Manhattan Associates Reports Record First Quarter Results

Rhea-AI Summary

Manhattan Associates reported a strong start to 2023 with Q1 revenue reaching $221.0 million, up from $179.0 million in Q1 2022. The company's GAAP diluted earnings per share increased to $0.62, compared to $0.48 last year, while non-GAAP adjusted diluted EPS rose to $0.80 from $0.60.

Cloud and services revenue growth exceeded expectations, with cloud subscription revenue at $57.2 million, significantly higher than $37.3 million in the same quarter last year. Despite cautious outlook due to economic conditions, the company raised its full-year guidance with total revenue expectations between $856 million and $864 million, representing a growth range of 12% to 13%.

Positive

• Q1 2023 total revenue of $221.0 million, up 23.5% YoY from $179.0 million.
• GAAP diluted EPS increased to $0.62 from $0.48 in Q1 2022.
• Non-GAAP adjusted diluted EPS rose to $0.80 from $0.60 in Q1 2022.
• Cloud subscription revenue grew to $57.2 million, up 53.6% YoY.
• Raised 2023 revenue guidance to $856-$864 million, 12-13% growth.

Negative

• License revenue decreased to $5.4 million from $8.4 million YoY.
• Total cash decreased to $181.6 million from $225.5 million at the end of 2022.

RPO Bookings Increase 42% over Prior Year on Strong Demand

Company Raises 2023 Full-Year Guidance

ATLANTA--(BUSINESS WIRE)-- Leading Supply Chain and Omnichannel Commerce Solutions provider Manhattan Associates Inc. (NASDAQ: MANH) today reported revenue of $221.0 million for the first quarter ended March 31, 2023. GAAP diluted earnings per share for Q1 2023 was $0.62 compared to $0.48 in Q1 2022. Non-GAAP adjusted diluted earnings per share for Q1 2023 was $0.80 compared to $0.60 in Q1 2022.

“Manhattan Associates is off to a great start to 2023. Demand is strong, customer satisfaction is solid, and our consistent investment in R&D continues to extend our leadership position. Cloud and services revenue growth exceeded our expectations. This drove better than expected top-line and earnings growth in the quarter,” said Manhattan Associates president and CEO Eddie Capel.

“While we remain appropriately cautious regarding the global economy, we continue to set aggressive growth and investment goals that are aligned to best help our customers digitally transform their businesses,” Mr. Capel concluded.

FIRST QUARTER 2023 FINANCIAL SUMMARY:

• Consolidated total revenue was $221.0 million for Q1 2023, compared to $179.0 million for Q1 2022.
  • Cloud subscription revenue was $57.2 million for Q1 2023, compared to $37.3 million for Q1 2022.
  • License revenue was $5.4 million for Q1 2023, compared to $8.4 million for Q1 2022.
  • Services revenue was $116.2 million for Q1 2023, compared to $89.9 million for Q1 2022.
• GAAP diluted earnings per share was $0.62 for Q1 2023, compared to $0.48 for Q1 2022.
• Adjusted diluted earnings per share, a non-GAAP measure, was $0.80 for Q1 2023, compared to $0.60 for Q1 2022.
• GAAP operating income was $47.1 million for Q1 2023, compared to $34.0 million for Q1 2022.
• Adjusted operating income, a non-GAAP measure, was $63.7 million for Q1 2023, compared to $48.1 million for Q1 2022.
• Cash flow from operations was $58.7 million for Q1 2023, compared to $31.8 million for Q1 2022. Days Sales Outstanding was 65 days at March 31, 2023, compared to 77 days at December 31, 2022.
• Cash totaled $181.6 million at March 31, 2023, compared to $225.5 million at December 31, 2022.
• During the three months ended March 31, 2023, the Company repurchased 514,838 shares of Manhattan Associates common stock under the share repurchase program authorized by our Board of Directors for a total investment of $74.2 million. In April 2023, our Board of Directors approved replenishing the Company’s remaining share repurchase authority to an aggregate of $75.0 million of our common stock.

