Q2 2025 Manhattan Associates Inc Earnings Call
Julian: My name is Julian, and I'll be your conference. time I would like to welcome everyone to Manhattan Associates. All lines have been placed on mute to prevent any back. After the speaker's remarks, there will be a question and answer. like to ask a question during this time, simply press star and then the number one on your telephone. If you would like to withdraw your question, press star and then the number 2.
Julian: As a reminder, ladies and gentlemen, this call is being recorded today, July 22nd, 2020.
Good afternoon. My name is Julian and I will be your conference facilitator. Today at this time I would like to welcome everyone to Manhattan Associates Q2 2025 earnings conference call 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'd like to ask a question during this time, simply press star and then the number 1 on your telephone keypad. If you would like to withdraw, your question, press star and then the number 2.
Michael Bauer: I would now like to introduce you to our host, Mr. Michael Bauer, Head of Investor Relations of Manhattan. Joseph Bauer, you may begin.
Speaker Change: Introduce you to our host Mr. Michael Bower, head of investor relations of Manhattan Associates, Mr. Bower, you may begin your conference
Eddie Capel: Thank you, Julian. And good afternoon, everyone.
Eddie Capel: Welcome to Manhattan Associates 2025 second quarter earnings call.
Michael Bauer: I will review our cautionary language and then turn the call over to our executive chairman, Eddie Capel, for some brief opening commentary before he hands it off to our president and chief executive officer, Eric Clark. During this call, including the Q&A session, we may make forward-looking statements regarding future events or Manhattan Associates' future financial performance. We caution you that these forward-looking statements, in bulk, involve risk and uncertainties, are not guarantees of future performance, and the actual results may differ materially from the projections contained in our forward-looking statements. I refer you to Manhattan Associates SEC reports 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 2024, and the risk factor discussion in that report, and any risk factor updates we provide in our subsequent Form 10-Qs.
Michael Bower: Thank you, Julian and good afternoon everyone. Welcome to Manhattan Associates 2025 second quarter earnings call. I will review our cautionary language and then turn the call over to our executive chairman Eddie cable for some brief opening commentary. Before he hands it off to our president and chief executive officer, Eric Clark,
Michael Bauer: Please note the turbulent global macroenvironment could impact our performance and cause actual results to differ materially from our projections. We are under no obligation to update these statements. In addition, our comments include certain non-GAAP financial measures to provide additional information to investors. We have reconciled all non-GAAP measures with related GAAP measures in accordance with SEC rules.
Michael Bower: During this call including the Q&A session. We may make forward-looking statements regarding future events or Manhattan, Associates future financial performance. We caution you that these 4 looking statements invoke, involve risk and uncertainties are not guarantees of future performance and the actual results May differ materially from the projections contained in how far we're looking statements. I refer you to Manhattan, Associates SEC reports for important factors. That could cause actual results to differ materially from those. In our projections, particularly our annual report on form. 10K for fiscal year 2024, and the risk factor factor discussion. In that report and any risk factor updates. We provide and our subsequent informed 10 cues.
Michael Bauer: You'll find reconciliation schedules in the Form 8-K we filed with the SEC earlier today and on our website at mnh.com.
Eddie Capel: Now, I'll turn the call over to Eddie. Thanks, Mike. And good afternoon, everyone. It's my pleasure one more time to kick things off and welcome everyone today's call. Now, before we get to the real substance of the update, though, I'd like to commend Eric on his first 160 days as CEO. The transition really couldn't have been smooth. We've had a very successful Momentum Conference a couple of months ago. You're going to hear about excellent Q2 performance and execution in just a moment. And Eric is making meaningful and positive impact to our company across the board.
Michael Bower: Please note that turbulent Global macro environment could impact our performance and of course, actual results of different materially from our projections on the 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 that relate to gaap measures in accordance with SEC rules. You'll find reconciliation schedules in the Form 8K. We filed with the SEC earlier today and on our website at nan.com now I'll turn the call over to Eddie
Speaker Change: Thanks, Mike and good afternoon, everyone. It's my pleasure 1. More time to kick things off and welcome everyone today's call. Now, before we get to the real substance of the update though, I'd like to commend Eric on his first, uh, 160 days as CEO. Uh, the transition really couldn't have been smoother
Speaker Change: We've had a very successful momentum conference a couple of months ago. Uh you're going to hear about excellent Q2 performance and execution in just a moment.
Eddie Capel: Manhattan's fundamentals continue to be strong, and as always, we're innovating at pace, driving success for our customers, employees, and shareholders.
Eddie Capel: And with this in mind, the board and I plan for me to transition away from all of my remaining executive management responsibilities during the balance of 2025, so that beginning on January 1, 2026, my title and role at Manhattan will be chairman of the board. I continue, as you would expect, to be as excited as ever about Manhattan's future and the opportunity in front of us. And I look forward to supporting Eric and our global teams in any possible way that I can.
Speaker Change: And Eric is making meaningful and positive impact to our company. Across the board, Manhattan's fundamentals, continue to be strong. And as always, we're innovating at PACE driving success for our customers employees and shareholders.
Eric Clark: And with this, with this, in mind, the board and I planned for me to transition away from all of my remaining executive management responsibilities during the balance of 2025. So that beginning on January 1 2026, my title and role at Manhattan will be chairman of the board. I continue
Eric Clark: So with that, over to Eric. Great. Thank you, Eddie.
Eric Clark: As you would expect to be as excited as ever about Manhattan's future and the opportunity in front of us. And I look forward to supporting Eric and our Global teams in any possible way that I can
Eric Clark: Good afternoon, everyone. And thank you for joining us as we review our record second quarter results and discuss our increased full year 2025 outlook, and briefly recap some of the market leading innovation that we announced at our customer conference just a couple of months ago. Our Q2 results were better than expected as 22% cloud revenue growth drove top line outperformance in earnings leverage. And while the global macro environment remains volatile, for consecutive quarters, our services revenue has slightly outperformed expectations. This execution is encouraging. However, given the inherent flexibility of time and materials contracts, coupled with the ongoing tariff and general market uncertainty, we remain cautious on our services revenue growth.
So with that over to Eric great. Thank you, Eddie.
Good afternoon, everyone and thank you for joining us as we review our record second quarter results and discuss our increased full year, 2025 Outlook and briefly recap. Some of the market leading Innovation that we announced at our customer conference just a couple of months ago.
Eric Clark: Our Q2 results were better than expected as 22% Cloud. Revenue growth drove, Topline, outperformance, and earnings Leverage.
Eric Clark: And while the global macro environment remains volatile for consecutive quarters, our services Revenue has slightly outperformed expectations. This execution is encouraging. However given the inherent flexibility of time and materials contracts.
Eric Clark: Coupled with the ongoing tariff and General. Martin Market uncertainty, we remain cautious on our services Revenue growth.
Eric Clark: Importantly, our business fundamentals are solid and we remain optimistic on our long-term opportunity. Manhattan's platform is superior and our product portfolio offers best-in-class functionality across the supply chain commerce ecosystem. This is driving solid pipeline and providing our sales team with numerous opportunities to drive growth. Those opportunities include adding new customers, cross-selling our growing unified product portfolio, and converting our on-premise customers to the cloud. All of these sales channels contributed to RPO increasing 26% year over year and surpassing the 2 billion milestone at the end of the quarter. Win rates against our top five competitors in the quarter were consistent at over 70% and like Q1 we once again experienced strength from new customers as more than 70% of our new cloud bookings were generated from net new logos.
Eric Clark: Certainly our business fundamentals are solid, and we remain optimistic on our long-term opportunity. Manhattan's platform is superior and our product portfolio offers best-in-class functionality across the supply chain Commerce, ecosystem.
Eric Clark: This is driving solid Pipeline and providing our sales team with numerous opportunities to drive growth.
Eric Clark: Those opportunities include adding new customers cross-selling, our growing unified product portfolio and converting our on-premise customers to the cloud.
Eric Clark: All of these sales channels contribute to RPO increasing 26% year-over-year and surpassing the 2 billion Milestone. At the end of the quarter.
When rates against our top 5 competitors, in the quarter, were consistent at over 70% and like q1. We once again experienced strength from new customers as More than 70% of our new Cloud. Bookings were generated from net new logos.
Eric Clark: With new logos representing approximately 35% of our current pipeline, we anticipate bookings from net new logos to revert back to the standard one-third of our bookings over time. From a vertical perspective, our end markets are diverse, and we have healthy established footprints across numerous subsectors, which include retail, grocery, food distribution, life sciences, industrial, technology, airlines, third-party logistics, and more. For example, Q2 deals included a global logistics and supply chain company that became a new logo with MAWM and MAO, a grocery wholesaler that became a new logo with MAWM, a global producer, wholesaler, and retailer of luxury goods that converted from on-prem to MAWM, a global beverage and snack provider that became a new logo with MAO, a global automated warehouse services company that became a new logo with MAWM and MATM.
