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Manhattan Associates Reports Record Third Quarter 2019 Revenue

October 22, 2019 4:06 PM

Company raises full-year Revenue and EPS guidance

ATLANTA, Oct. 22, 2019 (GLOBE NEWSWIRE) -- Leading Supply Chain and Omnichannel Commerce Solutions provider Manhattan Associates Inc. (NASDAQ: MANH) today reported record total revenue of $162.3 million for the third quarter ended September 30, 2019, applying the new revenue recognition standard retrospectively. GAAP diluted earnings per share for Q3 2019 was $0.42 compared to $0.43 in Q3 2018. Non-GAAP adjusted diluted earnings per share for Q3 2019 was $0.51 compared to $0.49 in Q3 2018.

“Due to robust demand across all of our core solutions, Manhattan Associates posted strong organic growth in the quarter, resulting in an all-time record revenue quarter. Cloud, License and Services revenue momentum exceeded our expectations driving exceptional operating results in our ongoing Cloud transition,” said Manhattan Associates president and CEO Eddie Capel. “Our suite of Manhattan Active® omnichannel, inventory and supply chain solutions continues to drive solid pipeline and revenue momentum positioning us well for the balance of 2019 and beyond. Based on our outlook for the remainder of the year, we are raising our 2019 full-year revenue and earnings guidance.”

“While appropriately cautious regarding global geopolitical and economic volatility, we continue to be optimistic on the market opportunity ahead, with supply chain complexity and retail evolution in our target markets bringing continued need for our solutions. Positive customer feedback and strong competitive win rates, combined with continued product advancements, are enabling our clients to Push Possible® with their commerce supply chains,” added Mr. Capel.

THIRD QUARTER 2019 FINANCIAL SUMMARY:

NINE 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$610 $614 9% 10%
Total revenue - previous guidance$598 $604 7% 8%
Operating Margin:
GAAP operating margin - current guidance 17.7% 17.9%
Equity-based compensation 5.3% 5.3%
Adjusted operating margin(1) - current guidance 23.0% 23.2%
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$1.26 $1.27 -20% -20%
Equity-based compensation, net of tax 0.37 0.38
Adjusted EPS(1) - current guidance$1.63 $1.65 -9% -8%
GAAP EPS - previous guidance$1.08 $1.12 -32% -29%
Equity-based compensation, net of tax 0.38 0.38
Adjusted EPS(1) - previous guidance$1.46 $1.50 -18% -16%
(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 third quarter financial results will be held today, October 22, 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 ­­­­­­­­2677286 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’ fourth 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 nine months ended September 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 SUBSIDIARIES
Condensed Consolidated Statements of Income
(in thousands, except per share amounts)

Three Months Ended September 30, Nine Months Ended September 30,
2019 2018 2019 2018
(unaudited) (unaudited) (unaudited) (unaudited)
Revenue:
Cloud subscriptions $14,242 $6,455 $31,110 $16,301
Software license 15,486 11,526 39,621 32,054
Maintenance 37,763 37,177 111,185 110,567
Services 91,626 84,136 274,208 245,160
Hardware 3,158 3,057 8,896 10,709
Total revenue 162,275 142,351 465,020 414,791
Costs and expenses:
Cost of software license 748 1,211 1,963 4,615
Cost of cloud subscriptions, maintenance and services 73,618 59,975 211,151 173,446
Research and development 22,614 18,453 65,824 53,688
Sales and marketing 12,125 10,726 41,426 37,419
General and administrative 16,236 13,711 48,091 39,396
Depreciation and amortization 1,937 2,179 5,710 6,616
Total costs and expenses 127,278 106,255 374,165 315,180
Operating income 34,997 36,096 90,855 99,611
Other income, net 810 1,538 368 3,245
Income before income taxes 35,807 37,634 91,223 102,856
Income tax provision 8,700 9,179 22,219 24,081
Net income $27,107 $28,455 $69,004 $78,775
Basic earnings per share $0.42 $0.43 $1.07 $1.18
Diluted earnings per share $0.42 $0.43 $1.06 $1.18
Weighted average number of shares:
Basic 64,247 65,658 64,591 66,539
Diluted 64,992 65,901 65,112 66,717