2023 GUIDANCE

Manhattan Associates provides the following revenue, operating margin and diluted earnings per share guidance for the full year 2023:

		Guidance Range - 2023 Full Year
	($'s in millions, except operating margin and EPS)	$ Range				% Growth Range
	Total revenue - current guidance	$856		$864		12%		13%
	Operating margin:
	GAAP operating margin - current guidance	18.6%		18.9%
	Equity-based compensation	7.8%		7.8%
	Adjusted operating margin(1) - current guidance	26.4%		26.7%
	Diluted earnings per share (EPS):
	GAAP EPS - current guidance	$2.00		$2.06		-1%		1%
	Equity-based compensation, net of tax	0.90		0.90
	Excess tax benefit on stock vesting(2)	(0.05)		(0.05)
	Adjusted EPS(1) - current guidance	$2.85		$2.91		3%		5%
	(1) Adjusted operating margin and adjusted EPS are non-GAAP measures that exclude the impact of equity-based compensation and related income tax effects.
	(2) Excess tax benefit on stock vesting expected to occur primarily in the first quarter of 2023.

Manhattan Associates currently intends to publish in each quarterly earnings release certain expectations with respect to future financial performance. Those statements, including the guidance provided above and guideposts in the supplemental information below, are forward looking. Actual results may differ materially. See our cautionary note regarding “forward-looking statements” below. Those statements do not reflect the potential impact of mergers, acquisitions or other business combinations that may be completed after the date of the release.

Manhattan Associates will make this earnings release and published expectations available on the investor relations section of the Manhattan Associates website at ir.manh.com. Following publication of this earnings release, any expectations with respect to future financial performance contained in this release, including the guidance and guideposts, should be considered historical only, and Manhattan Associates disclaims any obligation to update them.

CONFERENCE CALL

Manhattan Associates’ conference call regarding its first quarter financial results will be held today, April 25, 2023, at 4:30 p.m. Eastern Time. The Company will also discuss its business and expectations for the year and next quarter in additional detail during the call. We invite investors to a live webcast of the conference call through the Investor Relations section of the Manhattan Associates website at ir.manh.com. To listen to the live webcast, please go to the website at least 15 minutes before the call to download and install any necessary audio software. The Internet webcast will be available until Manhattan Associates’ second quarter 2023 earnings release.

GAAP VERSUS NON-GAAP PRESENTATION

Manhattan Associates provides adjusted operating income and margin, adjusted income tax provision, adjusted net income, and adjusted diluted earnings per share in this press release as additional information regarding the Company’s historical and projected operating results. These measures are not in accordance with, or alternatives to, GAAP, and may be different from similarly titled non-GAAP measures used by other companies. The Company believes the presentation of these non-GAAP financial measures facilitates investors’ ability to understand and compare the Company’s results and guidance, because the measures provide supplemental information in evaluating the operating results of its business, as distinct from results that include items not indicative of ongoing operating results, and because the Company believes its peers typically publish similar non-GAAP measures. This release should be read in conjunction with the Company’s Form 8-K earnings release filing for the three months ended March 31, 2023.

Non-GAAP adjusted operating income and margin, adjusted income tax provision, adjusted net income and adjusted diluted earnings per share exclude the impact of equity-based compensation – net of income tax effects. We include reconciliations of the Company’s GAAP financial measures to non-GAAP adjustments in the supplemental information attached to this release.

ABOUT MANHATTAN ASSOCIATES

Manhattan Associates is a technology leader in supply chain and omnichannel commerce. We unite information across the enterprise, converging front-end sales with back-end supply chain execution. Our software, platform technology and unmatched experience help drive both top-line growth and bottom-line profitability for our customers.

Manhattan Associates designs, builds and delivers leading edge cloud solutions so that across the store, through your network or from your fulfillment center, you are ready to reap the rewards of the omnichannel marketplace. For more information, please visit www.manh.com.