Eric Clark: Line we anticipate bookings from net, new logos to refer to revert back to the standard 1/3 of our bookings over time.
Eric Clark: from a vertical perspective, our end markets are diverse and we have healthy established Footprints, across numerous sub sectors, which include retail grocery, food distribution, Life Sciences industrial technology, Airlines third-party Logistics and more
Eric Clark: For example, Q2 deals included, a global logistics and supply chain company that became a new logo with maugham and Mao.
Eric Clark: A grocery wholesaler that became a new logo with maugham. A global producer wholesaler and retailer of luxury goods that converted from on-prem to maugham.
Eric Clark: And finally, a regional health care system that became a new logo with Manhattan Active Supply Chain Planning and Manhattan Active Scale, as well as a number of others that we closed during the quarter. And while the timing of large deals and the mix of bookings will vary on a quarterly basis, we believe our bookings breadth from both new and existing customers over a broad set of industries and across our full products portfolio exemplifies our multiple opportunities for sustainable long-term growth.
Eric Clark: A global beverage and snack provider. That became a new logo with MAO, a global automated Warehouse services company. That became a new logo with maugham and Matt m.
Eric Clark: And finally, a Regional Health Care system that became a new logo with Manhattan, active supply chain planning and Manhattan active scale as well as a number of others that we closed during the quarter.
And while the timing of large deals, and the mix of bookings will vary on a quarterly basis, we believe our bookings breadth from both new and existing customers over a broad set of Industries. And across our full product portfolio, exemplifies our multiple opportunities for sustainable long-term growth.
Eric Clark: To accelerate our sales velocity and drive even further share gains within our large addressable market, we're strategically increasing our investment in sales and marketing. So I want to share several updates since our last call.
Eric Clark: First, we've promoted Bob Howell to Chief Sales Officer. Bob has been a sales leader at Manhattan for nearly 20 years and has over 25 years of supply chain experience. Bob's knowledge, leadership, and strong executive, strong execution leading our America sales organization makes him ideal for this expanded role. We look forward to Bob bringing his proven, disciplined approach to our entire global sales team.
Eric Clark: To accelerate our sales velocity velocity and drive even further share gains within our large, addressable Market were strategically increasing our investment in sales and marketing. So I want to share several updates since our last call
Eric Clark: Second, we've hired several new sales leaders on the team. So this includes a new strategic sales leader to facilitate executive demand creation, as well as new sales leaders for both POS and TMS. These are two large markets where we have industry-leading solutions and a tremendous runway for market share gain. Third, we've added, and will continue to add, more feet on the street. This includes individual sales talent and product specialists. Since our last earnings call, we've hired more sales talent than in any quarter in the past 10 years.
First, we promoted Bob Howell to Chief sales officer. Bob has been a sales leader at Manhattan for nearly 20 years and has over 25 years of supply chain experience, Bob's knowledge leadership, and strong executive um, strong execution leading. Our America sales organization makes him ideal for this expanded role. We look forward to Bob, bringing his proven disciplined approach to our entire Global sales team.
Eric Clark: Second we've hired several new sales leaders on the team. So this includes a new strategic sales leader to facilitate executive demand creation, as well as new sales leaders for both posos and TMS. These are 2, large markets, where we have industry-leading Solutions, and a tremendous runway for market share gains.
Eric Clark: And fourth, we've expanded key go-to-market partnerships with Google and Shopify. Announced in May at our user conference, Manhattan Solutions are now available on Google Cloud Marketplace. This expanded alliance removes friction and enables customers to more easily procure, deploy, and manage our industry-leading solutions. This sales channel has already hit the ground running. In fact, our largest deal in Q2 was influenced by Google Cloud Marketplace, and we have a growing pipeline of Google Marketplace deals.
Eric Clark: Third, we've added and will continue to add more feet on the street. This includes individual sales talent and product Specialists, since our last earnings call, we've hired more sales Talent than an any quarter in the past 10 years.
Eric Clark: And forth, we've expanded key, go to market Partnerships with Google and Shopify.
Eric Clark: Announced in May at our user conference Manhattan Solutions are now available on Google Cloud Marketplace, this expanded Alliance removes friction and enables customers to more easily, procure deploy, and manage our industry-leading Solutions.
Eric Clark: We're also excited about our expanded partnership with Shopify. The Connector app to Manhattan Active Order Management is now available in the Shopify app store. Several enterprise class retailers are live on the app as we partner with Shopify to deliver a leading end-to-end commerce solution. We believe this deeper partnership will drive quicker adoption and deployments of our OMS and POS solutions.
Eric Clark: This sales channel has already hit the ground running. In fact, our largest deal in Q2 was influenced by Google Cloud Marketplace and we have a growing pipeline of Google marketplace deals.
Eric Clark: We're also excited about our expanded partnership with Shopify the connector. App to Manhattan, active order management is now available in the Shopify App Store.
Several Enterprise class rely retailers are live on the app as we partner with Shopify to deliver a leading in to-end, Commerce solution. We believe this deeper partnership will drive quicker, adoption and deployments of our MS and PS Solutions.
Eric Clark: Now let's turn to some brief updates on our product. First, I'd like to provide an update on agentic AI. Earlier this year at Momentum, we provided some exciting updates on our existing AI capabilities in Manhattan Assist and Manhattan ActiveMaven. And we also announced new capabilities in our forthcoming agent platform. So, starting with Manhattan Assist, we've now serviced hundreds of thousands of inquiries from customers across the globe, spanning all Manhattan Active Platform applications. For multiple quarters, customers have been receiving high-quality responses to questions regarding application capabilities. More importantly, Manhattan Assist is providing detailed guidance on how to best configure applications like warehouse, transportation, and order management to drive optimal business outcomes.
Now, let's turn to some brief updates on our products.
First, I'd like to provide an update on a gentic AI earlier this year at momentum, we provided some exciting updates on our existing AI capabilities in Manhattan, assist, and Manhattan active Maven. And we also announced new capabilities in our forthcoming agent platform.
Eric Clark: So, starting with Manhattan assist. We've now serviced hundreds of thousands of inquiries, from customers across the globe, spanning all Manhattan, active platforms for multiple quarters. Customers have been receiving high quality responses to questions regarding application capabilities.
Eric Clark: More importantly, Manhattan assist is providing detailed guidance on how to best configure applications like Warehouse transportation and Order management to drive optimal business outcomes.
Eric Clark: More recently, we've added the ability for customers to upload their own operational documentation and for Manhattan Assist to provide answers which reflect each customer's operational preference. Customers are uploading content including training documents, process flows, and annotated screenshots. Armed with this additional information, ASSIST now enables associates to ask questions about customer-specific distribution centers or store operations. We believe this set of new capabilities expands the user pool for Assist and commensurately expands the value it creates across our customers each day.
more recently, we've added the ability for customers to upload their own operational documentation, and for Manhattan assist to provide answers which reflect each customer's operational preferences,
Eric Clark: Customers are uploading content, including training, documents process, flows and annotated screenshots.
Eric Clark: Assist now enables Associates to ask questions about customer specific, distribution centers, or store operations.
Eric Clark: We believe this set of new capabilities, expand the user pool for assist and commensurately expands the value. It creates across our customers each day.
Eric Clark: But we didn't stop there. At Momentum, we also announced our next big step forward with agentic AI. Starting this fall, each Manhattan Active Platform application will include purpose-built agents for each app's respective roles and personas. These agents will intelligently automate and optimize processes, allowing associates to be faster and far more effective. For example, our labor optimization agent will recommend real-time reassignment of associates in the D.C. based on upcoming workload and historical productivity at the associate level. For years, D.C. managers have found it challenging to dynamically balance department-level capacity with fulfillment demand, and we think agentic AI offers a unique path forward for finally solving this difficult problem.
Eric Clark: but we didn't stop there at momentum, we all
Also announced our next big step forward with a gentic AI.
Eric Clark: Starting this fall each Manhattan, active platform application will include purpose-built agents for each app's respective roles and personas. These agents will intelligently automate and optimize processes allowing Associates to be faster and far more effective.
Eric Clark: For example, our labor optimization agent will recommend real-time reassignment of Associates in the DC based on upcoming workload and historical protectivity at the associate level.
Eric Clark: And in the store, associates can receive detailed selling guidance in real time. When a store associate is actively selling, our store selling agent will provide personalized selling guidance based on the customer's omnichannel transaction history and the items they're purchasing at that moment. And in between customer visits, the agent will provide selling insights to store associates, including highlighting what items or styles are currently selling well, either online or in other stores in their area. Right now we're actively collaborating with store operations leaders from across our point of sale customer base to hone these use cases in advance of our release later this year.
For years. DC managers have found it challenging to dynamically balanced Department level capacity with fulfillment demand. And we think a gentic AI offers a unique path forward for finally solving this difficult problem. And in the store associates can receive detailed selling guidance in real time when a store associate is actively selling our store selling agent, will provide personalized selling guidance based on the customers Omni Channel, transaction history, and the items. They're purchasing at that moment.