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,
2019 2018 2019 2018
Operating income $34,997 $36,096 $90,855 $99,611
Equity-based compensation (a) 8,002 5,303 23,646 14,573
Purchase amortization (c) 108 107 323 322
Adjusted operating income (Non-GAAP) $43,107 $41,506 $114,824 $114,506
Income tax provision $8,700 $9,179 $22,219 $24,081
Equity-based compensation (a) 1,960 1,299 5,793 3,570
Tax (deficiency) benefit of stock awards vested (b) 88 41 146 771
Purchase amortization (c) 26 26 79 79
U.S. Tax Cuts and Jobs Act impact (d) - - - 348
Adjusted income tax provision (Non-GAAP) $10,774 $10,545 $28,237 $28,849
Net income $27,107 $28,455 $69,004 $78,775
Equity-based compensation (a) 6,042 4,004 17,853 11,003
Tax (deficiency) benefit of stock awards vested (b) (88) (41) (146) (771)
Purchase amortization (c) 82 81 244 243
U.S. Tax Cuts and Jobs Act impact (d) - - - (348)
Adjusted net income (Non-GAAP) $33,143 $32,499 $86,955 $88,902
Diluted EPS $0.42 $0.43 $1.06 $1.18
Equity-based compensation (a) 0.09 0.06 0.27 0.16
Tax (deficiency) benefit of stock awards vested (b) - - - (0.01)
Purchase amortization (c) - - - -
U.S. Tax Cuts and Jobs Act impact (d) - - - (0.01)
Adjusted diluted EPS (Non-GAAP) $0.51 $0.49 $1.34 $1.33
Fully diluted shares 64,992 65,901 65,112 66,717

(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 nine months ended September 30, 2019, and 2018:

Three Months Ended September 30, Nine Months Ended September 30,
2019 2018 2019 2018
Cost of services $2,407 $1,531 $6,952 $4,204
Research and development 1,582 1,074 4,561 3,135
Sales and marketing 638 591 2,433 1,496
General and administrative 3,375 2,107 9,700 5,738
Total equity-based compensation $8,002 $5,303 $23,646 $14,573

(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 nine months ended September 30, 2018.


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

September 30, 2019 December 31, 2018
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents $113,618 $99,126
Short-term investments - 1,440
Accounts receivable, net of allowance of $2,611 and $2,589, respectively 108,397 100,108
Prepaid expenses and other current assets 19,580 14,708
Total current assets 241,595 215,382
Property and equipment, net 20,959 14,318
Operating lease right-of-use assets 37,178 -
Goodwill, net 62,233 62,240
Deferred income taxes 6,747 5,442
Other assets 11,585 9,768
Total assets $380,297 $307,150
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $21,190 $18,181
Accrued compensation and benefits 40,023 29,485
Accrued and other liabilities 19,334 12,161
Deferred revenue 97,302 81,894
Income taxes payable 4,645 3,543
Total current liabilities 182,494 145,264
Operating lease liabilities, long-term 33,929 -
Other non-current liabilities 12,224 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; 63,900,528 and 64,860,419 shares issued and outstanding at September 30, 2019 and December 31, 2018, respectively 639 649
Retained earnings 169,560 163,359
Accumulated other comprehensive loss (18,549) (16,861)
Total shareholders' equity 151,650 147,147
Total liabilities and shareholders' equity $380,297 $307,150


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

Nine Months Ended September 30,
2019 2018
(unaudited) (unaudited)
Operating activities:
Net income $69,004 $78,775
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 5,710 6,616
Equity-based compensation 23,646 14,573
(Gain) loss on disposal of equipment (436) 56
Deferred income taxes (1,331) (244)
Unrealized foreign currency gain (570) (1,373)
Changes in operating assets and liabilities:
Accounts receivable, net (9,178) (1,995)
Other assets (7,042) (5,296)
Accounts payable, accrued and other liabilities 16,271 11,059
Income taxes 576 (7,488)
Deferred revenue 15,696 8,635
Net cash provided by operating activities 112,346 103,318
Investing activities:
Purchase of property and equipment (11,358) (5,536)
Net maturities (purchases) of investments 1,439 (5,196)
Net cash used in investing activities (9,919) (10,732)
Financing activities:
Purchase of common stock (86,459) (124,558)
Net cash used in financing activities (86,459) (124,558)
Foreign currency impact on cash (1,476) (3,801)
Net change in cash and cash equivalents 14,492 (35,773)
Cash and cash equivalents at beginning of period 99,126 125,522
Cash and cash equivalents at end of period $113,618 $89,749


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 3rd Qtr YTD
GAAP Diluted EPS$0.33 $0.42 $0.43 $0.40 $1.58 $0.32 $0.32 $0.42 $1.06
Adjustments to GAAP:
Equity-based compensation 0.05 0.06 0.06 0.06 0.23 0.08 0.10 0.09 0.27
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 $0.51 $1.34
Fully Diluted Shares 67,736 66,535 65,901 65,526 66,434 65,204 65,093 64,992 65,112