This press release contains “forward-looking statements” relating to Manhattan Associates, Inc. Forward-looking statements in this press release include, without limitation, the information set forth under “2023 Guidance” and “Guideposts,” statements we make about market adoption of our cloud-based solution and other statements identified by words such as “may,” “expect,” “forecast,” “anticipate,” “intend,” “plan,” “believe,” “could,” “seek,” “project,” “estimate” and similar expressions. Prospective investors are cautioned that any of those forward-looking statements are not guarantees of future performance and involve risks and uncertainties, and that actual results may differ materially from those contemplated by those forward-looking statements. Among the important factors that could cause actual results to differ materially from those indicated by those forward-looking statements are: economic conditions, including inflation; disruption in the retail sector; delays in product development; competitive and pricing pressures; software errors and information technology failures, disruption and security breaches; disruption in the retail sector; risks related to our products’ technology and customer implementations; global instability, including the war in Ukraine; and the other risk factors set forth in Item 1A of the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, and in Item 1A of Part II in subsequent Quarterly Reports on Form 10-Q. Manhattan Associates undertakes no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes in future operating results.

MANHATTAN ASSOCIATES, INC. AND SUBSIDIARIES Condensed Consolidated Statements of Income (in thousands, except per share amounts)
		Three Months Ended March 31,
		2023		2022
		(unaudited)		(unaudited)
Revenue:
Cloud subscriptions		$57,220		$37,297
Software license		5,352		8,358
Maintenance		35,650		35,302
Services		116,170		89,918
Hardware		6,621		8,081
Total revenue		221,013		178,956
Costs and expenses:
Cost of cloud subscriptions, maintenance and services		103,327		83,025
Cost of software license		302		402
Research and development		30,794		27,455
Sales and marketing		18,065		14,390
General and administrative		19,953		17,965
Depreciation and amortization		1,487		1,747
Total costs and expenses		173,928		144,984
Operating income		47,085		33,972
Other income, net		143		738
Income before income taxes		47,228		34,710
Income tax provision		8,437		4,118
Net income		$38,791		$30,592
Basic earnings per share		$0.62		$0.48
Diluted earnings per share		$0.62		$0.48
Weighted average number of shares:
Basic		62,211		63,213
Diluted		62,767		63,871

MANHATTAN ASSOCIATES, INC. AND SUBSIDIARIES Reconciliation of Selected GAAP to Non-GAAP Measures (in thousands, except per share amounts)
			Three Months Ended March 31,
			2023		2022
Operating income			$47,085		$33,972
Equity-based compensation (a)			16,640		14,138
Adjusted operating income (Non-GAAP)			$63,725		$48,110
Income tax provision			$8,437		$4,118
Equity-based compensation (a)			2,409		2,182
Tax benefit of stock awards vested (b)			2,955		4,375
Adjusted income tax provision (Non-GAAP)			$13,801		$10,675
Net income			$38,791		$30,592
Equity-based compensation (a)			14,231		11,956
Tax benefit of stock awards vested (b)			(2,955)		(4,375)
Adjusted net income (Non-GAAP)			$50,067		$38,173
Diluted EPS			$0.62		$0.48
Equity-based compensation (a)			0.23		0.19
Tax benefit of stock awards vested (b)			(0.05)		(0.07)
Adjusted diluted EPS (Non-GAAP)			$0.80		$0.60
Fully diluted shares			62,767		63,871

(a)

Adjusted results exclude all equity-based compensation to facilitate comparison with our peers and because it typically does not require cash settlement. As explained in our Current Report on Form 8-K filed today with the SEC, we do not include that expense when assessing our operating performance. We do not receive a GAAP tax benefit for a portion of our equity-based compensation, mainly due to Section 162(m) of the Internal Revenue Code, which limits tax deductions for compensation granted to certain executives.

			Three Months Ended March 31,
			2023		2022
Cost of services			$6,516		$5,137
Research and development			3,655		3,189
Sales and marketing			1,648		1,406
General and administrative			4,821		4,406
Total equity-based compensation			$16,640		$14,138

(b)

Adjustments represent the excess tax benefits and tax deficiencies of the equity awards vested during the period. Excess tax benefits (deficiencies) occur when the amount deductible on our tax return for an equity award is more (less) than the cumulative compensation cost recognized for financial reporting purposes. As discussed above, we exclude equity-based compensation from adjusted non-GAAP results to be consistent with other companies in the software industry and for the other reasons explained in our Current Report on Form 8-K filed with the SEC. Therefore, we also exclude the related tax benefit (expense) generated upon their vesting.

