Q3 2025 Manhattan Associates Inc Earnings Call

Warehouse and active omni.

A global developer manufacturer and distributor of pharmaceuticals converted from on Prem to act of warehouse.

Food and beverage distributor converted from on Prem to active warehouse and at the same time added our entire active portfolio, including active transportation active omni and active supply chain planning.

A leading telecommunications company became a new logo with active scale as well as a number of others.

And while the timing of large deals in the mix of bookings will vary on a quarterly basis, we believe our bookings breath 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.

To successfully execute on these robust opportunities we continue to strategically invest in our sales and marketing team and mature our go to market partnerships.

I want to share several updates since our last call.

First we continue to add key sales talent to the team, including sales specialists in our newer products.

Additionally, in Q3, we launched a dedicated renewal team led by our Manhattan veteran this team brings consistency across all of our renewables to make sure. We are maximizing the opportunity for cross sell and expansion at the time of renewal.

We also launched a conversion program. This enables us enables us to take a more proactive and consultative approach to converting our on prem customers to Manhattan active.

We've been very encouraged by the early results, including some early wins and significant pipeline growth for conversions.

And this afternoon, we announced the addition of Greg bets to the newly created position of Chief operating Officer, Greg brings more than two decades of experience leading complex global organizations. He has a proven track record of operational excellence and strategic execution. Most recently, Greg led Microsoft's global cloud Onboarding organization.

Fast track a flagship program designed to accelerate customer conversions to Microsoft's cloud solutions.

In his new position here at Manhattan, Greg will play a key role in helping scale the operational frameworks around conversions in renewals as well as drive the next generation of our partner model across global size, Manhattan's specialists and technology partners like Google and Shopify I'm delighted to welcome Greg to the team.

So now I'll turn to some updates on our products, we are investing in <unk> across all of our Manhattan active solutions and we are focused on delivering high impact to use cases for key personas across our user community.

Earlier this month, we made good on the promise that we made at momentum about being ready to rollout Agentic AI. This fall. We're currently working with a number of strategic customers as part of an early access program focused on agent deployments.

Applications covered as part of this early access program include warehouse transportation store and contact center.

Our aim is to gather feedback create additional capabilities and rollout to multiple groups of early access customers throughout this quarter, we will move to general availability for this initial set of agents in early 2026.

So I'd like to share a couple of examples of the value that our initial set of agents are already providing.

Inactive warehouse, we have embedded agents into the workflow that monitor operational performance in real time and make high impact recommendations. The key user to make key users more productive. This includes areas like wave planning, which drives all of the outbound activity within a D. C. R.

Our wave agent empowers DC Super users to ensure that orders are being allocated effectively and turned into task and those tasks are being released reliably and completed on the DC floor.

Inactive transportation, we have created freight audit and pay agents by automating the induction and payment of freight bills, our agents increase efficiency speed and accuracy, while reducing or even removing the need for human involvement.

And remember all of this is executed within our unified cloud native API platform embedding AI agents into the workflow to make people more productive no data lakes no latency deployed in minutes not months and creating value for our customers in real time.

Another announcement that we made at momentum was the launch of the new product enterprise promise and fulfill.

<unk> is designed to work seamlessly with leading ERP like SAP to help our customers at agility and responsiveness to their supply chains with.

With EPS, we help our customers monetize their inventory more effectively by helping them sell to anyone and fulfill from anywhere and we improve the end customer experience by providing transparency and flexibility throughout the fulfillment process.

We already have a number of customers live with EPS and we've signed some substantial new deals recently, including one of the large global <unk>.

As our wholesale customers continue to find growth through acquisition and industry consolidation. They are faced with increasingly complex and fragmented fulfillment networks their ability to maximize their value of acquisition hinges in part on their ability to hide this network complexity and instead to present, a simple interface to their sales force and EPS.

Some do just that.

<unk> also serves another important purpose for us it provides a natural bridge between our supply chain planning and supply chain execution solutions, particularly outside of retail the combination of planning an ETF serves as a nexus of network inventory and facilitates the forecasting procurement promising and selling of that.

Inventory across the widest possible market.

And speaking of supply chain planning, we continue to make progress in this exciting new focus area for us our message around unifying planning and execution is absolutely resonating and it's helping us find our way into deals that we werent seeing just a year ago.