Eric Clark: And in between customer visits the agent will provide selling insights to store associates including highlighting what items or styles are currently selling. Well either online or in other stores in their area.
Eric Clark: But I believe the most exciting part of our AI story is the Agent Foundry. In addition to these out-of-the-box agents within each application, Manhattan Active Agent Foundry enables our customers customers to build their own agents within our platform. Foundry will provide customers the freedom to define the scope and capability of the agents they want their associates to use. Customers can either start with an existing Manhattan agent and provide tweaks of their own, or they can create an agent completely from scratch using our library of APIs. And finally, Foundry also provides the ability to interact with other agents, including agents outside of the Manhattan Active Platform, through our native support of both agent to agent and model context protocol.
Right now, we're actively collaborating with store operations leaders from across our point of sale customer base to hone these. Use cases in advance of our release later this year.
But I believe the most exciting part of our AI story is the agent Foundry. In addition to these out-of-the-box agents with any application Manhattan, active agent Foundry, enables our customers customers to build their own agents within our platform Foundry, will provide customers the freedom to define the scope and capability of the agents. They want their Associates to use
Eric Clark: Customers can either start with an existing Manhattan agent and provide tweaks of their own or they can create an agent completely from scratch using our library of apis.
Eric Clark: The excitement we heard from our customers after our AI announcements at Momentum was overwhelming, and we're excited to get these base agents and agent foundry into the hands of our customers later this year.
And finally Foundry also provides the ability to interact with other agents including agents outside of the Manhattan active platform, through our native support of both agent to agent and model context protocol.
The excitement we heard from our customers, after our AI announcements at momentum was overwhelming and we're excited to get these base agents and agent Foundry into the hands of our customers later this year.
Eric Clark: Now, on a different note, I'm happy to share that we continue to see exceptional cross-sell results when it comes to our unified product platform. Our functional and technical unification message continues to resonate with customers of all sizes across geographies and across industries. Over the past five quarters, roughly 80% of our customers that bought MATM also bought or had previously purchased MAWM. So our customers are truly experiencing the value of unification. The cross-sell results that we've seen since launching Manhattan Active Supply Chain Execution have far exceeded what we were able to achieve with our prior platform.
Eric Clark: Now on a different note, I'm happy to share that we continue to see exceptional cross sell results when it comes to our unified product platform, our functional and Technical unification message continues to resonate with customers of all sizes, across geographies and across Industries, over the past 5 quarters, roughly 80% of our customers. That bought matm also bought or, or had previously purchased maugham
So, our customers are truly experiencing the value of unification.
Eric Clark: And we continue to double down on this investment strategy with an engineering team focused solely on building unified functional advantages. We also recently launched a product council dedicated to serving our unified customers because we know that the best way to innovate is to co-create alongside the world-class supply chain practitioners in our customer base.
Eric Clark: The cross sell results that we've seen since launching Manhattan. Active supply chain execution have far exceeded what we were able to achieve with our prior platform and we continue to double down on this investment strategy, with an engineering team, focused solely on building unified functional advantages. We also recently launched a product Council dedicated to serving our unified customers because we know that the best way to innovate is to co-create alongside the world-class supply chain practitioners in our customer base.
Eric Clark: So that concludes my business update.
Dennis Story: Next, Dennis will provide you with an update on our financial performance and outlook, and then I'll close our prepared remarks with a brief summary before we move to Q&A.
Dennis Story: So Dennis, take it away. Okay, thanks, Eric. Our Manhattan Global teams continue to execute well in a challenging macro environment. For the quarter, we delivered a better-than-expected financial performance on the top and bottom lines. This includes solid results across RPO bookings, cloud revenue growth, gross and operating margin expansion, as well as free cash flow generation. FX volatility persists. In Q2, it was a one point tailwind to year over year total revenue growth, but did not have a material impact on first half revenue growth. FX was also a $29 million tailwind to sequential RPO growth, and a $28 million tailwind to year-over-year RPO growth.
Eric Clark: So that concludes my business update. Uh, next Dennis will provide you with an update on our financial performance and Outlook and then I'll close our prepared remarks with a brief summary before we move to Q&A. So, Dennis, take it away. Okay, thanks Eric, our Manhattan Global teams continue to execute well, and a challenging macro environment for the quarter. We delivered, a better than expected financial performance on the top and bottom lines. This includes solid results, RPO bookings,
Dennis: Cloud Revenue, growth, gross and operating margin expansion as well as free cash flow generation.
Dennis: FX volatility persists and Q2 it was a 1-point Tailwind to year-over-year total revenue growth but did not have a material impact on first half Revenue growth.
Dennis Story: Now turning to our Q2 results, which were better than expected, regardless of FX movements, our growth rates are reported on a year-over-year basis, unless otherwise stated. For the quarter, total revenue was $272 million, up 3%. Cloud revenue increased 22% to $100 million, and services revenue declined 6% to $129 million. Both were a bit better than expected. As previously discussed, the year-over-year decline in services revenue reflects customer budgetary constraints that shifted services work to future periods. As Eric highlighted, given the uncertain macro environment and inherent flexibility of time and material contracts, we remain cautious on our services revenue growth.
FX was also a 29 million Tailwind to sequential RPO growth and a 28 million Tailwind to year-over-year RPO growth.
Dennis: year-over-year basis unless otherwise stated
Dennis: For the quarter, total revenue was 272 million up 3%.
Dennis: Cloud Revenue, increased 22% to 100 million dollars and services Revenue declined 6% to 129 million.
Dennis: Both were a bit better than expected as previously discussed the year-over-year, decline in Services, Revenue, reflects customer, customer budgetary, constraints.
That shifted Services worked to Future periods.
Dennis Story: We ended Q2 with RPO of $2.01 billion. up 26% compared to the prior year and 6% sequentially. The solid Q2 performance was driven by strength in new customers and a healthy contribution from existing customers. Our average contract duration remains at 5.5 to 6 years. Like Q1, some customers are electing longer ramp timelines. While the full contract is non-cancelable, we believe the current macro environment has resulted in some customers taking a more conservative approach to the implementation timeline of their contract. Accordingly, we expect 38% of RPO to be recognized as revenue over the next 24 months.
Speaker Change: As Eric highlighted, given the uncertain macro environment and inherent flexibility of time and material contracts. We remain cautious on our services Revenue growth.
Speaker Change: We ended Q2 with RPO of 2.01 billion.
Speaker Change: Up 26% compared to the prior year and 6% sequentially.
The solid Q2 performance was driven by strength and new customers and a healthy contribution from existing customers. Our average contract duration, remains at 5.5 to 6 years, like, q1. Some customers are electing longer wrap timelines. While the full contract is non-cancellable, we believe the current macro environment, has resulted in some customers taking a more conservative Pro approach to the implementation
Implementation timeline of their contracts.
Speaker Change: Accordingly, we expect 38% of RPO to be recognized as Revenue over the next 24 months.
Dennis Story: As we've previously stated, our teams are focused on accelerating the adoption of our products and our contracts, always allow customers to amend their timeline for quicker deployments, but not slower ones. Adjusted operating profit was $101 million with an adjusted operating margin of 37.1%. This is up 210 basis points year over year. Our performance was driven by strong cloud revenue growth combined with operating leverage as our cloud business continues to scale. Turning to earnings per share, we delivered Q2 adjusted earnings per share of $1.31 up 11% and GAAP earnings per share of $0.93 up 9%. Moving to cash, operating cash flow increased 1% to a solid $74 million.
Speaker Change: As we've previously stated our teams are focused on accelerating the adoption of our products. And our contracts, always allow customers to come in their timeline for quicker, deployments, but not slower ones.
Speaker Change: Adjusted offer operating profit was 101 million with an adjusted operating margin of 37.1%.
Speaker Change: This is up to 210 basis points year-over-year.
Speaker Change: Performance was driven by strong Cloud Revenue, growth combined with operating leverage as our Cloud business continues to scale.
Speaker Change: Turning to earnings per share. We delivered Q2 adjusted earnings per share of a dollar 31 up 11% and gaap earnings per share of 93 cents up 9%.
Dennis Story: Note, our Q2 growth rate was adversely impacted by strong cash collections in the year ago period. This resulted in a 26% free cash flow margin and a 38% adjusted EBITDA margin with the difference due to the cash taxes paid in the quarter. Year-to-date, our operating cash flow is up 17% to $149 million. Regarding the ballot sheet, deferred revenue increased 16% to $300 million. We ended the quarter with $231 million in cash and zero debt. In the quarter, we leveraged our strong cash position and invested $50 million in share repurchases, resulting in $150 million in buybacks year to date.
Moving to cash, operating cash flow increased 1% to a solid 74 million note, our Q2 growth rate was adversely impacted by strong cash collections in the year ago. Period.
