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Manhattan Associates Reports Record Second Quarter 2019 Revenue

July 23, 2019 4:05 PM

ATLANTA, July 23, 2019 (GLOBE NEWSWIRE) -- Leading Supply Chain and Omnichannel Commerce Solutions provider Manhattan Associates Inc. (NASDAQ: MANH) today reported record total revenue of $154.3 million for the second quarter ended June 30, 2019, applying the new revenue recognition standard retrospectively. GAAP diluted earnings per share for Q2 2019 was $0.32 compared to $0.42 in Q2 2018. Non-GAAP adjusted diluted earnings per share for Q2 2019 was $0.42 compared to $0.47 in Q2 2018.

“Q2 was another solid growth quarter for Manhattan Associates posting record total revenue and exceeding our earnings expectations on strong demand,” said Manhattan Associates president and CEO Eddie Capel. “In a turbulent global macro, our suite of Manhattan Active™ omnichannel, inventory and supply chain solutions continued to drive solid revenue momentum positioning us well for the balance of 2019. We remain focused on enabling our clients to accelerate growth and Push Possible®, while investing significantly in innovation to achieve long-term sustainable growth in 2019 and beyond,” added Mr. Capel.

SECOND QUARTER 2019 FINANCIAL SUMMARY:

SIX MONTH 2019 FINANCIAL SUMMARY:

2019 GUIDANCE

Manhattan Associates provides the following updated revenue, operating margin and diluted earnings per share guidance for the full year 2019:

Guidance Range - 2019 Full Year
($'s in millions, except operating margin and EPS)$ Range % Growth Range
Total revenue - current guidance$598 $604 7% 8%
Total revenue - previous guidance$582 $592 4% 6%
Operating Margin:
GAAP operating margin - current guidance 15.6% 15.9%
Equity-based compensation 5.4% 5.4%
Adjusted operating margin(1) - current guidance 21.0% 21.2%
GAAP operating margin - previous guidance 15.6% 15.8%
Equity-based compensation 5.4% 5.4%
Adjusted operating margin(1) - previous guidance 21.0% 21.2%
Diluted earnings per share (EPS):
GAAP EPS - current guidance$1.08 $1.12 -32% -29%
Equity-based compensation, net of tax 0.38 0.38
Adjusted EPS(1) - current guidance$1.46 $1.50 -18% -16%
GAAP EPS - previous guidance$1.05 $1.09 -34% -31%
Equity-based compensation, net of tax 0.37 0.37
Adjusted EPS(1) - previous guidance$1.42 $1.46 -21% -18%
(1) Adjusted operating margin and adjusted EPS are non-GAAP measures that exclude the impact of equity-based
compensation and acquisition-related costs, and the related income tax effects of these items if applicable.

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. Those statements, including the guidance provided above, 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 its earnings release and published expectations available on its website (www.manh.com). Following publication of this earnings release, any expectations with respect to future financial performance contained in this release, including the guidance above, should be considered historical only, and Manhattan Associates disclaims any obligation to update them.

CONFERENCE CALL

The Company’s conference call regarding its second quarter financial results will be held today, July 23, 2019, at 4:30 p.m. Eastern Time. We invite investors to a live webcast of the conference call through the Investor Relations section of Manhattan Associates' website at www.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.

Those who cannot listen to the live broadcast may access a replay shortly after the call by dialing +1.855.859.2056 in the U.S. and Canada, or +1.404.537.3406 outside the U.S., and entering the conference identification number ­­­­­­­­2188038 or via the web at www.manh.com. The phone replay will be available for two weeks after the call, and the Internet webcast will be available until Manhattan Associates’ third quarter 2019 earnings release.

GAAP VERSUS NON-GAAP PRESENTATION

The Company 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 six months ended June 30, 2019.

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, acquisition-related costs and the amortization of these costs, and (from time to time) restructuring charges – all net of income tax effects, and the impact of the enactment of the Tax Cuts and Jobs Act. 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 and on-premise 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 “2019 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 such 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 such forward-looking statements. Among the important factors that could cause actual results to differ materially from those indicated by such forward-looking statements are: uncertainty about the global economy, risks related from transitioning our business from a traditional perpetual license software company (generally hosted by our customers on their own premises and equipment) to a subscription-based software-as-a service/cloud-based model, disruption in the retail sector, the possible effect of new U.S. tariffs on imports from other countries (and possible responsive tariffs on U.S. exports by other countries) on international commerce, delays in product development, competitive pressures, software errors, information security breaches and the risk factors set forth in Item 1A of the Company’s Annual Report on Form 10-K for the year ended December 31, 2018 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 SUBSIDIARIESCondensed Consolidated Statements of Income(in thousands, except per share amounts)

