Manhattan Associates Reports Record Revenue and Earnings
Leading Supply Chain and Omnichannel Commerce Solutions provider Manhattan Associates Inc. (NASDAQ: MANH) today reported revenue of $238.4 million for the third quarter ended September 30, 2023. GAAP diluted earnings per share for Q3 2023 was $0.79 compared to $0.47 in Q3 2022. Non-GAAP adjusted diluted earnings per share for Q3 2023 was $1.05 compared to $0.66 in Q3 2022.
“We are pleased with our quarterly and year-to-date results. Solid demand for our industry leading cloud solutions and services drove record results on the top and bottom lines,” said Manhattan Associates president and CEO Eddie Capel.
“Manhattan’s business fundamentals are strong, and our commitment to delivering innovation to our customers across mission-critical commerce and supply chain systems remains resolute. While we remain appropriately cautious and anticipate continued volatility, we are very optimistic about our expanding market opportunities. We are raising our 2023 outlook across all metrics and are providing preliminary solid 2024 parameters,” Mr. Capel concluded.
THIRD QUARTER 2023 FINANCIAL SUMMARY:
Consolidated total revenue was $238.4 million for Q3 2023, compared to $198.1 million for Q3 2022. Cloud subscription revenue was $65.0 million for Q3 2023, compared to $45.3 million for Q3 2022. License revenue was $3.9 million for Q3 2023, compared to $6.4 million for Q3 2022. Services revenue was $128.0 million for Q3 2023, compared to $103.4 million for Q3 2022. GAAP diluted earnings per share was $0.79 for Q3 2023, compared to $0.47 for Q3 2022. Adjusted diluted earnings per share, a non-GAAP measure, was $1.05 for Q3 2023, compared to $0.66 for Q3 2022. GAAP operating income was $53.4 million for Q3 2023, compared to $36.8 million for Q3 2022. Adjusted operating income, a non-GAAP measure, was $72.5 million for Q3 2023, compared to $51.3 million for Q3 2022. Cash flow from operations was $58.6 million for Q3 2023, compared to $39.9 million for Q3 2022. Days Sales Outstanding was 71 days at September 30, 2023, compared to 70 days at June 30, 2023. Cash totaled $182.3 million at September 30, 2023, compared to $153.3 million at June 30, 2023. During the three months ended September 30, 2023, the Company repurchased 128,133 shares of Manhattan Associates common stock under the share repurchase program authorized by our Board of Directors for a total investment of $25.1 million. In October 2023, our Board of Directors approved replenishing our remaining share repurchase authority to an aggregate of $75.0 million of our common stock.NINE MONTH 2023 FINANCIAL SUMMARY:
Consolidated total revenue for the nine months ended September 30, 2023, was $690.5 million, compared to $569.0 million for the nine months ended September 30, 2022. Cloud subscription revenue was $183.2 million for the nine months ended September 30, 2023, compared to $124.8 million for the nine months ended September 30, 2022. License revenue was $13.0 million for the nine months ended September 30, 2023, compared to $19.9 million for the nine months ended September 30, 2022. Services revenue was $368.7 million for the nine months ended September 30, 2023, compared to $294.3 million for the nine months ended September 30, 2022. GAAP diluted earnings per share for the nine months ended September 30, 2023, was $2.05, compared to $1.43 for the nine months ended September 30, 2022. Adjusted diluted earnings per share, a non-GAAP measure, was $2.72 for the nine months ended September 30, 2023, compared to $1.95 for the nine months ended September 30, 2022. GAAP operating income was $151.0 million for the nine months ended September 30, 2023, compared to $108.0 million for the nine months ended September 30, 2022. Adjusted operating income, a non-GAAP measure, was $204.6 million for the nine months ended September 30, 2023, compared to $152.2 million for the nine months ended September 30, 2022. Cash flow from operations was $157.9 million for the nine months ended September 30, 2023, compared to $124.4 million for the nine months ended September 30, 2022. During the nine months ended September 30, 2023, the Company repurchased 1,024,328 shares of Manhattan Associates common stock under the share repurchase program authorized by our Board of Directors, for a total investment of $166.0 million.2023 GUIDANCE
Manhattan Associates provides the following revenue, operating margin and diluted earnings per share guidance for the full year 2023:
Guidance Range - 2023 Full Year
($'s in millions, except operating margin and EPS)
$ Range
% Growth Range
Total revenue - current guidance
$912
$916
19%
19%
Operating margin:
GAAP operating margin - current guidance
21.0%
21.3%
Equity-based compensation
7.9%
7.8%
Adjusted operating margin(1) - current guidance
28.9%
29.1%
Diluted earnings per share (EPS):
GAAP EPS - current guidance
$2.59
$2.61
28%
29%
Equity-based compensation, net of tax
0.98
0.98
Excess tax benefit on stock vesting(2)
(0.06)
(0.06)
Adjusted EPS(1) - current guidance
$3.51
$3.53
27%
28%
(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 occurred 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, are forward looking. Actual results may differ materially. See our cautionary note regarding “forward-looking statements” below.
