UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10‑Q10-Q
[Mark One]
☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended September 30, 20172023
OR
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from ____________ to ____________
Commission File Number: 0-23999
MANHATTAN ASSOCIATES, INC.
(Exact Name of Registrant as Specified in Its Charter)
Georgia | 58-2373424 | ||
(State or Other Jurisdiction of Incorporation or Organization) | (I.R.S. Employer Identification No.) | ||
2300 Windy Ridge Parkway, Tenth Floor | |||
Atlanta, Georgia | 30339 | ||
(Address of Principal Executive Offices) | (Zip Code) |
Registrant’s Telephone Number, Including Area Code: (770) (770) 955-7070
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
Common stock | MANH | Nasdaq Global Select Market |
Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes☒ No ☐
Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulations S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes☒ No ☐
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ☒ | Accelerated filer | ☐ | |
Non-accelerated filer | ☐ |
| Smaller reporting company | ☐ |
Emerging Growth Company | ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
The number of shares of the Registrant’s class of capital stock outstanding as of October 20, 2017,26, 2023, the latest practicable date, is as follows: 68,933,14861,565,157 shares of common stock, $0.01 par value per share.
MANHATTAN ASSOCIATES, INC.
FORM 10-Q
Quarter Ended September 30, 20172023
TABLE OF CONTENTS
PART I
Item 1. | ||
3 | ||
4 | ||
5 | ||
6 | ||
7 | ||
Notes to Condensed Consolidated Financial Statements | 8 | |
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations. |
|
Item 3. |
| |
Item 4. |
| |
PART II | ||
Item 1. |
| |
Item 1A. |
| |
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds. |
|
Item 3. |
| |
Item 4. |
| |
Item 5. |
| |
Item 6. | 28 | |
|
2
PART I
Item 1. Financial Statements
MANHATTAN ASSOCIATES, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(in thousands, except share and per share data)
|
| September 30, 2017 |
|
| December 31, 2016 |
|
| September 30, 2023 |
|
| December 31, 2022 |
| ||||
|
| (unaudited) |
|
|
|
|
|
| (unaudited) |
|
|
|
| |||
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Current Assets: |
|
|
|
|
|
|
|
| ||||||||
Current assets: |
|
|
|
|
|
| ||||||||||
Cash and cash equivalents |
| $ | 124,818 |
|
| $ | 95,615 |
|
| $ | 182,312 |
|
| $ | 225,463 |
|
Short-term investments |
|
| 4,901 |
|
|
| - |
| ||||||||
Accounts receivable, net of allowance of $3,163 and $3,595, respectively |
|
| 97,011 |
|
|
| 100,285 |
| ||||||||
Accounts receivable, net of allowance of $5,367 and $6,009, at September 30, 2023 and December 31, 2022, respectively |
|
| 183,377 |
|
|
| 166,767 |
| ||||||||
Prepaid expenses and other current assets |
|
| 11,638 |
|
|
| 11,118 |
|
|
| 27,170 |
|
|
| 23,145 |
|
Total current assets |
|
| 238,368 |
|
|
| 207,018 |
|
|
| 392,859 |
|
|
| 415,375 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Property and equipment, net |
|
| 15,275 |
|
|
| 17,424 |
|
|
| 11,266 |
|
|
| 12,803 |
|
Operating lease right-of-use assets |
|
| 19,976 |
|
|
| 17,794 |
| ||||||||
Goodwill, net |
|
| 62,245 |
|
|
| 62,228 |
|
|
| 62,228 |
|
|
| 62,230 |
|
Deferred income taxes |
|
| 2,691 |
|
|
| 2,867 |
|
|
| 55,523 |
|
|
| 37,206 |
|
Other assets |
|
| 7,670 |
|
|
| 7,603 |
|
|
| 31,143 |
|
|
| 24,770 |
|
Total assets |
| $ | 326,249 |
|
| $ | 297,140 |
|
| $ | 572,995 |
|
| $ | 570,178 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
LIABILITIES AND SHAREHOLDERS' EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Current liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Accounts payable |
| $ | 15,136 |
|
| $ | 12,052 |
|
| $ | 25,253 |
|
| $ | 25,701 |
|
Accrued compensation and benefits |
|
| 17,173 |
|
|
| 20,700 |
|
|
| 67,187 |
|
|
| 54,469 |
|
Accrued and other liabilities |
|
| 12,394 |
|
|
| 12,510 |
|
|
| 26,429 |
|
|
| 24,569 |
|
Deferred revenue |
|
| 70,984 |
|
|
| 63,457 |
|
|
| 213,440 |
|
|
| 208,807 |
|
Income taxes payable |
|
| 6,745 |
|
|
| 8,924 |
|
|
| 517 |
|
|
| 2,049 |
|
Total current liabilities |
|
| 122,432 |
|
|
| 117,643 |
|
|
| 332,826 |
|
|
| 315,595 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Operating lease liabilities, long-term |
|
| 16,237 |
|
|
| 14,065 |
| ||||||||
Other non-current liabilities |
|
| 9,463 |
|
|
| 10,131 |
|
|
| 13,827 |
|
|
| 13,718 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Shareholders' equity: |
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Preferred stock, no par value; 20,000,000 shares authorized, no shares issued or outstanding in 2017 and 2016 |
|
| - |
|
|
| - |
| ||||||||
Common stock, $0.01 par value; 200,000,000 shares authorized; 68,930,029 and 70,233,955 shares issued and outstanding at September 30, 2017 and December 31, 2016, respectively |
|
| 689 |
|
|
| 702 |
| ||||||||
Additional paid-in capital |
|
| 3,694 |
|
|
| - |
| ||||||||
Preferred stock, no par value; 20,000,000 shares authorized, no shares issued or outstanding in 2023 and 2022 |
|
| - |
|
|
| - |
| ||||||||
Common stock, $0.01 par value; 200,000,000 shares authorized; 61,562,480 and 62,191,570 shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively |
|
| 616 |
|
|
| 621 |
| ||||||||
Retained earnings |
|
| 202,717 |
|
|
| 184,558 |
|
|
| 238,315 |
|
|
| 253,711 |
|
Accumulated other comprehensive loss |
|
| (12,746 | ) |
|
| (15,894 | ) |
|
| (28,826 | ) |
|
| (27,532 | ) |
Total shareholders' equity |
|
| 194,354 |
|
|
| 169,366 |
|
|
| 210,105 |
|
|
| 226,800 |
|
Total liabilities and shareholders' equity |
| $ | 326,249 |
|
| $ | 297,140 |
|
| $ | 572,995 |
|
| $ | 570,178 |
|
See accompanying Notes to Condensed Consolidated Financial Statements.
3
Item 1. Financial Statements (continued)
3
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, |
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||||||||||||
|
| 2017 |
|
| 2016 |
|
| 2017 |
|
| 2016 |
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||||||
|
| (unaudited) |
|
| (unaudited) |
|
| (unaudited) |
|
| (unaudited) |
|
| (unaudited) |
|
| (unaudited) |
|
| (unaudited) |
|
| (unaudited) |
| ||||||||
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Cloud subscriptions |
| $ | 65,033 |
|
| $ | 45,267 |
|
| $ | 183,196 |
|
| $ | 124,767 |
| ||||||||||||||||
Software license |
| $ | 18,794 |
|
| $ | 21,633 |
|
| $ | 64,009 |
|
| $ | 62,871 |
|
|
| 3,870 |
|
|
| 6,386 |
|
|
| 12,967 |
|
|
| 19,869 |
|
Maintenance |
|
| 35,296 |
|
|
| 35,820 |
|
|
| 106,772 |
|
|
| 107,115 |
| ||||||||||||||||
Services |
|
| 115,555 |
|
|
| 119,267 |
|
|
| 341,216 |
|
|
| 355,363 |
|
|
| 127,965 |
|
|
| 103,425 |
|
|
| 368,744 |
|
|
| 294,284 |
|
Hardware and other |
|
| 18,534 |
|
|
| 11,313 |
|
|
| 45,288 |
|
|
| 38,731 |
| ||||||||||||||||
Hardware |
|
| 6,277 |
|
|
| 7,203 |
|
|
| 18,791 |
|
|
| 22,946 |
| ||||||||||||||||
Total revenue |
|
| 152,883 |
|
|
| 152,213 |
|
|
| 450,513 |
|
|
| 456,965 |
|
|
| 238,441 |
|
|
| 198,101 |
|
|
| 690,470 |
|
|
| 568,981 |
|
Costs and expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Cost of license |
|
| 2,830 |
|
|
| 2,966 |
|
|
| 7,425 |
|
|
| 8,401 |
| ||||||||||||||||
Cost of services |
|
| 44,750 |
|
|
| 49,436 |
|
|
| 142,244 |
|
|
| 149,733 |
| ||||||||||||||||
Cost of hardware and other |
|
| 15,492 |
|
|
| 9,276 |
|
|
| 37,337 |
|
|
| 30,874 |
| ||||||||||||||||
Cost of cloud subscriptions, maintenance and services |
|
| 111,142 |
|
|
| 95,691 |
|
|
| 322,914 |
|
|
| 266,482 |
| ||||||||||||||||
Cost of software license |
|
| 297 |
|
|
| 467 |
|
|
| 967 |
|
|
| 1,749 |
| ||||||||||||||||
Research and development |
|
| 14,747 |
|
|
| 13,389 |
|
|
| 43,074 |
|
|
| 41,553 |
|
|
| 33,093 |
|
|
| 29,375 |
|
|
| 95,487 |
|
|
| 84,754 |
|
Sales and marketing |
|
| 10,739 |
|
|
| 10,003 |
|
|
| 34,260 |
|
|
| 34,606 |
|
|
| 17,650 |
|
|
| 15,742 |
|
|
| 54,278 |
|
|
| 47,881 |
|
General and administrative |
|
| 11,031 |
|
|
| 11,225 |
|
|
| 34,290 |
|
|
| 36,041 |
|
|
| 21,371 |
|
|
| 18,392 |
|
|
| 61,561 |
|
|
| 54,963 |
|
Depreciation and amortization |
|
| 2,275 |
|
|
| 2,334 |
|
|
| 6,863 |
|
|
| 6,806 |
|
|
| 1,440 |
|
|
| 1,664 |
|
|
| 4,247 |
|
|
| 5,157 |
|
Restructuring charge |
|
| (77 | ) |
|
| - |
|
|
| 2,945 |
|
|
| - |
| ||||||||||||||||
Total costs and expenses |
|
| 101,787 |
|
|
| 98,629 |
|
|
| 308,438 |
|
|
| 308,014 |
|
|
| 184,993 |
|
|
| 161,331 |
|
|
| 539,454 |
|
|
| 460,986 |
|
Operating income |
|
| 51,096 |
|
|
| 53,584 |
|
|
| 142,075 |
|
|
| 148,951 |
|
|
| 53,448 |
|
|
| 36,770 |
|
|
| 151,016 |
|
|
| 107,995 |
|
Other income (loss), net |
|
| 207 |
|
|
| 210 |
|
|
| (232 | ) |
|
| 1,384 |
| ||||||||||||||||
Other income, net |
|
| 1,739 |
|
|
| 1,612 |
|
|
| 2,923 |
|
|
| 4,593 |
| ||||||||||||||||
Income before income taxes |
|
| 51,303 |
|
|
| 53,794 |
|
|
| 141,843 |
|
|
| 150,335 |
|
|
| 55,187 |
|
|
| 38,382 |
|
|
| 153,939 |
|
|
| 112,588 |
|
Income tax provision |
|
| 18,704 |
|
|
| 20,298 |
|
|
| 49,876 |
|
|
| 56,018 |
|
|
| 5,766 |
|
|
| 8,708 |
|
|
| 26,107 |
|
|
| 21,497 |
|
Net income |
| $ | 32,599 |
|
| $ | 33,496 |
|
| $ | 91,967 |
|
| $ | 94,317 |
|
| $ | 49,421 |
|
| $ | 29,674 |
|
| $ | 127,832 |
|
| $ | 91,091 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Basic earnings per share |
| $ | 0.47 |
|
| $ | 0.47 |
|
| $ | 1.33 |
|
| $ | 1.31 |
|
| $ | 0.80 |
|
| $ | 0.47 |
|
| $ | 2.07 |
|
| $ | 1.45 |
|
Diluted earnings per share |
| $ | 0.47 |
|
| $ | 0.47 |
|
| $ | 1.32 |
|
| $ | 1.30 |
|
| $ | 0.79 |
|
| $ | 0.47 |
|
| $ | 2.05 |
|
| $ | 1.43 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Weighted average number of shares: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Basic |
|
| 68,928 |
|
|
| 71,403 |
|
|
| 69,389 |
|
|
| 71,981 |
|
|
| 61,639 |
|
|
| 62,592 |
|
|
| 61,902 |
|
|
| 62,917 |
|
Diluted |
|
| 69,135 |
|
|
| 71,743 |
|
|
| 69,614 |
|
|
| 72,340 |
|
|
| 62,310 |
|
|
| 63,165 |
|
|
| 62,501 |
|
|
| 63,483 |
|
See accompanying Notes to Condensed Consolidated Financial Statements.
4
Item 1. Financial Statements (continued)
4
MANHATTAN ASSOCIATES, INC. AND SUBSIDIARIES
Consolidated Statements of Comprehensive Income
(in thousands)
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||||||||||||
|
| 2017 |
|
| 2016 |
|
| 2017 |
|
| 2016 |
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||||||
|
| (unaudited) |
|
| (unaudited) |
|
| (unaudited) |
|
| (unaudited) |
|
| (unaudited) |
|
| (unaudited) |
|
| (unaudited) |
|
| (unaudited) |
| ||||||||
Net income |
| $ | 32,599 |
|
| $ | 33,496 |
|
| $ | 91,967 |
|
| $ | 94,317 |
|
| $ | 49,421 |
|
| $ | 29,674 |
|
| $ | 127,832 |
|
| $ | 91,091 |
|
Foreign currency translation adjustment |
|
| 376 |
|
|
| 75 |
|
|
| 3,148 |
|
|
| (1,715 | ) |
|
| (2,086 | ) |
|
| (3,566 | ) |
|
| (1,294 | ) |
|
| (8,781 | ) |
Comprehensive income |
| $ | 32,975 |
|
| $ | 33,571 |
|
| $ | 95,115 |
|
| $ | 92,602 |
|
| $ | 47,335 |
|
| $ | 26,108 |
|
| $ | 126,538 |
|
| $ | 82,310 |
|
See accompanying Notes to Condensed Consolidated Financial Statements.