Three Months Ended June 30, Six Months Ended June 30,
2019 2018 2019 2018
(unaudited) (unaudited) (unaudited) (unaudited)
Revenue:
Cloud subscriptions $9,009 $5,377 $16,868 $9,846
Software license 11,721 12,973 24,135 20,528
Maintenance 37,323 36,993 73,422 73,390
Services 93,951 82,267 182,582 161,024
Hardware 2,337 4,261 5,738 7,652
Total revenue 154,341 141,871 302,745 272,440
Costs and expenses:
Cost of software license 623 2,096 1,215 3,404
Cost of cloud subscriptions, maintenance and services 70,955 56,985 137,533 113,471
Research and development 21,997 18,176 43,210 35,235
Sales and marketing 14,520 13,809 29,301 26,693
General and administrative 16,805 12,885 31,855 25,685
Depreciation and amortization 1,859 2,235 3,773 4,437
Total costs and expenses 126,759 106,186 246,887 208,925
Operating income 27,582 35,685 55,858 63,515
Other (loss) income, net (71) 986 (442) 1,707
Income before income taxes 27,511 36,671 55,416 65,222
Income tax provision 6,586 9,003 13,519 14,902
Net income $20,925 $27,668 $41,897 $50,320
Basic earnings per share $0.32 $0.42 $0.65 $0.75
Diluted earnings per share $0.32 $0.42 $0.64 $0.75
Weighted average number of shares:
Basic 64,623 66,429 64,765 66,987
Diluted 65,093 66,535 65,148 67,132

MANHATTAN ASSOCIATES, INC. AND SUBSIDIARIESReconciliation of Selected GAAP to Non-GAAP Measures(in thousands, except per share amounts)

Three Months Ended June 30, Six Months Ended June 30,
2019 2018 2019 2018
Operating income $27,582 $35,685 $55,858 $63,515
Equity-based compensation (a) 8,462 4,927 15,644 9,270
Purchase amortization (c) 107 108 215 215
Adjusted operating income (Non-GAAP) $36,151 $40,720 $71,717 $73,000
Income tax provision $6,586 $9,003 $13,519 $14,902
Equity-based compensation (a) 2,073 1,207 3,833 2,271
Tax benefit (deficiency) of stock awards vested (b) 154 (19) 58 730
Purchase amortization (c) 26 26 53 53
U.S. Tax Cuts and Jobs Act impact (d) - - - 348
Adjusted income tax provision (Non-GAAP) $8,839 $10,217 $17,463 $18,304
Net income $20,925 $27,668 $41,897 $50,320
Equity-based compensation (a) 6,389 3,720 11,811 6,999
Tax (deficiency) benefit of stock awards vested (b) (154) 19 (58) (730)
Purchase amortization (c) 81 82 162 162
U.S. Tax Cuts and Jobs Act impact (d) - - - (348)
Adjusted net income (Non-GAAP) $27,241 $31,489 $53,812 $56,403
Diluted EPS $0.32 $0.42 $0.64 $0.75
Equity-based compensation (a) 0.10 0.06 0.18 0.10
Tax (deficiency) benefit of stock awards vested (b) - - - (0.01)
Purchase amortization (c) - - - -
U.S. Tax Cuts and Jobs Act impact (d) - - - -
Adjusted diluted EPS (Non-GAAP) $0.42 $0.47 $0.83 $0.84
Fully diluted shares 65,093 66,535 65,148 67,132

(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 today with the SEC. Equity-based compensation is included in the following GAAP operating expense lines for the three and six months ended June 30, 2019, and 2018:

Three Months Ended June 30, Six Months Ended June 30,
2019 2018 2019 2018
Cost of services $2,448 $1,556 $4,545 $2,673
Research and development 1,603 1,140 2,979 2,061
Sales and marketing 976 347 1,795 905
General and administrative 3,435 1,884 6,325 3,631
Total equity-based compensation $8,462 $4,927 $15,644 $9,270

(b) Adjustments represent the excess tax benefits and tax deficiencies of the stock awards vested during the period. Excess tax benefits (deficiencies) occur when the amount deductible for an award of equity instruments on our tax return is more (less) than the cumulative compensation cost recognized for financial reporting purposes. As discussed above, we excluded 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 excluded the related tax benefit (expense) generated upon their vesting.

(c) Adjustments represent purchased intangibles amortization from a prior acquisition. We exclude that amortization from adjusted results to facilitate comparison with our peers, to facilitate comparisons of the results of our core operations from period to period and for the other reasons explained in our Current Report on Form 8-K filed with the SEC.

(d) In the fourth quarter of 2017, we recorded a provisional net one-time tax of $2.8 million due to the enactment of the Tax Cuts and Jobs Act in December 2017. We calculated that amount based on a reasonable estimate of the income tax effects, primarily from a tax on accumulated foreign earnings and the remeasurement of deferred tax assets. We adjusted our estimate by $0.3 million during the six months ended June 30, 2018.