The cloud native architecture, which underpins the Manhattan active platform allows us to unlock use cases that vendors focused only on planning simply can't match. We now have our first customer live on supply chain planning a U S based retailer with over 700 stores. This customer also runs active warehouse and active trans.

<unk> a number of the other customers that we have going live in the next few months also run other Manhattan active products, reflecting the strength of the cross sell potential.

We also continue to hire planning talent aggressively into our engineering teams, allowing us to make rapid progress on building out both core planning capabilities as well as differentiating unification features across planning and execution.

So that concludes my product up today update and before I hand, it off to Dennis I'd like to share that as we indicated last quarter, our chairman Eddie Capel, we'll be completing his transition away from any remaining executive management responsibilities as of January one and we will continue in his role as chairman of the board.

And with that Dennis will provide you with an update on our financial performance and outlook and then I'll close our prepared remarks before we open it up to Q&A, So Dennis over to you.

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 as our reported results returned to the exceeding the rule of 40, and we continued to generate solid.

Free cash flow.

Regarding FX in Q3, it was a one point tailwind to year over year total revenue growth, but did not have a material impact on year to date revenue growth.

<unk> was a $2 million headwind to.

Two potential <unk>.

Sequential <unk> growth and a $7 million tailwind to year over year <unk> growth.

Now turning to our Q3 results our growth rates are reported on a year over year basis, unless otherwise stated.

For the quarter total revenue was $276 million up 3%, excluding license and maintenance revenue, which removes the compression driven by our cloud transition our total revenue was up 7%.

Cloud revenue increased 21% to $105 million and was slightly better than expected.

Services revenue declined 3% to $133 million driving the better than expected performance was solid execution and timing of about $2 million of service revenue shifting to Q3 from Q4.

As previously discussed the year over year decline in services revenue reflects customary budgetary constraints that shifted services work to future periods.

We ended Q3 with RP O of $2 1 billion up 23% compared to the prior year and 3% sequentially.

As Eric discussed unlike the year ago period, our bookings were impacted by the Lumpiness of large deals in Q3 seasonality.

Importantly, Manhattan's demand remains robust win rates are strong and our year to date bookings performance has accelerated compared to the year ago period.

Again in light of these factors, we expect to achieve towards the high end of our 2025 RP O outlook.

Ex FX, despite the ongoing macro uncertainty.

Our average contract duration remains at five five to six years and as previously discussed some customers are electing longer ramp timelines.

Well our customer contracts are noncancelable, we believe the current macro environment has resulted in customers, taking a more conservative approach to the implementation timeline of their contracts.

Accordingly, we expect 38% of RP O to be recognized as revenue over the next 24 months.

As we've previously stated our teams are focused on accelerating the adoption of our products and this will be one of the key areas of focus for our newly appointed CEO. Greg beds also remember our contracts always allow customers to amend their timeline for quicker deployments.

But not slower ones.

Adjusted operating profit was $103 million with an adjusted operating margin of 37% and a 5%.

This is up about 40 basis points year over year and nicely ahead of plan. Our performance was driven by strong cloud revenue growth combined with operating leverage as our cloud business continues to scale.

Turning to turning to earnings per share, we delivered Q3 adjusted earnings per share of $1 36 up 1% and GAAP.

EPS of <unk> 96 down 7%.

As discussed last quarter, our higher tax rate is due 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 benefited Q3 operating cash flow by approximately $20 million and will likely benefit Q4 operating cash flow by about $15 million.

So moving to cash operating cash flow increased 49% to $93 million, removing the benefit from the U S tax law change operating cash flow increased about 18%.

As reported this resulted in a 32% free cash flow margin and a 38% adjusted EBITDA margin.

Year to date, our operating cash flow is up 27% to $242 million.

Regarding the balance sheet deferred revenue increased 17% to $297 million, we ended the quarter with $264 million in cash and zero debt.

In the quarter, we leveraged our strong cash position and invested $50 million in share repurchases, resulting in $200 million in <unk>.

Buybacks year to date.

Additionally, our board has approved a replenishment of our $100 million share repurchase authority.

Now onto our updated 2025 guidance.

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. These are drivers to our best in class return on invested capital as we maintain a balanced inverse.

<unk> approach to growth and profitability.

As noted on prior earnings calls our goal is to update our RP.

