Q3 2024 Manhattan Associates Inc Earnings Call
[music].
Good afternoon, My name is Alicia and I'll be your conference facilitator today at this time I would like to welcome everyone to Manhattan Associates Q3, 'twenty 'twenty four conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer period.
If you would like to ask a question. During this time simply press Star and then the number one on your telephone keypad. If you would like to withdraw your question Press Star and then the number two as a reminder, ladies and gentlemen. This call is being recorded today October 22nd 2024, now I would like to introduce you to your host.
Speaker Change: Michael Bauer head of Investor Relations of Manhattan Associates. Mr. Bauer you May proceed.
Michael Bauer: Great. Thank you Alicia and good afternoon, everyone. Welcome to Manhattan Associates 2024 third quarter earnings call I will review, our cautionary language and then turn the call over to Eddie Capel.
Speaker Change: Yep.
In this call, including the question and answer session. We may make forward looking statements regarding future events or the few.
Speaker Change: The financial performance of Manhattan Associates.
Speaker Change: 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.
Speaker Change: For you to 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 in our subsequent form 10, Qs we know it.
Speaker Change: Global macro environment could impact our performance cause actual results to differ materially from our projections are under no obligation to update. These statements. In addition, our comments include certain non-GAAP financial measures provide additional information to investors.
Speaker Change: We have reconciled all non-GAAP measures that are related to GAAP measures.
Speaker Change: Yes.
Speaker Change: You'll find reconciliation schedules in our form 8-K, we submitted to the SEC earlier today and on our website and in Miami Dot Com now I will turn the call over to Eddie.
Eddie Capel: Great. Thanks, Mike Good afternoon, everyone and thank you for joining us as we review our third quarter results discuss our Q4 outlook and provide some very preliminary color at least on 2025.
Eddie Capel: Q3 and year to date results set all time records on both bottom and top lines for the quarter total revenue increased 12% to $267 million and adjusted earnings per share increased 29% to $1 35, both of these metrics were above our expectations.
Eddie Capel: Yeah.
Eddie Capel: Driving the top line outperformance and earnings leverage with solid cloud and services revenue growth across all geographies with cloud subscription revenue posting 33% growth in the quarter.
Eddie Capel: In Manhattan's business fundamentals are solid and we remain confident and very optimistic about that business opportunity.
Eddie Capel: The global macro environment remains challenging demand for our solutions is robust customer satisfaction is high and as evidenced by our recent release of minute. The Manhattan active supply chain planning solution. The investments, we're making in R&D and our people are creating a clear differentiation.
Eddie Capel: <unk> consistent market, leading innovation is creating more opportunities across supply chain omnichannel retail and that the world has the world's best brands look to unify and digitally transform.
Eddie Capel: Or P O remaining performance obligation increased 27% to roughly $1 7 billion.
Eddie Capel: And as we've often cautioned large complex deals can be lumpy on a quarter over quarter basis.
Eddie Capel: And while we haven't seen much of that lumpiness over the past three or four years this quarter and to a lesser extent last quarter, we have seen some.
Eddie Capel: And the third quarter, our P. O growth was impacted by some large digital digital transformational projects pushing acts that set a fourth quarter is off to a great start and demand is solid.
Eddie Capel: And attributes that attributes that.
Eddie Capel: Give us confidence that we will actually achieve at the high end of our 2020 for RPM bookings guidance of $1 8 billion.
Eddie Capel: Across our industry, leading product portfolio and global global pipeline sits at record levels.
Eddie Capel: Win rates remained strong at about 70% and these factors. Despite the uncertain macro environment again give us confidence that we'll achieve the high end of our 2020 for RVO or P O bookings.
Eddie Capel: Goals and equally important.
Eddie Capel: Well positioned for continued success in 2025 2026 and of course beyond that.
Eddie Capel: Now looking a little deeper into our Q3 bookings from a vertical perspective, 80% of our deals came from retail manufacturing and wholesale.
Eddie Capel: Across our solutions the sub verticals continue to be pretty diverse.
Eddie Capel: It's just some of the cloud deals. We won this quarter include our North American supply chain solutions provider, a global pack, a plastics manufacturer and multi national home improvement retailer a global manufacturer of HVAC and refrigeration products, a global life Sciences, and clinical research company a global.
Eddie Capel: Apparel retailer and many others.
Eddie Capel: In Q3, 14% of our new bookings were generated from net new logos and we continue to have a very healthy mix of conversions Upsells and cross sells.
Eddie Capel: And we believe this demonstrates the many and varied opportunities we have.
For sustainable future growth.
Eddie Capel: And as stated earlier our solution pipeline is at record levels of new potential customers represent about 35% of that demand.