MANHATTAN ASSOCIATES, INC. AND SUBSIDIARIES Condensed Consolidated Balance Sheets (in thousands, except share and per share data)
		March 31, 2023				December 31, 2022
		(unaudited)
ASSETS
Current assets:
Cash and cash equivalents		$	181,595			$	225,463
Accounts receivable, net of allowance of $6,140 and $6,009, at March 31, 2023 and December 31, 2022, respectively			160,568				166,767
Prepaid expenses and other current assets			29,341				23,145
Total current assets			371,504				415,375
Property and equipment, net			12,049				12,803
Operating lease right-of-use assets			16,973				17,794
Goodwill, net			62,233				62,230
Deferred income taxes			39,743				37,206
Other assets			28,341				24,770
Total assets		$	530,843			$	570,178
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable		$	25,357			$	25,701
Accrued compensation and benefits			45,802				54,469
Accrued and other liabilities			24,452				24,569
Deferred revenue			216,312				208,807
Income taxes payable			10,830				2,049
Total current liabilities			322,753				315,595
Operating lease liabilities, long-term			13,044				14,065
Other non-current liabilities			13,974				13,718
Shareholders' equity:
Preferred stock, no par value; 20,000,000 shares authorized, no shares issued or outstanding in 2023 and 2022			-				-
Common stock, $0.01 par value; 200,000,000 shares authorized; 62,026,840 and 62,191,570 shares issued and outstanding at March 31, 2023 and December 31, 2022, respectively			620				621
Retained earnings			207,176				253,711
Accumulated other comprehensive loss			(26,724	)			(27,532	)
Total shareholders' equity			181,072				226,800
Total liabilities and shareholders' equity		$	530,843			$	570,178

MANHATTAN ASSOCIATES, INC. AND SUBSIDIARIES Condensed Consolidated Statements of Cash Flows (in thousands)
		Three Months Ended March 31,
		2023				2022
		(unaudited)				(unaudited)
Operating activities:
Net income		$	38,791			$	30,592
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			1,487				1,747
Equity-based compensation			16,640				14,138
Loss on disposal of equipment			16				-
Deferred income taxes			(2,523	)			(3,985	)
Unrealized foreign currency loss (gain)			1,167				(494	)
Changes in operating assets and liabilities:
Accounts receivable, net			6,730				(8,077	)
Other assets			(8,760	)			(10,934	)
Accounts payable, accrued and other liabilities			(10,009	)			(6,177	)
Income taxes			7,850				6,175
Deferred revenue			7,327				8,807
Net cash provided by operating activities			58,716				31,792
Investing activities:
Purchase of property and equipment			(666	)			(1,159	)
Net cash used in investing activities			(666	)			(1,159	)
Financing activities:
Repurchase of common stock			(101,688	)			(77,108	)
Net cash used in financing activities			(101,688	)			(77,108	)
Foreign currency impact on cash			(230	)			(914	)
Net change in cash and cash equivalents			(43,868	)			(47,389	)
Cash and cash equivalents at beginning of period			225,463				263,706
Cash and cash equivalents at end of period		$	181,595			$	216,317

MANHATTAN ASSOCIATES, INC. SUPPLEMENTAL INFORMATION
1. GAAP and adjusted earnings per share by quarter are as follows:
	2022										2023
	1st Qtr		2nd Qtr		3rd Qtr		4th Qtr		Full Year		1st Qtr
GAAP Diluted EPS	$0.48		$0.49		$0.47		$0.60		$2.03		$0.62
Adjustments to GAAP:
Equity-based compensation	0.19		0.20		0.19		0.21		0.79		0.23
Tax benefit of stock awards vested	(0.07)		-		-		-		(0.07)		(0.05)
Adjusted Diluted EPS	$0.60		$0.69		$0.66		$0.81		$2.76		$0.80
Fully Diluted Shares	63,871		63,419		63,165		63,028		63,408		62,767