MANHATTAN ASSOCIATES, INC. AND SUBSIDIARIESCondensed Consolidated Balance Sheets(in thousands, except share and per share data)

June 30, 2019 December 31, 2018
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents $119,401 $99,126
Short-term investments - 1,440
Accounts receivable, net of allowance of $1,678 and $2,589, respectively 100,291 100,108
Prepaid expenses and other current assets 19,865 14,708
Total current assets 239,557 215,382
Property and equipment, net 14,512 14,318
Operating lease right-of-use assets 39,701 -
Goodwill, net 62,239 62,240
Deferred income taxes 5,174 5,442
Other assets 11,000 9,768
Total assets $372,183 $307,150
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $17,272 $18,181
Accrued compensation and benefits 34,130 29,485
Accrued and other liabilities 18,448 12,161
Deferred revenue 98,195 81,894
Income taxes payable 1,087 3,543
Total current liabilities 169,132 145,264
Operating lease liabilities, long-term 35,800 -
Other non-current liabilities 12,564 14,739
Shareholders' equity:
Preferred stock, no par value; 20,000,000 shares authorized, no shares issued or outstanding in 2019 and 2018 - -
Common stock, $0.01 par value; 200,000,000 shares authorized; 64,322,067 and 64,860,419 shares issued and outstanding at June 30, 2019 and December 31, 2018, respectively 643 649
Retained earnings 170,668 163,359
Accumulated other comprehensive loss (16,624) (16,861)
Total shareholders' equity 154,687 147,147
Total liabilities and shareholders' equity $372,183 $307,150

MANHATTAN ASSOCIATES, INC. AND SUBSIDIARIESCondensed Consolidated Statements of Cash Flows(in thousands)

Six Months Ended June 30,
2019 2018
(unaudited) (unaudited)
Operating activities:
Net income $41,897 $50,320
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 3,773 4,437
Equity-based compensation 15,644 9,270
Gain on disposal of equipment (121) (37)
Deferred income taxes 272 803
Unrealized foreign currency loss (gain) 156 (1,359)
Changes in operating assets and liabilities:
Accounts receivable, net (312) (7,913)
Other assets (6,144) (5,217)
Accounts payable, accrued and other liabilities 4,238 15,846
Income taxes (3,145) (14,300)
Deferred revenue 16,149 16,244
Net cash provided by operating activities 72,407 68,094
Investing activities:
Purchase of property and equipment (3,305) (4,055)
Net maturities (purchases) of investments 1,439 (5,196)
Net cash used in investing activities (1,866) (9,251)
Financing activities:
Purchase of common stock (50,238) (103,714)
Net cash used in financing activities (50,238) (103,714)
Foreign currency impact on cash (28) (1,617)
Net change in cash and cash equivalents 20,275 (46,488)
Cash and cash equivalents at beginning of period 99,126 125,522
Cash and cash equivalents at end of period $119,401 $79,034

MANHATTAN ASSOCIATES, INC.SUPPLEMENTAL INFORMATION

1. GAAP and Adjusted earnings per share by quarter are as follows:

2018 2019
1st Qtr 2nd Qtr 3rd Qtr 4th Qtr Full Year 1st Qtr 2nd Qtr YTD
GAAP Diluted EPS$0.33 $0.42 $0.43 $0.40 $1.58 $0.32 $0.32 $0.64
Adjustments to GAAP:
Equity-based compensation 0.05 0.06 0.06 0.06 0.23 0.08 0.10 0.18
Tax benefit of stock awards vested (0.01) - - - (0.01) - - -
Purchase amortization - - - - - - - -
U.S. Tax Cuts and Jobs Act impact (0.01) - - - - - - -
Adjusted Diluted EPS$0.37 $0.47 $0.49 $0.46 $1.79 $0.41 $0.42 $0.83
Fully Diluted Shares 67,736 66,535 65,901 65,526 66,434 65,204 65,093 65,148