Outlook on an annual basis year to date FX has been about a $40 million tailwind to RPM and removing this impact we expect to achieve towards 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.

This was evidenced by our Q3 performance and our expectations of a strong conclusion of the year.

As discussed earlier on this call the macro environment remains uncertain, while clarity on external variables remains limited given our strong year to date performance. We are raising our full year total revenue operating margin and EPS outlooks. This guidance is also.

<unk> in our earnings release.

With that for RPM.

We continue to target to one 1 billion to $2 $1 5 billion, excluding FX movements for total revenue. We expect 1.03 billion to 1.0, $7 7 billion with a 1.075 billion midpoint comparing favor favorably.

To our prior outlook due to our year to date outperformance.

For adjusted operating margin, we are increasing the mid point to 35, 6% from our prior midpoint of 35%.

While increasing investment in our business.

Our full year adjusted earnings per share midpoint is increasing 16.

$4 96.

While our GAAP earnings per share midpoint increase of 17%.

To $3 44.

This implies Q4 total revenue of $264 million, which is $3 million lower than our prior Q4 midpoint as we now anticipate $1 million less of hardware revenue and as previously discussed the time.

Being a $2 million of services revenue that shifted to Q3 from Q4.

This results in our adjusted operating margin target of 33% and earnings per share of $1 11.

Now moving to our 2026 preliminary parameters to be better aligned with our software peers and to provide adequate time for calendar budget cycles to firm up.

Going forward, we intend to provide our initial annual guidance that will continue to include all the familiar line item transparency on our Q4 call.

Otherwise our philosophy towards guidance remains unchanged and given our visibility we continue to expect 20% cloud revenue growth in 2026.

And as Eric previously highlighted we also expect services to grow in 2026.

Additionally, with initiatives now in place to drive migration of our maintenance paying customers to cloud, we anticipate maintenance attrition will begin to accelerate next year.

Removing the impacts of license and maintenance attrition, we expect our adjusted operating margin to expand between 50 to 75 basis points, which is in line with our historical approach to margin expansion.

Also increasing investment in our business, particularly in sales and marketing.

And finally, while the global macroeconomic environment remains volatile and we are in the very early stages of our 2026 budget cycle. We believe consensus 2026 estimates are generally appropriate and.

In summary.

Solid year to date execution by the Manhattan team globally, and we are looking forward to ending the year strong. Thank you and back to Eric with some closing remarks.

Great. Thank you Dennis we are pleased with our Q3 and year to date financial results and while we had to navigate some seasonality in Q3, we expect to achieve towards the high end of our Rps goals in 2025 and grow cloud revenue in 2020% in 2026.

We are optimistic about our expanding market opportunity and we're making strategic investments to accelerate our growth initiatives to drive new logos cross sell our unified product portfolio and convert our on premise customers to the cloud.

And with that thank you to everyone for joining the call and thank you to the Manhattan team for their dedication to our customers and that concludes our prepared remarks, and we'd be happy to take any questions.

Thank you.

We will now be conducting a question and answer session. If you would.

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Our first question comes from Terry Tillman from true with Securities. You May proceed with your question.

For taking my questions good afternoon, Eric and Mike too.

Two questions.

There's a lot of investor focus on RPM on a lot of interest in the story in general but in particular RVO.

I know you're not giving any perspective for next year, but can you just share a little bit more on maybe your level of optimism about <unk> levels, and just visibility into that potential metric as we move into 'twenty and beyond because theres a lot of things going on here youre going to get renewals base next year potential cross selling conversions et cetera, just anything at least qualitatively you could share more around <unk>.

Do you think going forward and just optimism there and then had a follow up.

Sure so.

When you look at the third quarter RP O. If you normalize the year ago period for FX, it's actually double digit growth of <unk> in third quarter, So and Thats.

Also 23% increase year over year.

When you look forward the fourth quarter and next year I think one of the things that.

Gives us a lot of clarity and a lot of optimism.

And where we expect to be with <unk> next year as the renewal cycle and you mentioned that and it's something that we've talked about before if you think about the way we talk about current RPI keep in mind current RVO is 24 months, we've got a major renewal cycle coming over the next 18 months and those are some big warehouse management customers that.

Current RPI is dwindling down to zero until we renew and then it gets kind of re upped at a larger scale than it was before so.