2. Revenues and operating income by reportable segment are as follows (in thousands):
	2022										2023
	1st Qtr		2nd Qtr		3rd Qtr		4th Qtr		Full Year		1st Qtr
Revenue:
Americas	$139,540		$151,996		$156,674		$155,674		$603,884		$170,759
EMEA	32,151		31,614		31,843		33,330		128,938		39,658
APAC	7,265		8,314		9,584		9,099		34,262		10,596
	$178,956		$191,924		$198,101		$198,103		$767,084		$221,013
GAAP Operating Income:
Americas	$21,393		$24,507		$22,914		$30,475		$99,289		$29,647
EMEA	10,517		9,423		9,851		10,239		40,030		12,793
APAC	2,062		3,323		4,005		3,991		13,381		4,645
	$33,972		$37,253		$36,770		$44,705		$152,700		$47,085
Adjustments (pre-tax):
Americas:
Equity-based compensation	$14,138		$15,538		$14,533		$15,152		$59,361		$16,640
	$14,138		$15,538		$14,533		$15,152		$59,361		$16,640
Adjusted non-GAAP Operating Income:
Americas	$35,531		$40,045		$37,447		$45,627		$158,650		$46,287
EMEA	10,517		9,423		9,851		10,239		40,030		12,793
APAC	2,062		3,323		4,005		3,991		13,381		4,645
	$48,110		$52,791		$51,303		$59,857		$212,061		$63,725

3. Impact of Currency Fluctuation
The following table reflects the increases (decreases) in the results of operations for each period attributable to the change in foreign currency exchange rates from the prior period as well as foreign currency gains (losses) included in other income, net for each period (in thousands):
	2022										2023
	1st Qtr		2nd Qtr		3rd Qtr		4th Qtr		Full Year		1st Qtr
Revenue	$(2,268)		$(4,568)		$(6,152)		$(5,124)		$(18,112)		$(3,084)
Costs and expenses	(2,043)		(3,862)		(5,412)		(5,354)		(16,671)		(3,616)
Operating income	(225)		(706)		(740)		230		(1,441)		532
Foreign currency gains (losses) in other income	711		2,056		1,569		353		4,689		(810)
	$486		$1,350		$829		$583		$3,248		$(278)

Manhattan Associates has a large research and development center in Bangalore, India. The following table reflects the increases (decreases) in the financial results for each period attributable to changes in the Indian Rupee exchange rate (in thousands):
	2022										2023
	1st Qtr		2nd Qtr		3rd Qtr		4th Qtr		Full Year		1st Qtr
Operating income	$470		$710		$1,166		$1,900		$4,246		$1,632
Foreign currency gains (losses) in other income	809		2,085		1,713		738		5,345		(283)
Total impact of changes in the Indian Rupee	$1,279		$2,795		$2,879		$2,638		$9,591		$1,349

4. Other income includes the following components (in thousands):
	2022										2023
	1st Qtr		2nd Qtr		3rd Qtr		4th Qtr		Full Year		1st Qtr
Interest income	$19		$92		$112		$373		$596		$969
Foreign currency gains (losses)	711		2,056		1,569		353		4,689		(810)
Other non-operating income (expense)	8		95		(69)		102		136		(16)
Total other income (loss)	$738		$2,243		$1,612		$828		$5,421		$143

5. Capital expenditures are as follows (in thousands):
	2022										2023
	1st Qtr		2nd Qtr		3rd Qtr		4th Qtr		Full Year		1st Qtr
Capital expenditures	$1,159		$1,084		$1,909		$2,435		$6,587		$666

6. Stock Repurchase Activity (in thousands):
	2022										2023
	1st Qtr		2nd Qtr		3rd Qtr		4th Qtr		Full Year		1st Qtr
Shares purchased under publicly announced buy-back program	383		417		347		206		1,353		515
Shares withheld for taxes due upon vesting of restricted stock units	203		4		8		2		217		208
Total shares purchased	586		421		355		208		1,570		723
Total cash paid for shares purchased under publicly announced buy-back program	$49,965		$50,151		$50,000		$25,234		$175,350		$74,177
Total cash paid for shares withheld for taxes due upon vesting of restricted stock units	27,143		528		1,242		197		29,110		27,511
Total cash paid for shares repurchased	$77,108		$50,679		$51,242		$25,431		$204,460		$101,688