5
Item 1. Financial Statements (continued)
MANHATTAN ASSOCIATES, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(in thousands)
|
| Nine Months Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||
|
| 2017 |
|
| 2016 |
|
| 2023 |
|
| 2022 |
| ||||
|
| (unaudited) |
|
| (unaudited) |
|
| (unaudited) |
|
| (unaudited) |
| ||||
Operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Net income |
| $ | 91,967 |
|
| $ | 94,317 |
|
| $ | 127,832 |
|
| $ | 91,091 |
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Depreciation and amortization |
|
| 6,863 |
|
|
| 6,806 |
|
|
| 4,247 |
|
|
| 5,157 |
|
Equity-based compensation |
|
| 11,041 |
|
|
| 11,724 |
|
|
| 53,598 |
|
|
| 44,209 |
|
Loss on disposal of equipment |
|
| 34 |
|
|
| 19 |
| ||||||||
Tax benefit of stock awards exercised/vested |
|
| - |
|
|
| 5,166 |
| ||||||||
Excess tax benefits from equity-based compensation |
|
| - |
|
|
| (5,170 | ) | ||||||||
Loss (gain) on disposal of equipment |
|
| 42 |
|
|
| (20 | ) | ||||||||
Deferred income taxes |
|
| 741 |
|
|
| (259 | ) |
|
| (18,359 | ) |
|
| (20,736 | ) |
Unrealized foreign currency loss (gain) |
|
| 93 |
|
|
| (363 | ) |
|
| 922 |
|
|
| (2,933 | ) |
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Accounts receivable, net |
|
| 5,095 |
|
|
| (1,850 | ) |
|
| (17,168 | ) |
|
| (23,384 | ) |
Other assets |
|
| (940 | ) |
|
| (1,555 | ) |
|
| (7,747 | ) |
|
| (9,190 | ) |
Accounts payable, accrued and other liabilities |
|
| (2,273 | ) |
|
| (14,033 | ) |
|
| 13,477 |
|
|
| 20,743 |
|
Income taxes |
|
| (2,151 | ) |
|
| 6,063 |
|
|
| (4,347 | ) |
|
| (730 | ) |
Deferred revenue |
|
| 6,169 |
|
|
| 633 |
|
|
| 5,362 |
|
|
| 20,195 |
|
Net cash provided by operating activities |
|
| 116,639 |
|
|
| 101,498 |
|
|
| 157,859 |
|
|
| 124,402 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Investing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Purchase of property and equipment |
|
| (3,897 | ) |
|
| (5,465 | ) |
|
| (2,761 | ) |
|
| (4,152 | ) |
Net (purchases) maturities of investments |
|
| (4,487 | ) |
|
| 10,201 |
| ||||||||
Net cash (used in) provided by investing activities |
|
| (8,384 | ) |
|
| 4,736 |
| ||||||||
Net cash used in investing activities |
|
| (2,761 | ) |
|
| (4,152 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Purchase of common stock |
|
| (81,700 | ) |
|
| (117,968 | ) | ||||||||
Proceeds from issuance of common stock from options exercised |
|
| - |
|
|
| 18 |
| ||||||||
Excess tax benefits from equity-based compensation |
|
| - |
|
|
| 5,170 |
| ||||||||
Repurchase of common stock |
|
| (195,716 | ) |
|
| (179,029 | ) | ||||||||
Net cash used in financing activities |
|
| (81,700 | ) |
|
| (112,780 | ) |
|
| (195,716 | ) |
|
| (179,029 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Foreign currency impact on cash |
|
| 2,648 |
|
|
| (1,039 | ) |
|
| (2,533 | ) |
|
| (7,872 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Net change in cash and cash equivalents |
|
| 29,203 |
|
|
| (7,585 | ) |
|
| (43,151 | ) |
|
| (66,651 | ) |
Cash and cash equivalents at beginning of period |
|
| 95,615 |
|
|
| 118,416 |
|
|
| 225,463 |
|
|
| 263,706 |
|
Cash and cash equivalents at end of period |
| $ | 124,818 |
|
| $ | 110,831 |
|
| $ | 182,312 |
|
| $ | 197,055 |
|
|
|
|
|
|
|
|
See accompanying Notes to Condensed Consolidated Financial Statements.
6
MANHATTAN ASSOCIATES, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Shareholders’ Equity
(in thousands, except share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Accumulated |
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
| Additional |
|
|
|
|
|
| Other |
|
| Total |
| |||
|
| Common Stock |
|
| Paid-In |
|
| Retained |
|
| Comprehensive |
|
| Shareholders' |
| |||||||||
|
| Shares |
|
| Amount |
|
| Capital |
|
| Earnings |
|
| (Loss) Income |
|
| Equity |
| ||||||
Balance, December 31, 2015 (audited) |
|
| 72,766,383 |
|
| $ | 728 |
|
| $ | - |
|
| $ | 207,070 |
|
| $ | (12,306 | ) |
| $ | 195,492 |
|
Repurchase of common stock |
|
| (2,988,627 | ) |
|
| (30 | ) |
|
| (21,157 | ) |
|
| (146,746 | ) |
|
| - |
|
|
| (167,933 | ) |
Stock option exercises |
|
| 3,610 |
|
|
| - |
|
|
| 18 |
|
|
| - |
|
|
| - |
|
|
| 18 |
|
Restricted stock units issuance |
|
| 452,589 |
|
|
| 4 |
|
|
| (4 | ) |
|
| - |
|
|
| - |
|
|
| - |
|
Equity-based compensation |
|
| - |
|
|
| - |
|
|
| 15,934 |
|
|
| - |
|
|
| - |
|
|
| 15,934 |
|
Tax effects of equity-based compensation |
|
| - |
|
|
| - |
|
|
| 5,209 |
|
|
| - |
|
|
| - |
|
|
| 5,209 |
|
Foreign currency translation adjustment |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (3,588 | ) |
|
| (3,588 | ) |
Net income |
|
| - |
|
|
| - |
|
|
| - |
|
|
| 124,234 |
|
|
| - |
|
|
| 124,234 |
|
Balance, December 31, 2016 (audited) |
|
| 70,233,955 |
|
|
| 702 |
|
|
| - |
|
|
| 184,558 |
|
|
| (15,894 | ) |
|
| 169,366 |
|
Repurchase of common stock |
|
| (1,672,661 | ) |
|
| (17 | ) |
|
| (9,168 | ) |
|
| (72,515 | ) |
|
| - |
|
|
| (81,700 | ) |
Restricted stock units issuance |
|
| 368,735 |
|
|
| 4 |
|
|
| (4 | ) |
|
| - |
|
|
| - |
|
|
| - |
|
Equity-based compensation |
|
| - |
|
|
| - |
|
|
| 11,041 |
|
|
| - |
|
|
| - |
|
|
| 11,041 |
|
Adjustment due to adoption of ASC 2016-09, Compensation - Stock Compensation: Improvements to Employee Share-Based Payment Accounting |
|
| - |
|
|
| - |
|
|
| 1,825 |
|
|
| (1,293 | ) |
|
| - |
|
|
| 532 |
|
Foreign currency translation adjustment |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 3,148 |
|
|
| 3,148 |
|
Net income |
|
| - |
|
|
| - |
|
|
| - |
|
|
| 91,967 |
|
|
| - |
|
|
| 91,967 |
|
Balance, September 30, 2017 (unaudited) |
|
| 68,930,029 |
|
| $ | 689 |
|
| $ | 3,694 |
|
| $ | 202,717 |
|
| $ | (12,746 | ) |
| $ | 194,354 |
|
See accompanying Notes to Condensed Consolidated Financial Statements.
76
Item 1. Financial Statements (continued)
MANHATTAN ASSOCIATES, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Shareholders’ Equity
(in thousands, except share data)
|
|
|
|
|
|
|
|
|
|
|
|
| Accumulated |
|
| |||||||||
|
|
|
|
|
|
|
| Additional |
|
|
|
|
| Other |
|
| Total |
| ||||||
|
| Common Stock |
|
| Paid-In |
|
| Retained |
| Comprehensive | Shareholders' |
| ||||||||||||
|
| Shares |
|
| Amount |
|
| Capital |
|
| Earnings |
|
| Loss |
|
| Equity |
| ||||||
For the Three Months Ended September 30, 2023 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Balance, June 30, 2023 (unaudited) |
|
| 61,668,512 |
|
| $ | 617 |
|
| $ | - |
|
| $ | 196,673 |
|
| $ | (26,740 | ) |
| $ | 170,550 |
|
Repurchase of common stock |
|
| (136,165 | ) |
|
| (1 | ) |
|
| (18,821 | ) |
|
| (7,779 | ) |
|
| - |
|
|
| (26,601 | ) |
Restricted stock units issuance |
|
| 30,133 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
Excise tax on net stock repurchases |
|
| - |
|
|
| - |
|
|
| (209 | ) |
|
| - |
|
|
| - |
|
|
| (209 | ) |
Equity-based compensation |
|
| - |
|
|
| - |
|
|
| 19,030 |
|
|
| - |
|
|
| - |
|
|
| 19,030 |
|
Foreign currency translation adjustment |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (2,086 | ) |
|
| (2,086 | ) |
Net income |
|
| - |
|
|
| - |
|
|
| - |
|
|
| 49,421 |
|
|
| - |
|
|
| 49,421 |
|
Balance, September 30, 2023 (unaudited) |
|
| 61,562,480 |
|
| $ | 616 |
|
| $ | - |
|
| $ | 238,315 |
|
| $ | (28,826 | ) |
| $ | 210,105 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
For the Nine Months Ended September 30, 2023 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Balance, December 31, 2022 (audited) |
|
| 62,191,570 |
|
| $ | 621 |
|
| $ | - |
|
| $ | 253,711 |
|
| $ | (27,532 | ) |
| $ | 226,800 |
|
Repurchase of common stock |
|
| (1,244,580 | ) |
|
| (11 | ) |
|
| (52,477 | ) |
|
| (143,228 | ) |
|
| - |
|
|
| (195,716 | ) |
Restricted stock units issuance |
|
| 615,490 |
|
|
| 6 |
|
|
| (6 | ) |
|
| - |
|
|
| - |
|
|
| - |
|
Excise tax accrued |
|
|
|
|
|
|
|
| (1,115 | ) |
|
|
|
|
|
|
|
| (1,115 | ) | ||||
Equity-based compensation |
|
| - |
|
|
| - |
|
|
| 53,598 |
|
|
| - |
|
|
| - |
|
|
| 53,598 |
|
Foreign currency translation adjustment |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (1,294 | ) |
|
| (1,294 | ) |
Net income |
|
| - |
|
|
| - |
|
|
| - |
|
|
| 127,832 |
|
|
| - |
|
|
| 127,832 |
|
Balance, September 30, 2023 (unaudited) |
|
| 61,562,480 |
|
| $ | 616 |
|
| $ | - |
|
| $ | 238,315 |
|
| $ | (28,826 | ) |
| $ | 210,105 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
For the Three Months Ended September 30, 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Balance, June 30, 2022 (unaudited) |
|
| 62,718,513 |
|
| $ | 627 |
|
| $ | - |
|
| $ | 233,151 |
|
| $ | (25,043 | ) |
| $ | 208,735 |
|
Repurchase of common stock |
|
| (354,711 | ) |
|
| (3 | ) |
|
| (14,533 | ) |
|
| (36,706 | ) |
|
| - |
|
|
| (51,242 | ) |
Restricted stock units issuance |
|
| 30,658 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
Equity-based compensation |
|
| - |
|
|
| - |
|
|
| 14,533 |
|
|
| - |
|
|
| - |
|
|
| 14,533 |
|
Foreign currency translation adjustment |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (3,566 | ) |
|
| (3,566 | ) |
Net income |
|
| - |
|
|
| - |
|
|
| - |
|
|
| 29,674 |
|
| - |
|
|
| 29,674 |
| |
Balance, September 30, 2022 (unaudited) |
|
| 62,394,460 |
|
| $ | 624 |
|
| $ | - |
|
| $ | 226,119 |
|
| $ | (28,609 | ) |
| $ | 198,134 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
For the Nine Months Ended September 30, 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Balance, December 31, 2021 (audited) |
|
| 63,154,494 |
|
| $ | 631 |
|
| $ | - |
|
| $ | 269,841 |
|
| $ | (19,828 | ) |
| $ | 250,644 |
|
Repurchase of common stock |
|
| (1,361,605 | ) |
|
| (13 | ) |
|
| (44,203 | ) |
|
| (134,813 | ) |
|
| - |
|
|
| (179,029 | ) |
Restricted stock units issuance |
|
| 601,571 |
|
|
| 6 |
|
|
| (6 | ) |
|
| - |
|
|
| - |
|
|
| - |
|
Equity-based compensation |
|
| - |
|
|
| - |
|
|
| 44,209 |
|
|
| - |
|
|
| - |
|
|
| 44,209 |
|
Foreign currency translation adjustment |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (8,781 | ) |
|
| (8,781 | ) |
Net income |
|
| - |
|
|
| - |
|
|
| - |
|
|
| 91,091 |
|
|
| - |
|
|
| 91,091 |
|
Balance, September 30, 2022 (unaudited) |
|
| 62,394,460 |
|
| $ | 624 |
|
| $ | - |
|
| $ | 226,119 |
|
| $ | (28,609 | ) |
| $ | 198,134 |
|
See accompanying Notes to Condensed Consolidated Financial StatementsStatements.