This resulted in a 26% free cash, flow margin and a 38% adjusted ibaa margin with the difference, due to the cash taxes paid in the quarter.
Speaker Change: Year to date. Our operating cash flow is up, 17% to 149 million.
Speaker Change: Regarding the balance sheet, deferred revenue, increased 16% to $300 million. We ended the quarter with 231 million in cash and zero debt.
Speaker Change: In the quarter, we leveraged our strong cash position and invested, $50 million in share repurchases.
Dennis Story: Additionally, our board has approved the replenishment of our $100 million share repurchase authority.
Resulting in $150 million in BuyBacks year to date.
Speaker Change: Additionally, our board has approved the replenishment of our 100 million dollar. Share repurchase Authority.
Dennis Story: Now on to our updated 2025 guidance. Our long term and long standing financial objective is to deliver sustainable double digit top line growth and top quartile operating margins benchmarked against enterprise software comps. These are drivers to our best-in-class return on invested capital as we maintain a balanced investment approach to growth and profitability.
Speaker Change: now, on to our updated 2025 guidance,
Speaker Change: Our long-term and long-standing financial objective is to deliver sustainable double digit, Topline growth, and top quartile operating margins benchmarked against enterprise software comps.
Dennis Story: As noted on prior earnings calls, our goal is to update our RPO outlook on an annual basis. Year-to-date FX has been about a $42 million tailwind to RPO and removing this impact we are entering the second half of the year tracking to the high end of our guidance. Additionally, as previously discussed, our bookings performance is impacted by the number and relative value of large deals we close in any quarter, which can potentially cause lumpiness or non-linear bookings throughout the year.
Speaker Change: These are drivers to our best-in-class return on invested Capital as we maintain a balanced investment approach to growth and profitability.
As noted on prior earnings calls, our goal is to update our RPO outlook on an annual basis.
Speaker Change: Year to date FX has been about a 42 million dollar Tailwind to RPO and removing this impact. We are entering the second half of the Year tracking to the high end of our guidance.
Dennis Story: As discussed earlier on this call, the macro environment remains uncertain. While clarity on external variables remains limited, given our strong first-half performance and second-half visibility, we are raising our full-year total revenue, operating margin, and EPS outlook. This guidance is also provided in our earnings release. And regarding FX, it is about a $4 million tailwind to second half revenue from guidance we provided in late April. With that, for RPO, we continue to target $2.11 billion to $2.15 billion, excluding FX movement. For total revenue, we expect $1.071 billion to $1.075 billion, with a $1.073 billion midpoint comparing favorably to our prior outlook due to our first half outperformance.
Speaker Change: Variables remains limited, given our strong first half performance and second half visibility. We are raising our full year. Total revenue operating margin and EPS outlooks.
This guidance is also provided in our earnings release.
And regarding FX, it is about a $9. Tailwind to second half revenue from guidance, we provided in late April
Speaker Change: with that, for RPO, we continue to Target 2 111 billion, to 2.15 billion, excluding FX movements
Speaker Change: For total revenue. We expect 1.071 billion to 1.075 billion with a 1.073 billion. Midpoint comparing favorably to our prior Outlook, due to our first half outperformance.
Dennis Story: For Q3, we continue to target total revenue of $270 million to $272 million, accounting for retail peak seasonality. For Q4, we continue to target a midpoint of $267 million. For adjusted operating margin, we are increasing the midpoint to 35% from our prior midpoint of 33.25%. At the midpoint, we are targeting Q3 adjusted operating margin of 35%. and accounting for retail peak seasonality about 33.2% in Q4. Our full-year adjusted earnings per share at the midpoint is increasing by $0.21 to $4.80, up from our prior midpoint of $4.59, and includes our annual tax rate increasing to 22.5%, up from 21%, which represents an 8-cent headwind to the second half of the year.
Speaker Change: For Q3, we continue to Target total revenue of 270 million to 272 million accounting for retail Peak seasonality. For Q4, we continue to Target a midpoint of 267 million
Speaker Change: For adjusted operating margin. We are increasing the midpoint to 35% from our prior midpoint of 33.25%.
At the midpoint we are targeting, Q3 adjusted operating margin of 35%.
Speaker Change: And accounting for retail Peak seasonality about 33.2% in Q4.
Dennis Story: The increase in our tax rate is related to an increase in tax reserves caused by the acceleration of our domestic R&D cost deductions under the July 4th U.S. tax law change. As such, this change will also lower our cash taxes paid and likely benefit operating cash flow by approximately $30 million in 2025. On a quarterly basis, we are targeting a Q3 tax rate of 25% and an earnings per share of $1.17 and accounting for retail peak seasonality and a tax rate of 22.5%, $1.13 in Q4. For GAAP EPS our range is increasing to $3.23 to $3.31.
Speaker Change: Our full year adjusted earnings per share at the midpoint is increasing by 21 cents to 4.80 up from our prior, midpoint of 4.59 and includes our annual tax rate, increasing to 22.5% up from 21%, which represents an 8 cent headwind to the second half of the year.
Speaker Change: The increase in our tax rate is related to an increase in tax reserves caused by the acceleration of our domestic R&D. Cost deductions under the July, 4th us tax law change as such. This change will also lower our cash taxes paid and likely benefit operating Cash Flow by approximately 30 million dollars in 2025.
Speaker Change: On a quarterly basis, we are targeting a Q3 tax rate of 25%.
Speaker Change: And and earnings per share of a dollar 17 and accounting for retail Peak seasonality and a tax rate of 22 and a half percent a13 in Q4.
Dennis Story: For Q3, we are targeting GAAP EPS of $0.77.
Speaker Change: For gaap EPS, our range is increasing to 3.23 to 3.31 for Q3 we are targeting. Gaap, EPS of 77 cents
Dennis Story: Here are some additional details on our 2025 outlook. For full year 2025, on our first half outperformance, our cloud revenue midpoint upticks to $408.5 million on a quarterly basis. We continue to assume $104.5 million in Q3 and $109 million in Q4. For services, we continue to expect a midpoint of $497 million. On a quarterly basis, this assumes $127 million in Q3 and accounting for retail peak seasonality, $120 million in Q4. For maintenance, our midpoint increases to $128 million, or a 7% decline on attrition to the cloud. On a quarterly basis, we expect Q3 $32 million and Q4 $29 million.
Here are some additional details on our 2025 Outlook.
Speaker Change: For full year 2025 on our first half outperformance, our Cloud Revenue, midpoint upticks to 4808.5 million on a quarterly basis. We continue to assume 104.5 million in Q3 and 109 million in Q4.
Speaker Change: For services. We continue to expect a midpoint of 497 million on a quarterly basis. This assumes 127 million in Q3 and accounting for retail Peak seasonality 120 million dollars in Q4.
for maintenance our midpoint increases to 128 million,
Speaker Change: Or a 7% decline on attrition to the collapse.
Speaker Change: On a quarterly basis. We expect Q3 32 million in Q4 29 million.
Dennis Story: Finally, we expect our diluted share count to be 61.3 million shares, which assumes no buyback activity.
Dennis Story: In summary, a solid Q2 performance by the Manhattan Global team.
Speaker Change: And finally, we expect our diluted share count to be 61.3 million shares which assumes no buyback activity.
Eric Clark: Thank you, and back to Eric for some closing remarks. Great. Thank you, Dennis.
Eric Clark: We're really pleased with our better-than-expected second quarter and first half results. As we have stated, the global macro environment remains challenging. However, we're optimistic about our business fundamentals and our growth opportunity. We believe our industry leading unified cloud platform positions Manhattan is the clear choice for modern supply chain commerce solution.
Speaker Change: In summary a solid Q2 performance by the Manhattan Global team. Thank you, and back to Eric for some closing remarks. Great. Thank you. Dennis, we're we're really pleased with our better than expected. Second quarter and first half results.
Speaker Change: As we have stated the global macro environment remains challenging. However, we're optimistic about our business fundamentals and our growth opportunity.
Eric Clark: So thank you to everyone for joining the call. And thank you to the Manhattan team for their dedication and execution.
Unknown Executive: And that concludes our prepared remarks.
Unknown Executive: And we'd be happy to take questions. Thank you.
Speaker Change: Everyone for joining the call. And thank you to the Manhattan team for their dedication and execution, and that concludes our prepared remarks, and we'd be happy to take questions.
Unknown Executive: We will now be conducting a question and answer session. As a reminder, if you'd like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate that your line is in the Press star two to remove yourself from. Participants using speaker equipment, it may be necessary to pick up the handset before pressing start.
Thank you. We will now be conducting. A question and answer session as a reminder. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate that your line is in the question queue. You may press star 2 to remove yourself from the queue.
Unknown Executive: One moment, while we.
Speaker Change: For participants using speaker equipment, and may be necessary to pick up the handset. Before pressing the star Keys, 1 moment, while we pull for questions.