Eddie Capel: This strong demand is driven by our best of breed cloud native solutions that provide continuous access to innovation and helping our customers digitally transform their businesses to drive success.
Eddie Capel: Our mission critical solutions help our clients improve customer satisfaction drive more revenue and improve efficiency.
Eddie Capel: And this strong demand for our solutions is also fueling opportunities and growth.
Eddie Capel: Internal services organization and systems integrator integration partners in Q3, our global services team completed over 100 go lives and continue to perform very well for our customers.
Eddie Capel: No.
Eddie Capel: Turning to a few product updates I mentioned last quarter and our annual customer conference momentum.
Eddie Capel: We unveiled the Manhattan active supply chain planning solutions and I'm happy to report that as planned we completed the development and shipped. This latest addition to the Manhattan active family right on schedule 17 days ago, just at the beginning of October.
Eddie Capel: And active supply chain planning is now generally available deployed in our evergreen cloud environments, and just like all of them Manhattan active platform applications. It will receive functional and technical enhancements every single quarter.
Since announcing this new offering in May we've seen notable interest from around the globe.
As we'd hoped and kind of symptom suspected at WNS and Tms users are fascinated by how the vision of combining these solutions with planning to improve their ability to execute in the field.
And I'm Manhattan active omni users are digging in as well to see how a real a real time view of inventory health can help them make better promising and filming fulfillment decisions, which will yield even more margin advantages, but their businesses.
Eddie Capel: Now as a reminder.
Eddie Capel: Manhattan active supply chain planning is the first planning solution pre wired directly into the operations.
Eddie Capel: When combined with Manhattan active warehouse management for example, a new planning solution will deliver detailed and accurate projections of your DC labor and operational needs for the next 52 weeks all the way down to the department and job function if necessary.
Eddie Capel: Now having been in the WNS business and helping our customers plan their labor for over 30 years now we feel very confident in saying that today very few operations getting anywhere near that level of forward visibility being able to match your labor plans to your labor needs from the next 30.
Eddie Capel: And it stand up to the next 30 weeks improves just about every operational metric from on time shipping to total cost of labor, but we didn't stop there.
Eddie Capel: Just like we put more planning into AWS solution, we put more execution into our planning solutions as well.
Eddie Capel: Like traditional solutions Manhattan active supply chain planning runs continuously constantly fine tuning order quantities, even on orders already processing and distribution center.
Eddie Capel: And this is really transformative because it allows real time demand data from from throughout the day to continuously shape. The final order quantities right up until those orders are ready to be shipped.
This level of supply chain agility is simply an achievable without the industry's leading cloud native platform that we call. The Manhattan active platform. The sub second always connected nature of the Manhattan active applications allows them to collaborate with zero latency.
Eddie Capel: True industry first.
Eddie Capel: Now.
Eddie Capel: I went into a little bit of detail on that scenario involving Manhattan active wm, because I thought it would help illustrate the types of benefits that were going away, but we're delivering.
Eddie Capel: But rest assured many other similar use cases exist for that solution Manhattan active TM and Manhattan active omni as well.
Eddie Capel: We're in conversations.
Eddie Capel: With several customers beginning to activate Manhattan active supply chain planning.
Early to mid 2025, so certainly stay tuned for more news will be in the early stages of our newest Manhattan active offering.
Eddie Capel: Now we take a lot of pride in building software that enables our customers to gain a competitive advantage in their respective markets.
Eddie Capel: Along those lines. We recently released a few new capabilities within Manhattan active omni to that customers are really applauding in an earlier quarter I mentioned that our first of a kind fulfillment experience insight dashboard.
Eddie Capel: This fulfillment experience insights allows our customers to continuously benchmark their omnichannel fulfillment performance against their peers and against our competitors.
Eddie Capel: But we didn't stop there we knew that this level of insight and visibility was really great, but operational recommendations or better. So to that end. We received recently introduced a capability that we call post game spotlight and postgame spotlight provides detailed recommendations on high fulfill.
Eddie Capel: <unk> performance can be improved from both the customer experience and a cost standpoint.
Eddie Capel: And this is done by making detailed recommendations on element slight inventory deployment and fulfillment staffing in stores.
Eddie Capel: We put the spotlight on specific operational changes that we believe will move the needle for our customers.
Eddie Capel: Both fulfillment experience insights and postgame Chipotle are really great examples of why our prospects choose and customers stay with Manhattan active omni.
Eddie Capel: We've moved.
Eddie Capel: Beyond enabling enablement, we're now helping customers optimize and fine tune their ever evolving omnichannel fulfillment processes.
