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Manhattan Associates Reports Record Quarterly Revenue and Earnings

July 26, 2022 4:05 PM

RPO Bookings Increase 84% over Prior Year on Strong Demand

Company Raises 2022 Full-Year Revenue and EPS Guidance

ATLANTA, July 26, 2022 (GLOBE NEWSWIRE) -- Leading Supply Chain and Omnichannel Commerce Solutions provider Manhattan Associates Inc. (NASDAQ: MANH) today reported revenue of $191.9 million for the second quarter ended June 30, 2022. GAAP diluted earnings per share was $0.49 for Q2 2022 compared to $0.48 for Q2 2021. Non-GAAP adjusted diluted earnings per share for Q2 2022 was $0.69 compared to $0.61 in Q2 2021.

“Manhattan delivered a record second quarter and first half results. Our business momentum is strong, as Q2 cloud revenue growth of 48% and service revenue growth of 19% exceeded our expectations and drove excellent operating results,” said Manhattan Associates president and CEO Eddie Capel.

“While we continue to operate in a turbulent global macro environment, our teams are executing very well for our customers, and demand for our cloud-native solutions remains robust. With our business fundamentals strengthening and revenue visibility increasing, we are again raising our 2022 guidance,” Mr. Capel concluded.

SECOND QUARTER 2022 FINANCIAL SUMMARY:

SIX MONTH 2022 FINANCIAL SUMMARY:

2022 GUIDANCE

Manhattan Associates provides the following revenue, operating margin and diluted earnings per share guidance for the full year 2022:

Guidance Range - 2022 Full Year
($'s in millions, except operating margin and EPS)$ Range % Growth Range
Total revenue$733 $741 10% 12%
Operating Margin:
GAAP operating margin 17.4% 17.6%
Equity-based compensation 8.1% 8.1%
Adjusted operating margin(1) 25.5% 25.7%
Diluted earnings per share (EPS):
GAAP EPS$1.63 $1.67 -5% -3%
Equity-based compensation, net of tax 0.79 0.79
Excess tax benefit on stock vesting (2) (0.07) (0.07)
Adjusted EPS(1)$2.35 $2.39 5% 7%
(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.
(2) Excess tax benefit on stock vesting expected to occur primarily in the first quarter of 2022.

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. We note in particular that the severity, duration and ultimate impact of the COVID-19 pandemic are difficult to predict at this time. In addition, 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 second quarter 2022 financial results will be held today, July 26, 2022, 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 broadcast replay will be available until Manhattan Associates’ third quarter 2022 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 six months ended June 30, 2022.

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. 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 “2022 Guidance” and “Guideposts,” any statements about the future effect of the COVID-19 pandemic on our business, customers or the global economy, our business prospects following the pandemic, 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: the risk that the duration and severity of the COVID-19 pandemic, and its ultimate effects on the global economy, our customers and our business, may be worse than expected; economic conditions, including inflation; disruption in the retail sector; delays in product development; competitive and pricing pressures; software errors and information technology failures, system 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, 2021, 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,
2022 2021 2022 2021
(unaudited) (unaudited) (unaudited) (unaudited)
Revenue:
Cloud subscriptions $42,203 $28,595 $79,500 $55,238
Software license 5,125 8,823 13,483 16,661
Maintenance 35,993 37,732 71,295 73,891
Services 100,941 84,703 190,859 165,062
Hardware 7,662 6,261 15,743 12,112
Total revenue 191,924 166,114 370,880 322,964
Costs and expenses:
Cost of software license 880 556 1,282 1,112
Cost of cloud subscriptions, maintenance and services 87,766 70,072 170,791 143,581
Research and development 27,924 23,213 55,379 47,473
Sales and marketing 17,749 13,750 32,139 27,146
General and administrative 18,606 17,082 36,571 34,651
Depreciation and amortization 1,746 2,084 3,493 4,219
Total costs and expenses 154,671 126,757 299,655 258,182
Operating income 37,253 39,357 71,225 64,782
Other income, net 2,243 306 2,981 13
Income before income taxes 39,496 39,663 74,206 64,795
Income tax provision 8,671 9,070 12,789 11,559
Net income $30,825 $30,593 $61,417 $53,236
Basic earnings per share $0.49 $0.48 $0.97 $0.84
Diluted earnings per share $0.49 $0.48 $0.97 $0.83
Weighted average number of shares:
Basic 62,954 63,537 63,083 63,591
Diluted 63,419 64,276 63,644 64,371

