie Capel: These are important drivers to our best-in-class return on invested capital as we maintain a balanced investment approach to growth and profitability.
Eddie Capel: With our solid first half performance, we are again raising our 2024 revenue, operating margin, and earnings per share guidance, which can be found in today's earnings release.
Dennis B. Story: We are also reiterating our 2024 RPO target range and midpoint of $1.78 billion. As noted on previous earnings calls, our objective is to update our RPO outlook on an annual basis. And lastly, on RPO, as previously noted, 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.
Eddie Capel: We are also reiterating our 2024 RPO target range and midpoint of $1.78 billion.
Eddie Capel: As noted on the prior earnings calls, our objective is to update our RPO outlook on an annual basis.
Eddie Capel: And lastly, on RPO, as previously noted, 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.
Dennis B. Story: With that... For the full year 2024, we expect total revenue of $1.036 billion to $1.044 billion, with a $1.04 billion midpoint comparing favorably to our prior outlook in representing 17% growth, excluding license and maintenance, and 12% all-in. For Q3, we are targeting total revenue of $261 million to $265 million, accounting for retail peak seasonality. For Q4, we are targeting a midpoint of $257 million. For adjusted operating margin, we are increasing the midpoint to 32.1 percent from our prior midpoint of 29.8 percent, which includes a 120 basis point headwind from our license and maintenance revenue attrition to cloud. And, as Eddie highlighted, given the combination of our demand and the size of our opportunity, we continue to invest in our business.
Dennis B. Story: At the midpoint, we are targeting a Q3 adjusted operating margin of 31.5% and accounting for retail peak seasonality of 30.5% in Q4. Our full year adjusted earnings per share is increasing by $0.36 to $4.26, up 9% from our prior midpoint of $3.90. On a quarterly basis, we are targeting Q3 earnings per share of $1.06 and accounting for retail peak seasonality of a dollar in Q4. Similarly... For gap earnings per share, our midpoint increases by $0.30 to $3.12. For Q3, we are targeting GAAP earnings per share of $0.74. Here are some additional details on our 2024 outlook.
Eddie Capel: With that...
Eddie Capel: For the full year 2024, we expect total revenue of $1.036 billion to $1.044 billion.
Eddie Capel: with a $1.04 billion midpoint comparing favorably to our prior outlook and representing.
Eddie Capel: 17% growth excluding license and maintenance and 12% all-in.
Eddie Capel: For Q3, we are targeting total revenue of $261 million to $265 million, accounting for retail peak seasonality. For Q4, we are targeting a midpoint of $257 million.
Eddie Capel: For Adjusted Operating Margin, we are increasing the midpoint to 32.1% from our prior midpoint of 29.8%, which includes a 120-basis point headwind from our license and maintenance revenue attrition to cloud.
Eddie Capel: And as Eddie highlighted, given the combination of our demand and size of our opportunity, we continue to invest in our business.
Eddie Capel: At the midpoint, we are targeting Q3 adjusted operating margin of 31.5% and accounting for retail peak seasonality of 30.5% in Q4.
Eddie Capel: Our full year adjusted earnings per share is increasing by $0.36 to $4.26, up 9% from our prior midpoint of $3.90.
Eddie Capel: On a quarterly basis, we are targeting Q3 earnings per share of $1.06 and accounting for retail peak seasonality of $1.00 in Q4.
Eddie Capel: Similarly, for GAAP earnings per share, our midpoint increases by $0.30 to $3.12. For Q3, we are targeting GAAP earnings per share of $0.74.
Eddie Capel: Here are some additional details on our 2024 outlet.
Dennis B. Story: We are increasing our cloud revenue midpoint to $334.5 million, representing 31% growth. On a quarterly basis, we are targeting $85 million in Q3 and $89 million in Q4. Due to the timing of Project Go Lives and several deal pushes, we are tweaking our services forecast slightly lower by $4 million to $535 to $539 million, with the $537 million midpoint representing 10% growth. On a quarterly basis, we are targeting Q3 services revenue of $136 million and, accounting for retail peak seasonality, $130 million in Q4.
Eddie Capel: We are increasing our cloud revenue midpoint to $334.5 million, representing 31% growth. On a quarterly basis, we are targeting $85 million in Q3 and $89 million in Q4.