(Unaudited)
7
Notes to Condensed Consolidated Financial Statements
(Unaudited)
|
|
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements of Manhattan Associates, Inc. and its subsidiaries (the “Company”“Company,” “we,” “us,” “our,” or “Manhattan”) have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”)(GAAP) for interim financial information, with the instructions to Form 10-Q and with Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required for complete financial statements. In the opinion of management, these condensed consolidated financial statements contain all normal recurring adjustments considered necessary for a fair presentation of the Company’sour financial position at September 30, 2017,2023, the results of operations for the three and nine months ended September 30, 20172023 and 2016,2022, and cash flows for the nine months ended September 30, 20172023 and 2016.2022. The results for the three and nine months ended September 30, 20172023 are not necessarily indicative of the results to be expected for the full year.year or any other interim period. These statements should be read in conjunction with the Company’sour audited consolidated financial statements and management’s discussion and analysis included in the Company’sour annual report on Form 10-K for the year ended December 31, 2016.2022.
Principles of Consolidation
The accompanying condensed consolidated financial statements include the Company’sour accounts and the accounts of its wholly-ownedour wholly owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.
New Accounting Pronouncements Adopted in Fiscal Year 2017
Stock Compensation
During the three months ended March 31, 2017,We recognize revenue when we adopted Accounting Standards Update (ASU) 2016-09, Compensation – Stock Compensation: Improvements to Employee Share-Based Payment Accounting, to improve the accounting for employee share-based payments. Under the new guidance, all excess tax benefits and certain tax deficiencies are recorded as income tax expense or benefit in the income statement rather than recorded in additional paid-in capital. The additional paid-in capital pools are eliminated. This new guidance must be applied on a prospective basis. As a result, the excess tax benefits of $1.9 million for the nine months ended September 30, 2017 are recorded in our provision for income taxes rather than additional paid-in capital. As required by the ASU, excess tax benefits recognized on share-based compensation expense are classified as an operating activity on the statement of cash flows rather than as a financing activity, and we have applied this provision on a prospective basis.
The ASU also allows the Company to repurchase more of an employee’s shares than it previously could for tax withholding purposes without triggering liability accounting and to make a policy election to account for forfeitures as they occur. We have elected to account for forfeitures as they occur, rather than estimate expected forfeitures over the course of a vesting period. As a result, the net cumulative-effect of this election was recognized as a $1.8 million increase to additional paid-in capital, a $0.5 million increase to deferred tax assets and a $1.3 million decrease to retained earnings as of January 1, 2017.
In May 2017, the FASB issued ASU 2017-09, Compensation – Stock Compensation: Scope of Modification Accounting to clarify when changes to the terms or conditions of a share-based payment award must be accounted for as modifications. Entities should apply the modification accounting guidance if the fair value, vesting conditions or classificationtransfer control of the award changes. The new guidance is effective for all entities for annual periods, and interim periods within those annual periods, beginning after December 15, 2017 on a prospective basis to an award modified on or after the adoption date. Early adoption is permitted. We early adopted this guidance during the three months ended June 2017, and the adoption did not impact our financial statements.
Goodwill Impairment
In January 2017, the FASB issued ASU 2017-04, Intangibles - Goodwill and Other (Topic 350) that simplifies the test for goodwill impairment by eliminating step two from the goodwill impairment test. Under the new guidance, an entity should recognize an impairment charge for the amount based on the excess of a reporting unit’s carrying amount over its fair value. The impairment charge will be limited to the amount of goodwill allocated to that reporting unit. For public companies, the guidance is effective for annual and interim impairment tests performed in periods beginning after December 15, 2019 on a prospective basis, and earlier adoption is permitted for goodwill impairment tests performed on testing dates after January 1, 2017. We early adopted this guidance during the three months ended March 2017, and the adoption did not impact our financial statements.
Classification of Certain Cash Receipts and Cash Payments on the Statement of Cash Flows
In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows – Classification of Certain Cash Receipts and Cash Payments (Topic 230) that clarifies how entities should classify certain cash receipts and cash payments on the statement of cash
8
flows. Prior to the issuance, there were certain issues where diversity in practice in how certain cash receipts and cash payments were presented and classified in the statement of cash flows. This guidance addresses eight specific cash flow issues with the objective of reducing the existing diversity in practice. For public companies, the guidance is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted. We early adopted this guidance during the three months ended June 30, 2017, and the adoption did not impact our financial statements.
New Accounting Pronouncements Not Yet Adopted
Revenue Recognition
In May 2014, the FASB issued ASU 2014-09, Revenue Recognition – Revenue from Contracts with Customers (Topic 606), which will replace substantially all current revenue recognition guidance once it becomes effective. The new standard provides accounting guidance for all revenue arising from contracts with customers and affects all entities that enter into contracts to provide goodspromised products or services to theirour customers, unlessin an amount that reflects the contracts are in the scope of other standards. The new standard is less prescriptive and may require software entities to use more judgment and estimates in the revenue recognition process than are required under existing revenue guidance.
In March 2016, the FASB issued ASU 2016-08, Revenue from Contracts with Customers (Topic 606) – Principal versus Agent Considerations, which clarifies the implementation guidance for principal versus agent considerations in ASU 2014-09. In April 2016, the FASB issued ASU 2016-10, Revenue from Contracts with Customers (Topic 606) – Identifying Performance Obligations and Licensing, which amends the guidance in ASU 2014-09 related to identifying performance obligations and accounting for licenses of intellectual property. In May 2016, the FASB issued ASU 2016-12, Revenue from Contracts with Customers (Topic 606) – Narrow-Scope Improvements and Practical Expedients, which clarifies the following aspects in ASU 2014-09: collectability, presentation of sales taxes and other similar taxes collected from customers, noncash considerations, contract modifications at transition, completed contracts at transition, and technical correction. In December 2016, the FASB issued ASU 2016-20, Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers, which provides thirteen technical corrections and improvements to the new revenue standard. We must adopt ASU 2016-08, ASU 2016-10, ASU 2016-12, and ASU 2016-20 with ASU 2014-09, which is effective for annual and interim periods beginning after December 15, 2017.
The new revenue standard may be applied using either of the following transition methods: (1) a full retrospective approach reflecting the application of the standard in each prior reporting period with the option to elect certain practical expedients, or (2) a modified retrospective approach with the cumulative effect of initially adopting the standard recognized at the date of adoption (which includes additional footnote disclosures).
We will adopt the standard in the first quarter of 2018 and are planning to use the modified retrospective method. Currently,consideration we are in the process of reviewing our historical contracts to quantify the impact that the adoption of the standard will have on specific performance obligations. We expect to recognizebe entitled to in exchange for those products or services. We derive our hardware revenue net of related cost under the new standard which will reduce both hardware revenue and cost of sales as compared to our current accounting. We are also continuing to evaluate the impact of the standard on our recognition of costs related to obtaining customer contracts. Currently, sales commissions are expensed in sales and marketing expense when earned. We believe these commissions represent direct incremental costs of obtaining our contracts with customers. Under the standard, these costs must be expensed on a systematic basis that is consistent with the transfer of the related goods and services to the customer. Based on expected renewals of customer support andfrom cloud subscriptions, software enhancements and sales of optional implementation services, we believe a portion of our commissions expense should be deferred and amortized over time as the corresponding services are transferred to the customer under the new standard. We have not identified other significant differences related to the pattern of revenue recognition or presentation of revenue compared to our historical accounting.
Leases
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. Under the new guidance, a lessee will be required to recognize assets and liabilities for leases with lease terms of more than 12 months. Consistent with current GAAP, the recognition, measurement, and presentation of expenses and cash flows arising from a lease by a lessee primarily will depend on its classification as a finance or operating lease. However, unlike current GAAP—which requires only capital leases to be recognized on the balance sheet—the new ASU will require both types of leases to be recognized on the balance sheet. The ASU also will require disclosures to help investors and other financial statement users better understand the amount, timing, and uncertainty of cash flows arising from leases. These disclosures include qualitative and quantitative requirements, providing additional information about the amounts recorded in the financial statements. For public companies, this guidance is effective for annual periods beginning after December 15, 2018, and interim periods within those annual periods, but may be adopted earlier. We are expecting to adopt the standard in the first quarter of 2019 on a modified prospective basis and currently evaluating the impact that the adoption of this standard will have on our Consolidated Financial Statements. The adoption will increase our total assets and liabilities.
9
|
|
The Company’s revenue consists of fees from the licensing, hosting of software and software as a service (“SaaS”) arrangements (collectively included in “Software license” revenue in the Condensed Consolidated Statements of Income), fees from implementation and training services (collectively, “professional services”) andlicenses, customer support services and software enhancements (collectively with professional(“maintenance”), implementation and training services, revenue included in “Services” revenue in the Condensed Consolidated Statements of Income), and sales of hardwarehardware. We exclude sales and other revenue,usage-based taxes from revenue.
Nature of Products and Services
Cloud subscriptions includes software as a service (SaaS) and arrangements which consists of reimbursements of out-of-pocket expenses incurred in connectionprovide customers with the right to use our professional services (collectively included in “Hardwaresoftware within a cloud environment that we provide and other” revenue inmanage, where the Condensed Consolidated Statements of Income). Revenue generated from our hosting and SaaS arrangements represented approximately 10% of total software license revenue forcustomer does not have the nine months ended September 30, 2017. All revenue is recognized net of any related sales taxes.
The Company recognizes license revenue when the following criteria are met: (1) a signed contract is obtained covering all elementsright to take possession of the arrangement, (2) delivery of the product has occurred, (3) the license fee is fixed or determinable,software without significant penalty. SaaS and (4) collection is probable. Revenue recognition for software with multiple-element arrangements requires recognition of revenue using the “residual method” when (a) there is vendor-specific objective evidence (VSOE) of the fair values of all undelivered elements in a multiple-element arrangement that is not accounted for using long-term contract accounting, (b) VSOE of fair value does not exist for one or more of the delivered elements in the arrangement, and (c) all other applicable revenue-recognition criteria for software revenue recognition are satisfied. For those contracts that contain significant customization or modifications, license revenue is recognized using contract accounting. Hosting and SaaS arrangements generally have a non-cancellable initial term followed by annual renewal periods. Hosting and SasShosting revenues are recognized ratably over the term ofcontract period.
For contracts that include a perpetual license and hosting services, we generally consider the related arrangements. For hosting arrangements, where perpetual licenses are also sold, the initial non-cancellable period generally results in the arrangements being accounted forarrangement as an overall service, agreements, accordingly, amounts billed for the licenses are recognized over the customer relationship period.
initial hosting term. The Company allocates revenue to customer support services and software enhancements and any other undelivered elements of the arrangement based on VSOE of fair value of each element, and such amounts are deferred until the applicable delivery criteria and other revenue recognition criteria have been met. The balance of the revenue, net of any discounts inherent in the arrangement, is recognizedlicense fee typically due at the outset of the arrangement usingis not payable again if the residual methodcustomer renews the hosting services, so that the customer’s option to renew the hosting services is a material right, the revenue from which, if the option is exercised, we will recognize over the applicable renewal period. Managed services account for less than 2% of our cloud subscription contracts.
Our perpetual software licenses provide the customer with a right to use the software as it exists at the producttime of purchase. We recognize revenue for distinct software licenses once the license period has begun and we have made the software available to the customer. Our perpetual software licenses are delivered. Iftypically sold with maintenance under which we provide a comprehensive 24 hours per day, 365 days per year program that provides customers with software upgrades, when and if available, which include additional or improved functionality and technological advances incorporating emerging supply chain and industry initiatives. Revenue related to maintenance is generally paid in advance and recognized ratably over the Company cannot objectively determine the fair value of each undelivered element based on the VSOE of fair value, the Company defers revenue recognition until all elements are delivered, all services have been performed, or until fair value can be objectively determined. The Company must apply judgment in determining all elementsterm of the arrangement and in determining the VSOE of fair value for each element, considering the price charged for each product on a stand-alone basis or applicable renewal rates. For arrangements that include futureagreement, typically twelve months. Perpetual software functionality deliverables, the Companylicense revenue accounts for these deliverables as a separate elementapproximately 2% of the arrangement. Because the Company does not sell these deliverables on a standalone basis, the Company is not able to establish VSOE of fair value of these deliverables. As a result, the Company defers all revenue under the arrangement until the future functionality has been delivered to the customer.total revenue.
Payment terms for the Company’s software licenses vary. Each contract is evaluated individually to determine whether the fees in the contract are fixed or determinable and whether collectability is probable. Judgment is required in assessing the probability of collection, which is generally based on evaluation of customer-specific information, historical collection experience, and economic market conditions. If market conditions decline, or if the financial conditions of customers deteriorate, the Company may be unable to determine that collectability is probable, and the Company could be required to defer the recognition of revenue until the Company receives customer payments. The Company has an established history of collecting under the terms of its software license contracts without providing refunds or concessions to its customers. Therefore, the Company has determined that the presence of payment terms that extend beyond contract execution in a particular contract do not preclude the conclusion that the fees in the contract are fixed or determinable. Although infrequent, when payment terms in a contract extend beyond twelve months, the Company has determined that such fees are not fixed or determinable and recognizes revenue as payments become due provided that all other conditions for revenue recognition have been met.
The Company’s8
Our services revenue consists of fees generated from professionalimplementation, training, and application managed services, and customer support and software enhancements related to the Company’s software products. Professionalincluding reimbursements of out-of-pocket expenses in connection with our implementation services. Implementation services include system planning, design, configuration, testing, and other software implementation support, and are not typically essentialoptional and distinct from our software. Following implementation, customers who have purchased perpetual licenses may purchase application managed services to the functionality of thesupport and maintain our software. Fees from professionalfor our services performed by the Company are separately priced and are generally billed on an hourly basis, and revenue is recognized over time as the services are performed. In certain situations, we render professional services are rendered under agreements in which billings are limited to contractual maximums or based upon a fixed fee for portions of or all of the engagement. Revenue related to fixed-fee-based services contracts is recognized on a proportional performance basisover time based on the hours incurred on discrete projects within an overall services arrangement. The Company has determined that output measures, or services delivered, approximate the input measures associated with fixed-fee services arrangements. Project losses are provided for in their entirety in the period in which they become known. Revenue related to customer support services and software enhancements is generally paid in advance and recognized ratably over the term of the agreement, typically twelve months.proportion performed.