Eddie Capel: And finally on our products I'd like to provide a brief update on on yes generative AI.
Eddie Capel: As we've said before AI is far from a new phenomenon here at Manhattan, We've had our operations research and data science team embedding AI into nearly every Manhattan application for for several decades now.
Eddie Capel: Generative AI is the latest of these powerful technologies and we're off to a really good start shipping production ready January of AI capabilities or momentum again, we introduced Manhattan assist for example to gin generative AI capability accessible from all Manhattan active solutions, our customers use Manhattan.
Eddie Capel: Every single day net helping them quickly understand the many capabilities within our applications and it's really been great kind of fun to be honest to see the questions that they're asking and some of the answers that we're providing and frankly, where we can still tune at large language model.
Eddie Capel: Our partners at Google of course has continued to be a great help here as they continue to improve the underlying technology at a really rapid pace.
Eddie Capel: So we're hard at work on our next generation of.
Eddie Capel: Gen AI based capabilities right now and we'll be rolling those out in the first half of 2025.
Speaker Change: So that concludes my business update Dennis is going to provide you with an update on our financial performance and our outlook and then I'll close our prepared remarks with a brief summary of our malls.
Move to Q&A. So finished okay. Thanks Eddie.
Eddie Capel: Lower Manhattan Global teams continue to execute well in a challenging macro environment for.
Dennis: For the quarter, we delivered a strong balanced financial performance across topline growth operating margin and cash flows.
Dennis: This includes posting record results across RPM.
Dennis: Revenue operating income and adjusted earnings per share.
Dennis: On an as reported basis. Our Q3 results came in slightly below 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: Of course FX has remained volatile it did it did not have a meaningful impact to Q3 revenue growth, but it was a $9 million tailwind to year to date <unk> growth and an 18 million tailwind to sequential <unk> growth.
Dennis: Now to our results.
Dennis: All growth rates are on an as reported year over year basis, unless otherwise stated.
Dennis: Total revenue was $267 million up 12%, excluding license and maintenance revenue, which removes the compression driven by our cloud transition our total revenue was up 15%.
Dennis: Cloud revenue totaled $86 million up 33%.
Dennis: We ended the quarter with <unk> of roughly $1 7 billion up 27% compared to the prior year and up 5% sequentially.
Speaker Change: And as Ed discussed several large strategic digital transformational deals pushed importantly, Manhattan continues to benefit from our record pipeline that includes solid demand from both new and existing customers.
Dennis: Strong win rates are giving us confidence in achieving the high end of our 2020 for RPI bookings outlook and the ability to provide strong 2025 outlook parameters.
Dennis: Okay.
Dennis: Our global services teams delivered record revenue totaling $137 million up 7% as cloud sales continue to fuel services revenue growth front growth for Manhattan.
Dennis: Adjusted operating profit was $99 million with adjusted operating margin of 37, 1%. This is 670 basis points year over year.
Dennis: <unk>.
Dennis: Our performance was driven by strong cloud and services revenue growth combined with operating leverage as our cloud business continues to scale.
Speaker Change: As Ed discussed we are very optimistic on our business opportunity and continue to invest in innovation to drive sustainable long term growth.
Speaker Change: Turning to EPS earnings per share, we delivered Q3 adjusted earnings per share of $1 35.
Speaker Change: 29% and GAAP earnings per share of $1 three up 30%.
Speaker Change: Moving to cash Q3, operating cash flow increased 6% to a solid $62 million. This resulted in 23% free cash flow margin and 38% adjusted EBITDA margin.
Speaker Change: Regarding the balance sheet total deferred revenue increased 18% to $253 million.
Speaker Change: We ended the quarter with $215 million in cash and zero debt.
Speaker Change: Accordingly, we leveraged our strong cash position and invested $50 million in share repurchases in the quarter.
Speaker Change: Resulting in a $198 million in buybacks.
Speaker Change: Year to date.
Speaker Change: Also our board has approved a replenishment of our $75 million share repurchase authority.
Speaker Change: Onto our updated 2020 for guidance.
Speaker Change: As consistently mentioned our financial objective is to deliver sustainable double digit topline growth and top quartile operating margins benchmark against any enterprise SaaS comps. These are important drivers to our best in class return on invested capital as we maintain a balanced investment approach.
Speaker Change: <unk> to growth and profitability.
With our strong year to date performance and an uneven macro environment. We are tightening our 2020 for revenue guidance and increasing our operating margin and EPS guidance Dita.
Speaker Change: Details can be found in today's earnings release.
Speaker Change: Also as discussed earlier, we expect to achieve the high end of our 2020 for RPM outlook of $1 75 billion to $1 8 billion.