Eddie Capel: Due to the timing of Project Go Lives and several deal pushes, we are tweaking our services forecast slightly lower by $4 million to $535 to $539 million, with the $537 million midpoint representing 10% growth.
Eddie Capel: On a quarterly basis, we are targeting Q3 services revenue of $136 million and accounting for retail peak seasonality, $130 million in Q4.
Dennis B. Story: For maintenance, our midpoint upticks to $134 million, which represents a 7% decline. On a quarterly basis, we are targeting $34 million in Q3 and $30 million in Q4. For a consolidated subscription, maintenance, and services margin, we are targeting 140 basis points of margin improvement for the year. Finally, we expect our tax rate to be 21.5% for Q3 and Q4, and our diluted share count to be 62.2 million shares, which assumes no buyback activity. That covers the financial update. I'll turn it back to Eddie.
Eddie Capel: For maintenance, our midpoint upticks to $134 million, which represents a 7% decline. On a quarterly basis, we are targeting $34 million in Q3 and $30 million in Q4.
Eddie Capel: For Consolidated Subscription, Maintenance, and Services Margin, we are targeting 140 basis points of margin improvement for the year.
Eddie Capel: Finally, we expect our tax rate to be 21.5% for Q3 and Q4, and our diluted share count to be 62.2 million shares.
Eddie Capel: which assumes no buyback activity.
Eddie Capel: So that covers the financial update. I'll turn it back to Eddie.
Eddie Capel: Okay. Thanks, Dennis. Terrific.
Eddie Capel: Well, we're certainly very pleased with our second quarter and our first half result. Of course, we continue to be appropriately cautious in light of the volatile macro conditions that are out there. And there's no doubt that we experienced a little more choppiness this quarter than we usually do.
Eddie Capel: Okay. Thanks, Dennis. Terrific. Well, we're certainly very pleased with our second quarter and our first half results.
Eddie Capel: Of course, we continue to be appropriately cautious on the volatile macro conditions that are out there. And there's no doubt that we experience a little more choppiness this quarter than we usually do. But clearly, our business fundamentals are very solid.
Eddie Capel: But clearly, our business fundamentals are very solid, and we continue to be very optimistic about expanding our market opportunities. And we enter the second half of 2024 certainly from a position of strength. So we thank everybody for joining the call, and thank you to our global team for all the great work that they're doing for our customers out there in the field. So that concludes our prepared remarks, and Alicia, we'd be happy to take any questions. You will now be conducting
Eddie Capel: We continue to be very optimistic about expanding our market opportunity, and we enter the second half of 2024 certainly from a position of strength.
Speaker Change: So we thank everybody for joining the call, and thank you to our global team for all the great work that they're doing for our customers out there in the field. So that concludes our prepared remarks, and Alicia, we'd be happy to take any questions.
Alicia: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key.
Speaker Change: We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue.
Speaker Change: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please while we poll for questions.
Alicia: One moment, please, while we pull for questions. Thank you. Our first question is from Terry Tillman with Truist Securities. Please proceed with your question.
Speaker Change: Thank you.
Speaker Change: Our first question is from Terry Tillman with Truist Securities. Please proceed with your question.
Terrell Frederick Tillman: Hey, good afternoon, Eddie, Dennis, and Mike. Thanks for taking my questions, and I guess I would say congratulations, especially on the operating margin and the operating profit. It's very impressive.
Terrell Frederick Tillman: Hey, good afternoon, Eddie, Dennis, and Mike. Thanks for taking my questions, and I guess I would say congratulations, especially on the operating margin and the operating profit. It's very impressive.
Terrell Frederick Tillman: I'm going to go a little bit different here and ask maybe two-and-a-half questions versus two questions, so hopefully that's okay, but maybe the first question for you, Eddie, is whether you have a large WMS install base. I think I asked last quarter or the quarter prior as well, just where are we now on the cycle in terms of folks somewhere in the journey of kicking off a move to cloud WMS, so whether they've signed deals, they're in flight, or they're fully up and running, just whether it's sites or percentage of the installed base. We'd love to get an update on that, and then, like I said, maybe one-and-a-half other questions.
Terrell Frederick Tillman: I'm gonna go a little bit different here and ask maybe two and a half questions versus two questions, so hopefully that's okay. But maybe the first question for you, Eddie, is you have a large WMS installed base. I think I asked last quarter or the quarter prior as well.
Terrell Frederick Tillman: Just where are we now on the cycle in terms of folks somewhere in the journey?