10
Hardware and other revenue is generated from the resaleAs part of a variety ofcomplete solution, our customers periodically purchase hardware products developed and manufactured by third parties that are integrated with and complementary to the Company’s software solutions. As part of a complete solution, the Company’s customers periodically purchase hardware from the Companyus for use with the software licenses purchased from the Company.us. These products include computer hardware, radio frequency terminal networks, radio frequency identification (RFID) chip readers, bar code printers and scanners, and other peripherals. HardwareAs we do not physically control the hardware that we sell, we are acting as an agent in the transaction and recognize our hardware revenue net of related cost. We recognize hardware revenue when control is recognized upon shipmenttransferred to the customer when title passes. The Company generally purchases hardwareupon shipment.
Significant Judgments
Our customer contracts include the sale of multiple SaaS services or licensed products. Judgment is required to determine whether each service or product sold is a distinct performance obligation that should be accounted for separately. We allocate the transaction price to the distinct performance obligations based on relative standalone selling price (SSP). We estimate SSP based on the prices we charge our customers or by using other information such as market conditions and other observable inputs. However, the selling price of our software licenses is highly variable. Thus, we estimate SSP for software licenses using the residual approach, determined based on total transaction price less the SSP of other goods and services promised in the contract.
Contract Balances
Timing of invoicing to customers may differ from timing of revenue recognition. Payment terms for our software licenses vary. We have an established history of collecting under the terms of our software license contracts without providing refunds or concessions to our customers. Cloud subscriptions and maintenance are typically billed annually in advance. We typically bill our professional services monthly as performed. In instances where the timing of revenue recognition differs from the Company’s vendors only after receiving an ordertiming of invoicing, we have determined that our contracts generally do not include a significant financing component. The primary purpose of our invoicing terms is to provide customers with predictable ways to purchase our software and services, not to provide or receive financing. Additionally, we are applying the practical expedient to exclude from consideration any contracts with payment terms of one year or less as we rarely offer terms extending beyond one year or invoice more than a customer. year in advance.
Deferred revenue represents amounts collected prior to having completed performance of cloud subscriptions, maintenance, and professional services. In the three and nine months ended September 30, 2023, we recognized $39.2 million and $181.9 million of revenue that was included in the deferred revenue balance as of December 31, 2022. In the three months ended September 30, 2023, we recognized $97.9 million of revenue that was included in the deferred revenue balance as of June 30, 2023.
Remaining Performance Obligations
As of September 30, 2023, approximately $1.3 billion of revenue - approximately 98% of which is cloud-native subscriptions - is expected to be recognized from remaining performance obligations (RPO) with a non-cancelable term greater than 1 year (including deferred revenue as well as amounts that are expected to be invoiced and recognized as revenue in future periods). We expect to recognize revenue on approximately 40% of these remaining performance obligations over the next 24 months with the balance recognized thereafter. We have elected not to provide disclosures regarding remaining performance obligations for contracts with a term of 1 year or less.
Returns and Allowances
We have not experienced significant returns or warranty claims to date and, as a result, have not recorded a provision for the Companycost of returns and product warranty claims.
9
We record an allowance for credit losses based on historical experience of write-offs and a detailed assessment of accounts receivable. Additions to the allowance for credit losses generally does not maintain hardware inventory.
In accordance with the other presentation matters within the Revenue Recognition Topic of the FASB Accounting Standards Codification (ASC), the Company recognizes amounts associated with reimbursements from customers for out-of-pocket expensesrepresent a sales allowance on services revenue, which are recorded to operations as a reduction to services revenue. Such amounts have been included in “Hardware and other” revenue in the Condensed Consolidated Statements of Income. The total amount of expense reimbursement recordedcharged to revenueoperations was $5.0$2.8 million and $4.8$0.9 million for the three months ended September 30, 20172023 and 2016,2022, respectively, and $13.8$4.0 million and $13.9$2.1 million for both the nine months ended September 30, 2023 and 2022.
Our analysis involved utilizing a model of internal historical losses data. In estimating the allowance for credit losses, we considered the age of the accounts receivable, our historical write-offs, and the historical creditworthiness of the customer, among other factors. Should any of these factors change, the estimates made by us will also change accordingly, which could affect the level of our future allowances. We also analyzed future expected credit losses given ever present changes to future risks in projected economic conditions and future risks of customer collection.
Deferred Commissions
We consider sales commissions to be incremental costs of obtaining a contract with a customer. We defer and recognize an asset for sales commissions related to performance obligations with an expected period of benefit of more than one year. We apply the practical expedient to expense sales commissions when the amortization period would have been one year or less. Deferred commissions were $38.0 million as of September 30, 2023, of which $28.7 million is included in other assets and $9.3 million is included in prepaid expenses. Sales commission expense is included in Sales and Marketing expense in the accompanying Consolidated Statements of Income. Amortization of sales commissions was $2.4 million and $1.8 million for the three months ended September 30, 2023 and 2022, respectively, and $7.0 million and $5.5 million for the nine months ended September 30, 20172023 and 2016,2022, respectively.No impairment losses were recognized during the periods.
|
|
The Company measures itsWe measure our investments based on a fair value hierarchy disclosure framework that prioritizes and ranks the level of market price observability used in measuring assets and liabilities at fair value. Market price observability is affected by a number of factors, including the type of asset or liability and its characteristics. This hierarchy prioritizes the inputs into three broad levels as follows:
Level 1–Quoted prices in active markets for identical instruments.
Level 2–Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets.
Level 3–Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.
Investments with maturities of 90 days or less from the date of purchase are classified as cash equivalents; investments with maturities of greater than 90 days from the date of purchase but less than one year are generally classified as short-term investments; and investments with maturities of one year or greater from the date of purchase are generally classified as long-term investments. Unrealized holding gains and losses are reflected as a net amount in a separate component of shareholders’ equity until realized. For the purposes of computing realized gains and losses, cost is determined on a specific identification basis.
At September 30, 2017, the Company’s2023, our cash and cash equivalents were $98.4 million and $83.9 million, respectively. We had neither short-term investments balances were $98.0 million, $26.8 million, and $4.9 million, respectively. The Company currently has nonor long-term investments.investments at September 30, 2023. Cash equivalents consist of highly liquid money market funds and certificates of deposit. Short-term investments consist of certificates of deposit.funds. For money market funds, the Company useswe use quoted prices from active markets that are classified at Level 1, as athe highest level of observable input in the disclosure hierarchy framework. At September 30, 2017 and December 31, 2016, the CompanyWe had $10.5 million and $30.3 million, respectively, in money market funds, which are classified as Level 1 and are included in cash and cash equivalents on the Condensed Consolidated Balance Sheets. The Company has no investments classified asat Level 2 or Level 3.3 at September 30, 2023.
|
|
The CompanyWe granted 97,458876 and 71,0252,411 restricted stock units (“RSUs”)(RSUs) during the three months ended September 30, 20172023 and 2016,2022, respectively, and 458,449granted 582,209 and 420,256679,540 RSUs during the nine months ended September 30, 20172023 and 2016,2022, respectively. The Company recorded equity-basedEquity-based compensation expense related to RSUs of $3.8was $19.0 million and $3.5$14.5 million during the three months ended September 30, 20172023 and 2016,2022, respectively, and $11.0$53.6 million and $11.7$44.2 million during the nine months ended September 30, 20172023 and 2016,2022, respectively.
1110
We present below a summary of changes during the nine months ended September 30, 2023 in our unvested units of restricted stock:
Number of shares/units | ||||
Outstanding at December 31, 2022 | 1,427,831 | |||
Granted | 582,209 | |||
Vested | (615,490 | ) | ||
Forfeited | (12,726 | ) | ||
Outstanding at September 30, 2023 | 1,381,824 |
Our effective tax rate was 10.4% and 22.7% for the three months ended September 30, 2023 and 2022, respectively, and 17.0% and 19.1% for the nine months ended September 30, 2017 is as follows:
| ||||
|
| |||
|
| |||
|
|
| ||
|
|
| ||
|
|
|
|
2023 and 2022, respectively. The Company’sdecrease in the effective tax rate was 36.5% and 37.7% for the three months ended September 30, 20172023 is due to a decrease of tax with respect to foreign tax creditability in the United States, allowable United States research and 2016, respectively,development credits, and 35.2% and 37.3% for the nine months ended September 30, 2017 and 2016, respectively.favorable return to provision estimates. The decrease in the effective tax rate for the nine months ended September 30, 2017 was primarily2023 is due to a decrease of tax with respect to foreign tax creditability in the implementationUnited States, allowable United States research and development credits, and favorable return to provision estimates offset by a decrease of ASU 2016-09, Improvements to Employee Share-Based Payment Accounting on January 1, 2017. The income tax provision for the nine months ended September 30, 2017 includes excess tax benefits of $1.9 million on vesting of restricted stock which would have been recorded in additional paid-in-capital under the previous guidance.vesting.
The Company appliesWe apply the provisions for income taxes related to, among other things, accounting for uncertain tax positions and disclosure requirements in accordance with theAccounting Standards Classification (ASC) 740, Income Taxes Topic of FASB ASC 740.Taxes. For the three and nine months ended September 30, 2017, there were no material changes to the Company’s uncertain tax positions. There has been no change to the Company’s policy that recognizes potential interest and penalties related to2023, our uncertain tax positions within its global operations in incomeincreased by a net $0.3 million due to the settlement of a tax expense.contingency reserve.
The Company currently plans to permanently reinvest all of its remaining undistributed foreign earnings. Accordingly, no provision for U.S. federal and state income taxes has been provided thereon. Upon repatriation of those earnings, in the form of dividends or otherwise, the Company would be subject to both U.S. income taxes (subject to adjustment for foreign tax credits) and withholding taxes payable to various foreign countries for such distributions. It is impractical to calculate the tax impact until such repatriation occurs.
The Company conductsWe conduct business globally and, as a result, filesfile income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. In the normal course of business, the CompanyManhattan is subject to examination by taxing authorities throughout the world. The Company isWe are no longer subject to U.S. federal, income tax examinations, substantially all state and local income tax examinations and substantially all non-U.S. income tax examinations for years before 2012.2010.
Under the Inflation Reduction Act of 2022, we are subject to a 1% excise tax on stock repurchases, net of stock issuances, beginning in 2023. We have included the tax in the cost of our stock repurchases as a reduction of shareholders' equity.
|
|
Basic net earningsincome per share is computed using net income divided by the weighted average number of shares of common stock outstanding (“Weighted Shares”) for eachthe period presented.
Diluted net earningsincome per share is computed using net income divided by the sum of Weighted Shares and the treasury stock method effect of common equivalent shares (CESs) outstanding for each period presented usingpresented.
In the treasury stock method.
12
The following istable, we present a reconciliation of earnings per share and the net income and share amountsshares used in the computation of basic and diluted net earnings per common share for the three and nine months ended September 30, 20172023 and 2016 (in2022(in thousands, except per share data):
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||||||||||||
|
| 2017 |
|
| 2016 |
|
| 2017 |
|
| 2016 |
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||||||
|
| (in thousands, except per share data) |
|
| (in thousands, except per share data) |
|
| (in thousands, except per share data) |
|
| (in thousands, except per share data) |
| ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Net income |
| $ | 32,599 |
|
| $ | 33,496 |
|
| $ | 91,967 |
|
| $ | 94,317 |
|
| $ | 49,421 |
|
| $ | 29,674 |
|
| $ | 127,832 |
|
| $ | 91,091 |
|
Earnings per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Basic |
| $ | 0.47 |
|
| $ | 0.47 |
|
| $ | 1.33 |
|
| $ | 1.31 |
|
| $ | 0.80 |
|
| $ | 0.47 |
|
| $ | 2.07 |
|
| $ | 1.45 |
|
Effect of CESs |
|
| - |
|
|
| - |
|
|
| (0.01 | ) |
|
| (0.01 | ) |
|
| (0.01 | ) |
|
| - |
|
|
| (0.02 | ) |
|
| (0.02 | ) |
Diluted |
| $ | 0.47 |
|
| $ | 0.47 |
|
| $ | 1.32 |
|
| $ | 1.30 |
|
| $ | 0.79 |
|
| $ | 0.47 |
|
| $ | 2.05 |
|
| $ | 1.43 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Weighted average number of shares: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Basic |
|
| 68,928 |
|
|
| 71,403 |
|
|
| 69,389 |
|
|
| 71,981 |
|
|
| 61,639 |
|
|
| 62,592 |
|
|
| 61,902 |
|
|
| 62,917 |
|
Effect of CESs |
|
| 207 |
|
|
| 340 |
|
|
| 225 |
|
|
| 359 |
|
|
| 671 |
|
|
| 573 |
|
|
| 599 |
|
|
| 566 |
|
Diluted |
|
| 69,135 |
|
|
| 71,743 |
|
|
| 69,614 |
|
|
| 72,340 |
|
|
| 62,310 |
|
|
| 63,165 |
|
|
| 62,501 |
|
|
| 63,483 |
|
The number of anti-dilutive CESs during 2017the three and 2016nine months ended September 30, 2023 and 2022 was immaterial.