Speaker Change: As noticed on the as noted on the prior earnings calls our objective is to update our outlook on an annual basis and lastly on RPM. As previously noted our bookings performance is impacted by the number and relative value of large deals we close in any quarter, which.
Speaker Change: Can potentially cause lumpiness or non linear bookings throughout the year as evidenced by our Q3 deal pushes.
Speaker Change: All guidance references made on today's call will be at the midpoint of their respective ranges.
Speaker Change: With that for the full year 2024, we expect total revenue of 1.039 billion to 1.041 billion with a 1.04 billion midpoint, which represents 12% growth.
Speaker Change: For operating margin, we are increasing our midpoint to 34%. This compares favorably from our prior midpoint of 32, 1% and 34% in the prior year period.
Speaker Change: As Eddie highlighted given the demand and size of our opportunity we continue to invest in our business to fully leverage the new large tam expansion revenue streams through investments in R&D and sales and marketing.
Our full year earnings per share midpoint is increasing 35 to $4 61, and represents 23% growth compared to the prior year.
Speaker Change: Our GAAP earnings per share our midpoint increases by 36 to.
The $3 48, and also represents 23% growth compared to the prior year.
Speaker Change: This implies Q4 total revenue of $253 $5 million, which is $3 $5 million lower than our prior Q4 midpoint as we now anticipate services revenue of $121 $5 million as the choppy macro environment has resulted in several transfer.
Speaker Change: Promotional deal pushes.
Speaker Change: Some customers shifting services projects to 2025, and a more pronounced pause it pausing.
Speaker Change: Impact from this year's retail peak season.
Speaker Change: We are increasing our cloud target to $89 $5 million and maintenance revenue upticks to $33 5 million.
Speaker Change: Our operating margin target is increasing to 32, 5% and is up from our prior 35% estimate.
The Q4 sequential change in operating margin accounts for retail peak seasonality, which as a reminder is when customers idle implementations to focus on their peak busy season.
Speaker Change: Now moving to 2025.
Speaker Change: We're going to provide some preliminary parameters here. We are currently in the very early stages of our 2025 budget cycle and we'll firm up this outlook on our Q4 call as we get through the U S election process and our final market analysis.
Speaker Change: With that we are targeting total revenue of 1.13 to one 4 billion, representing 9% to 10% growth with license and maintenance of tuition masking total growth by five percentage points.
Speaker Change: This includes our cloud revenue target of $415 million, representing 23% year over year growth.
Speaker Change: For <unk>, we are targeting to one 5 billion, which represents 21% growth.
Speaker Change: In 2025, we are targeting services revenue of $565 million to $575 million.
Speaker Change: $570 million midpoint represents 8% growth.
Speaker Change: On license and maintenance attrition to cloud, we are targeting maintenance revenue to be about $118 million, which represents a 15% decline and for license revenue to be about $5 million, which is well below 1% of total revenue.
Speaker Change: We anticipate operating margin to be about 33, 5% normalizing for our license and maintenance revenue attrition to cloud our 2025 operating margin increases roughly 100 bips year over year.
Speaker Change: While we simultaneously increase our investment in our business and higher leading supply chain talent.
Speaker Change: We expect our 2025 tax rate to be 21% and diluted share count to be approximately 63 million shares which assumes no buyback activity.
Speaker Change: In summary, our preliminary 2025 parameters include.
Speaker Change: Total revenue, excluding license and maintenance attrition to increase 14%.
Speaker Change: Cloud revenue to increase 23%.
Speaker Change: Services revenue to increase 8% in <unk>.
<unk> increased 21% and for an operating margin of 33, 5%, while increasing our investment and Manhattan, leading innovation.
Speaker Change: Al and solid execution by our global Manhattan team and looking forward to the ending the.
The year strong thank you very much and back to Eddie Yes.
Eddie Capel: Thanks, Dennis but we're pleased we're pleased with that Q3 and year to date results. While we continue to be appropriately cautious I think on the volatile macro conditions and we did experience a more pronounced impact this quarter as we said earlier, though we are still very confident in achieving the high end of our <unk> goals for <unk>.
Speaker Change: 2024.
Speaker Change: Longer term, our business fundamentals win rates and innovation strategies are really solid.
Speaker Change: Accordingly, we are optimistic about expanding our opportunity and what we've provided what we consider to be albeit preliminary but responsible targets for 2025. So.
So we thank everybody for joining the call.
Speaker Change: We thank our global team for all the great work that they do for our customers.
Speaker Change: So that concludes our prepared remarks, and Alicia we'll be happy to take any questions.
Speaker Change: Great.