Terry Tillman: And our first question comes from the line of Terry Tillman with Truist. Yeah, thanks for taking my questions. And good afternoon, Eddie, Eric, Dennis and Mike. Nice to see these results. So good job on that.
And our first question comes from the line of Terry Tillman with true Securities. Please receive with your questions.
Terry Tillman: Two questions. First question is on the supply chain unification. It resonated at the Momentum event that I attended. I think y'all showed a bunch of logos in terms of combined TM and WM transactions. I mean, maybe easier said than done. But is there anything you can programmatically kind of now do to even put more kind of, you know, gas on the fire here in terms of whether it's tuning the products better together? Is it go to market investments? Maybe AI fuses them better together? Just what can you do on your own and your controllables to even drive more of these unification deals?
Yeah. Thanks for taking my questions and uh, good afternoon, Eddie Eric, Dennis and Mike uh nice to see these results. So uh good job on that. Um,
Speaker Change: 2 questions. First question is on the supply chain, unification it resonated at the momentum event that I attended. Uh, I think you all showed a bunch of logos in terms of combined TM and WM transactions. I mean, maybe easier said than done. But is there anything you can programmatically kind of now do to, to even put more kind of
Terry Tillman: And then I had a follow up Okay, yeah, great.
Speaker Change: Uh, you know, gas on the fire here in terms of whether it's tuning, the products Better Together. Is it go to market Investments, maybe AI fuses them better together. Just what can you do on your own and your controllables, to even drive more of these unification deals and then I had a follow-up.
Eric Clark: Thank you, Terry. Love the question. You know, as I mentioned, in my prepared remarks, we're truly doubling down on on our investment in unification. And we're doing that in several ways. So we have created an engineering team that's focused solely on building these unified functional advantages. So we want to make that make that even bigger and more clear of why it makes sense to to leverage our unified platform. We've also engaged with our customers by creating this product council that's dedicated to serving these unified customers to really find out, you know, directly from them what they're looking for, what they need and co-innovate and co-create.
Eric Clark: And then sales and awareness is a big part of that as well. But I think one of the common themes that I heard at Momentum this year, because you're right, we talked a lot about unification, but our customers also talked a lot about unification. And one of the themes was that, you know, customers would tell me a year ago at Momentum that unification was a compelling strategy. Customers believed in it. People were starting to lean in. But this year at Momentum, it came to life. And there were customers on stage telling their stories of how it increased efficiency, how it increased ROI, how it created strategic advantages for them.
Okay, yeah, great. Thank you Terry. Um, love the question. Um, you know, as I mentioned, in my prepared remarks, we're we're truly doubling down on on our investment in unification and and we're doing that in several ways. So we have created an engineering team that's focused solely on building these unified functional advantages. So we want to make that make that even bigger and more clear of why it makes sense to, to leverage our unified platform. Um, we've also engaged with our customers by creating this, uh, product Council that's dedicated to serving these unified customers to really find out, you know, directly from them what they're looking for, what they need and and co-innovate and co-create.
Eric Clark: So we're really seeing our customers buying in. And also to your point, yeah, I think Manhattan active warehouse management and transportation management are probably leading the way. And we've more than doubled our unification logos in that area from, you know, year over year. But we're also seeing lots of unification logos. And I mentioned some of them in my opening remarks that are, you know, unified leveraging MAO and supply chain planning and POS. So great optimism. And we're continuing to lean in and invest here around unification. That's great.
Speaker Change: Um, yeah. And then sales and awareness is is a big part of that as well, but I think 1 of the common themes that that I heard at momentum this year. Um, because you're right, we talked a lot about unification, but our customers also talked a lot about unification and 1 of the themes was that, um, you know, customers would tell me, a year ago at, at momentum, that unification was a compelling strategy, customers believed in it. People were starting to lean in but this year at momentum, it came to life and there were customers on stage telling their stories of how it increased efficiency, how it increased Roi, how it created strategic advantages for them. So we're really seeing our customers buying in, um, and also to your point, um, yeah, I think Manhattan active warehouse management, and transportation management are probably leading the way and we've more than doubled our unification logos and
Speaker Change: In that area from, you know year-over-year. But we're also seeing lots of unification logos. And I mentioned some of them in my opening, remarks remarks that are, you know, unified leveraging, Mao and supply chain planning, and POS so um, great optimism. And we're continuing to lean in and invest here around unification.
Eric Clark: Thanks, Eric, for that. My follow-up question is on cloud subscription revenue. It picked up a bit in terms of the growth rate compared to first quarter, so that was nice to see. It does look like, you know, you have this large balance of RPO, so I guess that supports, you know, going forward visibility, but I would just love an update on confidence level and sustaining 20% growth beyond just the next quarter or two. Just anything you could share on, yeah, that subscription revenue visibility. Thank you. Yeah, so, you know, when we originally provided the multi-year metric of the sustained, you know, multi-year 20% growth, we said we weren't going to update that metric every quarter, but I can tell you, we do remain confident.
Speaker Change: That's great. Thanks Eric for that. My follow-up question is on cloud subscription, Revenue, it picked up a bit in terms of the growth rate compared to first quarter 7 is nice to see. It does look like you know you have this large balance of RPO so I guess that's supports you know going forward visibility but I would just love an update on confidence level and sustaining 20% growth Beyond just the next quarter to just anything you could share on. Yeah, that subscription Revenue visibility. Thank you.
Eric Clark: And, you know, the reasons why we remain confident, we've got a large booked business in RPO, like you mentioned, and that gives us good visibility, particularly good visibility in, you know, second half of next year. Our bookings and pipeline continue to be solid. Our TAM is expanding. You know, as I mentioned, we're making changes to accelerate sales velocity. That includes specialization, and that's specialization around products, around renewals, around conversions, strengthening partnerships, adding sales talent. And then another big factor that we talk about when it comes to maintaining that 20 plus percent growth is the renewal cycle.
Yeah, so you know, when we originally provided the multi-year metric of the sustained, you know multi-year 20% growth. We said we weren't going to update that metric every quarter, but I can tell you, we do remain confident and you know, the the reasons why we remain confident, we've got a large booked business in RPO, like, you mentioned and that gives us good visibility particularly good visibility and you know, second half and next year, um, our bookings and pipeline continue to be solid. Um, our Tam is expanding um, you know, as I mentioned we're making changes to accelerate sales velocity that includes specialization that, and that specialization around products around renewals around conversions. Um, strengthening Partnerships adding sales talent. And then another big factor that we talk about when it comes.
Eric Clark: And that really starts to pick up pace next year, particularly with our Manhattan Active Warehouse Management. And, you know, if you walk through the mechanics of that, you know, you think about as the contract progresses, the dollars move from RPO to subscription revenue, and by the end of the contract, there's no RPO left. And then when we renew, it renews that RPO and refreshes that RPO, but it also does that at a higher level for a number of reasons. Number one, you know, we've ramped that customer through the first, you know, X number of years of the contract.
Eric Clark: So we've ramped up DCs and users. So we're now going to be renewing at a run rate that's much higher. We've also got the opportunity to cross-sell when we renew. So when those customers that are going to be renewing in 26, when they bought Warehouse Management, we didn't have transportation management or supply chain management or AI agents. So all of those things are opportunities for cross-sell. Of course, there's also the opportunity for price increases in some cases, and all of this will drive higher RPO and higher subscription revenue. So, and then add to that the fact that, you know, as we've mentioned in previous calls, we do have customers that are maybe taking a conservative view of their deployment cycles and are rolling out a little bit slower.
Speaker Change: Reasons number 1, you know, we've ramped that customer through the first you know uh X number of years of the contract. So we've ramped up DC's and users. So we're now going to be renewing at a run rate. That's much higher. We've also got the opportunity to cross-sell when we're when we renew. So when those customers that are going to be renewing in 26, when they bought warehouse management, we didn't have transportation management or Supply Chain management, or AI agents. So all of those things are opportunities for cross sell, of course. There's also, the opportunity for price increases in some cases and all of this will drive higher RPO and higher subscription Revenue.
Eric Clark: We are actively working with those customers to find opportunities for them to move faster. And as they move faster, that grows our subscription revenue faster as well. So, we think we've got lots of levers to pull to be proactive and work with our customers to drive this and continue the success. That's great.
Speaker Change: So, and then, and then add to that the fact that, um, you know, as we've mentioned in, in previous calls, um, we do have customers that are maybe taking a conservative view of their deployment cycles, that are rolling out a little bit slower. Um, we are actively working with those customers to find opportunities for them to move faster, and as they move faster, that grows our subscription Revenue faster as well. So we think we've got lots of levers to pull to um, to be proactive and work with our customers to drive this and and continue the success.
Speaker Change: That's great. Thanks.
Joe Brude: And our next question comes from the line of... Joe Brude with Baird. Please receive a Great, thanks. Thanks for taking my questions.
Speaker Change: Thank you.
Speaker Change: And our next question comes from the line of
Joe Brewing: Joe Brewing.
Joe Brewing: With beard, please receive with your question.