11
|
|
From time to time, the Companywe may be involved in litigation relating to claims arising out of itsthe ordinary course of business, and occasionally legal proceedings not in the ordinary course. Many of the Company’sour installations involve products that are critical to the operations of itsour clients’ businesses. Any failure in a Companyone of our products could result in a claim for substantial damages against the Company,us, regardless of the Company’sour responsibility for such failure. Although the Company attemptswe attempt to limit contractually itsour liability for damages arising from product failures or negligent acts or omissions, there can be no assurance that the limitations of liability set forth in itsour contracts will be enforceable in all instances. The Company isWe are not currently a party to any legal proceedings the result of which it believeswe believe is likely to have a material adverse impact upon itson our business, financial position, results of operations, or cash flows. The Company expensesWe expense legal costs associated with loss contingencies as such legal costs are incurred.
|
|
The Company manages itsWe manage our business by geographic segment. The Company has region and have three geographic reportable segments: North America and Latin America (the “Americas”); Europe, the Middle East and Africa (EMEA); and Asia Pacific (APAC). All segments derive revenue from the sale and implementation of the Company’sour supply chain commerce solutions. The individual products sold by the segments are similar in nature and are all designed to help companies manage the effectiveness and efficiency of their supply chain commerce. The Company usesWe use the same accounting policies for each reportable segment. The chief executive officer and chief financial officer evaluateoperating decision maker evaluates performance based on revenue and operating results for each reportable segment.
The Americas segment charges royalty fees to the other segments based on software licenses and cloud subscriptions sold by those reportable segments. The royalties, which totaled approximately $1.0$3.1 million and $0.9$2.1 million for the three months ended September 30, 20172023 and 2016,2022, respectively, and approximately $5.4$9.7 million and $2.1$6.6 million for the three and nine months ended September 30, 20172023 and 2016,2022, respectively,are included in costcosts of revenue for each segment with a corresponding reduction in the Americas segment’s cost of revenue. The revenues represented below are from external customers only. The geographical-basedgeography-based costs consist of costs offor professional services personnel, direct sales and marketing expenses, cost of infrastructure costs to support the employeesemployee and customer base, billing and financial systems, management and general and administrative support. There are certainCertain corporate expenses included in the Americas segment that are not charged to the other segments, includingsegments. Such expenses include research and development, certain marketing and general and administrative costs that support the global organization, and the amortization of acquired developed technology. IncludedCosts in the Americas segment’s costs aresegment include all research and development costs, including the costs associated with the Company’s India operations.our operations in India.
1312
The following table presents the revenues, expenses and operating income
In accordance with ASC 280, Segment Reporting, we present below certain financial information by reportable segmentfor the three and nine months ended September 30, 20172023 and 20162022 (in thousands):
|
| Three Months Ended September 30, |
|
| Three Months Ended September 30, |
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
| 2017 |
|
| 2016 |
|
| 2023 |
|
| 2022 |
| ||||||||||||||||||||||||||||||||||||||||||||||||||||
|
| Americas |
|
| EMEA |
|
| APAC |
|
| Consolidated |
|
| Americas |
|
| EMEA |
|
| APAC |
|
| Consolidated |
|
| Americas |
|
| EMEA |
|
| APAC |
|
| Consolidated |
|
| Americas |
|
| EMEA |
|
| APAC |
|
| Consolidated |
| ||||||||||||||||
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Cloud subscriptions |
| $ | 52,846 |
|
| $ | 10,343 |
|
| $ | 1,844 |
|
| $ | 65,033 |
|
| $ | 38,451 |
|
| $ | 5,695 |
|
| $ | 1,121 |
|
| $ | 45,267 |
| ||||||||||||||||||||||||||||||||
Software license |
| $ | 14,741 |
|
| $ | 2,158 |
|
| $ | 1,895 |
|
| $ | 18,794 |
|
| $ | 18,050 |
|
| $ | 1,843 |
|
| $ | 1,740 |
|
| $ | 21,633 |
|
|
| 3,502 |
|
|
| 51 |
|
|
| 317 |
|
|
| 3,870 |
|
|
| 4,686 |
|
|
| 708 |
|
|
| 992 |
|
|
| 6,386 |
|
Maintenance |
|
| 27,951 |
|
|
| 5,159 |
|
|
| 2,186 |
|
|
| 35,296 |
|
|
| 27,901 |
|
|
| 5,657 |
|
|
| 2,262 |
|
|
| 35,820 |
| ||||||||||||||||||||||||||||||||
Services |
|
| 92,517 |
|
|
| 15,615 |
|
|
| 7,423 |
|
|
| 115,555 |
|
|
| 101,344 |
|
|
| 12,787 |
|
|
| 5,136 |
|
|
| 119,267 |
|
|
| 96,045 |
|
|
| 25,594 |
|
|
| 6,326 |
|
|
| 127,965 |
|
|
| 78,479 |
|
|
| 19,737 |
|
|
| 5,209 |
|
|
| 103,425 |
|
Hardware and other |
|
| 17,575 |
|
|
| 680 |
|
|
| 279 |
|
|
| 18,534 |
|
|
| 10,705 |
|
|
| 448 |
|
|
| 160 |
|
|
| 11,313 |
| ||||||||||||||||||||||||||||||||
Hardware |
|
| 6,220 |
|
|
| 57 |
|
|
| - |
|
|
| 6,277 |
|
|
| 7,157 |
|
|
| 46 |
|
|
| - |
|
|
| 7,203 |
| ||||||||||||||||||||||||||||||||
Total revenue |
|
| 124,833 |
|
|
| 18,453 |
|
|
| 9,597 |
|
|
| 152,883 |
|
|
| 130,099 |
|
|
| 15,078 |
|
|
| 7,036 |
|
|
| 152,213 |
|
|
| 186,564 |
|
|
| 41,204 |
|
|
| 10,673 |
|
|
| 238,441 |
|
|
| 156,674 |
|
|
| 31,843 |
|
|
| 9,584 |
|
|
| 198,101 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Costs and Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Cost of revenue |
|
| 50,777 |
|
|
| 8,493 |
|
|
| 3,802 |
|
|
| 63,072 |
|
|
| 51,207 |
|
|
| 7,169 |
|
|
| 3,302 |
|
|
| 61,678 |
|
|
| 84,275 |
|
|
| 22,134 |
|
|
| 5,030 |
|
|
| 111,439 |
|
|
| 73,787 |
|
|
| 18,117 |
|
|
| 4,254 |
|
|
| 96,158 |
|
Operating expenses |
|
| 32,746 |
|
|
| 2,701 |
|
|
| 1,070 |
|
|
| 36,517 |
|
|
| 30,538 |
|
|
| 2,957 |
|
|
| 1,122 |
|
|
| 34,617 |
|
|
| 66,356 |
|
|
| 4,514 |
|
|
| 1,244 |
|
|
| 72,114 |
|
|
| 58,475 |
|
|
| 3,731 |
|
|
| 1,303 |
|
|
| 63,509 |
|
Depreciation and amortization |
|
| 2,092 |
|
|
| 131 |
|
|
| 52 |
|
|
| 2,275 |
|
|
| 2,141 |
|
|
| 130 |
|
|
| 63 |
|
|
| 2,334 |
|
|
| 1,278 |
|
|
| 141 |
|
|
| 21 |
|
|
| 1,440 |
|
|
| 1,498 |
|
|
| 144 |
|
|
| 22 |
|
|
| 1,664 |
|
Restructuring charge |
|
| (77 | ) |
|
| - |
|
|
| - |
|
|
| (77 | ) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
| ||||||||||||||||||||||||||||||||
Total costs and expenses |
|
| 85,538 |
|
|
| 11,325 |
|
|
| 4,924 |
|
|
| 101,787 |
|
|
| 83,886 |
|
|
| 10,256 |
|
|
| 4,487 |
|
|
| 98,629 |
|
|
| 151,909 |
|
|
| 26,789 |
|
|
| 6,295 |
|
|
| 184,993 |
|
|
| 133,760 |
|
|
| 21,992 |
|
|
| 5,579 |
|
|
| 161,331 |
|
Operating income |
| $ | 39,295 |
|
| $ | 7,128 |
|
| $ | 4,673 |
|
| $ | 51,096 |
|
| $ | 46,213 |
|
| $ | 4,822 |
|
| $ | 2,549 |
|
| $ | 53,584 |
|
| $ | 34,655 |
|
| $ | 14,415 |
|
| $ | 4,378 |
|
| $ | 53,448 |
|
| $ | 22,914 |
|
| $ | 9,851 |
|
| $ | 4,005 |
|
| $ | 36,770 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||||||||||||||||
|
| Nine Months Ended September 30, |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
| 2023 |
|
| 2022 |
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
| Americas |
|
| EMEA |
|
| APAC |
|
| Consolidated |
|
| Americas |
|
| EMEA |
|
| APAC |
|
| Consolidated |
| ||||||||||||||||||||||||||||||||||||||||
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||||||||||||||
Cloud subscriptions |
| $ | 148,812 |
|
| $ | 29,454 |
|
| $ | 4,930 |
|
| $ | 183,196 |
|
| $ | 106,064 |
|
| $ | 15,544 |
|
| $ | 3,159 |
|
| $ | 124,767 |
| ||||||||||||||||||||||||||||||||
Software license |
|
| 8,556 |
|
|
| 1,902 |
|
|
| 2,509 |
|
|
| 12,967 |
|
|
| 12,147 |
|
|
| 5,969 |
|
|
| 1,753 |
|
|
| 19,869 |
| ||||||||||||||||||||||||||||||||
Maintenance |
|
| 84,938 |
|
|
| 14,919 |
|
|
| 6,915 |
|
|
| 106,772 |
|
|
| 84,984 |
|
|
| 15,288 |
|
|
| 6,843 |
|
|
| 107,115 |
| ||||||||||||||||||||||||||||||||
Services |
|
| 275,602 |
|
|
| 75,321 |
|
|
| 17,821 |
|
|
| 368,744 |
|
|
| 222,206 |
|
|
| 58,670 |
|
|
| 13,408 |
|
|
| 294,284 |
| ||||||||||||||||||||||||||||||||
Hardware |
|
| 18,623 |
|
|
| 168 |
|
|
| - |
|
|
| 18,791 |
|
|
| 22,809 |
|
|
| 137 |
|
|
| - |
|
|
| 22,946 |
| ||||||||||||||||||||||||||||||||
Total revenue |
|
| 536,531 |
|
|
| 121,764 |
|
|
| 32,175 |
|
|
| 690,470 |
|
|
| 448,210 |
|
|
| 95,608 |
|
|
| 25,163 |
|
|
| 568,981 |
| ||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||||||||||||||||
Costs and Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||||||||||||||||
Cost of revenue |
|
| 242,998 |
|
|
| 66,401 |
|
|
| 14,482 |
|
|
| 323,881 |
|
|
| 203,592 |
|
|
| 52,552 |
|
|
| 12,087 |
|
|
| 268,231 |
| ||||||||||||||||||||||||||||||||
Operating expenses |
|
| 193,080 |
|
|
| 14,238 |
|
|
| 4,008 |
|
|
| 211,326 |
|
|
| 171,179 |
|
|
| 12,799 |
|
|
| 3,620 |
|
|
| 187,598 |
| ||||||||||||||||||||||||||||||||
Depreciation and amortization |
|
| 3,825 |
|
|
| 361 |
|
|
| 61 |
|
|
| 4,247 |
|
|
| 4,625 |
|
|
| 466 |
|
|
| 66 |
|
|
| 5,157 |
| ||||||||||||||||||||||||||||||||
Total costs and expenses |
|
| 439,903 |
|
|
| 81,000 |
|
|
| 18,551 |
|
|
| 539,454 |
|
|
| 379,396 |
|
|
| 65,817 |
|
|
| 15,773 |
|
|
| 460,986 |
| ||||||||||||||||||||||||||||||||
Operating income |
| $ | 96,628 |
|
| $ | 40,764 |
|
| $ | 13,624 |
|
| $ | 151,016 |
|
| $ | 68,814 |
|
| $ | 29,791 |
|
| $ | 9,390 |
|
| $ | 107,995 |
| ||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Nine Months Ended September 30, |
| |||||||||||||||||||||||||||||
|
| 2017 |
|
| 2016 |
| ||||||||||||||||||||||||||
|
| Americas |
|
| EMEA |
|
| APAC |
|
| Consolidated |
|
| Americas |
|
| EMEA |
|
| APAC |
|
| Consolidated |
| ||||||||
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Software license |
| $ | 42,110 |
|
| $ | 17,232 |
|
| $ | 4,667 |
|
| $ | 64,009 |
|
| $ | 54,343 |
|
| $ | 4,815 |
|
| $ | 3,713 |
|
| $ | 62,871 |
|
Services |
|
| 276,576 |
|
|
| 44,927 |
|
|
| 19,713 |
|
|
| 341,216 |
|
|
| 298,715 |
|
|
| 42,656 |
|
|
| 13,992 |
|
|
| 355,363 |
|
Hardware and other |
|
| 42,920 |
|
|
| 1,682 |
|
|
| 686 |
|
|
| 45,288 |
|
|
| 36,866 |
|
|
| 1,478 |
|
|
| 387 |
|
|
| 38,731 |
|
Total revenue |
|
| 361,606 |
|
|
| 63,841 |
|
|
| 25,066 |
|
|
| 450,513 |
|
|
| 389,924 |
|
|
| 48,949 |
|
|
| 18,092 |
|
|
| 456,965 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenue |
|
| 149,112 |
|
|
| 26,715 |
|
|
| 11,179 |
|
|
| 187,006 |
|
|
| 156,391 |
|
|
| 23,241 |
|
|
| 9,376 |
|
|
| 189,008 |
|
Operating expenses |
|
| 99,625 |
|
|
| 8,743 |
|
|
| 3,256 |
|
|
| 111,624 |
|
|
| 99,535 |
|
|
| 9,189 |
|
|
| 3,476 |
|
|
| 112,200 |
|
Depreciation and amortization |
|
| 6,313 |
|
|
| 392 |
|
|
| 158 |
|
|
| 6,863 |
|
|
| 6,205 |
|
|
| 404 |
|
|
| 197 |
|
|
| 6,806 |
|
Restructuring charge |
|
| 2,831 |
|
|
| 114 |
|
|
| - |
|
|
| 2,945 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
Total costs and expenses |
|
| 257,881 |
|
|
| 35,964 |
|
|
| 14,593 |
|
|
| 308,438 |
|
|
| 262,131 |
|
|
| 32,834 |
|
|
| 13,049 |
|
|
| 308,014 |
|
Operating income |
| $ | 103,725 |
|
| $ | 27,877 |
|
| $ | 10,473 |
|
| $ | 142,075 |
|
| $ | 127,793 |
|
| $ | 16,115 |
|
| $ | 5,043 |
|
| $ | 148,951 |
|
License revenues relatedCloud subscriptions revenue primarily relates to our Manhattan Active omnichannel, warehouse management solutions, and transportation management solutions for the Company’snine months ended September 30, 2023. The majority of our software license revenue (over 80%) relates to our warehouse and non-warehousemanagement product groupsgroup for the three and nine months ended September 30, 2017 and 2016 are as follows (in thousands):2023.
