Market Overview

Manhattan Associates Reports Second Quarter 2018 Results

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ATLANTA, Ga., July 24, 2018 (GLOBE NEWSWIRE) -- Leading Supply Chain and Omnichannel Commerce Solutions provider Manhattan Associates Inc. (NASDAQ:MANH) today reported GAAP diluted earnings per share for the second quarter ended June 30, 2018, of $0.42 compared to $0.45 in Q2 2017, on license revenue of $13.0 million, cloud subscriptions revenue of $5.4 million and total revenue of $141.9 million. Non-GAAP adjusted diluted earnings per share for Q2 2018 was $0.47 compared to $0.50 in Q2 2017.

"Q2 was another good quarter for our company with the underlying business fundamentals strengthening," said Manhattan Associates president and CEO Eddie Capel. "Q2 total revenue and earnings per share performance improved over Q1 and were slightly ahead of our expectations. Based on our outlook for the remainder of the year, we are raising our 2018 full-year guidance for total revenue and earnings." 

"While cautious regarding global geopolitical and economic volatility, we continue to be very bullish on the market opportunity ahead and are investing significant capital into transformative industry leading innovation. Our transition to Cloud continues as planned, and at our Momentum customer conference in May, we unveiled exciting product advancements, enabling our clients to Push Possible™ with their commerce supply chains," added Mr. Capel.

SECOND QUARTER 2018 FINANCIAL SUMMARY:

  • We have reclassified certain line items in prior period financial statements to conform to the current period presentation in the consolidated statements of income because of our business transition to cloud subscriptions.
  • GAAP diluted earnings per share was $0.42 in Q2 2018 compared to $0.45 in Q2 2017.
  • Adjusted diluted earnings per share, a non-GAAP measure, was $0.47 in Q2 2018, compared to $0.50 in Q2 2017.
  • Consolidated total revenue was $141.9 million in Q2 2018, compared to $154.1 million in Q2 2017. License revenue was $13.0 million in Q2 2018, compared to $20.1 million in Q2 2017. Cloud subscription revenue was $5.4 million in Q2 2018, compared to $2.4 million in Q2 2017.
  • GAAP operating income was $35.7 million in Q2 2018, compared to $49.3 million in Q2 2017.
  • Adjusted operating income, a non-GAAP measure, was $40.7 million in Q2 2018, compared to $55.2 million in Q2 2017.
  • Cash flow from operations was $16.8 million in Q2 2018, compared to $11.3 million in Q2 2017. Days Sales Outstanding was 64 days at June 30, 2018, compared to 59 days at March 31, 2018.
  • Cash and investments totaled $83.4 million at June 30, 2018, compared to $119.0 million at March 31, 2018.
  • During the three months ended June 30, 2018, the Company repurchased 1,082,660 shares of Manhattan Associates common stock under the share repurchase program authorized by our Board of Directors for a total investment of $47.9 million. In July 2018, our Board authorized the Company to repurchase up to an aggregate of $50 million of the Company's common stock.

SIX MONTH 2018 FINANCIAL SUMMARY:

  • We have reclassified certain line items in prior period financial statements to conform to the current period presentation in the consolidated statements of income because of our business transition to cloud subscriptions.
  • GAAP diluted earnings per share for the six months ended June 30, 2018 was $0.75, compared to $0.85 for the six months ended June 30, 2017.  
  • Adjusted diluted earnings per share, a non-GAAP measure, was $0.84 for the six months ended June 30, 2018, compared to $0.92 for the six months ended June 30, 2017.
  • Consolidated revenue for the six months ended June 30, 2018, was $272.4 million, compared to $297.6 million for the six months ended June 30, 2017. License revenue was $20.5 million for the six months ended June 30, 2018, compared to $41.3 million for the six months ended June 30, 2017. Cloud subscription revenue was $9.8 million for the six months ended June 30, 2018, compared to $3.9 million for the six months ended June 30, 2017.
  • GAAP operating income was $63.5 million for the six months ended June 30, 2018, compared to $91.0 million for the six months ended June 30, 2017.
  • Adjusted operating income, a non-GAAP measure, was $73.0 million for the six months ended June 30, 2018, compared to $101.5 million for the six months ended June 30, 2017. 
  • Cash flow from operations was $68.1 million in the six months ended June 30, 2018, compared to $72.6 million in the six months ended June 30, 2017.
  • During the six months ended June 30, 2018, the Company repurchased 2,240,356 shares of Manhattan Associates common stock under the share repurchase program authorized by our Board of Directors, for a total investment of $97.8 million.