Speaker Change: Thank you we will now be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad, a 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 for participants using speaker equipment. It may be necessary to pick up your <unk>.
Speaker Change: Before pressing the star keys.
Speaker Change: One moment, please while we poll for questions.
Speaker Change: Thank you.
Speaker Change: First question comes from the line of Terry Tillman with <unk> Securities. Please proceed with your question.
Terry Tillman: Yeah, Thanks, Hi, Addie Denison, Mike just two questions from me.
Terry Tillman: First question is Eddie I don't recall, usually in press releases given commentary on the current quarter. So you said also get start.
Terry Tillman: <unk> talked about it in your prepared remarks could we just dig into that our doubleclick into that a little bit more have you actually seems to those deals slip of actually closed in the second part of that first question is what kind of signals are you getting particularly on these bigger transformational deals that theres. Some budget flush in store here in <unk> and are you assuming that and then I had a follow up for Dennis.
Speaker Change: Good luck.
Speaker Change: And that Terry Thanks.
Speaker Change: Yes, so let's see in the start to Q4. The good start to Q4 has been a combination of some of the deals that slipped from Q3 into Q4 closing, but also some of the deals that we expected to close early in Q4, two indeed to indeed close.
So just feel feel good about where we are.
Speaker Change: And that in that regard, hence the reiteration of the.
Speaker Change: Full year IPO RVO guidance.
Speaker Change: In terms of budget flush don't expect to see that frankly.
Speaker Change: I think.
Speaker Change: For the most part of the days of end of year budget flush seemed to have disappeared because we're talking about.
Speaker Change: Opex here on a longer term revenue revenue stream for us and cost commitment for our customers. So.
Speaker Change: The days where.
Speaker Change: Customers and prospects may well flush a little.
Speaker Change: Budget on a one time license payment seems to largely of largely have gone away.
Speaker Change: Okay got it thanks, and I guess, Dennis just a follow up thanks for all the commentary for 25. So the one thing on services, what I'm curious about is because youre talking about hitting at least the high end of your <unk> guidance for this year and it looks pretty constructive in terms of the initial RVO.
Speaker Change: Targets for next year.
Speaker Change: On the services side I'm curious is there something to be said about some of these customers just maybe being more frugal when they sign a contract maybe theyre, just using less resources and you're assuming that or they're just kind of.
Speaker Change: Using maybe a longer duration of rolling it out.
Could impact services.
Speaker Change: <unk> is there just maybe some incremental conservatism you're baking in because of some of these risk factors like the global macro elections et cetera.
Speaker Change: Terry I'll take the first half of that Dennis can talk about any conservatism and so forth contingent that he may have built into the model, but I would tell you that there is kind of two two components. One is frankly, we are getting more efficient there's no question.
Speaker Change: As we've been gone down this journey.
Speaker Change: The cost of implementing and Manhattan active solutions is getting better and better and better we have seen on a number of fronts straight efficiency is getting better.
Speaker Change: On the services side, we're seeing far less customization because of the richness of the solutions.
Speaker Change: So that's on our side of the fence and secondly, as I think you know, we've we've advanced and enhanced system integrator network.
Speaker Change: And the good news is they're doing a healthy amount of the work.
Speaker Change: As well so we're getting.
Speaker Change: Global a global reach across those systems integrators, so thats, a little bit of a little bit of what's going on going on and Theyre strong strong software, but not quite as strong on the services side, but we see that as a largely as a positive.
Speaker Change: That's helpful. And then I guess, maybe just like on the idea, though just kind of finishing up here.
Speaker Change: In terms of Theres always been under promise and over deliver kind of philosophy here.
Is there are some incremental conservatism because of some of these things that you can't really control and then the <unk>.
Speaker Change: Thing that I didn't even plan on asking I'm going to ask you all benefited from some of these customers committing for long durations are you still seeing that kind of.
Speaker Change: Multi year five year plus contracting thank you.
Yes, so on the multi year five year contracting and you hit the nail on the head, we like to under promise and over <unk>.
Speaker Change: Deliver Terry.
Speaker Change: Yes.
Terry Tillman: Got it thanks.
Terry Tillman: Thank you Terry.
Thank you.
Speaker Change: Question comes from the line of Joe Wang.
Speaker Change: With Baird. Please proceed with your question.
Joe Wang: Alright, great. Thanks, Hi, everyone I wanted to begin by following up on <unk>.
Speaker Change: <unk> bookings coming from that new <unk> was.
Joe Wang: The lowest it's been in some time I guess is that just emblematic of the type of environment. We're in where naturally you would expect more of the bookings.
Book of business to come from.