Having visibility to that renewal cycle and visibility to what we've got in the pipeline is what gives us that confidence.

That's great Thanks, Erik for that.

I felt like I always like hearing about the customer examples in the diversity for the new deals.

More of this quarter I felt like on conversions, but I'd, just like to unpack a little bit more on some of your conversion strategies and unlocking this on prem customer base and getting them to move to cloud so kind of related to that how are you thinking about the mix of cloud for your WNS customer base may be ending this year and as we look out for the next couple of years, how do you see it trending thank you.

Yes, so thanks for the question as Terry.

Pretty excited about the early success around conversions. So I stated a quarter ago that we were going to take a more proactive and a more consultative approach to conversions. Our theory historically has been our customers will convert when they are ready and we had more focus on going out and taking share from our competitors as opposed to.

Converting our on Prem to the cloud and as I stated before we.

We haven't lost any on from customers to anybody elses cloud. So we've had success in letting them convert when they are ready to convert.

As.

The most recent versions of our on Prem software get older and older. The opportunity that is in front of these customers with the newest version of our cloud is getting bigger and bigger and the gaps between those on Prem versions is getting bigger and bigger and.

Bringing in Agentic AI is going to make that change even faster. So we've taken a as I mentioned a more consultative approach.

Gone out to our first cohort of customers, which we identified about 100 customers that were similar they're all warehouse customers. They're all similar size running a similar similar number of warehouses. So we had confidence to go out to them and offer them fixed fee fixed timeline conversion to active warehouse and we.

We're very pleased by the pickup rate and the number of customers that we are ready to have that conversation quickly once they learned more about it so.

That very quickly turned into about 30, new pipeline deals for us and we saw deal closing in Q3, we've got more expected to close in Q4, and it's given a whole lot of energy around our conversion pipeline, which as you know creates cloud revenue and creates services revenue. So in Q4, we were.

I'll take that two additional cohorts from warehouse management. We're also taking it to a cohort around transportation management and were even using a similar theory to go after some of our customers that may be behind in their DC rollouts and offer them faster ways in fixed fee ways to get back on track with our DC rollout. So.

Lot of excitement in the building here around what that is driving for us.

I appreciate that good luck in the <unk>. Thank you.

Thank you Terry.

During this question and answer period, we ask for one question and one follow up our next question will be from Brian Peterson from Raymond James.

Proceed with your question.

Thanks, gentlemen for taking the question. So Eric you talked about the fourth quarter was off to a pretty strong start in terms of RPI, where bookings is there any additional color that you could add to that and maybe how does that fourth quarter look so far this year versus what you saw in the fourth quarter of last year at this point in the year.

I think in any software business. The linearity typically is towards month three in a quarter, but sometimes when you have deals push into the next quarter and slip into the next quarter that gets you off to a quicker start.

Compared to a year ago, we experienced some of that a year ago, we had a.

Lower bookings Q3.

And.

Similar this year and I think what you saw from US last year as we came back with a very strong Q4, and we expect to do something similar to that this year.

Understood.

Greg will take a very impressive higher I just want to understand from your perspective, Eric where do you see him coming in and helping you guys. As you think about the growth story going forward. Thanks, guys.

Yes, So I think I mentioned getting him involved in some of our programs around conversions in renewals strengthening maturing our partner ecosystem a lot of things that he is going to be focused on or about <unk>.

Building pipeline from both existing customers and new logos faster.

And I think as I've talked about before we've already got a lot of programs in place there, but I think we've got some low hanging fruit, where he can come in and make a difference pretty quickly.

Thank you.

Our next question comes from Joe Brunswick.

From Baird you May proceed with your question.

Hi, great. Thanks for taking my questions.

Fichtean time conversion strategy can you maybe address that risk factor associated with this approach I guess are you able to share with customers, obviously, if you're kind of comment <unk> that cohort.

They have a pretty good experience to say that Gwen.

And implementation remains and scope without change orders they have been finishing on time and on budget is that kind of the approach here and how do you think about the risk Manhattan takes on in this strategy.

Yes, so it's really about repeat ability and similarity so.

As you mentioned this cohort of customers has a lot of things that are very similar and because they are running are our software that we deployed we know exactly what they are extensions are we know how many warehouses. They have so there's not a whole lot of surprise there for us. So we can be pretty confident in what it takes.