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

Three Months Ended June 30, Six Months Ended June 30,
2022 2021 2022 2021
Operating income $37,253 $39,357 $71,225 $64,782
Equity-based compensation (a) 15,538 10,709 29,676 20,760
Purchase amortization (c) - 107 - 214
Adjusted operating income (Non-GAAP) $52,791 $50,173 $100,901 $85,756
Income tax provision $8,671 $9,070 $12,789 $11,559
Equity-based compensation (a) 2,566 1,478 4,748 2,896
Tax benefit of stock awards vested (b) 8 402 4,383 4,057
Purchase amortization (c) - 26 - 53
Adjusted income tax provision (Non-GAAP) $11,245 $10,976 $21,920 $18,565
Net income $30,825 $30,593 $61,417 $53,236
Equity-based compensation (a) 12,972 9,231 24,928 17,864
Tax benefit of stock awards vested (b) (8) (402) (4,383) (4,057)
Purchase amortization (c) - 81 - 161
Adjusted net income (Non-GAAP) $43,789 $39,503 $81,962 $67,204
Diluted EPS $0.49 $0.48 $0.97 $0.83
Equity-based compensation (a) 0.20 0.14 0.39 0.28
Tax benefit of stock awards vested (b) - (0.01) (0.07) (0.06)
Purchase amortization (c) - - - -
Adjusted diluted EPS (Non-GAAP) $0.69 $0.61 $1.29 $1.04
Fully diluted shares 63,419 64,276 63,644 64,371

(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. The Tax Cuts and Jobs Act further increased those limitations.

Three Months Ended June 30, Six Months Ended June 30,
2022 2021 2022 2021
Cost of services $5,822 $3,513 $10,959 $6,792
Research and development 3,425 2,116 6,614 4,108
Sales and marketing 1,546 1,111 2,952 2,125
General and administrative 4,745 3,969 9,151 7,735
Total equity-based compensation $15,538 $10,709 $29,676 $20,760

(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.
(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.

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

June 30, 2022 December 31, 2021
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents $213,771 $263,706
Accounts receivable, net of allowance of $3,046 and $2,419, at June 30, 2022 and December 31, 2021, respectively 133,852 124,420
Prepaid expenses and other current assets 26,929 20,293
Total current assets 374,552 $408,419
Property and equipment, net 12,343 13,889
Operating lease right-of-use assets 23,198 27,272
Goodwill, net 62,227 62,239
Deferred income taxes 20,093 7,650
Other assets 21,876 20,239
Total assets $514,289 $539,708
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $25,154 $19,625
Accrued compensation and benefits 45,598 53,104
Accrued and other liabilities 22,385 22,741
Deferred revenue 178,019 153,196
Income taxes payable 70 376
Total current liabilities 271,226 249,042
Operating lease liabilities, long-term 18,934 23,157
Other non-current liabilities 15,394 16,865
Shareholders' equity:
Preferred stock, no par value; 20,000,000 shares authorized, no shares issued or outstanding in 2022 and 2021 - -
Common stock, $0.01 par value; 200,000,000 shares authorized; 62,718,513 and 63,154,494 shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively 627 631
Retained earnings 233,151 269,841
Accumulated other comprehensive loss (25,043) (19,828)
Total shareholders' equity 208,735 250,644
Total liabilities and shareholders' equity $514,289 $539,708