Joe Brude: Um, Eric, just the four different go to market investment areas you walk through, I appreciate some of these take time to become productive and revenue enhancing, but maybe you could go into a bit more just qualitative detail on what you think is possible through like the enhanced specialists and new hires. And quantitatively, if you had to put a number on it, you know, understand, given Terry's question, 20% growth in cloud subs, that was intended to be a multi-year target. But do you really think if some of these go to market investments pay off, we're thinking about a number beyond the 20% level?
Speaker Change: Hi great. Thanks, thanks for taking my question. Um, Eric just uh, 4 different, go to market investment areas. He walked through, I appreciate some of these take time to become productive and revenue enhancing, but maybe you could go into a bit more, just qualitative detail on what you think is possible through like the enhanced Specialists and new hires and uh, quantitatively it. If you have the put a number on it, you know, understand. Uh given Terry's question. 20% growth in Cloud Subs. That was intended to be a multi-year Target. But do you really think that some of these go to market Investments pay off? We're thinking about a number beyond the 20% level.
Eric Clark: Yeah, thank you for the question. Yeah, as I mentioned, we're, we're not making changes to that to that long term projection. But we are making a lot of changes to what we're doing in sales and go to market. And I think these are low risk changes that can have, you know, relatively quick impact, you know, some some quicker than others. So you talk about, you know, Bob Howell, who I mentioned, is taking over as chief sales officer, he's been here 20 years, he's worked closely on a lot of the big deals that we've done in Europe and APAC already.
Speaker Change: Yeah, thank you for the question. Um, yeah, I I, as I mentioned, we're, we're not making changes to that to that long-term projection, but, um, we, we are making a lot of changes to what we're doing in sales and go to market. And and I think these are low-risk changes that can have um, you know, relatively quick impact, you know, some some quicker than others. So you talked about, you know, Bob Howell who I'm mentioning is taking over.
Eric Clark: He's worked closely with those teams. So this gives him the opportunity to take some of the things that that Bob and his sales team in the Americas have really perfected in terms of specialization, sales, diligence, etc, and leverage that more globally. So some of the things that we're doing really well in the Americas, we can tap into in other parts of the world. And I think that's, you know, very low risk and can have a quick return. I think some of the things that we're doing with partnerships with Google, with with Shopify, as I mentioned, we're already seeing returns.
Eric Clark: The product specialization, I mentioned we've got new leaders for POS and TMS since the last time we had this call. You know, those guys are coming up to speed quickly. Obviously, they've been in this market. They know the business. They know Manhattan more as a competitor and how they're learning as a company that they're working for. But the relationships that they have in the market will be valuable, and they will help us to increase our pipelines very quickly. And I'm confident that the specialized teams that they're building around them will give us the ability to enter new markets.
Speaker Change: Chief sales officer, he's been here twenty years, he's worked closely on a lot of the big deals that we've done in Europe and APAC already. He's worked closely with those teams. So this gives him the opportunity to take some of the things that that Bob and his sales team. In the Americas have really perfected in terms of specialization um uh sales diligence, Etc, and leverage that more globally. So, some of the things that we're doing really well in the Americas, we can tap into in other parts of the world. And I think that's, you know, very low risk and can have a, a quick return. Um, I think some of the things that we're doing with Partnerships with Google with with um, Shopify. As I mentioned, we're already seeing returns
Eric Clark: I think one of the things that we've been pretty clear about is we know that we've got market-leading products in POS and TMS, but we probably don't have the market awareness that we want in those spaces. And I think those guys that we brought in can help us address that very, very quickly. So yeah, I think there are several things that we're doing that can have material impact, certainly next year. You know, some of these things, when you look from a revenue perspective, it's difficult to impact significantly revenue in the second half from a product standpoint, but all of these things should be able to give us a good impact for next year.
Speaker Change: the product specialization. Um, I mentioned we've got new leaders for PS and TMS since the last time we had this call, um, you know, the those guys are coming up to speed quickly. Obviously, they've been in this market, they know the business. Um, they they know, Manhattan more as a competitor. Now they're learning this as a as a company that they're working for, um, but the relationships that they have in the market will be valuable and they will help us to increase our pipelines very quickly. And I'm confident that the specialized teams that they're building around them will give us the ability to enter new markets. I think 1 of the things that we've been pretty clear about is we know that we've got Market leading products in PS and TMS, um, but we probably don't have the the market awareness that we want in those spaces. And I think those guys that we brought in
Can help us address that very, very quickly.
Speaker Change: So, yeah, I think there are several things that we're doing. That can have, um, material impact. Um, certainly next year, you know, some of these things, when you look from a revenue perspective, it's it's difficult to, uh, impact significantly Revenue in the second half from a product standpoint, but all of these things should be able to give us a good impact for next year.
Unknown Executive: Okay, that's great.
Eric Clark: Thank you. I wanted to ask about the RTO bookings much better this quarter than last quarter. I'm curious if you can maybe parcel out how much is customers just acclimating to the macro versus, you know, Manhattan works a pipeline, you know, sometimes for a while and opportunities come together in a period. Do you think it was just the pipeline opportunities you had going into this period that was conducive to the better RTO activity? I think a big part of it was, you know, just very solid execution by our sales team. But from a macro point of view, I think some of the uncertainty has abated, but I think also customers are adapting to moving forward with some uncertainty.
Speaker Change: Line, you know, sometimes for a while and opportunities come together in a period. Do you think it was just the pipeline opportunities you had going into this period? That was conducive to uh, the better RPO activity.
Eric Clark: And, you know, just like, just like we are doing, you know, we're managing through the uncertainty and controlling what we can. And I think our customers are doing that as well. And the pipeline that we went into Q2 was solid, and we continue to see solid pipeline in the second half.
Eric Clark: You know, one of the interesting things we talked about the tough macro that we've been in for a while now, our last three bookings quarters have been our best three bookings quarters ever. So and you can you can argue that all three of those quarters were during, you know, at least a changing if not a challenging macro. So I think our team continues to execute well, and we've got a product that the market wants and demand is strong.
Well, I think a big part of, it was, you know, just very solid execution by our sales team, but from a macro, um, point of view, I think some of the uncertainty has abated, but I think also customers are adapting to moving forward with some uncertainty and, you know, just like um, just like we are doing. You know, we're we're managing through the uncertainty and controlling what we can. And I think our customers are doing that as well. And the, the pipeline that we went into Q2 was was solid and we continue to see solid pipeline in in the second half.
Speaker Change: Um, you know, 1 of the interesting things. We talk about the tough macro that we've been in for a while. Now our last 3 books quarters have been our best 3 books quarters ever so. And you can you can argue that all 3 of those quarters were do were during, you know, at least a changing if not a changing macro. So, I think our team continues to execute well and we've got a product that the market wants and and demand is strong.
Unknown Executive: Great.
Speaker Change: Great, thank you very much.
Speaker Change: Yeah, thank you.
Brian Peterson: And our next question comes from the line of Brian Peterson with. Thanks, gentlemen, and congrats on the strong quarter. So I wanted to hit on maintenance that was a little bit higher than I had expected this quarter. Are you seeing some of your existing on premise customers kind of renew for longer? And can we get an update on where we stand on the status of that on premise to cloud migration? Yeah, so Bottom line, we've always taken the approach that our customers are going to convert to cloud when they're ready. And this is the second quarter in a row where we've had really strong bookings from new logo.
Speaker Change: Thank you. And our next question comes from the line of Brian Peterson with Raymond James. Please, proceed with your question.
Brian Peterson: Thanks gentlemen, and congrats on the strong quarter. So so I wanted to hit on on maintenance that was a little bit higher than I had expected. This quarter, are you seeing some of your existing on prevents customers, kind of renew for longer and can we get an update on on where we stand on the status of that on premise to Cloud migration for WMS
Speaker Change: Yeah. So um
Eric Clark: And ultimately, in the long run, that's going to drive more growth opportunity because that creates more opportunity for cross-sell. That being said, we are continuing to look at our conversion opportunities and conversion pipelines. And I do see that as an area that we can get more aggressive and not only create more cloud subscription revenue, but also create more services revenue. So conversions is an area that we will continue to focus on. Now, from a percentage standpoint, not a significant change from what we talked about a quarter ago. Roughly 20% of our on-prem customers have started that conversion to the cloud.
Eric Clark: When I walked through kind of some samples of our new logos and conversions that we've closed in Q2, we do continue to close conversions, but we still have a lot of conversions in the pipeline to close over the next several years.
Speaker Change: Bot bottom line. You know, we we've always taken the approach that our customers are going to convert to Cloud when they're ready. And you know, this is the second quarter in a row where we've had really strong, bookings from new logo and ultimately in the long run, that's going to drive more growth opportunity because that creates more opportunity for cross sell, um, that being said, um, We are continuing to look at our conversion opportunities and conversion pipelines, um, and I, and I do see that as an area that we can get more aggressive and not only create more Cloud, um, subscription Revenue, but also create more services Revenue. So conversions is an area that we will continue to focus on now from a percentage standpoint, not a significant change from what we talked about a quarter ago. Roughly 20% of our on-prem, customers have started that conversion.