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, should be considered historical only, and Manhattan Associates disclaims any obligation to update them.
CONFERENCE CALL
Manhattan Associates’ conference call regarding its third quarter 2023 financial results will be held today, October 24, 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’ fourth 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 and nine months ended September 30, 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. They also exclude the tax benefits or deficiencies of vested stock awards caused by differences in the amount deductible for tax purposes from the compensation expense recorded for financial reporting purposes. 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 global 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,” 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 wars in Ukraine and the Middle East; 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 September 30,
Nine Months Ended September 30,
2023
2022
2023
2022
(unaudited)
(unaudited)
(unaudited)
(unaudited)
Revenue:
Cloud subscriptions
$65,033
$45,267
$183,196
$124,767
Software license
3,870
6,386
12,967
19,869
Maintenance
35,296
35,820
106,772
107,115
Services
127,965
103,425
368,744
294,284
Hardware
6,277
7,203
18,791
22,946
Total revenue
238,441
198,101
690,470
568,981
Costs and expenses:
Cost of cloud subscriptions, maintenance and services
111,142
95,691
322,914
266,482
Cost of software license
297
467
967
1,749
Research and development
33,093
29,375
95,487
84,754
Sales and marketing
17,650
15,742
54,278
47,881
General and administrative
21,371
18,392
61,561
54,963
Depreciation and amortization
1,440
1,664
4,247
5,157
Total costs and expenses
184,993
161,331
539,454
460,986
Operating income
53,448
36,770
151,016
107,995
Other income, net
1,739
1,612
2,923
4,593
55,187
38,382
153,939
112,588
Income tax provision
5,766
8,708
26,107
21,497
Net income
$49,421
$29,674
$127,832
$91,091
Basic earnings per share
$0.80
$0.47
$2.07
$1.45
Diluted earnings per share
$0.79
$0.47
$2.05
$1.43
Weighted average number of shares:
Basic
61,639
62,592
61,902
62,917
Diluted
62,310
63,165
62,501
63,483
MANHATTAN ASSOCIATES, INC. AND SUBSIDIARIES
Reconciliation of Selected GAAP to Non-GAAP Measures
(in thousands, except per share amounts)
Three Months Ended September 30,
Nine Months Ended September 30,
2023
2022
2023
2022
Operating income
$53,448
$36,770
$151,016
$107,995
Equity-based compensation (a)
19,030
14,533
53,598
44,209
Adjusted operating income (Non-GAAP)
$72,478
$51,303
$204,614
$152,204
Income tax provision
$5,766
$8,708
$26,107
$21,497
Equity-based compensation (a)
3,030
2,265
8,067
7,013
Tax benefit of stock awards vested (b)
218
3
3,454
4,386
Adjusted income tax provision (Non-GAAP)
$9,014
$10,976
$37,628
$32,896
Net income
$49,421
$29,674
$127,832
$91,091
Equity-based compensation (a)
16,000
12,268
45,531
37,196
Tax benefit of stock awards vested (b)
(218)
(3)
(3,454)
(4,386)
Adjusted net income (Non-GAAP)
$65,203
$41,939
$169,909
$123,901
Diluted EPS
$0.79
$0.47
$2.05
$1.43
Equity-based compensation (a)
0.26
0.19
0.73
0.59
Tax benefit of stock awards vested (b)
-
-
(0.06)
(0.07)
Adjusted diluted EPS (Non-GAAP)
$1.05
$0.66
$2.72
$1.95
Fully diluted shares
62,310
63,165
62,501
63,483
(a)
Adjusted results exclude all equity-based compensation to facilitate comparison with our peers and for the other reasons explained in our Current Report on Form 8-K filed with the SEC. We do not receive a GAAP tax benefit for a portion of our equity-based compensation, mainly because of Section 162(m) of the Internal Revenue Code, which limits tax deductions for compensation granted to certain executives.