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

Six Months Ended June 30,
2022 2021
(unaudited) (unaudited)
Operating activities:
Net income $61,417 $53,236
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 3,493 4,219
Equity-based compensation 29,676 20,760
(Gain) loss on disposal of equipment (92) -
Deferred income taxes (12,535) 1,768
Unrealized foreign currency gain (2,087) (1,029)
Changes in operating assets and liabilities:
Accounts receivable, net (11,703) (5,289)
Other assets (6,697) (7,912)
Accounts payable, accrued and other liabilities (587) 9,592
Income taxes (3,519) (1,952)
Deferred revenue 27,116 12,002
Net cash provided by operating activities 84,482 85,395
Investing activities:
Purchase of property and equipment (2,243) (1,171)
Net cash used in investing activities (2,243) (1,171)
Financing activities:
Purchase of common stock (127,787) (79,486)
Net cash used in financing activities (127,787) (79,486)
Foreign currency impact on cash (4,387) (100)
Net change in cash and cash equivalents (49,935) 4,638
Cash and cash equivalents at beginning of period 263,706 204,705
Cash and cash equivalents at end of period $213,771 $209,343

MANHATTAN ASSOCIATES, INC.SUPPLEMENTAL INFORMATION

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

2021 2022
1st Qtr 2nd Qtr 3rd Qtr 4th Qtr Full Year 1st Qtr 2nd Qtr YTD
GAAP Diluted EPS$0.35 $0.48 $0.57 $0.32 $1.72 $0.48 $0.49 $0.97
Adjustments to GAAP:
Equity-based compensation 0.13 0.14 0.14 0.16 0.58 0.19 0.20 0.39
Tax benefit of stock awards vested (0.06) (0.01) - - (0.07) (0.07) - (0.07)
Purchase amortization - - - - - - - -
Adjusted Diluted EPS$0.43 $0.61 $0.71 $0.48 $2.23 $0.60 $0.69 $1.29
Fully Diluted Shares 64,466 64,276 64,238 64,224 64,323 63,871 63,419 63,644

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

2021 2022
1st Qtr 2nd Qtr 3rd Qtr 4th Qtr Full Year 1st Qtr 2nd Qtr YTD
Revenue:
Americas$122,813 $132,308 $135,233 $135,861 $526,215 $139,540 $151,996 291,536
EMEA 28,434 27,190 27,402 27,548 110,574 32,151 31,614 63,765
APAC 5,603 6,616 6,550 8,085 26,854 7,265 8,314 15,579
$156,850 $166,114 $169,185 $171,494 $663,643 $178,956 $191,924 $370,880
GAAP Operating Income:
Americas$16,116 $28,590 $29,727 $16,746 $91,179 $21,393 $24,507 $45,900
EMEA 8,374 8,643 10,485 7,245 34,747 10,517 9,423 19,940
APAC 935 2,124 2,196 3,152 8,407 2,062 3,323 5,385
$25,425 $39,357 $42,408 $27,143 $134,333 $33,972 $37,253 $71,225
Adjustments (pre-tax):
Americas:
Equity-based compensation$10,051 $10,709 $10,573 $11,926 $43,259 $14,138 $15,538 $29,676
Purchase amortization 107 107 50 - 264 - - -
$10,158 $10,816 $10,623 $11,926 $43,523 $14,138 $15,538 $29,676
Adjusted non-GAAP Operating Income:
Americas$26,274 $39,406 $40,350 $28,672 $134,702 $35,531 $40,045 $75,576
EMEA 8,374 8,643 10,485 7,245 34,747 10,517 9,423 19,940
APAC 935 2,124 2,196 3,152 8,407 2,062 3,323 5,385
$35,583 $50,173 $53,031 $39,069 $177,856 $48,110 $52,791 $100,901

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):

2021 2022
1st Qtr 2nd Qtr 3rd Qtr 4th Qtr Full Year 1st Qtr 2nd Qtr YTD
Revenue$2,932 $3,209 $823 $(716) $6,248 $(2,268) $(4,568) $(6,836)
Costs and expenses 2,000 2,442 551 (887) 4,106 (2,043) (3,862) (5,905)
Operating income 932 767 272 171 2,142 (225) (706) (931)
Foreign currency (losses) gains in other income (287) 315 (30) (243) (245) 711 2,056 2,767
$645 $1,082 $242 $(72) $1,897 $486 $1,350 $1,836

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):