Speaker Change: of kicking off a move to cloud WMS. So whether they've signed deals, they're in flight, or they're fully up and running, just whether it's sites or percentages of the installed base, we'd love to get an update on that. And then I had, like I said, maybe one and a half other questions.
Eddie Capel: Sure, certainly, Terry. In terms of migrating our existing customers to the cloud, we're up by 15% through the journey. Now, you know, I've said that we think the journey is, you know, about a six or seven year journey. Now, to be clear, I've been saying this for about a year and a half now. It does seem to sort of extend out, you know, extend out a little bit.
Speaker Change: Sure.
Speaker Change: Certainly, Terry. In terms of migrating our existing customers to the cloud, we're about 15% through the journey.
Speaker Change: Now, you know, I've said that we think the journey is, you know, about a six or seven year journey. Now, to be clear, I've been saying it's a six or seven year journey for about a year and a half now. It does seem to sort of extend out, you know, extend out a little bit. But I still think that horizon, you know, is about what we're looking at. Maybe there'll be a couple of stragglers at the end of it. But to specifically ask a question.
Eddie Capel: But I still think that the horizon, you know, is about what we're looking at. Maybe there'll be a couple of stragglers at the end of it. But to specifically ask your question, within a couple of decimal places, we're about 15% through the migration.
Speaker Change: Within a couple of decimal places, we're about 15% through the migration.
Eddie Capel: Got it. Thank you. That's helpful, Eddie.
Speaker Change: Got it. Thank you. That's helpful, Eddie. And I guess maybe the second question and then just one more follow-up.
Speaker Change: If we look at demand, so you know, whether it's WMAS or your other SKUs, how does it feel from a geo perspective across the different geographies you're in? You know, you talked about a couple of large deals or deals that flipped, but overall, it sounded pretty solid. But what are you seeing? Is it pretty balanced across geos? Or do you see any kind of a
Terrell Frederick Tillman: And I guess maybe the second question, and then just one more follow-up. If we look at demand, so you know, whether it's WMATS or your other SKUs, how does it feel from a geography perspective across the different geographies you're in? You know, you talked about a couple of large deals or deals that flipped, but overall, it sounded pretty good. But what are you seeing? Is it pretty balanced across geos, or do you see any kind of interesting patterns across geos? And then I had a follow-up appointment.
Eddie Capel: Yeah, it's pretty balanced, Terry, across geographies and across products. But, you know, given we focus mostly on finished goods, less on manufacturing, and with, you know, a little bit of tension between the U.S. and China, our Chinese market is probably a little flatter, but it's a very small piece of our business to begin with. So, honestly, the flatness there, you don't really see it. It's not terribly consequential to the overall top line. Got it. And then I have just one last question for you, Dennis.
Speaker Change: Interesting patterns across geos and then I had a follow-up. Yeah it's pretty balanced Terry across geos and across products you know I would say that
Speaker Change: You know, given we focus mostly on finished goods, less on manufacturing, and with, you know, the little bit of tension between the U.S. and China, our Chinese market is probably a little flatter, but it's a very small piece of our business to begin with. So, honestly, the flatness there, you know, you don't really see. It's not terribly consequential to the overall top line.
Terrell Frederick Tillman: I mean, 27%, if I understand this right, pre-cash flow margin is pretty strong. And that's, I guess, with $35 million or so in cash taxes. Can you share whether it's in the third quarter or the second half? Is it about the same level of cash taxes you're assuming, or do you get a little bit of benefit in the second half for less of the headwind? Thank you.
Speaker Change: Got it. And then just the last question for you, Dennis. I mean, 27%, if I have this right, free cash flow margin is pretty strong. And that's, I guess, with $35 million or so in cash taxes.
Speaker Change: Can you share whether it's in third quarter or the second half, is it about the same level of cash taxes you're assuming or do you get a little bit of benefit in the second half for less of the headwind? Thank you.
Dennis B. Story: It's about the same level, Terry, so it'll be in the neighborhood of $35 to $38 million in the second half.
Dennis: It's about the same level, Terry, so it'll be in the neighborhood of $35 to $38 million in the second half.
Dennis B. Story: In the second half, not per quarter, but the second half. That's right. Okay, thank you all. Congratulations. Basically, we'll spread it across the second half.
Dennis: In the second half, not per quarter, second half.