Joe Wang: Paying customers and Im wondering if thats true within the interest existing customers are expressing is that.
Joe Wang: Leaning more into maybe migrations and that's part of the strong <unk> activity Youre seeing or is that the cross sell of those aetna and truly getting buy in the active supply chain is that actually factoring in more prominently.
Joe Wang: No.
Speaker Change: I think Joe you bring up a good point that it is I think the lowest we've seen certainly for quite quite some time. So now as spread is is 14 to I think 52 or 53%.
Joe Wang: But as you look across the.
As you look across the deals you look across the pipeline and so forth. There was there was nothing particularly.
Joe Wang: Trend worthy in that.
Joe Wang: In that number.
Joe Wang: When you look at the pipeline about 35% of the pipeline is new logos.
Joe Wang: I'm not I'm not calling this but I would expect this to.
Joe Wang: Get back to historical norms in Q4 and going forward.
Speaker Change: Okay. That's.
Speaker Change: That's great on that large digital transformation projects that sound like they're converting already in <unk>.
Speaker Change: Is that still largely around WNS is there are multi product scope and that's why it's truly digital transformation then.
Speaker Change: Yes, I think over recent quarters theres been some cautious optimism that things like point of sale might factor more prominently in 2025, certainly it seems like supply chain planning is going to start.
Speaker Change: The more common in the deal flow any way to kind of maybe size or quantify or frame kind of those newer products.
Speaker Change: Kind of play.
Speaker Change: Playing into that cloud activity.
Yes, let's see so in terms of product mix.
Speaker Change: Specifically about the strong start to Q4.
Speaker Change: Nice product mix and the strong start to Q4.
Speaker Change: We don't have those percentages and all those kinds of things laid out laid out yet of course, but I know off the top of my head. We have got some WNS deals we've got some nice.
Speaker Change: Oma's deals we've got a point of sale deal and the mix already closed for Q4, so so pretty nice pretty nice mix in terms of.
Speaker Change: I suppose you're sort of asking for.
Speaker Change: Closer to the top of the pipeline funnel on supply chain planning and point of sale and in those kinds of things.
Speaker Change: Okay.
Speaker Change: Point of sale.
Speaker Change: We are enthused about the pipeline specifically for Q4 end.
Speaker Change: Into 2025 as far as supply chain planning is concerned.
Speaker Change: Concerned obviously, we're 717 days post <unk>. So it's a little early to be calling that but I would tell you the interest and the enthusiasm as I said in my prepared comments has been.
Speaker Change: Maybe maybe a little just a little on the positive side of surprising.
Speaker Change: Both here in the U S and in Europe and in APAC. So as we've as we've traveled around the world doing doing this launch so we're.
Speaker Change: These things don't move move the needle overnight, but we are certainly encouraged by the early conversations we're having.
Speaker Change: I would also say both with existing customers and net new conversations or answer placing planning.
Speaker Change: Yeah.
Speaker Change: Great I'll leave it there thank you.
Speaker Change: Thank you Jeff.
Speaker Change: Thank you. Our next question comes from the line of Brian Peterson with Raymond James. Please proceed with your question.
Speaker Change: Hey, guys. Thanks for taking the question. So I appreciate all the color I would love to understand if there's any commonality and what's driving the delayed deals for some of these larger customers you set a certain market or getting implementation plans over the finish line just a little bit understand if there's any commonality there now.
Speaker Change: No nothing.
Speaker Change: Nothing that I would call out Brian nobody when we talked to folks.
Speaker Change: There may be.
Speaker Change: Just a little.
Speaker Change: But something a little bit ahead of all others may be a little.
Speaker Change: A few folks wanted to wait to see how the election shakes, Dan I don't know how that really impacts a decision, but sometimes that is cited but but all of the other things that are going around around the planet.
Speaker Change: Were not discussed so I think it's just a.
Speaker Change: For us just a little bit of a confidence matter that we've got that we.
Speaker Change: We've got to get through with with our customers.
Speaker Change: Yeah.
Speaker Change: The great news is that our win rates.
On asset selection being selected continues to be very continues to be very strong. So some of the deals that have pushed both into Q4 and and even further than that we've been selected it's just a question of the customer and the prospect getting comfortable that the times.
Speaker Change: Time is right. So hence the reason for frankly, some of that confidence and enthusiasm.
Speaker Change: Understood. Thanks, Eddie and Dennis maybe more for you just you obviously give a lot in our preliminary outlook for 2005, but at a high level, how should we think about the underlying demand environment, that's kind of underpinning your underpinning your assumptions for 'twenty.
Speaker Change: Yes.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: No change Brian.
Speaker Change: Yes.