The other thing that plays into that is as we build more and more automation and leverage AI in our conversions and deployments we want to monetize that so over time, I think youll see us doing more fixed fee across everything that we're doing just to make sure that we can monetize what we built and monetize some of the acceleration that we have.

Created.

Okay.

<unk> allows us to hold our margins.

Sure No that's important.

I wanted to be clear it is the biggest change because theyre talking when you alluded to 2026 might look the 2026 sub growth the return to growth in services margin expansion.

A lot of that had kind.

Kind of a higher level I suppose is what you have been saying is that kind of the key message here is that youre, not making kind of the explicit.

Wages that you'd normally given preliminary commentary, but generally speaking things are tracking to what you've thought about 2026.

Yes, that's right and we're comfortable that the consensus that's out there is in the right ballpark and we will give clear guidance on the next call.

Okay. Thank you.

Our next.

<unk> comes from Chris <unk> from Morgan Stanley You May proceed with your question.

Hey, RK.

Thanks for taking our questions here.

I wanted to kind of similar to Terry's question, but on the services angle, but just curious.

How would you kind of describe from a qualitative perspective in terms of the momentum as we head into 'twenty six.

It's still early but just curious at a high level any any qualitative commentary because theres a lot of stuff going on there.

Gary are you moving to more of a fixed fee.

Some of these implementation timelines, but you also have a huge.

Premise space that Youre trying to buy so I was just kind of curious at a high level, how would you kind of describe that qualitatively.

Yes. So throughout this year, we've seen the services pipeline continued to strengthen the backlog continued to strengthen so.

We are optimistic about how that's building and we are.

Feel like we're in a good place where we are right now in Q4 and feel like we're going to be in a better place as we go into next year.

So.

And again.

Look at where we are year to date growth on <unk>, we're still expecting to hit the high end of the guidance on full year <unk> exceed.

Exceeding our financial numbers in Q3 and year to date. So we're pleased with where we are in the business continues to operate well and perform well.

Got it Super helpful and then.

As you were kind of talking through some of the customer examples from the quarter I was really struck by the food and beverage customer that converted and added the entire active portfolio. So just curious if there are any kind of lessons from that conversion and how big could this be to the rest of the base.

Yes, so the examples I gave this quarter.

<unk> dose of conversions and a heavy dose of cross sell and that one had both.

I think the message. There is this unification story is truly resonating I mentioned that one of the big takeaways from our momentum conference in May as we had a lot of customers that said a year ago. It was a great story, but now we've seen that it's real and we've got to get on board and once they realize that it takes a bit of time, where it is.

Start happening, but it's happening and we see it in the pipeline and we saw it in the results in Q3.

Awesome. Thanks, so much.

Yes. Thank you.

Our next question comes from <unk> Becker from William Blair. You May proceed with your question.

Hey, gentlemen, appreciate it.

And maybe for Eric starting out here and you talked about kind of structure and maybe some mechanization of a handful of processes around conversions renewals, we've talked about partners in the past all of that kind of ties into growing capacity and backlog kind of evident in the IPO and bookings commentary maybe about how are you thinking about.

<unk>.

Scaling the Si ecosystem to help kind of match the capacity side of the equation relative to what feels like a pretty healthy.

Backlog in growth from a demand perspective as things shape up into 2026.

Yes, so we've started to having those conversations with our Si partners. In fact, we had one of them here in the office all day today and Theyre pretty excited about where we're headed as well I think some of the changes that we're making really put us our partner program more similar to what they are used to with service now our sales force, where they've got more clearer expectations of how we're.

To support them and help them grow their business, but also a more clearer expectations about what we expect from them in terms of bringing us opportunities in bringing us deals and then having us help them win those deals together so I think.

Building that clarity and that trust. The other thing that we did is <unk>.

Greg will be taking over our training education certification team, which which will make it more easily available for our partners and will give us a better opportunity to build that ecosystem of certified consultants out in the market and also <unk>.

Our partners on how many certified consultants they've got by product to make sure that they are building their teams the way that we need and expect them to.

Okay. Okay. That's very helpful and then maybe.

Your Internet, obviously foundry at the conference and the opportunity for AI and agents, maybe some early use cases more deployments.