Dennis B. Story: Basically, we'll spread it across the second half.
Speaker Change: That's right.
Dennis: Okay, thank you all. Congrats. Basically, we'll spread it across the second half. Okay, thank you all.
Terrell Frederick Tillman: Got it. All right. Thank you.
Joseph D. Vruwink: Thank you. Our next question comes from the line of Joe Vruwink with Baird. Please proceed with your question.
Terrell Frederick Tillman: Very good. Thank you, Terry.
Speaker Change: Thank you. Our next question comes from the line of Joe Vruwink with Baird. Please proceed with your question.
Joseph D. Vruwink: Great, thanks for taking my questions. I wanted to start by asking about the opportunity created within SAP's install base by needing to migrate off legacy on-prem versions of their WMN ERP. I think Manhattan has already signed customers that initiated RFPs because of these migration events. Do you think this is starting to register more prominently in your pipeline activity, or could it actually become bigger as end-of-life dates approach? I think there'll be one next year and then also in 2027.
Joseph D. Vruwink: Great, thanks for taking my questions. I wanted to start by asking about the opportunity created within SAP's installed base by needing to migrate off legacy on-prem versions of their WMN ERP. I think Manhattan has already signed customers that initiated RFPs because of these migration events.
Speaker Change: Do you think this is starting to register more prominently in your pipeline activity or could it actually become bigger as end-of-life dates approach? I think there's one next year and then also in 2027.
Eddie Capel: Yeah, it's a good question, Joe. I mean, it's certainly not anything that we're banking on, to be perfectly honest with you, but it is a... I would say it's sort of a growing trend. We've seen some customers think quite publicly about it, frankly. They're moving from on-premises to S4HANA, moving to the CLAG with SAP. It's a like-for-like move for them, and the customers that we have have concluded that they need to innovate in the supply chain area and, fortunately, have chosen us to be able to do that.
Joseph D. Vruwink: Yeah, it's a good question, Joe. I mean, it's certainly not anything that we're banking on, to be perfectly honest with you, but it is a...
Speaker Change: I would say a sort of a growing trend. We've seen some customers think quite public about it, frankly. You know, they're moving from on-prem to S4HANA, moving to the CLAG with SAP.
Joseph D. Vruwink: It's a like-for-like move for them, and the customers that we have have concluded that they need to innovate.
Joseph D. Vruwink: in the supply chain area and, you know, fortunately have chosen us, you know, to be able to do that. You know, they tend to be the larger global players.
Eddie Capel: They tend to be the larger global players, so the decision-making process is not super fast or anything, but it's very strategic for us. And I think there are more of them to come. It's not going to be hundreds of customers or anything like that, I don't think, but it will be a strategic advantage for us to be able to provide that immediate access to innovation in areas that they need it.
Joseph D. Vruwink: So, you know, the decision-making process is not, you know, it's not super, super fast or anything, but it's very strategic for us.
Joseph D. Vruwink: And, you know, I think, you know, I think there's more of it to come. It's not going to be, you know, hundreds of customers or anything, you know, or anything like that that I don't think. But it will be, you know, a strategic advantage for us to be able to provide that.
Speaker Change: immediate access to innovation in areas that they areas that they needed.
Joseph D. Vruwink: Okay, that's great. And then maybe another strategic advantage for you.
Eddie Capel: So your qualitative comments, Eddie, about just the deals signed in the quarter, you mentioned a number of global customers and brands. I don't quite remember the global descriptor as often as this quarter, I guess. Are these bigger deals by virtue of being with global accounts? And is the global scope something that is maybe a bit new relative to the demand you've seen so far?
Speaker Change: Okay, that's great.
Eddie Capel: Maybe another strategic advantage for you, your qualitative comments, Eddie, about just the deals signed in the quarter. You mentioned a number of global customers and brands.
Speaker Change: I don't quite remember the global descriptor as often as this quarter, I guess, are these bigger deals by virtue of being with global accounts and is the global scope something that is maybe a bit new relative to the demand you've seen so far?
Joseph D. Vruwink: Now, you know, I'd love to tell you it was, you know, it was something new, but we've got a lot of global customers, Joe. You know, there was a nice spread this quarter, there's no question, both across vertical and across geography. But honestly, it wasn't typically or particularly unusual this quarter.