NEW PRESENTATION OF CONSOLIDATED STATEMENTS OF INCOME

We have reclassified certain line items in prior period financial statements to conform to the current period presentation in the consolidated statements of income because of our business transition to cloud subscriptions. These reclassifications include: all revenue line items; cost of license; cost of cloud subscriptions, maintenance and services; and cost of hardware. These reclassifications did not affect total revenue, operating income or net income. For further detail, please see note 7 in the supplemental financial information accompanying this press release.

2018 GUIDANCE

Manhattan Associates provides the following updated revenue, operating margin and diluted earnings per share guidance for the full year 2018:

    Guidance Range - 2018 Full Year
  ($'s in millions, except operating margin and EPS) $ Range     % Growth Range    
                                   
  Total revenue - current guidance $ 548     $ 560     -8 %     -6 %    
                                   
  Total revenue - previous guidance $ 546     $ 558     -8 %     -6 %    
                                   
  Operating Margin:                                
  GAAP operating margin - current guidance   21.1 %     21.4 %   -10.1 %     -9.8 %    
  Equity-based compensation   3.7 %     3.6 %                  
  Adjusted operating margin(1) - current guidance   24.8 %     25.0 %   -9.7 %     -9.5 %    
                                   
  GAAP operating margin - previous guidance   20.0 %     20.4 %   -11.2 %     -10.8 %    
  Equity-based compensation   4.0 %     3.9 %                  
  Adjusted operating margin(1) - previous guidance   24.0 %     24.3 %   -10.5 %     -10.2 %    
                                   
  Diluted earnings per share (EPS):                                
  GAAP EPS - current guidance $ 1.32     $ 1.36     -21 %     -19 %    
  Equity-based compensation, net of tax   0.25       0.25                    
  Adjusted EPS(1) - current guidance $ 1.57     $ 1.61     -16 %     -14 %    
                                   
  GAAP EPS - previous guidance $ 1.23     $ 1.27     -27 %     -24 %    
  Equity-based compensation, net of tax   0.25       0.25                    
  Adjusted EPS(1) - previous guidance $ 1.48     $ 1.52     -21 %     -19 %    
                                   
                                   
  (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 24, 2018, 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 ­­­­­­­­6059039 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 2018 earnings release.

GAAP VERSUS NON-GAAP PRESENTATION

The Company provides adjusted operating income and margin, adjusted income tax provision, adjusted net income, adjusted diluted earnings per share, adjusted cost of services, and adjusted cost of cloud subscriptions, maintenance and services 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, 2018. 