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 3rd Qtr YTD
Revenue:
Americas$104,615 $112,945 $113,886 $114,040 $445,486 $114,873 $121,778 $132,028 $368,679
EMEA 19,164 21,356 21,181 23,043 84,744 26,288 25,043 22,978 74,309
APAC 6,790 7,570 7,284 7,283 28,927 7,243 7,520 7,269 22,032
$130,569 $141,871 $142,351 $144,366 $559,157 $148,404 $154,341 $162,275 $465,020
GAAP Operating Income:
Americas$20,318 $26,589 $26,200 $24,422 $97,529 $18,051 $16,826 $26,310 $61,187
EMEA 5,475 6,252 7,413 7,297 26,437 7,734 8,057 6,371 22,162
APAC 2,037 2,844 2,483 2,557 9,921 2,491 2,699 2,316 7,506
$27,830 $35,685 $36,096 $34,276 $133,887 $28,276 $27,582 $34,997 $90,855
Adjustments (pre-tax):
Americas:
Equity-based
compensation		$4,343 $4,927 $5,303 $5,291 $19,864 $7,182 $8,462 $8,002 $23,646
Purchase amortization 107 108 107 108 430 108 107 108 323
$4,450 $5,035 $5,410 $5,399 $20,294 $7,290 $8,569 $8,110 $23,969
Adjusted non-GAAP Operating Income:
Americas$24,768 $31,624 $31,610 $29,821 $117,823 $25,341 $25,395 $34,420 $85,156
EMEA 5,475 6,252 7,413 7,297 26,437 7,734 8,057 6,371 22,162
APAC 2,037 2,844 2,483 2,557 9,921 2,491 2,699 2,316 7,506
$32,280 $40,720 $41,506 $39,675 $154,181 $35,566 $36,151 $43,107 $114,824

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 3rd Qtr YTD
Revenue$2,781 $1,699 $(581) $(1,068) $2,831 $(2,419) $(1,906) $(1,352) $(5,677)
Costs and expenses 2,328 831 (1,177) (1,774) 208 (2,686) (1,696) (988) (5,370)
Operating income 453 868 596 706 2,623 267 (210) (364) (307)
Foreign currency gains
(losses) in other income		 366 705 1,431 (1,185) 1,317 (590) (377) 298 (669)
$819 $1,573 $2,027 $(479) $3,940 $(323) $(587) $(66) $(976)

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 3rd Qtr YTD
Operating income$(360) $359 $828 $1,066 $1,893 $981 $438 $51 $1,470
Foreign currency gains
(losses) in
other income		 210 1,120 1,572 (1,074) 1,828 (182) (127) 437 128
Total impact of
changes in the
Indian Rupee		$(150) $1,479 $2,400 $(8) $3,721 $799 $311 $488 $1,598

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 3rd Qtr YTD
Interest income$347 $241 $201 $278 $1,067 $231 $178 $191 $600
Foreign currency gains (losses) 366 705 1,431 (1,185) 1,317 (590) (377) 298 (669)
Other non-operating
income (expense)		 8 40 (94) 6 (40) (12) 128 321 437
Total other income (loss)$721 $986 $1,538 $(901) $2,344 $(371) $(71) $810 $368

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

2018 2019
1st Qtr 2nd Qtr 3rd Qtr 4th Qtr Full Year 1st Qtr 2nd Qtr 3rd Qtr YTD
Capital expenditures$2,174 $1,881 $1,481 $1,770 $7,306 $616 $2,689 $8,053 $11,358

6. Stock Repurchase Activity (in thousands):

2018 2019
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 1,158 1,082 389 519 3,148 464 302 429 1,195
Shares withheld for taxes due upon vesting of restricted stock 111 1 3 - 115 106 1 4 111
Total shares purchased 1,269 1,083 392 519 3,263 570 303 433 1,306
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 $35,955 $80,875
Total cash paid for shares withheld for taxes due upon vesting of restricted stock 5,843 23 175 7 6,048 5,233 85 266 5,584
Total cash paid for shares repurchased$55,815 $47,899 $20,844 $24,764 $149,322 $30,160 $20,078 $36,221 $86,459

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		 September 30,
2019
Remaining Performance Obligations$33,999 $58,434 $64,175 $76,990 $100,532 $120,403 $152,043


Contact: Matt Humphries, CFA Rick Fernandez
Senior Director,
Investor Relations		 Senior Manager,
Corporate Communications
Manhattan Associates, Inc. Manhattan Associates, Inc.
678-597-6574 678-597-6988
[email protected] [email protected]



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