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||
|
| 2017 |
|
| 2016 |
|
| 2017 |
|
| 2016 |
| ||||
Warehouse |
| $ | 10,859 |
|
| $ | 11,060 |
|
| $ | 40,814 |
|
| $ | 36,514 |
|
Non-Warehouse |
|
| 7,935 |
|
|
| 10,573 |
|
|
| 23,195 |
|
|
| 26,357 |
|
Total software license revenue |
| $ | 18,794 |
|
| $ | 21,633 |
|
| $ | 64,009 |
|
| $ | 62,871 |
|
14
The Company’s services revenues, which consist of fees generated from professional services and customer support and software enhancements related to its software products,At September 30, 2023, total assets for the threeAmericas, EMEA and nine months ended September 30, 2017APAC segments were $464.4 million, $81.3 million, and 2016 are as follows (in thousands):$27.3 million, respectively.
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||
|
| 2017 |
|
| 2016 |
|
| 2017 |
|
| 2016 |
| ||||
Professional services |
| $ | 79,217 |
|
| $ | 84,843 |
|
| $ | 235,543 |
|
| $ | 256,341 |
|
Customer support and software enhancements |
|
| 36,338 |
|
|
| 34,424 |
|
|
| 105,673 |
|
|
| 99,022 |
|
Total services revenue |
| $ | 115,555 |
|
| $ | 119,267 |
|
| $ | 341,216 |
|
| $ | 355,363 |
|
|
|
In May 2017, the Company eliminated about 100 positions due to retail sector headwinds and to align our services capacity with demand. The Company recorded a restructuring charge of approximately $2.9 million pretax ($1.9 million after-tax or $0.03 per fully diluted share) in 2017. The charge primarily consists of employee severance, employee transition cost and outplacement services. The charge is classified in “Restructuring charge” in the Company’s Consolidated Statements of Income.
The following table summarizes the segment activity in the restructuring accrual for the nine months ended September 30, 2017:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
| Americas |
|
| EMEA |
|
| APAC |
|
| Consolidated |
| ||||||||
|
| (in thousands) |
| |||||||||||||||||
Restructuring charge |
| $ | 2,831 |
|
| $ | 114 |
|
| $ | - |
|
| $ | 2,945 |
| ||||
Cash payments |
|
| (2,793 | ) |
|
| (108 | ) |
|
| - |
|
|
| (2,901 | ) | ||||
Restructuring accrual balance at September 30, 2017 |
| $ | 38 |
|
| $ | 6 |
|
| $ | - |
|
| $ | 44 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The balance at September 30, 2017 is included in “Accrued compensation and benefits” in the Company’s Condensed Consolidated Balance Sheets. The remaining balance is expected to be paid by the end of 2017.
1513
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion should be read in conjunction with the condensed consolidated financial statements for the three and nine months ended September 30, 20172023 and 2016,2022, including the notes to those statements, included elsewhere in this quarterly report. We also recommend the following discussion be read in conjunction with management’s discussion and analysis and consolidated financial statements included in our annual report on Form 10-K for the year ended December 31, 2016.2022. Statements in the following discussion that are not statements of historical fact are “forward-looking statements.” Actual results may differ materially from the results predicted in such forward-looking statements, for a variety of factors. See “Forward-Looking Statements” below.
References in this filing to the “Company,” “Manhattan,” “Manhattan Associates,” “we,” “our,” and “us” refer to Manhattan Associates, Inc., our predecessors, and our wholly-ownedwholly owned and consolidated subsidiaries.
Business Overview
We develop, sell, deploy, service and maintain software solutions designed to manage supply chains,Unified Omnichannel Commerce and Digital Supply Chain, inventory and omni-channelomnichannel operations for retailers, wholesalers, manufacturers, logistics providers and other organizations. Our customers include many of the world’s most premier and most profitable brands.
Our business model is singularly focused on the development and implementation of complex commerce enablement software solutions that are designed to optimize supply chains, and retail store operations including point of salepoint-of-sale effectiveness and efficiency for our customers. In Q2 2017, we accelerated our transition to the Cloud with the release of our Manhattan Active™ Solutions.
We have threefive principal sources of revenue:
licenses, hosting of software andcloud subscriptions, including software as a service (“SaaS”) arrangements;
licenses of our software;
hardware sales and other revenue.
In the three and nine months ended September 30, 2017,2023, we generated $152.9$238.4 million and $450.5$690.5 million in total revenue, respectively, with arespectively. The revenue mix of: license revenue 12%; services revenue 76%; and hardware and other revenue 12% for the three months ended September 30, 2017, and license revenue 14%; services revenue 76%; and hardware and other revenue 10% for the nine months ended September 30, 2017.2023 was: cloud subscriptions 27%; software license 2%; maintenance 15%; services 53%; and hardware 3%.
The Company hasWe have three geographic reportable segments: North America and Latin America (the “Americas”), Europe, the Middle East and Africa (EMEA), and Asia-Pacific (APAC). Geographic revenue is based on the location of the sale. Our international revenue was approximately $41.6$72.4 million and $125.1$221.4 million for the three and nine months ended September 30, 2017,2023, respectively, which represents approximately 27%30% and 28%32% of our total revenue for the three and nine months ended September 30, 2017,2023, respectively. International revenue includes all revenue derived from sales to customers outside the United States. At September 30, 2017,2023, we employed approximately 2,8304,500 employees worldwide, of which 1,350 employees are based in the Americas, 210 in EMEA, and 1,270 in APAC (including India).worldwide. We have offices in Australia, Chile, China, France, Germany, India, Italy, Japan, the Netherlands, Singapore, Spain, the United Kingdom, and the United States, as well as representatives in Mexico and reseller partnerships in Latin America, Eastern Europe, the Middle East, South Africa, and Asia.
Future Expectations
While we remain cautious about the global economy, our results for the first nine months of 2023 exceeded our expectations due to solid demand for our cloud solutions. Our solutions are mission critical, supporting complex global supply chains. We believe that favorable secular tailwinds, such as the digital transformation of businesses in manufacturing, wholesale and retail, coupled with our commitment to investing in organic innovation to deliver leading cloud supply chain, inventory and omnichannel commerce solutions is in synergistic alignment with current market demand. We believe that this alignment is contributing to our strong financial results, higher demand and strong win rates for our solutions for the period. We remain committed to investing in our business to drive customer success and expand our total addressable market, which we believe will position us well to achieve long-term sustainable growth and earnings.
We have taken steps to best ensure the health and safety of our employees globally. Our daily execution is a hybrid (office and virtual) model, and we continue to find innovative ways to engage with employees, customers and prospects, ensuring that they are supported.
Going forward, we are investing in our cloud business, including enterprise investments in innovation, and strategic operating expenses to support growth objectives.
14
For the remainder of 2023, our five strategic goals remain to:
Cloud Subscription
In 2017, we released Manhattan Active™ Solutions, a cloud subscription service. Under a cloud subscription, customers pay a periodic fee for the right to use our software within a cloud environment that we provide and manage over a specified period of time. As part of our subscription program, we allow customers to convert their maintenance contracts to cloud subscription contracts.
In the sixth year of our cloud transition, demand for our cloud solutions is the dominant preference of customers. Cloud solutions are our fastest growing revenue line and represents 93% of total software revenue in the first nine months of 2023. We believe the reduction in license and maintenance revenue in favor of our cloud offerings is positive for our customers and Manhattan Associates.
Global Economic Trends and Industry Factors
Global macro-economic trends, technology spending, and supply chain management market growth are important barometers for our business. In both the three and nine months ended September 30, 2017,2023, approximately 73% and 72%, respectively68% of our total revenue was generated in the United States, 8% and 13%, respectively,18% in EMEA, and the remaining balance in APAC, Canada, and Latin America. In addition, Gartner Inc. (“Gartner”), an information technology research and advisory company, estimates that nearly 75%approximately 77% of every supply chain software solutions dollar invested is spent in the United StatesNorth America and Western Europe; consequently, the health of the U.S. and the Western European economies hashave a meaningful impact on our financial results.
We sell technology-based solutions with total pricing, including software and services, in many cases exceeding $1.0 million. Our software is often is a part of our customers’ and prospects’ much larger capital commitment associated with facilities expansion and business improvement. We believe that, given the lingering uncertainty in themission critical nature of our software, combined with a challenging global macro environment, theour current sales cycles for large license deals of $1.0 million or greatercloud subscriptions in our target markets have beencould be extended. TheWhile demand for our solutions is solid, the current business climate within the United States and the other geographic regions in which we operate continues tomay affect customers’ and prospects’ decisions regarding timing
16
of strategic capital expenditures. Delays with respect to such decisions can have a material adverse impact on our business, and may further intensify competition in our already highly competitive markets.
During 2016 and continuing into 2017, the overall trend has been steady for our large license deals, with recognized license revenue of $1.0 million or greater on eighteen new contracts during 2016 as well as twelve new contracts in the nine months ended September 30, 2017. While we are encouraged by our results, we along with many of our customers, still remain cautious regarding the pace of global economic recovery.growth. We believe global geopolitical and economic volatility likely will continue to shape customers’ and prospects’ enterprise software buying decisions, making it challenging to forecast sales cycles for our productsdecisions.
Revenue
Cloud Subscriptions and Software License Revenue. Cloud subscriptions revenue and remaining performance obligation (RPO) growth are the timing of large enterprise software license deals.
Revenue
License revenue. License revenue, a leading indicatorindicators of our business isperformance, primarily derived from licensing, hosting of software and SaaS arrangementscloud native subscription fees that customers pay for supply chain commerceour Unified Omnichannel Commerce and Digital Supply Chain solutions. License
In the nine months ended September 30, 2023, cloud subscriptions revenue totaled $18.8 million, or 12%was 93% of total cloud and software license revenue. RPO increased 37% over prior year on strong demand. As of September 30, 2023, approximately $1.3 billion of revenue, 98% of which is cloud native subscriptions, is expected to be recognized from RPO with gross margins of 84.9% fora non-cancelable term greater than 1 year (including deferred revenue as well as amounts that are expected to be invoiced and recognized as revenue in future periods).
In the three months ended September 30, 2017, and $64.02023, cloud subscriptions revenue totaled $65.0 million or 14%27% of total revenue, with gross margin of 88.4% forrevenues. In the nine months ended September 30, 2017. For2023, cloud subscriptions revenue totaled $183.2 million or 27% of total revenues. Cloud subscriptions revenue is recognized ratably over the threeterm of the agreement, typically five years and nine months ended September 30, 2017, the percentage mix of new to existing customers was approximately 20/80 and 40/60, respectively.
Licensemore. Cloud subscription revenue growth is influenced by the strength of general economic and business conditions and the competitive position of our software products. OurIn the three months ended September 30, 2023, software license revenue generally has long sales cycles andtotaled $3.9 million, or 2% of total revenue. In the timing of the closing of a few large license transactions can have a material impact on our quarterly license revenues, operating profit, operating margins, and earnings per share. For example, $1.1 million ofnine months ended September 30, 2023, software license revenue in the third quartertotaled $13.0 million or 2% of 2017 equates to approximately one cent of diluted earnings per share impact.total revenue.
Our softwareUnified Omnichannel Commerce and Digital Supply Chain solutionsare focused on core omnichannel operation (e-commerce, retail store operations and point-of-sale), supply chain commerce operations (Warehouse Management, Transportation Management and Labor Management), and Inventory optimization and Omni-channel operations (e-commerce, retail store operations and point of sale),Optimization, which are intensely competitive markets characterized by rapid technological change. We are a market leader in the supply chain management and omnichannel software solutions market as defined by industry analysts such as ARC Advisory Group and Gartner. Our goal is to extend our position as a leading global supply chain solutions provider by growing our cloud subscriptions and software license revenues faster than our competitors through investment in innovation. We expect to continue to face increased competition from Enterprise Resource Planning (ERP) and Supply Chain Management applications vendors and business application software vendors that may broaden their solution offerings by internally developing, or by acquiring or partnering with independent developers of supply chain planning and execution software. Increased competition could result in price reductions, fewer customer orders, reduced gross margins, and loss of market share.
Services revenue.
15
Maintenance Revenue. Our services business consists of professional services (consulting and customer training) and customer support services and software enhancements (CSSE). Servicesmaintenance revenue totaled $115.6 million, or 76% of total revenue, with gross margins of 61.3% for the three months ended September 30, 2017, and $341.22023 totaled $35.3 million, or 76%15% of total revenue, with gross margins of 58.3% forrevenue. For the nine months ended September 30, 2017. Professional services accounted for approximately 69%2023, maintenance revenue totaled $106.8 million or 15% of total revenue. For maintenance, we offer a comprehensive 24 hours per day, 365 days per year program that provides our perpetual software license customers with software upgrades, when and if available, which include additional or improved functionality and technological advances incorporating emerging supply chain and industry initiatives.
Maintenance revenue is influenced by: (1) the amount of new software license revenue; (2) annual renewal of support contracts; (3) increase in customers through acquisitions; (4) fluctuations in currency rates; and (5) conversion of maintenance contracts to cloud subscription contracts. Substantially all of our customers renew their annual support contracts or convert to cloud subscription contracts. Maintenance revenue is generally paid in advance and recognized ratably over the term of the agreement, typically twelve months. Maintenance renewal revenue is recognized over the renewal period once we have a contract upon payment from the customer.