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 a restructuring charge – all net of income tax effects, and the impact of the Tax Cuts and Jobs Act. Adjusted cost of services and adjusted cost of cloud subscriptions, maintenance and services exclude the impact of equity-based compensation. 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 "2018 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, 2017. 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 June 30,     Six Months Ended June 30,  
    2018     2017     2018     2017  
    (unaudited)     (unaudited)     (unaudited)     (unaudited)  
Revenue:                                
Software license   $ 12,973     $ 20,064     $ 20,528     $ 41,341  
Cloud subscriptions     5,377       2,378       9,846       3,874  
Maintenance     36,993       35,959       73,390       69,335  
Services     82,267       85,327       161,024       165,108  
Hardware     4,261       10,413       7,652       17,972  
Total revenue     141,871       154,141       272,440       297,630  
Costs and expenses:                                
Cost of license     2,096       1,438       3,404       2,790  
Cost of cloud subscriptions, maintenance and services     56,985       53,109       113,471       108,008  
Cost of hardware     -       7,766       -       13,136  
Research and development     18,176       14,102       35,235       28,327  
Sales and marketing     13,809       11,732       26,693       23,521  
General and administrative     12,885       11,387       25,685       23,259  
Depreciation and amortization     2,235       2,326       4,437       4,588  
Restructuring charge     -       3,022       -       3,022  
Total costs and expenses     106,186       104,882       208,925       206,651  
Operating income     35,685       49,259       63,515       90,979  
Other income (loss), net     986       (68 )     1,707       (439 )
Income before income taxes     36,671       49,191       65,222       90,540  
Income tax provision     9,003       18,047       14,902       31,172  
Net income   $ 27,668     $ 31,144     $ 50,320     $ 59,368  
                                 
Basic earnings per share   $ 0.42     $ 0.45     $ 0.75     $ 0.85  
Diluted earnings per share   $ 0.42     $ 0.45     $ 0.75     $ 0.85  
                                 
Weighted average number of shares:                                
Basic     66,429       69,227       66,987       69,610  
Diluted     66,535       69,421       67,132       69,844  
                                 


             
MANHATTAN ASSOCIATES, INC. AND SUBSIDIARIES
Reconciliation of Selected GAAP to Non-GAAP Measures
(in thousands, except per share amounts)
             
    Three Months Ended June 30,     Six Months Ended June 30,  
    2018     2017     2018     2017  
                                 
Operating income   $ 35,685     $ 49,259     $ 63,515     $ 90,979  
Equity-based compensation (a)     4,927       2,796       9,270       7,268  
Purchase amortization (c)     108       108       215       215  
Restructuring charge (d)     -       3,022       -       3,022  
Adjusted operating income (Non-GAAP)   $ 40,720     $ 55,185     $ 73,000     $ 101,484  
                                 
                                 
Income tax provision   $ 9,003     $ 18,047     $ 14,902     $ 31,172  
Equity-based compensation (a)     1,207       1,021       2,271       2,653  
Tax benefit of stock awards vested (b)     (19 )     (93 )     730       1,875  
Purchase amortization (c)     26       40       53       79  
Restructuring charge (d)     -       1,103       -       1,103  
U.S. Tax Cuts and Jobs Act impact (e)     -       -       348       -  
Adjusted income tax provision (Non-GAAP)   $ 10,217     $ 20,118     $ 18,304     $ 36,882  
                                 
                                 
Net income   $ 27,668     $ 31,144     $ 50,320     $ 59,368  
Equity-based compensation (a)     3,720       1,775       6,999       4,615  
Tax benefit of stock awards vested (b)     19       93       (730 )     (1,875 )
Purchase amortization (c)     82       68       162       136  
Restructuring charge (d)     -       1,919       -       1,919  
U.S. Tax Cuts and Jobs Act impact (e)     -       -       (348 )     -  
Adjusted net income (Non-GAAP)   $ 31,489     $ 34,999     $ 56,403     $ 64,163  
                              -  
                                 
Diluted EPS   $ 0.42     $ 0.45     $ 0.75     $ 0.85  
Equity-based compensation (a)     0.06       0.03       0.10       0.07  
Tax benefit of stock awards vested (b)     -       -       (0.01 )     (0.03 )
Purchase amortization (c)     -       -       -       -  
Restructuring charge (d)     -       0.03       -       0.03  
Adjusted diluted EPS (Non-GAAP)   $ 0.47     $ 0.50     $ 0.84     $ 0.92  
                                 
Fully diluted shares     66,535       69,421       67,132       69,844  
                                 

(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 on the date hereof. Equity-based compensation is included in the following GAAP operating expense lines for the three and six months ended June 30, 2018 and 2017:

    Three Months Ended June 30,     Six Months Ended June 30,  
    2018     2017     2018     2017  
                                 
Cost of services   $ 1,556     $ 580     $ 2,673     $ 1,721  
Research and development     1,140       434       2,061       1,154  
Sales and marketing     347       393       905       1,060  
General and administrative     1,884       1,389       3,631       3,333  
Total equity-based compensation   $ 4,927     $ 2,796     $ 9,270     $ 7,268  

(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 May 2017, we eliminated about 100 positions due to the headwinds in the retail sector and to align our services capacity with demand. That action did not impair or alter our strategic investment plans in innovation and sales and marketing to increase market share and extend our competitive advantage. As a result of that initiative, we recorded a charge of approximately $3.0 million in the second quarter of 2017. The charge primarily consisted of employee severance and employee transition and outplacement costs. We do not believe that the charge was a cost resulting from normal operating activities. Consequently, we excluded that charge from adjusted non-GAAP results.

(e) In the fourth quarter of 2017, we recorded a provisional net one-time tax of $2.8 million because of the enactment of the Tax Cuts and Jobs Act (the 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 provisional estimate by $0.3 million during the six months ended June 30, 2018.

             
MANHATTAN ASSOCIATES, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(in thousands, except share and per share data)
             
    June 30, 2018     December 31, 2017  
    (unaudited)          
ASSETS                
Current assets:                
Cash and cash equivalents   $ 79,034     $ 125,522  
Short-term investments     4,392       -  
Accounts receivable, net of allowance of $2,753 and $2,692, respectively     99,112       92,231  
Prepaid expenses and other current assets     22,192       10,320  
Total current assets     204,730       228,073  
                 
Property and equipment, net     15,323       15,493  
Goodwill, net     62,244       62,248  
Deferred income taxes     606       1,877  
Other assets     9,592       7,304  
Total assets   $ 292,495     $ 314,995  
                 
LIABILITIES AND SHAREHOLDERS' EQUITY                
Current liabilities:                
Accounts payable   $ 21,192     $ 14,028  
Accrued compensation and benefits     25,393       15,826  
Accrued and other liabilities     11,029       12,105  
Deferred revenue     90,413       75,068  
Income taxes payable     -       7,228  
Total current liabilities     148,027       124,255  
                 
Other non-current liabilities     15,226       15,784  
                 
Shareholders' equity:                
Preferred stock, no par value; 20,000,000 shares authorized, no shares issued or outstanding in 2018 and 2017     -       -  
Common stock, $0.01 par value; 200,000,000 shares authorized; 65,759,735 and 67,776,138 shares issued and outstanding at June 30, 2018 and December 31, 2017, respectively     658       678  
Retained earnings     143,994       186,117  
Accumulated other comprehensive loss     (15,410 )     (11,839 )
Total shareholders' equity     129,242       174,956  
Total liabilities and shareholders' equity   $ 292,495     $ 314,995  


       
MANHATTAN ASSOCIATES, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(in thousands)
       
    Six Months Ended June 30,  
    2018     2017  
    (unaudited)     (unaudited)  
Operating activities:                
Net income   $ 50,320     $ 59,368  
Adjustments to reconcile net income to net cash provided by operating activities:                
Depreciation and amortization     4,437       4,588  
Equity-based compensation     9,270       7,268  
(Gain) loss on disposal of equipment     (37 )     9  
Deferred income taxes     803       1,966  
Unrealized foreign currency (gain) loss     (1,359 )     42  
Changes in operating assets and liabilities:                
Accounts receivable, net     (7,913 )     5,243  
Other assets     (5,217 )     (2,985 )
Accounts payable, accrued and other liabilities     15,846       (2,117 )
Income taxes     (14,300 )     (9,336 )
Deferred revenue     16,244       8,549  
Net cash provided by operating activities     68,094       72,595  
                 