Speaker Change: To the cloud when I walked through kind of some samples of our uh, new logos and and and conversions that we close in Q2. Um, you know, we we do continue to close conversions but we still have a lot of conversions in the pipeline to close over the next, you know, several years.
Brian Peterson: Thanks, Eric. Maybe just to follow up, I know ERP migrations have gotten a lot of talk kind of industry wide as you see that strength and net Is that a big factor in what's driving new customers to Manhattan or maybe some commonality on what you're seeing on the net news side? Thanks. Yeah, yep. So the ERP continues to be a tailwind for us, right? As people are making decisions on ERP and looking at what some of the ERP players have to offer and comparing that to what we have to offer, the change that they have to do in ERP is creating an opportunity for them to do a change in supply chain as well.
Speaker Change: Thanks Eric and maybe just a follow-up. I know Erp migrations have have gotten a lot of talk kind of industry-wide as you see that strength and net new is that a big factor in in what's driving new customers to Manhattan or maybe some commonality on what you're seeing on the net new side. Thanks, guys.
Eric Clark: So that's absolutely creating pipeline for us. And I think the amount of pipeline and what that's driving has been consistent over the past several quarters, and we continue to see pipeline created that way.
Speaker Change: Yep. Yep. So, so the Erp continues to be, um, a Tailwind for us, right? As people are making decisions on Erp and looking at what, what some of the Erp players have to offer, and comparing that to what we have to offer. That's, you know, the change is creating the change that they have to do in Erp is creating an opportunity for them to do a change in in supply chain as well. So that's absolutely creating pipeline for us. Um, and and I think the the amount of Pipeline and what that's driving has been consistent over the past, several quarters, and we continue to see pipeline created that way.
Unknown Executive: Thank you.
Dylan Becker: Our next question. comes from the line of Dylan Becker with William Blair, please receive it. Hey, gentlemen, congrats here. Appreciate it. Maybe, Eric, sticking on one of those prior topics around the idea of conversion momentum, but also on the new logo side, I wonder if you could contextualize some of the efficiency . . you're seeing around kind of delivery and implementation, what you can do to make that process easier and faster. And maybe if that is a TAM unlock in and of itself, as it's kind of historically been viewed as a heavy implementation, if that allows you to go maybe more down.
Speaker Change: Thank you. Our next question comes from the line of Dylan Becker with William. Blair, please receive with your question.
Eric Clark: Hey gentlemen. Uh congrats here. Um, maybe Eric sticking on 1 of those prior topics around the idea of conversion momentum but also on the new logo side, I wonder if you could contextualize some of the efficiency gains.
Eric Clark: and what that TAM on. Yeah, great question. And in fact, you know, this is something that we talked about at Momentum as well, you know, our team is having success of, you know, leveraging automation and AI to reduce implementation timelines to reduce the, the number of extensions required to, you know, reduce the number of hours to create an extension. So there's, you know, example after example of where we're reducing timelines and reducing cost and deployment. So that absolutely makes our TAM bigger. And, you know, that's one of the things that we're one of the message that we're taking to market right now as well.
Eric Clark: You're seeing around kind of delivery and implementation, what you can do to make that process easier and faster. And maybe if that is a tam unlock in and of itself, as its kind of historically been viewed as a, as a heavy implementation. If that allows you to go, maybe more down Market into tier 2 and what that Tam unlock, uh, could potentially look like,
Eric Clark: As we can reduce the speed or increase the speed and reduce the complexity. It increases our TAM. And it also can be another way to encourage customers to to do those migrations and convert from on prem to the cloud. So those are those are messages that we're taking to market right now. And I think they're being they're being received very well. And by the way, at Momentum, our customers were also happy to hear that with that speed and reducing complexity, it gets them to their ROI faster, which is a very important message for them. very much.
Eric Clark: Extensions required to it, you know, reduce the number of hours to create an extension. So there's, you know, example, after example, of of where we're reducing timelines and reducing cost and deployment, so that absolutely makes our Tam bigger. And you know, that's 1 of the things that we're 1 of the message that we're taking to market right now as well. Um, as we can reduce the the speed or or increase the speed and reduce the complexity, um, it increases our Tam and it also can be another way to encourage customers to, to do those migrations and convert from on-prem to the cloud. So, those are, those are messages that we're taking to market right now. And, um, I think they're being they're being received very well.
Eric Clark: Sure, thank you. And and by the way at at momentum our, uh, our customers were also happy to hear that with that speed and, and, and reducing complexity, um, it gets them to their Roi faster, which is a very important message for them.
Unknown Executive: Yeah, perfect.
Unknown Executive: Okay, thank you. And then we've talked about the pace and productivity But if we were to kind of step back and contemplate the renewal cycle in fiscal 2020, kind of having come on board now 150, 160 days, could you maybe draw any parallels in your prior of how you're kind of positioning. Navigating that renewal. So I'm. Yeah, yeah, definitely. So you know, it's not not too dissimilar from the cycle that we were on when I joined ServiceNow, when ServiceNow was just over a billion dollars, and we were going through significant renewal cycles. And at the same time, we were introducing new products and doing cross-sell and upsell when we did those renewals.
Eric Clark: Very much so yeah, perfect. Okay, thank you. Um, and then we've talked about kind of the, the pace and productivity, kind of the expectations on sales hiring and where you think about kind of segmenting that out, but if we, if we were to kind of step back and contemplate the renewal cycle in fiscal, 26 kind of having come on board. Now 150160 days. Could you maybe draw any parallels in your prior experiences of how you're kind of positioning and viewing? Um, navigating that that renewal opportunity and what that can kind of contextualize from a potential
Eric Clark: Upsell, uh, obviously unification cross-selling dynamic as well. Thank you.
Unknown Executive: So that that will be a big focus for us in the second half of this year. And that's a big part of what Bob Howell and his team are going to be putting together is that global structure that we will use to make sure that we are maximizing the opportunity at renewal and not just renewing but driving growth within those customers as well. Great. Thanks, Eric. Appreciate it.
Eric Clark: Yeah, yeah definitely. So you know, it's not not too dissimilar from the cycle that we were on when I joined service. Now, when service now is just over a billion dollars and and we were going through significant renewal cycles and and at the same time we were introducing new products and doing cross-sell and upsell when we did those renewals so that that will be a big Focus for us in the second half of this year. And that's a big part of what Bob Howell and his team are going to be putting together. Is that Global structure that we will use, to make sure that we are maximizing the opportunity at renewal and not just renewing, but driving growth within those customers as well.
Great, thanks. I appreciate it.
George Kurosawa: Thank you. Our next question comes from the line of a George Kurosawa. Hey, thanks for taking the questions. Maybe as it relates to the macro backdrop, if you could talk about kind of linearity in the quarter. Transcripts provided by Transcription Outsourcing, LLC. You know, I wouldn't say there was anything material to note in terms of things improving throughout the quarter, or even in July. You know, typically in our business, Q3 has been seasonally a weaker quarter and Q4 seasonally a stronger quarter. You know, we'll see if that plays out. But in terms of the macro, nothing, nothing meaningful.
Speaker Change: Thank you. And our next question comes from the line of George karim-salah with City. Please proceed with your question.
George karim-salah: Hey, thanks for taking the questions. Maybe is it relates to the macro backdrop? If you could talk about kind of linearity in the quarter, did things improve as the quarter progressed and any comments on how things are are training so far into July,
George karim-salah: you know, I wouldn't say there was anything material to note in terms of things improving throughout the quarter, um, or even in July, um, you know, typically in our business Q3 has been seasonally a week or quarter in Q4 seasonally a stronger quarter. Um, you know, we we'll see if that plays out. But, um, in terms of the macro,
George karim-salah: Nothing. Nothing meaningful.
George Kurosawa: Okay, that's helpful.
Eric Clark: And then on the this 2026-2027 renewal cycle that you're, you're gearing up for anything you can help us with in terms You know, when you're looking at the timelines for when we should expect those to really start to kick in, when you have kind of the big book of business coming back to the table, and how you're thinking about success relative to. Renewal Cycles. Yeah, so, you know, it's not going to hit in one big wave, all of a sudden, it hits, it gets a little bit bigger every quarter. So it can sneak up on you if you're not prepared for it.
Speaker Change: Okay, that's helpful. And then on the this 2026 2027 renewal cycle that you're you're gearing up for anything. You can help us with in terms of, you know, when you're looking at the the timelines for when we should expect those to really start to to kick in when you have kind of the big book of of business uh coming back to the table and and um how you're thinking about success relative to, you know, renewal Cycles you've seen in the past.