Deployments expected here in 2026, but could you talk or expand on some of kind of the receptivity and use cases, you are seeing from customers maybe to what extent, that's serving as an additional care.

This accelerated kind of conversion opportunity.

Called out several examples around kind of unification it feels like to get full platform value.

I adopt more and lean into the Atlantic approach, but wondering if that's resonating in conversations.

Yes, so thanks for that and that quick short answer is yes, it's resonating very well and in fact as the word has gotten out in the Manhattan community that we have some early access customers out there.

I've been in a few conversations with customers, where they've told me Hey, I thought I was one of your best customers how come I'm not in the early access program. So we've had to let some more in and we've continued to have waves of customers getting into the early access program and the feedback has been.

Been quite positive and very encouraging in fact.

The Transportation example, that I gave earlier one of our customers even asked if they could extend that across the part of transportation that isn't dawn Manhattan, yet and use that agent across their entire transportation network. So we're exploring that option with them as well because.

While it is in their plan to move Manhattan across their entire transportation network. If we can get our agents out there in advance that gives us an opportunity to help them move even faster across that domain.

Great. Thank you.

Thank you.

Our next question comes from Parker Lane with Stifel. You May proceed with your question.

Hey, guys. Good afternoon. Thanks for taking the question, Eric you talked about the new dedicated renewal team and lots.

The conversion program, obviously added Greg here. This afternoon, how should we think about the <unk>.

Thanks for making your sales and marketing around it.

A lot of people that have been shifted into these new teams and initiatives.

Step up in investment that you're making.

Thanks.

Yes, so definitely incremental step up in investment, but it's also a mix of leveraging.

Manhattan veterans to make sure that we've got some of that knowledge on board as well. So I mentioned that our new dedicated renewals team is led by our Manhattan veteran John Lieberman has been with the company 27 years knows knows this company inside and out.

And we've built a team around him of people that have been in the company as well as people from outside the company to have experience in renewals.

Greg is another example of bringing in somebody from Microsoft that's been very focused on conversions and.

Getting customers to not only convert but expand within the Microsoft cloud platform. So all of those concepts are things, where we want to have a combination of outside knowledge and skills and ideas with all of the deep knowledge that we've got here at Manhattan, one of the things that we take pride in at Manhattan is the longevity of this team.

And we want to make sure that we take advantage of that as well I don't think any of our competitors can put together that mix of longevity with with new skills like we can.

Got it and one follow up on a comment you made earlier about working with customers that are a little bit behind on.

DC rollout is that primarily something thats related to services and budget unlock inside of them or are there. Other commonalities that you find in that cohort that you can work on to get across the goal line.

Really it's a mix.

A mix there are some cases, where maybe they have gotten the customer has gotten focused on something else and hasnt been as focused on getting all of their warehouses rolled out.

So it's really kind of it.

I would say similar to I mentioned earlier about conversions, we've always taken the approach of they'll come to us when they are ready there has been a little bit of that with Dcs as well, maybe we'll when we sell the new deal that includes the first five warehouses and we get those done and then we move on to the next customer and we don't go ask them about six through 15. So now now we're doing that and were taken.

More proactive consultative approach to make sure they get everything deployed.

Got it thanks for the feedback.

Yes. Thank you.

Our next question comes from George <unk> from Citi. You May proceed with your question.

Hey, Thanks for taking my question here I wanted to ask about the services upside in the quarter was nice to see the stabilization there maybe if you could.

Impact of drivers of that upside in.

It seemed like a $2 million pulled from Q4 into Q3 was that a function of maybe presume to projects that had been may be paused or slowed a bit earlier in the year or was there. Some other dynamic at play there. Thanks.

Yes. Thank you so I think first and foremost the services team continues to execute at a very high level.

And some of that what you saw Q4 being pulled into Q3 as a result of that they are executing at a high level and they are finding the opportunity to bring things quicker and we've got happy customers that want to move faster. So we will continue to look for opportunities and I mentioned earlier, we've got a building pipeline and a building backlog in services.

Which gives us a whole lot of optimism going into 2026.

Okay, great Great and then.

You referenced some of the hiring and doing on a go to market side, maybe you could just give some color on how that's going relative to your plan and what the initial productivity ramp looks like for those new hires.

Yes so.