Investing activities:                
Purchase of property and equipment     (4,055 )     (2,703 )
Net purchases of investments     (5,196 )     (9,457 )
Net cash used in investing activities     (9,251 )     (12,160 )
                 
Financing activities:                
Purchase of common stock     (103,714 )     (81,620 )
Net cash used in financing activities     (103,714 )     (81,620 )
                 
Foreign currency impact on cash     (1,617 )     2,274  
                 
Net change in cash and cash equivalents     (46,488 )     (18,911 )
Cash and cash equivalents at beginning of period     125,522       95,615  
Cash and cash equivalents at end of period   $ 79,034     $ 76,704  


MANHATTAN ASSOCIATES, INC.

SUPPLEMENTAL INFORMATION

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

  2017     2018  
  1st Qtr     2nd Qtr     3rd Qtr     4th Qtr     Full Year     1st Qtr     2nd Qtr     YTD  
GAAP Diluted EPS $ 0.40     $ 0.45     $ 0.47     $ 0.36     $ 1.68     $ 0.33     $ 0.42     $ 0.75  
Adjustments to GAAP:                                                              
Equity-based compensation   0.04       0.03       0.03       0.05       0.15       0.05       0.06       0.10  
Tax benefit of stock awards vested   (0.03 )     -       -       -       (0.03 )     (0.01 )     -       (0.01 )
Purchase amortization   -       -       -       -       -       -       -       -  
Restructuring charge   -       0.03       -       -       0.03       -       -       -  
U.S. Tax Cuts and Jobs Act impact   -       -       -       0.04       0.04       (0.01 )     -       -  
Adjusted Diluted EPS $ 0.42     $ 0.50     $ 0.51     $ 0.45     $ 1.87     $ 0.37     $ 0.47     $ 0.84  
Fully Diluted Shares   70,247       69,421       69,135       68,791       69,424       67,736       66,535       67,132  

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

  2017     2018  
  1st Qtr     2nd Qtr     3rd Qtr     4th Qtr     Full Year     1st Qtr     2nd Qtr     YTD  
Revenue:  
Americas $ 113,115     $ 123,658     $ 124,833     $ 115,543     $ 477,149     $ 104,615     $ 112,945     $ 217,560  
EMEA   23,360       22,028       18,453       21,508       85,349       19,164       21,356       40,520  
APAC   7,014       8,455       9,597       7,035       32,101       6,790       7,570       14,360  
  $ 143,489     $ 154,141     $ 152,883     $ 144,086     $ 594,599     $ 130,569     $ 141,871     $ 272,440  
                                                               
GAAP Operating Income:  
Americas $ 28,713     $ 35,717     $ 39,295     $ 32,968     $ 136,693     $ 20,318     $ 26,589     $ 46,907  
EMEA   10,754       9,995       7,128       7,952       35,829       5,475       6,252       11,727  
APAC   2,253       3,547       4,673       2,650       13,123       2,037       2,844       4,881  
  $ 41,720     $ 49,259     $ 51,096     $ 43,570     $ 185,645     $ 27,830     $ 35,685     $ 63,515  
                                                               
Adjustments (pre-tax):  
Americas:                                                              
Equity-based
  compensation
$ 4,472     $ 2,796     $ 3,773     $ 5,188     $ 16,229     $ 4,343     $ 4,927     $ 9,270  
Purchase amortization   107       108       108       107       430       107       108       215  
Restructuring charge   -       2,908       (77 )     (18 )     2,813       -       -       -  
  $ 4,579     $ 5,812     $ 3,804     $ 5,277     $ 19,472     $ 4,450     $ 5,035     $ 9,485  
                                                               
EMEA:                                                              
Restructuring charge   -       114       -       (6 )     108       -       -       -  
                                                               