Services Revenue. In the three months ended September 30, 2023, our services revenue in bothtotaled $128.0 million, or 53% of total revenue. In the three and nine months ended September 30, 2017. While we believe2023, our services margins are very strong, our consolidated operating margin profile may be lower than those of various other technology companies due to our large services revenue mix as a percentagetotaled $368.7 million, or 53% of total revenue as services margins are inherently lower than license revenue margins.revenue.
At September 30, 2017, our professional services organization totaled approximately 1,810 employees, accounting for 64% of our total employees worldwide. Our professional services organization provides our customers with expertise and assistance in planning and implementing our solutions. To ensure a successful product implementation, consultants assist customers with the initial installation of a system, the conversion and transfer of the customer’s historical data onto our system, and ongoing training, education, and system upgrades. We believe our professional services enable customers to implement our software rapidly, ensure the customer’s success with our solution,solutions, strengthen our customer relationships, and add to our industry-specific knowledge base for use in future implementations and product innovations.
Although our professional services are optional, the majority of our customers use at least some portion of these services for their planning, implementation, or related needs. Professional services are typically rendered under time and materials-based contracts with services typically billed on an hourly basis. Professional services are sometimes rendered under fixed-fee based contracts with payments due on specific dates or milestones.
Services revenue growth is contingent upon license revenuecloud sales and customer upgrade cycles, which are influenced by the strength of general economic and business conditions and the competitive position of our software products. In addition, our professional
17
services business has competitive exposure to offshore providers and other consulting companies. All of these factors potentially create the risk of pricing pressure, fewer customer orders, reduced gross margins, and loss of market share.
For CSSE, we offer a comprehensive 24 hours per day, 365 days per year program that provides our customers with software upgrades, when and if available, which includes additional or improved functionality and technological advances incorporating emerging supply chain and industry initiatives. Our CSSE revenues totaled $36.3 million and $105.7 million for the three and nine months ended September 30, 2017, respectively, representing approximately 31% of services revenue and 24% of total revenue for both periods. The growth of CSSE revenues is influenced by: (1) new license revenue growth; (2) annual renewal of support contracts; (3) increase in customers; and (4) fluctuations in currency rates. Substantially all of our customers renew their annual support contracts. Over the last three years, our annual revenue renewal rate of customers subscribing to comprehensive support and enhancements has been greater than 90%. CSSE revenue is generally paid in advance and recognized ratably over the term of the agreement, typically twelve months. CSSE renewal revenue is not recognized unless payment is received from the customer.
Hardware and other revenue.Revenue. Our hardware and other revenue, which we recognize net of related costs, totaled $18.5$6.3 million representing 12% of total revenue with gross margins of 16.4% forin the three months ended September 30, 2017, and $45.3 million,2023 representing 10%3% of total revenue with gross margin of 17.6% forrevenue. For the nine months ended September 30, 2017.2023, hardware revenue totaled $18.8 million, or 3% of total revenue. In conjunction with the licensing of our software, and as a convenience for our customers, we resell a variety of hardware products developed and manufactured by third parties. These products include computer hardware, radio frequency terminal networks, RFID chip readers, bar code printers and scanners, and other peripherals. We resell all third-party hardware products and related maintenance pursuant to agreements with manufacturers or through distributor-authorized reseller agreements pursuant to which we are entitled to purchase hardware products and services at discounted prices. We generally purchase hardware from our vendors only after receiving an order from a customer. As a result, we generally do not maintain hardware inventory.
Other revenue represents amounts associated with reimbursements from customers for out-of-pocket expenses. The total amount of expense reimbursement recorded to hardware and other revenue was $5.0 million and $13.8 million for the three and nine months ended September 30, 2017, respectively.
Product Development
We continue to invest significantly in research and development (R&D) to provide leading Unified Omnichannel Commerce and Digital Supply Chain solutions that helpto enable global retailers, manufacturers, wholesalers, distributors, retailers, and logistics providers to successfully manage accelerating and fluctuating demands as well as the increasing complexity and volatility of their local and global supply chains, retail store operations and pointpoints of sale. Our research and developmentR&D expenses were $14.7$33.1 million and $43.1$95.5 million for the three and nine months ended September 30, 2017, respectively. At September 30, 2017, our R&D organization totaled approximately 690 employees, located in the U.S. and India.2023.
We expect to continue to focus our R&D resources on the development and enhancement of our core supply chain, inventory optimization, omni-channelomnichannel and point of salepoint-of-sale software solutions. We offer what we believe to be the broadest solutionsolutions portfolio in the supply chain solutions marketplace, to addressaddressing all aspects of inventory optimization, transportation management, distribution management, planning, and omni-channelomnichannel operations including order management, store inventory & fulfillment, call center and point of sale.point-of-sale.
We also plan to continue to enhance our existing solutions and to introduce new solutions to address evolving industry standards and market needs. We identify opportunities to further enhance our solutions and to develop and provide new solutions through our customer support organization, as well as through ongoing customer consulting engagements and implementations, interactions with our user groups, association with leading industry analysts and market research firms, and participation onin industry standards and research committees. Our solutions address the needs of customers in various vertical markets, including retail, consumer goods, food and grocery, logistics service providers, industrial and wholesale, high technology and electronics, life sciences, and government.
16
Cash Flow and Financial Condition
For the three and nine months ended September 30, 2017,2023, we generated cash flow from operating activities of $44.0$58.6 million and $116.6$157.9 million, respectively. Our cash and cash equivalents at September 30, 20172023 totaled $129.7$182.3 million, with no debt on our balance sheet. We currently have no credit facilities. Our primary uses of cash continue to behave been for funding investmentinvestments in R&D in our Unified Omnichannel Commerce and operationsDigital Supply Chain solutions to drive revenue and earnings growth and repurchases of our common stock.
Wegrowth. In addition, during the nine months ended September 30, 2023, we repurchased 1,539,208 sharesapproximately $166.0 million of Manhattan Associates’ outstanding common stock under ourthe share repurchase program during the nine months ended September 30, 2017.approved by our Board of Directors. In October 2017,2023, our Board of Directors confirmed our existingapproved replenishing the Company’s remaining share repurchase authority to repurchase up to an aggregate of $50.0$75.0 million of Manhattan Associates’ outstandingour common stock.
18
For the remainder of 2017,2023, we anticipate thatexpect our prioritiesfirst priority for the use of cash will be in continued investment in product development and growth of the business. We expect to continue to evaluate acquisition opportunities that are complementary tobe investments in our product footprintUnified Omnichannel Commerce and technology direction.Digital Supply Chain solutions. We also expect to continueprioritize capital allocation in our global teams to weigh ourfund growth, and share repurchase options against cash for acquisitions and investing in the business.repurchases. We do not anticipate any borrowing requirements in the remainder of 20172023 for general corporate purposes.
Results of Operations
TheIn the following table, summarizeswe present a summary of our consolidated results for the three and nine months ended September 30, 20172023 and 2016.2022.
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||||||||||||
|
| 2017 |
|
| 2016 |
|
| 2017 |
|
| 2016 |
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||||||
|
| (in thousands, except per share data) |
|
| (in thousands, except per share data) |
| ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Revenue |
| $ | 152,883 |
|
| $ | 152,213 |
|
| $ | 450,513 |
|
| $ | 456,965 |
|
| $ | 238,441 |
|
| $ | 198,101 |
|
| $ | 690,470 |
|
| $ | 568,981 |
|
Costs and expenses |
|
| 101,787 |
|
|
| 98,629 |
|
|
| 308,438 |
|
|
| 308,014 |
|
|
| 184,993 |
|
|
| 161,331 |
|
|
| 539,454 |
|
|
| 460,986 |
|
Operating income |
|
| 51,096 |
|
|
| 53,584 |
|
|
| 142,075 |
|
|
| 148,951 |
|
|
| 53,448 |
|
|
| 36,770 |
|
|
| 151,016 |
|
|
| 107,995 |
|
Other income (loss), net |
|
| 207 |
|
|
| 210 |
|
|
| (232 | ) |
|
| 1,384 |
| ||||||||||||||||
Other income, net |
|
| 1,739 |
|
|
| 1,612 |
|
|
| 2,923 |
|
|
| 4,593 |
| ||||||||||||||||
Income before income taxes |
|
| 51,303 |
|
|
| 53,794 |
|
|
| 141,843 |
|
|
| 150,335 |
|
|
| 55,187 |
|
|
| 38,382 |
|
|
| 153,939 |
|
|
| 112,588 |
|
Net income |
| $ | 32,599 |
|
| $ | 33,496 |
|
| $ | 91,967 |
|
| $ | 94,317 |
|
| $ | 49,421 |
|
| $ | 29,674 |
|
| $ | 127,832 |
|
| $ | 91,091 |
|
Diluted earnings per share |
| $ | 0.47 |
|
| $ | 0.47 |
|
| $ | 1.32 |
|
| $ | 1.30 |
|
| $ | 0.79 |
|
| $ | 0.47 |
|
| $ | 2.05 |
|
| $ | 1.43 |
|
Diluted weighted average number of shares |
|
| 69,135 |
|
|
| 71,743 |
|
|
| 69,614 |
|
|
| 72,340 |
|
|
| 62,310 |
|
|
| 63,165 |
|
|
| 62,501 |
|
|
| 63,483 |
|
19
The Company hasWe have three geographic reportable segments: the Americas, EMEA, and APAC. Geographic revenue information is based on the location of sale. The revenues represented below are from external customers only. The geographical-basedgeography-based expenses include costs of personnel, direct sales, and marketing expenses, and general and administrative costs to support the business. There are certain corporate expenses included in the Americas segment that arewe do not chargedcharge to the other segments, including research and development,R&D, certain marketing and general and administrative costs that support the global organization, and the amortization of acquired developed technology. Included in the Americas segment costs are all research and developmentR&D costs, including the costs associated with the Company’s India operations.our operations in India. During the three and nine months ended September 30, 20172023 and 2016,2022, we derived the majority of our revenues from sales to customers within our Americas segment. TheIn the following table, summarizeswe present a summary of revenue and operating profitincome by segment:
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||||||||||
|
| 2017 |
|
| 2016 |
|
| % Change vs. Prior Year |
|
| 2017 |
|
| 2016 |
|
| % Change vs. Prior Year |
| ||||||
Revenue: |
| (in thousands) |
|
|
|
| (in thousands) |
|
|
| ||||||||||||||
Software license |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas |
| $ | 14,741 |
|
| $ | 18,050 |
|
|
| -18 | % |
| $ | 42,110 |
|
| $ | 54,343 |
|
|
| -23 | % |
EMEA |
|
| 2,158 |
|
|
| 1,843 |
|
|
| 17 | % |
|
| 17,232 |
|
|
| 4,815 |
|
|
| 258 | % |
APAC |
|
| 1,895 |
|
|
| 1,740 |
|
|
| 9 | % |
|
| 4,667 |
|
|
| 3,713 |
|
|
| 26 | % |
Total software license |
|
| 18,794 |
|
|
| 21,633 |
|
|
| -13 | % |
|
| 64,009 |
|
|
| 62,871 |
|
|
| 2 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas |
|
| 92,517 |
|
|
| 101,344 |
|
|
| -9 | % |
|
| 276,576 |
|
|
| 298,715 |
|
|
| -7 | % |
EMEA |
|
| 15,615 |
|
|
| 12,787 |
|
|
| 22 | % |
|
| 44,927 |
|
|
| 42,656 |
|
|
| 5 | % |
APAC |
|
| 7,423 |
|
|
| 5,136 |
|
|
| 45 | % |
|
| 19,713 |
|
|
| 13,992 |
|
|
| 41 | % |
Total services |
|
| 115,555 |
|
|
| 119,267 |
|
|
| -3 | % |
|
| 341,216 |
|
|
| 355,363 |
|
|
| -4 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hardware and Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas |
|
| 17,575 |