I mentioned last quarter, we had brought in new leaders for both Tms and POS. We also brought in a strategic selling leader all of those leaders are building out their teams and continue to bring in talent.

Kind of described it as a little bit of a snowball effect, we start to bring in talent that is well known in the market and that talent attracts more talent in.

You kind of go from recruiting talent to deciding which ones you want to bring in because everybody wants to join so we're kind of in a luxury right now where we've got.

Kind of a great pipeline of very strong candidates coming in and we continue to bring them in at what we think is the right pace. So that we can continue to get people.

<unk> very quickly and not have too many coming in at one time, but we will continue to have a steady steady growth of our sales team across the next several quarters.

Great Georgia.

Continue.

Also continue to drive solid margins in terms of the investment.

But Eric is talking about.

Very strong operating margins.

Thanks for calling.

Our next question comes from Guy hardware from Barclays. You May proceed with your question.

Hi, good afternoon.

Hello Hello.

Hello, Eric I was wondering if you could I know you touched on this in the last quarter about whether you could expand a little bit more on the impact of Egencia AI.

Alright, externally and internally make study internally.

The R&D to sales ratio still.

As you're investing what point would we potentially see some leverage on our R&D from Magenta Cowboy then.

So externally in terms of incremental revenues another model may have to be different for Jessica.

The SaaS model, but perhaps you could expand on that.

So internally, we are absolutely seeing leverage from Agentic AI right now.

And not just in R&D, but across just about every department within the company.

I would say specifically in R&D.

And I mentioned this last quarter as well we've taken the approach while <unk> seen some companies in the market talk about big layoffs because of agent take AI.

We've taken a different approach and that is we're doing a whole lot more by leveraging agentic AI. So we continue to add talent to the company and we continue to hire but every quarter as we do our quarterly releases on all of our products we have.

More and more features each quarter, so we're making the gap between us and the competition bigger and bigger every quarter and making it harder and harder for anybody else to be able to compete with us.

Alright, so thats internal and then external.

As I mentioned, we're really excited about what we've got with agent take AI. We've got a lot of customers that are excited about it I think what's truly unique about what we have with agent take AI and our platform is because our team has stuck to this model of <unk>.

Truly cloud native micro service API first we don't have to be talking about data lakes and we don't have to be talking about latency. We don't have to have discussions about increased security because you're moving data somewhere else and then you've got to take an action to move it back into the core system everything all of our Agentic AI can be done natively in hour.

Platform, which allows us to deploy agents in minutes not months and allows our customers to take advantage of it right away all of those things resonate very very well with our customers when they're having conversations with lots of software partners about how to take advantage of AI, it's a very different conversation with us that they.

Mike.

So that's going to create a lot of opportunities for us to truly own and control the domain around supply chain. When it comes to Agentic AI now from a revenue perspective, we've taken a very conservative approach.

We're just getting into this.

And we want to we want to work through with our customers and see what this is going to look like before we.

Start to talk about how much revenue growth, that's going to do for us again different than some of the other players in the software space.

Okay.

Just a quick follow up for Dennis just to be clear the.

Guidance of 2.11 to one five excludes FX.

Yes.

It could be a little higher than that including FX.

Yes.

Thank you.

Absolutely.

Thank you. Our next question comes from Mark Chappell from Loop capital markets. You May proceed with your question.

Thank you for taking my question Erika It was good to hear the call out on the supply chain planning win as part of the other larger deals I'm wondering if you could just provide some additional color on where the relatively new application stands with respect to say reference customers built out to to date.

And then also terrific you could just maybe touch on where you'd like to see that that product by the end of next year 2012.

Six.

Yes so.

As I've said on the past couple of calls we're ahead of schedule in terms of customers and pipeline and I think one thing thats been.

I guess expected is that it's a great unification play customers that are using warehouse and transportation, it's a natural add on.

Maybe the thing that was a little less expected, but very positive for US is we're also seeing customers look at supply chain planning as an entry point.

Two is the first product that they bought from Manhattan or the first active products that they've used.

So that's very encouraging for us.

The pipeline is.

Again.

In good shape and ahead of where we expected it to be.

No.

I don't have a number in mind of where it needs to be at the end of next year, but if you look at all of our products as we've launched them how they've grown we're very pleased with where this one is.

Great. Thank you and then just.

Shifting over to point of sale.