Adjusted non-GAAP Operating Income:  
Americas $ 33,292     $ 41,529     $ 43,099     $ 38,245     $ 156,165     $ 24,768     $ 31,624     $ 56,392  
EMEA   10,754       10,109       7,128       7,946       35,937       5,475       6,252       11,727  
APAC   2,253       3,547       4,673       2,650       13,123       2,037       2,844       4,881  
  $ 46,299     $ 55,185     $ 54,900     $ 48,841     $ 205,225     $ 32,280     $ 40,720     $ 73,000  
                                                               

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):

                                                               
  2017     2018  
  1st Qtr     2nd Qtr     3rd Qtr     4th Qtr     Full Year     1st Qtr     2nd Qtr     YTD  
Revenue $ (1,547 )   $ (1,219 )   $ 536     $ 1,820     $ (410 )   $ 2,781     $ 1,699     $ 4,480  
Costs and expenses   (789 )     (396 )     723       1,485       1,023       2,328       831       3,159  
Operating income   (758 )     (823 )     (187 )     335       (1,433 )     453       868       1,321  
Foreign currency (losses)
  gains in other income
  (646 )     (348 )     (81 )     (771 )     (1,846 )     366       705       1,071  
  $ (1,404 )   $ (1,171 )   $ (268 )   $ (436 )   $ (3,279 )   $ 819     $ 1,573     $ 2,392  

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):

  2017     2018  
  1st Qtr     2nd Qtr     3rd Qtr     4th Qtr     Full Year     1st Qtr     2nd Qtr     YTD  
Operating income $ (70 )   $ (326 )   $ (338 )   $ (345 )   $ (1,079 )   $ (360 )   $ 359     $ (1 )
Foreign currency
  (losses) gains in
  other income
  (320 )     (190 )     71       (43 )     (482 )     210       1,120       1,330  
Total impact of
  changes in the
  Indian Rupee
$ (390 )   $ (516 )   $ (267 )   $ (388 )   $ (1,561 )   $ (150 )   $ 1,479     $ 1,329  

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

  2017     2018  
  1st Qtr     2nd Qtr     3rd Qtr     4th Qtr     Full Year     1st Qtr     2nd Qtr     YTD  
Interest income $ 293     $ 264     $ 314     $ 303     $ 1,174     $ 347     $ 241     $ 588  
Foreign currency (losses) gains   (646 )     (348 )     (81 )     (771 )     (1,846 )     366       705       1,071  
Other non-operating
  (expense) income
  (18 )     16       (26 )     (112 )     (140 )     8       40       48  
Total other (loss) income $ (371 )   $ (68 )   $ 207     $ (580 )   $ (812 )   $ 721     $ 986     $ 1,707  

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

  2017     2018  
  1st Qtr     2nd Qtr     3rd Qtr     4th Qtr     Full Year     1st Qtr     2nd Qtr     YTD  
Capital expenditures $ 789     $ 1,914     $ 1,194     $ 2,302     $ 6,199     $ 2,174     $ 1,881     $ 4,055  

6. Stock Repurchase Activity (in thousands):

  2017     2018  
  1st Qtr     2nd Qtr     3rd Qtr     4th Qtr     Full Year     1st Qtr     2nd Qtr     YTD  
Shares purchased under publicly announced buy-back program   1,004       535       -       1,156       2,695       1,158       1,082       2,240  
Shares withheld for taxes due upon vesting of restricted stock   131       1       2       1       135       111       1       112  
Total shares purchased   1,135       536       2       1,157       2,830       1,269       1,083       2,352  
                                                               
Total cash paid for shares purchased under publicly announced buy-back program $ 49,978     $ 24,974     $ -     $ 49,953     $ 124,905     $ 49,972     $ 47,876     $ 97,848  
Total cash paid for shares withheld for taxes due upon vesting of restricted stock   6,641       27       80       54       6,802       5,843       23       5,866  
Total cash paid for shares repurchased $ 56,619     $ 25,001     $ 80     $ 50,007     $ 131,707     $ 55,815     $ 47,899     $ 103,714  