Eddie Capel: Now, you know, I'd love to tell you it was, you know, it was something new, but we've got a lot of global customers, Joe. You know, there was a nice spread this quarter, there's no question, both across vertical and across geo.
Eddie Capel: But honestly, it wasn't typically or particularly unusual this quarter.
Joseph D. Vruwink: Okay, fair enough. I'll leave it there. Thanks.
Joseph D. Vruwink: Okay. Fair enough. I'll leave it there. Thanks.
Brian Christopher Peterson: Thank you. Our next question comes from the line of Brian Peterson with Raymond James. Please proceed with your question.
Joseph D. Vruwink: Okay, thank you, Joe.
Speaker Change: Thank you. Our next question comes from the line of Brian Peterson with Raymond James. Please proceed with your question.
Brian Christopher Peterson: Hi, gentlemen. Thanks for taking the question. So, Eddie, you have a lot of product innovation. You mentioned out of momentum a lot of new products that are coming to market later this year. I'd be curious, as we think about maybe the next 12 to 18 months in that cross-sell opportunity, what are you most excited about?
Brian Christopher Peterson: Hi gentlemen, thanks for taking the question. So Eddie, you had a lot of product innovation. You mentioned out of momentum a lot of new products that are coming to market later this year. I'd be curious, as we think about maybe the next 12 to 18 months in that cross-sell opportunity, what are you most excited about?
Eddie Capel: Oh, wow. That's a great question. That's a great question.
Eddie Capel: Oh, wow. That's a great question. That's a great question. I'm excited about a lot of things. I really am. I mean, you know, the certainly supply chain planning that we announced at Momentum a couple of months ago, it launches
Eddie Capel: I'm excited about a lot of things. I really am. I mean, you know, certainly the supply chain planning that we announced at Momentum a couple of months ago will launch right at the end of Q3. You know, this quarter for us is very exciting. It's a journey, frankly, and something that the supply chain software industry has been chasing for decades now to bring together supply chain planning and supply chain execution on a truly unified platform, and we're the first ones to get there, and so forth, and obviously, we're excited about the opportunity, and we're excited for the first mover opportunity.
Speaker Change: Right at the end of Q3, you know, this quarter for us is very exciting. It's a journey, frankly, and something that...
Eddie Capel: The supply chain software industry has been chasing for decades now to bring together supply chain planning and supply chain execution on a truly unified basis.
Eddie Capel: platform and, you know, we're the first ones to get there and so forth and obviously we're excited. We're excited about the opportunity and we're excited for the first mover opportunity.
Eddie Capel: I would tell you that I continue to be very excited about our opportunity in point-of-sale and retail store systems. Before you ask, we didn't actually close any point-of-sale deals in Q2, but that does not dampen my enthusiasm at all. The pipeline is pretty stout for us, and we continue to have very encouraging conversations both with existing customers and new prospects in that area and make what we think is really good progress. We did have some nice new go-lives in the quarter, with customers that we'd signed in prior quarters going live for the first time with point-of-sale in Q2, but listen, let us not lose that focus on warehouse management.
Eddie Capel: You know, I would tell you that, you know, I continue to be very excited about our opportunity in point of sale and retail store systems.
Speaker Change: Before you ask, we didn't actually close any point-of-sale deals in Q2, but that does not
Speaker Change: I haven't dazzled my enthusiasm at all, you know, the pipeline is in a pretty state for us.
Speaker Change: You know, continue to have very encouraging conversations, both with existing customers and, you know, new prospects in, you know, in that area.
Speaker Change: And, you know, making what we think is really good progress. We did have some nice new, you know, go-lives in the quarter with customers that we signed in prior quarters going live for the first time with point of sale in, you know, in Q2.
Speaker Change: You know, but listen, let us not lose our focus on warehouse management. It continues to be, you know, a very important part of our portfolio. We've got, you know, a terrific pipeline for WMS as well. So I'm pretty much going down the product portfolio telling them I'm excited about everything we're doing. But I suppose in the near term, you know, the true release of...
Eddie Capel: It continues to be a very important part of our portfolio. We've got a terrific pipeline for WMS as well, so I'm pretty much going down the product portfolio telling them I'm excited about everything we're doing. I suppose in the near term, the true release of supply chain planning in the fall would have to be top of the list at the moment. Great color. Thanks.
Speaker Change: of Supply Chain Planning in the fall would have to be top of the list at the moment.