7. Remaining Performance Obligations
We disclose revenue we expect to recognize from our remaining performance obligations ("RPO"). Approximately 98% of our RPO represent cloud native subscriptions with a non-cancelable term greater than one year (including cloud-deferred revenue as well as amounts we will invoice and recognize as revenue from our performance of cloud services in future periods). Maintenance contracts are typically one year and are not included in the RPO. Our RPO as of the end of each period appears below (in thousands):
	March 31, 2022				June 30, 2022				September 30, 2022				December 30, 2022				March 31, 2023
Remaining Performance Obligations	$	809,540			$	897,680			$	969,603			$	1,051,544			$	1,153,404

8. The 2017 U.S. Tax Cuts and Jobs Act eliminated the expensing of research and development costs as incurred for tax purposes beginning in 2022.

This law changes the timing of cash tax payments, increasing near-term taxable income and payments, but normalizing over time as these expenses are amortized. Our income tax payments increased by approximately $26 million in 2022 due to this law change and we expect a similar negative impact for 2023. While there is still a possibility that legislation will be enacted that defers or eliminates the requirement to capitalize these costs, our current outlook factors in higher cash taxes as we will be required to make these payments, unless the existing law is amended. This legislation does not impact earnings per share, does not create any incremental expense obligation, and does not impact our ability to operationally grow cash flow.

9. Guideposts
The following table shows our (i) actual 2022 cloud revenue and remaining performance obligations (“RPO”) results, (ii) revised 2023 cloud revenue guidepost, (iii) 2023 RPO guidepost published as of October 25, 2022, and (iv) guideposts published as of February 1, 2022, for cloud revenue and RPO for 2024.
		Current Guideposts
		($'s in millions)
		Cloud Revenue
		Year		Low		Mid		High		% Growth(1)
		2022⁽²⁾		$176		$176		$176		44%
		2023⁽³⁾		$238		$240		$242		36%
		2024⁽⁵⁾		$310		$328		$345		37%
		Remaining Performance Obligations
		Year		Low		Mid		High		% Growth(1)
		2022⁽²⁾		$1,052		$1,052		$1,052		50%
		2023⁽⁴⁾		$1,300		$1,350		$1,400		28%
		2024⁽⁵⁾		$1,600		$1,700		$1,800		26%
		(1) Year-over-year percentage growth is calculated based on the actual or forecasted mid-points.
		(2) Amounts reflect actual results for 2022.
		(3) Amounts reflect revised range as of April 25, 2023.
		(4) Amounts remain unchanged from October 25, 2022.
		(5) Amounts remain unchanged from February 1, 2022.
These guideposts are forward-looking statements and are subject to all the risks and uncertainties applicable to our shorter-term 2023 Guidance, as stated above. In addition, the further into the future we project our financial expectations, the greater the risk that actual results will differ materially; consequently, our guideposts for the following fiscal year may be inherently more uncertain than our guideposts for this fiscal year, or than our 2023 Guidance published above.

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20230425005409/en/

Michael Bauer

Senior Director, Investor Relations

Manhattan Associates, Inc.

678-597-7538

mbauer@manh.com



Rick Fernandez

Director, Corporate Communications

Manhattan Associates, Inc.

678-597-6988

rfernandez@manh.com

Source: Manhattan Associates Inc.

FAQ

What were Manhattan Associates' Q1 2023 earnings results?

Manhattan Associates reported Q1 2023 revenue of $221.0 million and GAAP diluted earnings per share of $0.62.

How did Manhattan Associates' cloud subscription revenue perform in Q1 2023?

Cloud subscription revenue for Q1 2023 was $57.2 million, up 53.6% from Q1 2022.

What is the updated guidance for Manhattan Associates for 2023?

Manhattan Associates raised its 2023 revenue guidance to a range of $856 million to $864 million, indicating a growth of 12% to 13%.

What are the main highlights from Manhattan Associates' press release?

Key highlights include a 23.5% increase in total revenue, a rise in adjusted EPS, and strong cloud revenue growth.