Speaker Change: Would agree with that no real change in the demand environment. Obviously, we we continue as we have done for a number of years.
Speaker Change: Vertical diversification.
Our global diversification frankly remains about the same so we're.
Speaker Change: Pleased with that Theres, no real change there it moves a little bit again from quarter to quarter a product mix remains.
Speaker Change: About the same and our new logo to existing customer.
Speaker Change: Cross sell and up sell opportunity remains about the same about the same as well so no change there and continue to feel.
Speaker Change: Optimistic about the near term.
Speaker Change: Especially.
Speaker Change: Our competitive advantage and differentiation going forward.
Speaker Change: Got it thanks guys.
Speaker Change: Sure Brian.
Speaker Change: Thank you.
Speaker Change: Question comes from the line of Tim <unk> with Citi. Please proceed with your question.
Speaker Change: Hi, This is George yes, thanks for that.
George: Taking the questions here, maybe the first one on the pace of cloud migrations that you guys have seen I think in the past you've given 15% of the base has migrated over to cloud at this point, maybe an update there on that number directionally and how that's trended relative to expectations.
Speaker Change: Yep.
Speaker Change: Up a couple of points.
Speaker Change: Sort of you would expect and continuing to to tracking about the same same direction.
Speaker Change: So we're a little less than 20%.
Speaker Change: It's hard to put it.
Speaker Change: Yes.
Speaker Change: An exact number on it but right in there the midpoint of 15% to 20% or so is sort of where we are.
Speaker Change: The trajectory seems about the same I think we're still on about a six year my opinion six year trajectory to get.
Speaker Change: The bulk of that customers across the across the bridge.
Speaker Change: Okay, Great and then I did want to follow up on a line of discussion earlier on the duration of contraction.
Speaker Change: Some longer duration contracts was that I.
Speaker Change: I guess to put a finer point on it has duration of contracts on average been increasing and has that had a meaningful impact on RPM.
Speaker Change: No.
Speaker Change: Well so when we when we first started.
Speaker Change: Transitional process five six years ago.
Speaker Change: We originally thought this goes way back we originally thought three years was sort of going to be the going to be the number but a long time ago I want to say.
Speaker Change: <unk>.
Speaker Change: 2019 or so.
Speaker Change: Even 18, we started to see these five year.
Speaker Change: Contracts being requested primarily because of the stickiness of our systems.
Speaker Change: And our customers I think it made sense for them to be five years, and it's held pretty solid there.
Speaker Change: From so that what is that five or six years now.
Speaker Change: It's been pretty stable.
Speaker Change: Bye.
Speaker Change: Maybe five and a half years no major change.
Speaker Change: Okay, Great and then one last if I may on the margin upside I think that's pretty impressive last quarter. I think you called out mix being a tailwind here is that also story in this quarter and it sounds like scaling was also a benefit but just how would you frame kind of the upside that you saw in the quarter and in the guidance.
Speaker Change: Absolutely from a from a mix standpoint, so fantastic execution.
Speaker Change: The business record cloud and services.
Yes, just great performance there.
Great. Thanks for taking questions.
George: This is George.
Speaker Change: Thank you. Our next question comes from the line of Mark Scott Bell with loop capital markets. Please proceed with your question.
Speaker Change: Hey, guys. Thanks for thanks for taking my question here.
Speaker Change: With respect to the tone around your point of sale business, maybe just talk about whether there are any point of sale deals. During the quarter. You may have mentioned this on the call, but I'm quite encouraged.
Speaker Change: Yep.
Speaker Change: You did not.
Speaker Change: But no point of sale deals in Q3, but we have I did mentioned that we have closed one and one in early Q4.
Speaker Change: And.
Speaker Change: The near term pipeline for point of sale is encouraging.
We're excited about.
Speaker Change: The opportunity is even inside the quarter here that we might be able to close.
Speaker Change: Okay, Great and then with respect to.
Speaker Change: <unk>.
Speaker Change: Your sales motion in the quarter, you mentioned, new logos I think we're 40% what about the remaining sales balanced in terms of cross sells and conversions.
Speaker Change: Yes.
Speaker Change: Yes, so 14% was.
Speaker Change: Was the low.
Cross sales were just a little over 20%.
Conversion is pretty high this quarter at our back.
Speaker Change: Call. It 60, maybe even a little tick above 60% in terms of migrations.
Speaker Change: Okay.
Speaker Change: Great. Thank you that's all for me.
Speaker Change: Our pleasure Mark Thank you.
Speaker Change: Okay.
Speaker Change: Thank you.
Speaker Change: Last question will be from the line of Dylan Becker with William Blair. Please proceed with your question.