Brian Christopher Peterson: Great caller. Thanks, Eddie. And Dennis, maybe a follow-up for you.
Dennis B. Story: If I'm looking at the gross margins for subscriptions and maintenance and services, that was much higher than we had modeled, up north of 300 basis points year-over-year. Anything you can call out that's driving that? Thanks.
Eddie Capel: Great caller. Thanks, Eddie. And Dennis, maybe a follow-up for you. If I'm looking at the gross margins for subscriptions and maintenance and services, that was much higher than we had modeled up north of 300 basis points year over year. Anything you can call out that's driving that? Thanks, Dennis.
Dennis B. Story: Just a positive mix between services and the cloud in the gross.
Dennis: Just a positive mix between services and cloud in the gross margin.
Brian Christopher Peterson: Okay, so just more on the mix of the revenue components. Yep. Got it. Thanks, guys. Appreciate it.
Speaker Change: Okay, so just more on the mix of the revenue components.
Speaker Change: Yep.
Speaker Change: Got it. Thanks, guys. Appreciate it.
Dylan Tyler Becker: Our next question comes from the line of Dylan Becker with William Blair. Please proceed with your question.
Speaker Change: Thank you, Brian .
Speaker Change: Thank you. Our next question comes from the line of Dylan Becker with William Blair. Please proceed with your question.
Dylan Tyler Becker: Thank you for taking the questions here. Maybe Eddie, starting with you, obviously a lot of the retailers and businesses you're talking to are looking to operate more efficiently. I think labor constraints are a big component of that.
Dylan Tyler Becker: I wonder how your conversations are trending as you think about kind of the opportunity for a modern platform or point of sale as a key enabler of driving not only efficiency, upscaling, obviously employee retention, but tied to that kind of tangible ROI and how that's maybe helping continue to kind of contribute to some of the resiliency or decisioning that you're seeing today?
Speaker Change: I wonder how are your conversations trending as you think about the opportunity for a modern platform or point of sale as a key enabler?
Speaker Change: of driving not only like efficiency, upscaling, obviously employee retention tied to that kind of tangible ROI and how that's maybe helping continue to kind of contribute to some of the resiliency or decisioning that you're seeing today.
Eddie Capel: Yeah, I mean, it's true in the retail stores, you know, efficiency is important, obviously revenue generation is the key, you know, the key factor in stores, but, you know, you quickly mentioned a quick point there, you know, the retention of team members in stores, being able to have them or enable them with modern technology, both from an efficiency and a retention perspective is, you know, it's super important, but also, you know, the labor component inside distribution centers, hard to find, hard to keep, the need to be, you know, to be flexible and so forth is very, you know, very, very important, you know, and, you know, the level of automation that our customers are putting into distribution centers is continuing to increase because of, you know, that lack of availability of labor and the need to improve efficiency and we, you know, as you know, we thrive in environments that are, you know, complex in that nature, highly automated and the need for a great deal of velocity and throughput from those distribution centers. You know, we think that, you know, the innovation that we've built over the last 10 years, you know, meets those market needs and is definitely a differentiator for us.
Speaker Change: Yeah, I mean, it's true in the retail stores, you know, efficiency is important, obviously revenue generation is the key, you know, the key factor in stores, but, you know, you quickly mentioned a quick point there, you know, the retention of team members in stores, being able to have them or enable them with modern technology, both from an efficiency and a retention perspective is, you know, it's super important.
Speaker Change: but also, you know, the labor component inside distribution centers.
Speaker Change: Hard to find, hard to keep, the need to be flexible and so forth is very, very important. And the level of automation that our customers are putting into distribution centers is continuing to increase because of that lack of availability of labor and the need to improve efficiency. And we, as you know, we thrive in environments that are complex in that nature, highly automated, and the need for a great deal of velocity and throughput from those distribution centers. We think that the innovation that we've built over the last 10 years
Speaker Change: meets those market needs and is definitely a differentiator for us.
Dylan Tyler Becker: Okay, that's great. That's helpful. Maybe switching over to you, Dennis, and sticking with the gross margin theme, obviously, that favorable mix shift is going to continue. But how should we think about the opportunity for further leverage, maybe even more towards the steady state dynamic as we think about where the cloud business sits today, leverage and efficiencies as that continues to scale, paired with the opportunity of that becoming a larger share of the business here over the next three to five years? Yeah, early, I mean, early day.