Three Months Ended September 30,
Nine Months Ended September 30,
2023
2022
2023
2022
Cost of services
$7,643
$5,308
$21,337
$16,267
Research and development
4,141
3,126
11,711
9,740
Sales and marketing
1,878
1,508
5,333
4,460
General and administrative
5,368
4,591
15,217
13,742
Total equity-based compensation
$19,030
$14,533
$53,598
$44,209
(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)
September 30, 2023
December 31, 2022
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents
$
182,312
$
225,463
Accounts receivable, net of allowance of $5,367 and $6,009, at September 30, 2023 and December 31, 2022, respectively
183,377
166,767
Prepaid expenses and other current assets
27,170
23,145
Total current assets
392,859
415,375
Property and equipment, net
11,266
12,803
Operating lease right-of-use assets
19,976
17,794
Goodwill, net
62,228
62,230
Deferred income taxes
55,523
37,206
Other assets
31,143
24,770
Total assets
$
572,995
$
570,178
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable
$
25,253
$
25,701
Accrued compensation and benefits
67,187
54,469
Accrued and other liabilities
26,429
24,569
Deferred revenue
213,440
208,807
Income taxes payable
517
2,049
Total current liabilities
332,826
315,595
Operating lease liabilities, long-term
16,237
14,065
Other non-current liabilities
13,827
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; 61,562,480 and 62,191,570 shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively
616
621
Retained earnings
238,315
253,711
Accumulated other comprehensive loss
(28,826
)
(27,532
)
Total shareholders' equity
210,105
226,800
Total liabilities and shareholders' equity
$
572,995
$
570,178
MANHATTAN ASSOCIATES, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(in thousands)
Nine Months Ended September 30,
2023
2022
(unaudited)
(unaudited)
Operating activities:
Net income
$
127,832
$
91,091
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization
4,247
5,157
Equity-based compensation
53,598
44,209
Loss (gain) on disposal of equipment
42
(20
)
Deferred income taxes
(18,359
)
(20,736
)
Unrealized foreign currency loss (gain)
922
(2,933
)
Changes in operating assets and liabilities:
Accounts receivable, net
(17,168
)
(23,384
)
Other assets
(7,747
)
(9,190
)
Accounts payable, accrued and other liabilities
13,477
20,743
Income taxes
(4,347
)
(730
)
Deferred revenue
5,362
20,195
Net cash provided by operating activities
157,859
124,402
Investing activities:
Purchase of property and equipment
(2,761
)
(4,152
)
Net cash used in investing activities
(2,761
)
(4,152
)
Financing activities:
Repurchase of common stock
(195,716
)
(179,029
)
Net cash used in financing activities
(195,716
)
(179,029
)
Foreign currency impact on cash
(2,533
)
(7,872
)
Net change in cash and cash equivalents
(43,151
)
(66,651
)
Cash and cash equivalents at beginning of period
225,463
263,706
Cash and cash equivalents at end of period
$
182,312
$
197,055
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
2nd Qtr
3rd Qtr
YTD
GAAP Diluted EPS
$0.48
$0.49
$0.47
$0.60
$2.03
$0.62
$0.63
$0.79
$2.05
Adjustments to GAAP:
Equity-based compensation
0.19
0.20
0.19
0.21
0.79
0.23
0.25
0.26
0.73
Tax benefit of stock awards vested
(0.07)
-
-
-
(0.07)
(0.05)
-
-
(0.06)
Adjusted Diluted EPS
$0.60
$0.69
$0.66
$0.81
$2.76
$0.80
$0.88
$1.05
$2.72
Fully Diluted Shares
63,871
63,419
63,165
63,028
63,408
62,767
62,432
62,310
62,501
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
2nd Qtr
3rd Qtr
YTD
Revenue:
Americas
$139,540
$151,996
$156,674
$155,674
$603,884
$170,759
$179,208
$186,564
$536,531
EMEA
32,151
31,614
31,843
33,330
128,938
39,658
40,902
41,204
121,764