Discussion around point of sale. This quarter was wondering if you could just maybe spell out some of the challenges that you face in that business right now.

We're putting yourselves pretty exciting place to be so I did mention in my kind of list of new deals I talked about omni, which includes point of sale. So we do have some new point of sale in there.

And if you look purely at point of sale transactions, which is how we charge for point of sale based on transactions were up over Q3 up over 80% year over year.

That's a combination of our point of sale customers continuing to add new stores.

Store growth as well as more transactions in the stores and more registers and putting our point of sale product into more places.

Yes, I think point of sale is one of those gifts that keeps on giving and as we see our retail customers grow we're growing right along with them. So Q3 up 80% year over year, we're pretty excited about the retail season and peak coming up here in Q4.

Thank you.

Our next thank you comes from Laughlin Brown from Rothschild and co. You May proceed with your question.

Hi, Eric Dennis Thanks for the question.

Could you talk to the feedback that you've had from the early access program on <unk> II and how should we think about the gross margin impact from the installation I guess some of your peers have a point.

Pointed to a level of dilution given the high cost to compete should we expect something similar here or is the intention to preserve.

Margins within the cloud solutions.

Absolutely intention is to preserve our margins. So we are not expecting any dilution there.

We haven't shared our pricing.

The early access program.

We're still working with customers in finalizing how we're going to price. This and that's another part of the reason that we haven't really talked about revenue impact.

When we.

And in our Q4 call a quarter from now we'll have more information on how we're going to price and what we expect in that area, but I think you can be very confident that for us. This is about revenue growth and margin expansion.

That's clear thanks.

And with me I'm, sorry, sorry, sorry, I didn't say sorry, I didn't answer your full question. You also asked me the feedback we're getting I think that the key the key pieces of feedback is a lot of these customers in the early access program.

<unk> talked with other.

Partner software players about this they thought the early access program was going to be months of deployment.

Deployment, what does it take how long does it take so I think a big surprised at how quickly. We can turn these on because we truly have the standard platform. Our standard agents can be turned on and use the same day.

A lot of excitement around that and then.

Also the second piece that I would say that's pretty consistent is okay.

Okay. We can do all of this just by turning on standard agents, what if I can go build one that does this for my unique process and just getting people starting to think about what else. They can do and that's the whole point of the boundary. We can turn on the standard agents right away, but we've also got the ability to.

Build custom agents for you or we've also given you the ability to build your own custom agents or have a partner build your custom agents.

I appreciate the level of color.

Hey, guys being <unk> and the pipeline manav thought that existing customer expansion when it started to become a greater proportion just given the strong renewal cycle that.

Dissipated to come up next year or the next 18 months.

Would you anticipate this cohort to come into the pipeline.

And can you remind how could you remind me how long does it typically take.

For a customer in the pipeline to convert bookings.

Yes.

First of all when we talk about 35%.

We're talking about 35% of our new cloud pipeline. So that does not include renewals.

So renewals as a separate pipeline.

And when it comes to how long does it take to convert.

Obviously renewals and conversions and cross sell our much quicker than new logo.

The new logo pipeline.

This is not a three month sale for the most part these are typically.

Multiple quarter sales cycles.

And then once we do sell it varies by product I would say on <unk> pass we can roll out very very quickly.

And warehouse as was mentioned in some of the prepared remarks in the beginning we do have customers that take conservative or conservative approaches to the deployment of warehouses and can do that over quite some period of time, but again, all the focus that we've put around automation and leveraging AI in the deployments and.

<unk> that makes it faster easier and more economical for them to move faster because the faster they deploy the faster they achieve the ROI.

Makes sense. Thanks for your response.

Thank you.

This now concludes our question and answer session I would like to turn the floor back over to Eric Clark for closing comments.

Yes, Thank you all for joining.

Appreciate all the questions.

I guess I would close by saying, we're very pleased with where we are.

Strong fundamentals back to exceeding the rule of 40 in free cash flow margin of 32%, we're making the investments that we feel very confident are going to continue to drive the business in the right way and again confidence in hitting towards the high end of our <unk> guidance for this year and very optimistic about 2026. So thank you all.

Ladies and gentlemen, thank you for your participation. This does conclude today's teleconference. Please disconnect your lines and have a wonderful day.

Okay.

[music].

Yes.