Speaker Change: Okay, that's great. That's helpful. Maybe switching over to you, Dennis, and sticking with the gross margin theme. Obviously, that favorable mix shift is going to continue, but...
Dennis: How should we think about the opportunity for further leverage, maybe even more towards the steady state dynamic as we think about where the cloud business sits today, leverage and efficiencies as that continues to scale, paired with the opportunity of that becoming a larger share of the business here over the next three to five years or so?
Dennis B. Story: Yeah, early days, I mean early days; we'll give more commentary in the Q3 call on our outlook for next year. Not trying to push you off there, but we feel real good, we feel real good around our margin profiles, and we are very confident.
Speaker Change: Yeah early I mean early days we'll give we'll give more commentary in the Q3 call on our outlook for next year not trying to push you off there but we feel real good we feel real good around our margin profiles.
Speaker Change: and very confident.
Speaker Change: Okay, that's good. Thanks, guys.
George Michael Kurosawa: Thank you. Our next question comes from the line of George Kurosawa with Citi. Please proceed with your question.
Dylan Tyler Becker: Thank you, Dylan.
Speaker Change: Thank you. Our next question comes from the line of George Kurosawa with Citi. Please proceed with your question.
George Michael Kurosawa: Hi, thanks for taking the questions and congrats on a good result here in a choppy environment. I wanted to touch on the deal pushouts you called out. Any kind of commonalities between those deals, and are those situations where they signed in the first few weeks here of July, or maybe there's kind of budgetary situations where those might kind of push out till later in the year?
George Michael Kurosawa: Hi, thanks for taking the questions and congrats on a good result here in a, you know, choppy environment. I wanted to touch on the deal pushouts you called out. Any kind of commonalities between those deals and, you know, are those situations where, you know, they signed in the first few weeks here of July or maybe there's kind of budgetary situations those might kind of push out till later in the year?
Eddie Capel: No particular commonality there, George. They span geographies, industries, product offerings, and proposals that we had out there. So I'd love to point at something and tell you it was funds being put towards Gen AI or whatever, some thread, but it really wasn't. There wasn't anything specific there. I'm not going to go into a ton of details.
George Michael Kurosawa: Yeah, no particular commonality there, George, they span geographies, they span industries, they span product offerings and proposals that we had out there, so I'd love to point at something and tell you it was...
George Michael Kurosawa: you know, whether it was funds being put towards Gen AI or whatever, you know, some thread, but it really wasn't, there wasn't anything specific there. You know, not going to go into a ton of details this early in the quarter, yes, a couple of them have closed, so that's been...
Eddie Capel: This early in the quarter, yes, a couple of them have already closed, so that's been helpful. The good news is, across all of that, win rates are at 75%. So they weren't losses. They were just sort of stutter steps for a variety of reasons across the board.
George Michael Kurosawa: You know, that's been helpful. The good news is, across all of that, is that win rates are at 75%, so there weren't losses. You know, they were just sort of stutter steps for a variety of reasons across the board.
George Michael Kurosawa: Okay, that's, that's helpful. And then on services, I think there's a common commentary about, you know, kind of retaining your hiring posture, maybe just kind of double-click on what exactly you meant there in terms of that imply kind of hiring for replacement or maybe expanding by let's say another hundred heads in the kind of back half. Yeah, just any color would be helpful.
Speaker Change: Okay, that's helpful. And then on services, I think there's a commentary about, you know, kind of retaining your...
Speaker Change: your hiring posture, maybe just kind of to double click on what exactly you meant there in terms of that imply kind of hiring for replacement or maybe expanding by let's say another hundred heads in the kind of back half. Yeah, just any color would be helpful.
Eddie Capel: Yeah, we plan to continue to hire. Now, you know, the good news is that our attrition rate for this year is lower than we had forecasted. So that helps in all kinds of different ways, not least of which on efficiency, margin, customer satisfaction, and so forth. That lower attrition does mean potentially a little bit less hiring, but we do definitely plan to expand our team in the second half of the year, for sure, and those hires will be largely in customer-facing and services roles.
Speaker Change: Yeah, we plan to continue to hire. Now, you know, the good news is that our attrition rate is, for this year, is lower than we had forecasted.
Speaker Change: So that helps in all kinds of different ways.