Dylan Becker: Gentlemen, I appreciate the questions here, maybe Eddie starting for you.
Dylan Becker: You called out kind of any insight offering in small bites. It seems like there's a lot more value that you guys can add.
Speaker Change: <unk> solutions in the data set that you scale, but I wonder how youre thinking about the opportunity to kind of narrow benchmarking capabilities over time now that you can reconcile planning and execution and maybe how that has further intensified as the broader adoption across kind of your platform overtime well.
Speaker Change: Our strategy no question, it's a land and expand.
Speaker Change: Strategy, we think that as we as we continue to innovate and increase our Tam and kind of adjacent products and so forth that ability to cross sell into our existing customer base is very very important.
Speaker Change: Not always but most of the time.
Speaker Change: Customers and prospects by one SaaS solution at a time.
Speaker Change: Because obviously it takes some time to implement and so forth no point in paying SaaS fees for something that is going to be implemented nine to 12 months 12 months from that but.
It's all part and parcel of our strategy to expand our breadth.
Speaker Change: And be able to address.
Speaker Change: Greater total addressable total addressable market and across an expanded set of verticals.
Yeah.
Got it okay that makes sense.
Speaker Change: Maybe maybe for you Eddie or Dennis you into you guys called out any internal efficiencies on the service side. You also talked about some of the evolution of the partner ecosystem.
Can you give an update on how youre thinking about.
Speaker Change: Offloading to do more of that kind of services work to partners on our receptivity appetite growing. Thank you Joseph Thanks, Yeah, Yeah sure well first of all certainly add services team has done a fabulous job always have but continue to get more and more and more efficient there's no doubt that over the last if you kind of look back over the last.
Speaker Change: A couple of years 'twenty, Florida.
Speaker Change: To 30 months or so frankly, we did a lot of campus recruiting and those guys are really becoming experienced and efficient at.
Speaker Change: What they do now our attrition.
<unk> low so again, we're just sort of.
Speaker Change: Infusing experience into our services organization this creating a great deal of efficiency on top of that.
Speaker Change: Seeing the need for customer.
Speaker Change: Customers to customize a solution go down and that is because of the thoughtfulness and the richness of the new solutions that were.
Speaker Change: Introducing into the market. We've always said every time, we reengineer one of our solutions from the ground floor up it's based upon all the product experience that we've gained W. Mess. For example, 30 years of experience that we put into Manhattan active WCS everything you could possibly imagine and we are able.
Speaker Change: And fortunate enough to be able to start from a clean sheet of paper shows less customization required that drives services, Dan and we've been able to.
Attract larger systems integrator community for sure and frankly, a number of the bigger global systems integrators that are in the program.
Speaker Change: Our all important don't get me wrong, all of our partners, but when you look at the guys with global reach like data centers, and the caps and the Deloitte and Ibms and so forth.
But we're pushing services to them, but if our customers choose.
Speaker Change: Choose to use them either on a regional or global basis.
That's fine by Us and we're just seeing a little bit a little bit more of that vessel.
Unknown Executive: Okay, great, thank you. My pleasure, thank you.
Okay, great. Thanks, guys.
Speaker Change: My pleasure. Thank you.
Speaker Change: Okay.
Unknown Executive: Thank you. There are no further questions at this time.
Speaker Change: Thank you there are no further questions at this time I would like to pass the call back over to Eddie for closing remarks.
Paul: I would like to pass with Paul back over to Eddie for closing remarks.
Alicia: Very good, thank you, Alicia.
Eddie: Very good thank you Alicia.
Eddie Capel: Well, thank you very much, everybody, for joining us today. Thank you for support, as always. We'll look forward to getting back together in 90 days of certain reporting on Q4. And also, of course, tightening up then at 2025 guidance for you.
Eddie: Thank you very much everybody for joining us today. Thank you for support as always we'll look forward to getting back together in 90 days or so and reporting on Q4 and also of course tightening up than at 2025 guidance for you, but until then I guess, it's very early but it would be appropriate for me to say happy.
Eddie Capel: But until then, I guess it's very early, but it would be appropriate for me to say Happy holidays to everybody, even though it's a little premature. I guess the next time we speak to you, it'll be after. Thank you, bye-bye.
Eddie: All of these to everybody, even though it's a little premature because the next time, we speak to you it will be after.
Eddie: Thank you bye bye.
Speaker Change: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.
Unknown Executive: This concludes today's teleconference. You may disconnect your lives at this time. Thank you for your participation.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Yeah.
Speaker Change: Yes.
Speaker Change: Yeah.
Speaker Change: [music].
Speaker Change: Hum.
Speaker Change: Uh-huh.