APAC
7,265
8,314
9,584
9,099
34,262
10,596
10,906
10,673
32,175
$178,956
$191,924
$198,101
$198,103
$767,084
$221,013
$231,016
$238,441
$690,470
GAAP Operating Income:
Americas
$21,393
$24,507
$22,914
$30,475
$99,289
$29,647
$32,326
$34,655
$96,628
EMEA
10,517
9,423
9,851
10,239
40,030
12,793
13,556
14,415
40,764
APAC
2,062
3,323
4,005
3,991
13,381
4,645
4,601
4,378
13,624
$33,972
$37,253
$36,770
$44,705
$152,700
$47,085
$50,483
$53,448
$151,016
Adjustments (pre-tax):
Americas:
Equity-based
compensation
$14,138
$15,538
$14,533
$15,152
$59,361
$16,640
$17,928
$19,030
$53,598
$14,138
$15,538
$14,533
$15,152
$59,361
$16,640
$17,928
$19,030
$53,598
Adjusted non-GAAP Operating Income:
Americas
$35,531
$40,045
$37,447
$45,627
$158,650
$46,287
$50,254
$53,685
$150,226
EMEA
10,517
9,423
9,851
10,239
40,030
12,793
13,556
14,415
40,764
APAC
2,062
3,323
4,005
3,991
13,381
4,645
4,601
4,378
13,624
$48,110
$52,791
$51,303
$59,857
$212,061
$63,725
$68,411
$72,478
$204,614
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
2nd Qtr
3rd Qtr
YTD
Revenue
$(2,268)
$(4,568)
$(6,152)
$(5,124)
$(18,112)
$(3,084)
$104
$2,755
$(225)
Costs and expenses
(2,043)
(3,862)
(5,412)
(5,354)
(16,671)
(3,616)
(1,133)
1,033
(3,716)
Operating income
(225)
(706)
(740)
230
(1,441)
532
1,237
1,722
3,491
Foreign currency gains (losses)
in other income
711
2,056
1,569
353
4,689
(810)
(516)
387
(939)
$486
$1,350
$829
$583
$3,248
$(278)
$721
$2,109
$2,552
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
2nd Qtr
3rd Qtr
YTD
Operating income
$470
$710
$1,166
$1,900
$4,246
$1,632
$1,222
$728
$3,582
Foreign currency gains (losses)
in other income
809
2,085
1,713
738
5,345
(283)
(31)
812
498
Total impact of
changes in the
Indian Rupee
$1,279
$2,795
$2,879
$2,638
$9,591
$1,349
$1,191
$1,540
$4,080
4. Other income includes the following components (in thousands):
2022
2023
1st Qtr
2nd Qtr
3rd Qtr
4th Qtr
Full Year
1st Qtr
2nd Qtr
3rd Qtr
YTD
Interest income
$19
$92
$112
$373
$596
$969
$1,555
$1,371
$3,895
Foreign currency gains (losses)
711
2,056
1,569
353
4,689
(810)
(516)
387
(939)
Other non-operating
income (expense)
8
95
(69)
102
136
(16)
2
(19)
(33)
Total other income (loss)
$738
$2,243
$1,612
$828
$5,421
$143
$1,041
$1,739
$2,923
5. Capital expenditures are as follows (in thousands):
2022
2023
1st Qtr
2nd Qtr
3rd Qtr
4th Qtr
Full Year
1st Qtr
2nd Qtr
3rd Qtr
YTD
Capital expenditures
$1,159
$1,084
$1,909
$2,435
$6,587
$666
$1,009
$1,086
$2,761
6. Stock Repurchase Activity (in thousands):
2022
2023
1st Qtr
2nd Qtr
3rd Qtr
4th Qtr
Full Year
1st Qtr
2nd Qtr
3rd Qtr
YTD
Shares purchased under publicly announced buy-back program
383
417
347
206
1,353
515
381
128
1,024
Shares withheld for taxes due upon vesting of restricted stock units
203
4
8
2
217
208
4
8
220
Total shares purchased
586
421
355
208
1,570
723
385
136
1,244
Total cash paid for shares purchased under publicly announced buy-back program
$49,965
$50,151
$50,000
$25,234
$175,350
$74,177
$66,769
$25,072
$166,018
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
658
1,529
29,698
Total cash paid for shares repurchased
$77,108
$50,679
$51,242
$25,431
$204,460
$101,688
$67,427
$26,601
$195,716
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 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
June 30, 2023
September 30, 2023
Remaining Performance Obligations
$
809,540
$
897,680
$
969,603
$
1,051,544
$
1,153,404
$
1,238,672
$
1,324,861
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 may 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.
View source version on businesswire.com: https://www.businesswire.com/news/home/20231024452925/en/