Speaker Change: not least of which on efficiency, margin, customer satisfaction, and so forth. But lower attrition does mean, you know, potentially a little bit less hiring. But we do definitely plan to expand our team in the second half of the year for sure. And those hires will be largely in customer-facing.
George Michael Kurosawa: That's helpful. Thanks for taking the questions.
Speaker Change: and services roles.
Eddie Capel: Certainly. Our pleasure, George. Thank you. Thank you. Our last question comes from the line, please proceed with your. Hey, guys. Thanks.
Speaker Change: That's helpful. Thanks for taking the questions.
Mark William Schappel: Thank you. Our last question comes from the line of Mark Schappel with Loop Capital Markets. Please proceed with your question.
Speaker Change: Certainly. Our pleasure, George. Thank you.
Speaker Change: Thank you. Our last question comes from the line of Mark Schappel with Loop Capital Markets. Please proceed with your question.
Mark William Schappel: Hey guys, thanks for taking my question here and a nice job on the quarter. Most of my questions have been answered, but I just have one here with respect to active supply chain planning. I was wondering if you could just talk a little bit about
Speaker Change: whether that solution is designed to go head-to-head with some of the more established supply chain planning systems out there, like from Blue Yonder or Connexus.
Eddie Capel: Well, yes, probably not so much Kinaxis because it's a little, you know, a little further down the market and a little more manufacturing focused. But yes, it certainly is.
Speaker Change: Well, yes, probably not so much can access because it's a little further down market and a little more manufacturing focused.
Mark William Schappel: Obviously, you know, we, Mark, as you know, we're not focused on the manufacturing side of planning. So it's certainly, you know, on the finished goods side of the world and, you know, and so forth. The answer to that is yes, but, of course, we're taking quite a different approach with this being, you know, not a batch-based solution as they have traditionally been for the last several decades. Number one, continuous planning and inventory optimization integrated and unified with supply chain execution systems. So definitely the holy grail of what we've been, the world is, and the market has been chasing for quite some time now. Thank you. That's all for me.
Mark William Schappel: But yes, it certainly is. Obviously, we, Mark, as you know, are not focused on the manufacturing side of planning, so it's certainly in the finished goods side of the world and so forth. But the answer to that is yes, but of course we're taking quite a different approach.
Speaker Change: with, you know, this being, you know, not a batch-based solution as they...
Mark William Schappel: traditionally have been for the last several decades, number one, continuous.
Mark William Schappel: planning and inventory optimization, integrated and unified with supply chain execution systems. So, definitely the holy grail of what, you know, the things that we've been, the world is, and market's been chasing for quite some time now.
Unknown Executive: Thank you. That's all for me.
Mark Schappel: Thank you, Mark. Thank you.
Speaker Change: okay thank you that's all for me
Alicia: Thank you. There are no further questions at this time. I would like to turn the floor back over to Eddie for closing comments.
Unknown Executive: There are no further questions at this time.
Mark William Schappel: Thank you, Mark.
Eddie Capel: I would like to turn the floor back over to Eddie for closing comments.
Speaker Change: Thank you. There are no further questions at this time. I would like to turn the floor back over to Eddie for closing comments.
Eddie Capel: Okay. Well, thank you, Alicia, and thank you, everybody, for joining the call. We're excited about where we are. We're excited about the results for the first half, and even more excited about the second half of 2024 and beyond. So thanks a ton for joining the call, and we'll speak to you again in about three months from now with a Q3 update. Thanks a lot. Bye-bye.
Eddie Capel: Okay, well, thank you, Alicia, and thank everybody for joining the for joining the call. We're excited about where we are. We're excited about the results for the first half, even more excited about the second half of 2024 and beyond.
Eddie Capel: Okay. Well, thank you, Alicia, and thank you, everybody, for joining the call. We're excited about where we are. We're excited about the results for the first half, even more excited about the second half of 2024 and beyond. So thanks a ton for joining the call, and we'll speak to you in about three months from now with Q3 update. Thanks a lot. Bye-bye.
Eddie Capel: So thanks a ton for joining the call, and we'll speak to you in about three months from now with Q3 update. Thanks a lot. Bye-bye.
Alicia: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.
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Speaker Change: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.
Speaker Change: We are going to start with the first piece. It's called The Greatest Showman. It's a piece from the 19th century. It's a piece called A Greatest Showman. It's a piece from the 19th century. It's a piece from the 19th century. It's a piece called The Greatest Showman.