7.  Because of our business transition to Cloud Subscriptions, we have revised our presentations of revenue and related cost line items in our consolidated statements of income. We have reclassified certain line items in prior period financial statements to conform to the current period presentation in the consolidated statements of income. These reclassifications include: all revenue line items; cost of license; cost of cloud subscriptions, maintenance and services; and cost of hardware. These reclassifications did not affect total revenues, operating income or net income. The following table reflects the comparison between the former and new presentation (in thousands):

  2016     2017     2018  
  Full Year     1st Qtr     2nd Qtr     3rd Qtr     4th Qtr     Full Year     1st Qtr     2nd Qtr     YTD  
                                                                       
Former Presentation:                                                                      
Software license $ 84,996     $ 22,773     $ 22,442     $ 18,794     $ 17,900     $ 81,909     $ 12,024     $ 18,350     $ 30,374  
Services   467,286       108,833       116,828       115,555       110,394       451,610       111,701       118,504       230,205  
Hardware and other   52,275       11,883       14,871       18,534       15,792       61,080       6,844       5,017       11,861  
  $ 604,557     $ 143,489     $ 154,141     $ 152,883     $ 144,086     $ 594,599     $ 130,569     $ 141,871     $ 272,440  
                                                                       
Cost of license $ 10,820     $ 2,240     $ 2,355     $ 2,830     $ 3,169     $ 10,594     $ 3,982     $ 5,534     $ 9,516  
Cost of services   197,475       49,743       47,751       44,750       43,053       185,297       50,348       49,475       99,823  
Cost of hardware and other   41,584       9,638       12,207       15,492       12,505       49,842       3,464       4,072       7,536  
  $ 249,879     $ 61,621     $ 62,313     $ 63,072     $ 58,727     $ 245,733     $ 57,794     $ 59,081     $ 116,875  
                                                                       
                                                                       
New Presentation:                                                                      
Software license $ 79,213     $ 21,277     $ 20,064     $ 16,260     $ 14,712     $ 72,313     $ 7,555     $ 12,973     $ 20,528  
Cloud subscriptions (a)   5,783       1,496       2,378       2,534       3,188       9,596       4,469       5,377       9,846  
Maintenance   133,848       33,376       35,959       36,338       37,325       142,998       36,397       36,993       73,390  
Services   351,785       79,781       85,327       84,211       77,183       326,502       78,757       82,267       161,024  
Hardware   33,928       7,559       10,413       13,540       11,678       43,190       3,391       4,261       7,652  
  $ 604,557     $ 143,489     $ 154,141     $ 152,883     $ 144,086     $ 594,599     $ 130,569     $ 141,871     $ 272,440  
                                                                       
Cost of license $ 6,818     $ 1,352     $ 1,438     $ 1,316     $ 1,377     $ 5,483     $ 1,308     $ 2,096     $ 3,404  
Cost of cloud subscriptions, maintenance and services (b)   219,635       54,899       53,109       51,103       48,934       208,045       56,486       56,985       113,471  
Cost of hardware   23,426       5,370       7,766       10,653       8,416       32,205       -       -       -  
  $ 249,879     $ 61,621     $ 62,313     $ 63,072     $ 58,727     $ 245,733     $ 57,794     $ 59,081     $ 116,875  
                                                                       
                                                                       


Reconciliation of GAAP to Non-GAAP Measures:                  
                                                                       
  2016     2017     2018  
  Full Year     1st Qtr     2nd Qtr     3rd Qtr     4th Qtr     Full Year     1st Qtr     2nd Qtr     YTD  
                                                                       
Former Presentation:                                                                      
Cost of services $ 197,475     $ 49,743     $ 47,751     $ 44,750     $ 43,053     $ 185,297     $ 50,348     $ 49,475     $ 99,823  
Equity-based compensation (c)   (3,794 )     (1,141 )     (580 )     (875 )     (1,398 )     (3,994 )     (1,117 )     (1,556 )     (2,673 )
Adjusted Cost of services $ 193,681     $ 48,602     $ 47,171     $ 43,875     $ 41,655     $ 181,303     $ 49,231     $ 47,919     $ 97,150  
                                                                       
