Manhattan Associates Reports Third Quarter 2020 Results

ATLANTA, Oct. 22, 2020 (GLOBE NEWSWIRE) -- Leading Supply Chain and Omnichannel Commerce Solutions provider Manhattan Associates Inc. (NASDAQ: MANH) today reported revenue of $149.8 million for the third quarter ended September 30, 2020. GAAP diluted earnings per share for Q3 2020 was $0.39 compared to $0.42 for Q3 2019. Non-GAAP adjusted diluted earnings per share for Q3 2020 and Q3 2019 was $0.51.

“This was a strong quarter for Manhattan Associates, despite the continued impact that the COVID-19 pandemic is having globally,” said Manhattan Associates president and CEO Eddie Capel. “Our cloud business continues to trend positively as more and more customers look for modern, agile and scalable supply chain and omnichannel commerce solutions to help them operate in a rapidly evolving world.”

“We are starting to see some positive signs that economic conditions are beginning to stabilize, and interest in our solutions continues to grow.” Mr. Capel continued, “As a result of our strong performance and our view through the end of the year, we are raising our full-year revenue, operating margin and EPS guidance.”

“We remain confident in the long-term outlook for our business and expect to continue to invest into our business to drive further market penetration while expanding our addressable market globally,” Mr. Capel concluded.

THIRD QUARTER 2020 FINANCIAL SUMMARY:

• Consolidated total revenue was $149.8 million for Q3 2020, compared to $162.3 million for Q3 2019.
  • Cloud subscription revenue was $21.1 million for Q3 2020, compared to $14.2 million for Q3 2019.
  • License revenue was $13.2 million for Q3 2020, compared to $15.5 million for Q3 2019.
  • Service revenue was $73.5 million for Q3 2020, compared to $91.6 million for Q3 2019.
• GAAP diluted earnings per share was $0.39 for Q3 2020, compared to $0.42 for Q3 2019.
  
• Adjusted diluted earnings per share, a non-GAAP measure, was $0.51 both for Q3 2020 and Q3 2019.
• GAAP operating income was $35.0 million for both Q3 2020 and Q3 2019.
• Adjusted operating income, a non-GAAP measure, was $44.1 million for Q3 2020, compared to $43.1 million for Q3 2019.
• Cash flow from operations was $42.5 million for Q3 2020, compared to $39.9 million for Q3 2019. Days Sales Outstanding was 65 days at September 30, 2020, compared to 73 days at June 30, 2020.
• Cash and investments totaled $166.3 million at September 30, 2020, compared to $123.6 million at June 30, 2020.
• In April 2020, the Company suspended its share repurchase program because of COVID-19-related considerations. Accordingly, during the three months ended September 30, 2020, the Company did not repurchase any shares of Manhattan Associates common stock under the share repurchase program. The Company’s authorized repurchase limit remains at $50 million.

NINE MONTH 2020 FINANCIAL SUMMARY:

• Consolidated revenue for the nine months ended September 30, 2020, was $439.3 million, compared to $465.0 million for the nine months ended September 30, 2019.
  • Cloud subscription revenue was $56.8 million for the nine months ended September 30, 2020, compared to $31.1 million for the nine months ended September 30, 2019.
  • License revenue was $28.6 million for the nine months ended September 30, 2020, compared to $39.6 million for the nine months ended September 30, 2019. 
  • Service revenue was $232.7 million for the nine months ended September 30, 2020, compared to $274.2 million for the nine months ended September 30, 2019.
• GAAP diluted earnings per share for the nine months ended September 30, 2020, was $1.04, compared to $1.06 for the nine months ended September 30, 2019.  
• Adjusted diluted earnings per share, a non-GAAP measure, was $1.32 for the nine months ended September 30, 2020, compared to $1.34 for the nine months ended September 30, 2019.
• GAAP operating income was $85.9 million for the nine months ended September 30, 2020, compared to $90.9 million for the nine months ended September 30, 2019.
• Adjusted operating income, a non-GAAP measure, was $110.3 million for the nine months ended September 30, 2020, compared to $114.8 million for the nine months ended September 30, 2019. 
• Cash flow from operations was $102.9 million for the nine months ended September 30, 2020, compared to $112.3 million for the nine months ended September 30, 2019.
• During the nine months ended September 30, 2020, the Company repurchased 337,007 shares of Manhattan Associates common stock under the share repurchase program authorized by our Board of Directors, for a total investment of $25.0 million. However, as noted above, the Company’s share repurchase program has been suspended since April 2020.

2020 GUIDANCE

Manhattan Associates provides the following updated revenue, operating margin and diluted earnings per share guidance for the full year 2020:

Manhattan Associates currently intends to publish in each quarterly earnings release certain expectations with respect to future financial performance. Those statements, including the guidance provided above, are forward looking. Actual results may differ materially. See our cautionary note regarding “forward-looking statements” below. 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 its 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 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 2020 financial results will be held today, October 22, 2020, 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.

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 5090349 or via the web at ir.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 2020 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, 2020.

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 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 “2020 Guidance,” 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; risks related to transitioning our business from a traditional perpetual license software company (generally hosted by our customers on their own premises and equipment) to a subscription/cloud-based software-as-a service 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 and pricing pressures; software errors and information technology failures, disruption and security breaches; risks related to our products’ technology and customer implementations; 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, 2019, 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)

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

(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 this 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. Thus, in the fourth quarter of 2019, we changed from applying an overall effective rate in our tax adjustment to using the actual tax benefit for equity-based compensation included in our GAAP results after considering the impact of non-deductible equity-based compensation.

(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 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.

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

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

MANHATTAN ASSOCIATES, INC.
SUPPLEMENTAL INFORMATION

1.        Corporate Response to COVID-19:

Regarding the COVID-19 pandemic, we remain cautious about the global recovery, which we expect to be slow and protracted. In the nine months ended September 30, 2020, we experienced solid demand for our cloud-based supply chain and omnichannel commerce solutions and our competitive win rates remain strong. In May, we launched Manhattan Active® Warehouse Management, the next generation of Warehouse Management solutions. We have rearchitected our warehouse management solution from the ground up as a cloud-native, microservices based, versionless application. The reception has been positive and pipeline opportunities continue to build. Our solutions are mission critical, supporting large and complex global supply chains. While we are experiencing strong demand and expect continued growth for our Cloud solutions, sales cycles could extend as customers and prospects continue to evaluate our industry leading, modern solutions, specifically Manhattan Active Warehouse Management. Our Professional Services revenue through the nine months ended September 30, 2020, is approximately 15% lower, and excluding billed travel, approximately 12% lower than the nine months ending September 30, 2019, as clients delay projects due to COVID-19. We have had no notable cancellations in 2020. For the fourth quarter of 2020, we expect Services revenue to be lower than the previous year, primarily driven by COVID-19, as well as our traditional retail peak season impact, which typically occurs in the fourth quarter.

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

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

4.        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):

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):

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

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

7.        Stock Repurchase Activity (in thousands):

8.         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):