Eric Clark: And that's why we are, you know, making a very clear effort to be prepared for it and build the team, build the comp plan, build the structure all around it, so that we can measure it very well. And in fact, we're already measuring at 18 months out, you know, we're looking at the next 18 months, what the renewals are coming in, making sure that we're preparing, and making sure that we can have the right cross sell conversations in advance, so they can have their budgets ready, and we can maximize this opportunity.
Speaker Change: Yeah, so, um, you know, it's not going to hit in 1 big way of all of a sudden. It, it hits, it. It gets a little bit bigger of recorder, so it it's, it can sneak up on you if you're not prepared for it. And that's why we are, you know, making, uh, a very clear effort to be prepared for it and build the team build the comp plan, build the structure all around it, so that we can measure it very well. Um, and in fact, we're already measuring at 18 months out, you know, we're looking at the next 18 months, what the renewals are coming in, making sure that we're preparing and, and making sure that we can have the right cross sell conversations in advance, so that they can have their budgets ready. And we can maximize this opportunity.
Unknown Executive: Great, thanks for taking the question. Thank you.
Speaker Change: Great. Thanks for taking the questions.
Speaker Change: Thank you. Our next question comes from the line of Mark Chappelle with loop capital markets. Please proceed with your question.
Unknown Executive: Hi, thank you for taking my question and nice job on the on the arc. Eric, question for you, you know, given that things kind of seem to have... Settling down a little bit since Liberation Day, what's your observation around or sentiment around CIOs moving forward with, say, large WMS or TMS? and then also since Liberation Day. You know, are you seeing any of these niches kind of being crowded out? Well, I think I think one thing is very clear that that Liberation Day was just one more reason for CIOs and boards to recognize that this is mission critical software.
Speaker Change: Hi. Thank you for taking my question and uh, nice job on the, on the RPO print. Uh, Eric question for you, you know, given that things kind of seem to have, uh, be settling down a little bit since since Liberation day. What's your observation around or sentiment around cios moving forward with say, large WMS or t must upgrade your expansions. And and then also since Liberation day, you know, are, are you seeing any of these niches kind of being crowded out by other priorities?
Eric Clark: And, you know, what we are seeing is You know, while some of the uncertainty is maybe getting more clear, and some of the uncertainty is getting more common, people are figuring out how to work around the uncertainty. We're seeing that the most forward leaning companies are not holding back on investing in supply chain, they recognize this as a differentiator, and they recognize it as something that they need to, you know, look for strategic advantages. So we're not seeing large customers use this as a place to save money. That being said, I'll continue to use the same caution that when it comes to rollout cycles, you know, that's where they have, you know, a little bit more flexibility and how quickly they want to spend and how quickly they want to deploy.
Speaker Change: I think 1 thing is very clear that that Liberation day was just 1, more reason for cios and boards to recognize that this is Mission critical software. And um you know what we are seeing is
you know, while some of the uncertainty is maybe getting more clear and some of the uncertainty is getting more common, people are figuring out how to work around the uncertainty. Um, we're seeing that the most forward-leaning companies are not holding back on investing in supply chain. They they they recognize this as a differentiator and they recognize it as something that they need to, you know, look for strategic advantages. Um so we're not seeing large customers. Use this as a place to save money.
Speaker Change: Great. Yeah that being said I'll I'll I'll continue to use the the same caution that when it comes to rollout Cycles you know that that's where they have you know, a little bit more flexibility and how quickly they want to spend and how quickly they want to deploy.
Eric Clark: Thank you. And then, you know, I appreciate your earlier comments on the go-to-market investments from On the marketing front or market awareness front, what can we expect on that front? Yeah, you know, we're in a period of change right now. So I think maybe, maybe a quarter for now, we can give you a bigger update on what that's going to look like. But we have an open search for a chief marketing officer. And, you know, we've, we've made it clear that we want to, we want to invest, we want to, you know, change our awareness and presence in the market.
Speaker Change: Great, thank you. And then, um, you know, I appreciate your earlier comments, uh, on your on the go to market Investments, you're making
Um, on on the marketing front or or Market, awareness front. What what can we expect uh, on that front for the, for the balance of the year?
Unknown Executive: And, you know, we're, we're taking the steps to make sure that we do that. Thank you.
Speaker Change: Yeah. You know, we're in a period of change right now. Um so I think maybe maybe a quarter for now we can give you a bigger update on what that's going to look like. But we have an open search for a chief marketing officer and and you know, we've we've made it clear that we want to, we want to invest, we want to, you know, change our awareness and presence in the market. Um, and, you know, we're we're taking the steps to make sure that we do that.
Chris Quintero: That's all for me. Thank you.
Speaker Change: Thank you. That's all for me.
Eric Clark: Our next question comes from the line of Chris Quintero.
Speaker Change: Thank you. And our next question comes from the line of Chris Quinto with Morgan Stanley, please receive with your question.
Eric Clark: Eric, Dennis, great to be on the call here with you all. How far along are we on those? How much more is left? And when you think about the new sales reps that you're hiring? Yeah, so in terms of how far along, we're just getting started. You know, I mentioned a lot of these hires were in the past quarter since the last time we did this earnings call. Backgrounds, they're, you know, coming from our competitors in many cases. And, you know, they're coming from the competitors that we're often routinely beating, and they want to come be a part of Manhattan.
Hey Dennis, uh, great to be on the call here with you all. Thanks for taking the question. Um,
Speaker Change: Some of the the go to market changes here.
Speaker Change: Here's kind of how, how far along are we on those, how much more is left? And when you think about the, the new sales reps that you're hiring, what's the kind of background and profile? And, and
Speaker Change: Be that different from the historical.
Speaker Change: Sales throughout that you all have.
Eric Clark: So, you know, this group of people that we hired has experience across, you know, Yonder and Oracle, Mad Mobile, Walmart, you know, and just about every competitor, you know, we're bringing in people that understand those businesses and can help us, you know, build a better product and create more market awareness around our product.
Yeah. So in terms of how far along we're, we're just getting started, you know, you know, I mentioned a lot of these hires were were in the past quarter, since the, last time we, we did this earnings call, um, backgrounds. They're, you know, coming from our competitors, in many cases. And, um, you know, they're they're coming from the competitors that were often routinely beating and they want to come be a part of Manhattan. So, um, you know, this, this group of people that we hired has experienced
Speaker Change: Across, you know, Blue Yonder, and Oracle, uh, Mad Mobile, um, uh, Walmart. Um, you know, and just about every competitor, you know, we're we're bringing in people that that understand those businesses and can help us, you know, build a better product and, and uh, create more Market awareness around our product.
Eric Clark: All right, that's helpful, Eric.
Eric Clark: And then I want to follow up on services. before your Yeah, we're staying conservative. You know, again, that's, that's the part of our business that the customers have a lot of flexibility, it's time and material contracts. And if they if they want to, you know, put their foot on the throttle and really go fast, we can help them do that. But if they want to slow down, we do that with them as well. So we're just taking a conservative approach. And, you know, but we're pleased with where we are at this point in the year.
Speaker Change: Got it? That's that's helpful. Eric. Um and I want to follow up on Services. Really nice to see that outperformance in the quarter um before your guide stays unchanged. So just curious like any change on how you're thinking about the full year or just staying conservative
Speaker Change: Yeah, we're staying conservative. You know, again that's that's the part of our business. That that customers have a lot of flexibility, its time and material contracts. And if they, if they want to, you know, put their foot on the throttle and really go fast. We, we can help them do that. But if they want to slow down, we we do that with them as well. So, um, we're, we're just taking a conservative approach and, um, you know, uh, but we're pleased with where we are at this point in the year.
Unknown Executive: Next one. Thank you. And with that, there are no further questions at this time.
Speaker Change: Excellent, thank you.
Eric Clark: I'd like to turn the call back to Eric Clark for closing remarks. Yeah, thanks very much. Appreciate you joining and appreciate all the questions. You know, bottom line, we're pleased we had a very solid quarter and we did, you know, better than expected and had great new logo performance and great margin expansion. I'm personally very excited about the go to market changes. I'm excited about what Bob can bring to the global team. And, you know, also excited to see the impact that agentic AI will have on our business in the second half and beyond. Great.
Speaker Change: Thank you. And with that there, no further questions at this time, I'd like to turn the call back to Eric Clark for closing remarks.
Speaker Change: Yeah, thanks very much. Uh, appreciate you joining and appreciate all the questions. Um, you know, bottom line. We're we're pleased, we had a very solid quarter and we did, you know, better than expected and had great new logo, performance and great margin expansion. Um, I'm I'm personally very excited about the go to market changes. I'm excited about what Bob can bring to the global team? Um, and uh, you know, also excited to see the impact that agentic AI will have on our business in the second half and Beyond.
Unknown Executive: Thank you.
Unknown Executive: And everyone, this does conclude today's teleconference.
Unknown Executive: We thank you for your participation. Disconnect your lines.
Great, thank you. And everyone, this does conclude today's teleconference we thank you for your participation. You may disconnect your lines at this time.