2. Revenues and operating income by reportable segment are as follows (in thousands):

2018 2019
1st Qtr 2nd Qtr 3rd Qtr 4th Qtr Full Year 1st Qtr 2nd Qtr YTD
Revenue:
Americas$104,615 $112,945 $113,886 $114,040 $445,486 $114,873 $121,778 $236,651
EMEA 19,164 21,356 21,181 23,043 84,744 26,288 25,043 51,331
APAC 6,790 7,570 7,284 7,283 28,927 7,243 7,520 14,763
$130,569 $141,871 $142,351 $144,366 $559,157 $148,404 $154,341 $302,745
GAAP Operating Income:
Americas$20,318 $26,589 $26,200 $24,422 $97,529 $18,051 $16,826 $34,877
EMEA 5,475 6,252 7,413 7,297 26,437 7,734 8,057 15,791
APAC 2,037 2,844 2,483 2,557 9,921 2,491 2,699 5,190
$27,830 $35,685 $36,096 $34,276 $133,887 $28,276 $27,582 $55,858
Adjustments (pre-tax):
Americas:
Equity-based compensation$4,343 $4,927 $5,303 $5,291 $19,864 $7,182 $8,462 $15,644
Purchase amortization 107 108 107 108 430 108 107 215
$4,450 $5,035 $5,410 $5,399 $20,294 $7,290 $8,569 $15,859
Adjusted non-GAAP Operating Income:
Americas$24,768 $31,624 $31,610 $29,821 $117,823 $25,341 $25,395 $50,736
EMEA 5,475 6,252 7,413 7,297 26,437 7,734 8,057 15,791
APAC 2,037 2,844 2,483 2,557 9,921 2,491 2,699 5,190
$32,280 $40,720 $41,506 $39,675 $154,181 $35,566 $36,151 $71,717

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):

2018 2019
1st Qtr 2nd Qtr 3rd Qtr 4th Qtr Full Year 1st Qtr 2nd Qtr YTD
Revenue$2,781 $1,699 $(581) $(1,068) $2,831 $(2,419) $(1,906) $(4,325)
Costs and expenses 2,328 831 (1,177) (1,774) 208 (2,686) (1,696) (4,382)
Operating income 453 868 596 706 2,623 267 (210) 57
Foreign currency gains (losses) in other income 366 705 1,431 (1,185) 1,317 (590) (377) (967)
$819 $1,573 $2,027 $(479) $3,940 $(323) $(587) $(910)

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):

2018 2019
1st Qtr 2nd Qtr 3rd Qtr 4th Qtr Full Year 1st Qtr 2nd Qtr YTD
Operating income$(360) $359 $828 $1,066 $1,893 $981 $438 $1,419
Foreign currency gains (losses) in other income 210 1,120 1,572 (1,074) 1,828 (182) (127) (309)
Total impact of changes in the Indian Rupee$(150) $1,479 $2,400 $(8) $3,721 $799 $311 $1,110

4. Other income includes the following components (in thousands):

2018 2019
1st Qtr 2nd Qtr 3rd Qtr 4th Qtr Full Year 1st Qtr 2nd Qtr YTD
Interest income$347 $241 $201 $278 $1,067 $231 $178 $409
Foreign currency gains (losses) 366 705 1,431 (1,185) 1,317 (590) (377) (967)
Other non-operating income (expense) 8 40 (94) 6 (40) (12) 128 116
Total other income (loss)$721 $986 $1,538 $(901) $2,344 $(371) $(71) $(442)

5. Capital expenditures are as follows (in thousands):

2018 2019
1st Qtr 2nd Qtr 3rd Qtr 4th Qtr Full Year 1st Qtr 2nd Qtr YTD
Capital expenditures$2,174 $1,881 $1,481 $1,770 $7,306 $616 $2,689 $3,305

6. Stock Repurchase Activity (in thousands):

2018 2019
1st Qtr 2nd Qtr 3rd Qtr 4th Qtr Full Year 1st Qtr 2nd Qtr YTD
Shares purchased under publicly-announced buy-back program 1,158 1,082 389 519 3,148 464 302 766
Shares withheld for taxes due upon vesting of restricted stock 111 1 3 - 115 106 1 107
Total shares purchased 1,269 1,083 392 519 3,263 570 303 873
Total cash paid for shares purchased under publicly-announced buy-back program$49,972 $47,876 $20,669 $24,757 $143,274 $24,927 $19,993 $44,920
Total cash paid for shares withheld for taxes due upon vesting of restricted stock 5,843 23 175 7 6,048 5,233 85 5,318
Total cash paid for shares repurchased$55,815 $47,899 $20,844 $24,764 $149,322 $30,160 $20,078 $50,238

7. Remaining Performance Obligations

Under the new revenue recognition standard, we now disclose revenue we expect to recognize from our remaining performance obligations. Our reported performance obligations primarily represent cloud 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). Our deferred revenue on the balance sheet primarily relates to our maintenance contracts, which are typically one year in duration and are not included in the remaining performance obligations. Below are our remaining performance obligations as of the end of each period (in thousands):

March 31,2018 June 30,2018 September 30,2018 December 31,2018 March 31,2019 June 30,2019
Remaining Performance Obligations$33,999 $58,434 $64,175 $76,990 $100,532 $120,403

Contact: Dennis Story Rick Fernandez
Chief Financial Officer Senior Manager, Corporate Communications
Manhattan Associates, Inc. Manhattan Associates, Inc.
770-955-7070 678-597-6988
[email protected] [email protected]

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Source: Manhattan Associates, Inc.

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