2021 2022
1st Qtr 2nd Qtr 3rd Qtr 4th Qtr Full Year 1st Qtr 2nd Qtr YTD
Operating income$79 ($294) ($37) $281 $29 $470 $710 $1,180
Foreign currency gains (losses) in other income 315 535 3 (9) 844 809 2,085 2,894
Total impact of changes in the Indian Rupee$394 $241 $(34) $272 $873 $1,279 $2,795 $4,074

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

2021 2022
1st Qtr 2nd Qtr 3rd Qtr 4th Qtr Full Year 1st Qtr 2nd Qtr YTD
Interest income($15) ($10) ($9) $102 $68 $19 $92 $111
Foreign currency gains (losses) (287) 315 (30) (243) (245) 711 2,056 2,767
Other non-operating income (expense) 9 1 (3) (91) (84) 8 95 103
Total other income (loss)$(293) $306 $(42) $(232) $(261) $738 $2,243 $2,981

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

2021 2022
1st Qtr 2nd Qtr 3rd Qtr 4th Qtr Full Year 1st Qtr 2nd Qtr YTD
Capital expenditures$569 $602 $987 $1,858 $4,016 $1,159 $1,084 $2,243

6. Stock Repurchase Activity (in thousands):

2021 2022
1st Qtr 2nd Qtr 3rd Qtr 4th Qtr Full Year 1st Qtr 2nd Qtr YTD
Shares purchased under publicly announced buy-back program 214 244 123 128 709 383 417 800
Shares withheld for taxes due upon vesting of restricted stock units 172 1 5 1 179 203 4 207
Total shares purchased 386 245 128 129 888 586 421 1,007
Total cash paid for shares purchased under publicly announced buy-back program $26,988 $32,894 $19,994 $20,117 $99,993 $49,965 $50,151 $100,116
Total cash paid for shares withheld for taxes due upon vesting of restricted stock units 19,414 190 762 59 20,425 27,143 528 27,671
Total cash paid for shares repurchased $46,402 $33,084 $20,756 $20,176 $120,418 $77,108 $50,679 $127,787

7. Remaining Performance Obligations

We disclose revenue we expect to recognize from our remaining performance obligations. Over 97% of our reported performance obligations 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 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 31,2021 June 30,2021 September 30,2021 December 31,2021 March 31,2022 June 30,2022
Remaining Performance Obligations$421,196 $488,718 $573,712 $699,244 $809,540 $897,680

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. As such, our cash outlook for 2022 includes the negative impact of approximately $25 million to $30 million in additional income tax payments. 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 (i) actual 2021 results for cloud revenue and remaining performance obligations (“RPO”), (ii) revised 2022 cloud revenue guidepost and (iii) guideposts published as of February 1, 2022, for cloud revenue for 2023 through 2024 and remaining performance obligations (“RPO”) for each year 2022 through 2024. We expect to exceed our 2022 RPO guidepost and plan to update all guideposts on our upcoming third quarter earnings release.

Current Guideposts
($'s in millions)
Cloud Revenue
Year Low Mid High % Growth(1)
2021 (2) $122 $122 $122 53%
2022 (3) $170 $171 $172 40%
2023 (4) $220 $230 $240 35%
2024 (4) $310 $328 $345 42%
Remaining Performance Obligations
Year Low Mid High % Growth(1)
2021 (2) $699 $699 $699 126%
2022 (4) $950 $1,000 $1,050 43%
2023 (4) $1,250 $1,325 $1,400 33%
2024 (4) $1,600 $1,700 $1,800 28%
(1) Year-over-year percentage growth is calculated based on the actual or forecasted mid-points.(2) 2021 represents the actual result. (3) Amount reflects revised range as of July 26, 2022. (4) Amounts remain unchanged from February 1, 2022. Will address in Q3 2022 Earnings call.

These guideposts are forward-looking statements and are subject to all the risks and uncertainties applicable to our shorter-term 2022 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 longer-term guideposts may be inherently more uncertain than our shorter-term guidance.

Contact: Michael Bauer Rick Fernandez
Senior Director, Investor Relations Director, Corporate Communications
Manhattan Associates, Inc. Manhattan Associates, Inc.
678-597-7538 678-597-6988
[email protected] [email protected]

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Source: Manhattan Associates, Inc.

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