New Presentation:                                                                      
Cost of cloud subscriptions, maintenance and services (b) $ 219,635     $ 54,899     $ 53,109     $ 51,103     $ 48,934     $ 208,045     $ 56,486     $ 56,985     $ 113,471  
Equity-based compensation (c)   (3,794 )     (1,141 )     (580 )     (875 )     (1,398 )     (3,994 )     (1,117 )     (1,556 )     (2,673 )
Adjusted Cost of cloud subscriptions, maintenance and services $ 215,841     $ 53,758     $ 52,529     $ 50,228     $ 47,536     $ 204,051     $ 55,369     $ 55,429     $ 110,798  
                                                                       
                                                                       
(a) Cloud subscriptions includes software as a service ("SaaS") and arrangements that provide customers the right to use our software within a cloud-based environment that we manage where the customer does not have the right to take possession of the software without significant penalties.          
                                                                       
(b) Cost of cloud subscriptions, maintenance and services consists primarily of salaries and other personnel-related expenses of employees dedicated to cloud subscriptions; maintenance services; and professional and technical services as well as hosting fees.          
                                                                       
(c) Adjusted results exclude all equity-based compensation to facilitate comparison with our competitors and peers and for the other reasons explained in our Current Report on Form 8-K filed with the SEC on the date of this release.          

8. We adopted the new revenue recognition standard, FASB ASC Topic 606, Revenue from Contracts with Customers, in the first quarter of 2018. The new standard provides accounting guidance for all revenue arising from contracts with customers and affects substantially all entities. We adopted the standard using the modified retrospective method with the cumulative effect of initially adopting the standard recorded as an adjustment to retained earnings as of January 1, 2018. We recorded historical hardware sales prior to the adoption of ASC606 on a gross basis, as we were the principal in the transaction in accordance with ASC 605-45. Under the new standard, we are an agent in the transaction as we do not physically control the hardware we sell. Accordingly, we recognize our hardware revenue net of related cost, which reduces both hardware revenue and cost of sales as compared to our accounting prior to 2018. We recognize and present our hardware revenue net of related cost under the new standard prospectively. For comparison purposes only, had we implemented ASC 606 using the full retrospective method, we would have presented hardware revenue net of expense in our 2017 quarterly financial results below:

  2016     2017     2018  
  Full Year     1st Qtr     2nd Qtr     3rd Qtr     4th Qtr     Full Year     1st Qtr     2nd Qtr     YTD  
                                                                       
Presentation of Hardware Revenue - Pre ASC 606 adoption:          
                                                                       
Revenue                                                                      
Hardware Revenue $ 33,928     $ 7,559     $ 10,413     $ 13,540     $ 11,678     $ 43,190     $ 11,224     $ 16,252     $ 27,476  
                                                                       
Cost of Revenue                                                                      
Cost of Hardware   (23,426 )     (5,370 )     (7,766 )     (10,653 )     (8,416 )     (32,205 )     (7,833 )     (11,991 )     (19,824 )
                                                                       
Hardware Revenue, net $ 10,502     $ 2,189     $ 2,647     $ 2,887     $ 3,262     $ 10,985     $ 3,391     $ 4,261     $ 7,652  
                                                                       
Proforma Presentation of Hardware Revenue - Post ASC 606 Using Full Retrospective Method:                  
                                                                       
Hardware Revenue $ 10,502     $ 2,189     $ 2,647     $ 2,887     $ 3,262     $ 10,985     $ 3,391     $ 4,261     $ 7,652  
                                                                       


         
         
Contact:   Dennis Story   Rick Fernandez
    Chief Financial Officer   Senior Manager, Corporate Communications
    Manhattan Associates, Inc.   Manhattan Associates, Inc.
    770-955-7070   678-597-6988
    dstory@manh.com    rfernandez@manh.com 
         


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