|
|
| 10,705 |
|
|
| 64 | % |
|
| 42,920 |
|
|
| 36,866 |
|
|
| 16 | % |
EMEA |
|
| 680 |
|
|
| 448 |
|
|
| 52 | % |
|
| 1,682 |
|
|
| 1,478 |
|
|
| 14 | % |
APAC |
|
| 279 |
|
|
| 160 |
|
|
| 74 | % |
|
| 686 |
|
|
| 387 |
|
|
| 77 | % |
Total hardware and other |
|
| 18,534 |
|
|
| 11,313 |
|
|
| 64 | % |
|
| 45,288 |
|
|
| 38,731 |
|
|
| 17 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas |
|
| 124,833 |
|
|
| 130,099 |
|
|
| -4 | % |
|
| 361,606 |
|
|
| 389,924 |
|
|
| -7 | % |
EMEA |
|
| 18,453 |
|
|
| 15,078 |
|
|
| 22 | % |
|
| 63,841 |
|
|
| 48,949 |
|
|
| 30 | % |
APAC |
|
| 9,597 |
|
|
| 7,036 |
|
|
| 36 | % |
|
| 25,066 |
|
|
| 18,092 |
|
|
| 39 | % |
Total revenue |
| $ | 152,883 |
|
| $ | 152,213 |
|
|
| 0 | % |
| $ | 450,513 |
|
| $ | 456,965 |
|
|
| -1 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas |
| $ | 39,295 |
|
| $ | 46,213 |
|
|
| -15 | % |
| $ | 103,725 |
|
| $ | 127,793 |
|
|
| -19 | % |
EMEA |
|
| 7,128 |
|
|
| 4,822 |
|
|
| 48 | % |
|
| 27,877 |
|
|
| 16,115 |
|
|
| 73 | % |
APAC |
|
| 4,673 |
|
|
| 2,549 |
|
|
| 83 | % |
|
| 10,473 |
|
|
| 5,043 |
|
|
| 108 | % |
Total operating income |
| $ | 51,096 |
|
| $ | 53,584 |
|
|
| -5 | % |
| $ | 142,075 |
|
| $ | 148,951 |
|
|
| -5 | % |
Summary of the Third Quarter 2017
17
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||||||||||
|
| 2023 |
|
| 2022 |
|
| % Change vs. |
|
| 2023 |
|
| 2022 |
|
| % Change vs. |
| ||||||
Revenue: |
| (in thousands) |
|
|
| (in thousands) |
|
| ||||||||||||||||
Cloud subscriptions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Americas |
|
| 52,846 |
|
|
| 38,451 |
|
|
| 37 | % |
|
| 148,812 |
|
|
| 106,064 |
|
|
| 40 | % |
EMEA |
|
| 10,343 |
|
|
| 5,695 |
|
|
| 82 | % |
|
| 29,454 |
|
|
| 15,544 |
|
|
| 89 | % |
APAC |
|
| 1,844 |
|
|
| 1,121 |
|
|
| 64 | % |
|
| 4,930 |
|
|
| 3,159 |
|
|
| 56 | % |
Total cloud subscriptions |
|
| 65,033 |
|
|
| 45,267 |
|
|
| 44 | % |
|
| 183,196 |
|
|
| 124,767 |
|
|
| 47 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Software license |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Americas |
|
| 3,502 |
|
|
| 4,686 |
|
|
| -25 | % |
|
| 8,556 |
|
|
| 12,147 |
|
|
| -30 | % |
EMEA |
|
| 51 |
|
|
| 708 |
|
|
| -93 | % |
|
| 1,902 |
|
|
| 5,969 |
|
|
| -68 | % |
APAC |
|
| 317 |
|
|
| 992 |
|
|
| -68 | % |
|
| 2,509 |
|
|
| 1,753 |
|
|
| 43 | % |
Total software license |
|
| 3,870 |
|
|
| 6,386 |
|
|
| -39 | % |
|
| 12,967 |
|
|
| 19,869 |
|
|
| -35 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Maintenance |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Americas |
|
| 27,951 |
|
|
| 27,901 |
|
|
| 0 | % |
|
| 84,938 |
|
|
| 84,984 |
|
|
| 0 | % |
EMEA |
|
| 5,159 |
|
|
| 5,657 |
|
|
| -9 | % |
|
| 14,919 |
|
|
| 15,288 |
|
|
| -2 | % |
APAC |
|
| 2,186 |
|
|
| 2,262 |
|
|
| -3 | % |
|
| 6,915 |
|
|
| 6,843 |
|
|
| 1 | % |
Total maintenance |
|
| 35,296 |
|
|
| 35,820 |
|
|
| -1 | % |
|
| 106,772 |
|
|
| 107,115 |
|
|
| 0 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Americas |
|
| 96,045 |
|
|
| 78,479 |
|
|
| 22 | % |
|
| 275,602 |
|
|
| 222,206 |
|
|
| 24 | % |
EMEA |
|
| 25,594 |
|
|
| 19,737 |
|
|
| 30 | % |
|
| 75,321 |
|
|
| 58,670 |
|
|
| 28 | % |
APAC |
|
| 6,326 |
|
|
| 5,209 |
|
|
| 21 | % |
|
| 17,821 |
|
|
| 13,408 |
|
|
| 33 | % |
Total services |
|
| 127,965 |
|
|
| 103,425 |
|
|
| 24 | % |
|
| 368,744 |
|
|
| 294,284 |
|
|
| 25 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Hardware |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Americas |
| 6,220 |
|
|
| 7,157 |
|
|
| -13 | % |
|
| 18,623 |
|
|
| 22,809 |
|
|
| -18 | % | |
EMEA |
|
| 57 |
|
|
| 46 |
|
|
| 24 | % |
|
| 168 |
|
|
| 137 |
|
|
| 23 | % |
APAC |
|
| - |
|
|
| - |
|
| - |
|
|
| - |
|
|
| - |
|
| - |
| ||
Total hardware and other |
|
| 6,277 |
|
|
| 7,203 |
|
|
| -13 | % |
|
| 18,791 |
|
|
| 22,946 |
|
|
| -18 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Total Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Americas |
|
| 186,564 |
|
|
| 156,674 |
|
|
| 19 | % |
|
| 536,531 |
|
|
| 448,210 |
|
|
| 20 | % |
EMEA |
|
| 41,204 |
|
|
| 31,843 |
|
|
| 29 | % |
|
| 121,764 |
|
|
| 95,608 |
|
|
| 27 | % |
APAC |
|
| 10,673 |
|
|
| 9,584 |
|
|
| 11 | % |
|
| 32,175 |
|
|
| 25,163 |
|
|
| 28 | % |
Total revenue |
| $ | 238,441 |
|
| $ | 198,101 |
|
|
| 20 | % |
| $ | 690,470 |
|
| $ | 568,981 |
|
|
| 21 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Operating income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Americas |
|
| 34,655 |
|
|
| 22,914 |
|
|
| 51 | % |
|
| 96,628 |
|
|
| 68,814 |
|
|
| 40 | % |
EMEA |
|
| 14,415 |
|
|
| 9,851 |
|
|
| 46 | % |
|
| 40,764 |
|
|
| 29,791 |
|
|
| 37 | % |
APAC |
|
| 4,378 |
|
|
| 4,005 |
|
|
| 9 | % |
|
| 13,624 |
|
|
| 9,390 |
|
|
| 45 | % |
Total operating income |
| $ | 53,448 |
|
| $ | 36,770 |
|
|
| 45 | % |
| $ | 151,016 |
|
| $ | 107,995 |
|
|
| 40 | % |
Condensed Consolidated Financial ResultsSummary - Third Quarter 2023
Diluted earnings per share was $0.47 in bothConsolidated total revenue: $238.4 million for the third quarter of 2017 and 2016.
Consolidated total revenue was $152.9
18
Operating income was $51.1 million in the third quarter of 2017, compared to $53.6 million in the third quarter of 2016.
Cash flow from operations was $44.0 million in the third quarter of 2017, compared to $42.0 million in the third quarter of 2016. Days sales outstanding was 58outstanding: 71 days at September 30, 2017,2023, compared to 5770 days at June 30, 2017.
Cash and investments on-hand was $129.7Cash: $182.3 million at September 30, 2017,2023, compared to $86.6$153.3 million at June 30, 2017.
20
The consolidated results of our operations for the third quarters of 20172023 and 2016 are discussed below.2022.
Revenue
|
| Three Months Ended September 30, |
| |||||||||||||||||
|
|
|
| % Change vs. |
|
| % of Total Revenue |
| ||||||||||||
|
| 2017 |
|
| 2016 |
|
| Prior Year |
|
| 2017 |
|
| 2016 |
| |||||
|
| (in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Software license |
| $ | 18,794 |
|
| $ | 21,633 |
|
|
| -13 | % |
|
| 12 | % |
|
| 14 | % |
Services |
|
| 115,555 |
|
|
| 119,267 |
|
|
| -3 | % |
|
| 76 | % |
|
| 79 | % |
Hardware and other |
|
| 18,534 |
|
|
| 11,313 |
|
|
| 64 | % |
|
| 12 | % |
|
| 7 | % |
Total revenue |
| $ | 152,883 |
|
| $ | 152,213 |
|
|
| 0 | % |
|
| 100 | % |
|
| 100 | % |
Revenue
Our revenue consists of fees generated from the licensing, hosting of software and SaaS arrangements; fees from professional services, customer support services and software enhancements; hardware sales of complementary equipment; and other revenue representing amounts associated with reimbursements from customers for out-of-pocket expenses.
|
| Three Months Ended September 30, |
| |||||||||||||||||
|
|
|
| % Change vs. |
|
| % of Total Revenue |
| ||||||||||||
|
| 2023 |
|
| 2022 |
|
| Prior Year |
|
| 2023 |
|
| 2022 |
| |||||
|
| (in thousands) |
|
|
|
|
|
|
|
|
|
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Cloud subscriptions |
| $ | 65,033 |
|
| $ | 45,267 |
|
|
| 44 | % |
|
| 27 | % |
|
| 23 | % |
Software license |
|
| 3,870 |
|
|
| 6,386 |
|
|
| -39 | % |
|
| 2 | % |
|
| 3 | % |
Maintenance |
|
| 35,296 |
|
|
| 35,820 |
|
|
| -1 | % |
|
| 15 | % |
|
| 18 | % |
Services |
|
| 127,965 |
|
|
| 103,425 |
|
|
| 24 | % |
|
| 53 | % |
|
| 52 | % |
Hardware |
|
| 6,277 |
|
|
| 7,203 |
|
|
| -13 | % |
|
| 3 | % |
|
| 4 | % |
Total revenue |
| $ | 238,441 |
|
| $ | 198,101 |
|
|
| 20 | % |
|
| 100 | % |
|
| 100 | % |
License revenue. License revenue decreased $2.8 million, or 13%, inCloud Subscriptions Revenue. In the third quarter of 20172023, cloud subscriptions revenue increased $19.8 million compared to the same quarter in the prior year influenced by our Manhattan ActiveTM Solutions transitionyear. Our customers have demonstrated a clear preference for cloud-based solutions, including existing customers that are migrating from on-premise to cloud-based offerings. Cloud as traditional perpetual license deals converted to Cloud deals based on customer demand. Our licensesubscriptions revenue performance depends onfor the numberAmericas, EMEA and relative value of large dealsAPAC segments increased $14.4 million, $4.7 million and perpetual versus cloud mix we close in the period. We recognized license revenue of $1.0$0.7 million or greater on four new separate contracts in the third quarter of 2017. 2023, respectively.
Software License Revenue. Software license revenue decreased $2.5 million in the third quarter of 2023 compared to the same quarter in the prioryear on strong market preference for our cloud-native solutions.The perpetual license sales percentage mix across our product suite in the third quarter ended September 30, 20172023 was approximately 60%80% warehouse management solutions and 40% non-warehouse management solutions.
Services revenue. ServicesMaintenance Revenue. Maintenance revenue decreased $3.7$0.5 million or 3%, in the third quarter of 20172023 compared to the same quarter in the prior year. The majority of our maintenance revenue is derived from our Americas segment.
Services Revenue. Services revenue increased $24.5 million in the third quarter of 2023 compared to the same quarter in the prior year. Services revenue for the Americas, EMEA and APAC segments increased $17.5 million, $5.9 million, and $1.1 million, respectively, compared to the same quarter in the prior year, due to a $5.6 million decrease in professional services revenue, partially offsetprimarily driven by a $1.9 millionthe increase in customer support and software enhancements. The decline in services revenue was in the Americas segment, due to some retail customers delaying project implementations and upgrades, combined with our services teams improving the speed of implementations. Services revenue for the Americas segment decreased $8.8 million, and services revenue for the EMEA and APAC segments increased $2.8 million and $2.3 million, respectively, in the third quarter of 2017 compared to the same quarter of 2016.cloud subscriptions.
Hardware and other.Revenue. Hardware sales increased by $7.0 million to $13.5decreased $0.9 million in the third quarter of 20172023 compared to $6.5 million for the thirdsame quarter of 2016.in the prior year. The majority of our hardware sales arerevenue is derived from our Americas segment. Sales of hardware areis largely dependent upon customer-specific desires, which fluctuate. Other revenue represents reimbursements for professional service travel expenses that are required to be classified as revenue and are included in hardware and other revenue. Reimbursements by customers for out-of-pocket expenses were approximately $5.0 million and $4.8 million for the quarters ended September 30, 2017 and 2016, respectively.
19
Cost of Revenue
|
| Three Months Ended September 30, |
| |||||||||
|
| 2017 |
|
| 2016 |
|
| % Change vs. Prior Year |
| |||
Cost of license |
| $ | 2,830 |
|
| $ | 2,966 |
|
|
| -5 | % |
Cost of services |
|
| 44,750 |
|
|
| 49,436 |
|
|
| -9 | % |
Cost of hardware and other |
|
| 15,492 |
|
|
| 9,276 |
|
|
| 67 | % |
Total cost of revenue |
| $ | 63,072 |
|
| $ | 61,678 |
|
|
| 2 | % |
|
| Three Months Ended September 30, |
| |||||||||
|
| 2023 |
|
| 2022 |
|
| % Change vs. |
| |||
Cost of software license |
| $ | 297 |
|
| $ | 467 |
|
|
| -36 | % |
Cost of cloud subscriptions, maintenance and services |
|
| 111,142 |
|
|
| 95,691 |
|
|
| 16 | % |
Total cost of revenue |
| $ | 111,439 |
|
| $ | 96,158 |
|
|
| 16 | % |
Cost of license.Software License. Cost of software license consists of the costs associated with software reproduction; hosting services; media, packaging and delivery,delivery; documentation, and other related costs; and royalties on third-party software sold with or as part of our products. Cost of software license decreased by $0.1$0.2 million in the third quarter of 20172023 compared towith the same quarter of 2016.in the prior year.
21
Cost of services. CostCloud Subscriptions, Maintenance and Services. Costs of cloud subscriptions, maintenance and services consistsconsist primarily of salaries and other personnel-related expenses of employees dedicated to cloud subscriptions; maintenance services; and professional and technical services and customer support services.as well as computer infrastructure costs. The $4.7$15.5 million or 9%, decrease in cost of servicesincrease in the quarter ended September 30, 20172023 compared to the same quarter in the prior year was principally due to a $3.1$15.0 million decreaseincrease in compensation and other-personnel relatedother personnel-related expenses, a $1.4 million increase in travel expenses, and a $1.4$0.9 million increase in computer infrastructure costs, partially offset by a $2.1 million decrease in performance-based compensation.
Cost of hardware and other. Cost of hardware and other increased by $6.2 million to $15.5 million in the third quarter of 2017 compared to $9.3 million in the same quarter of 2016. Cost of hardware and other includes professional services billed travel expenses reimbursed by customers of approximately $4.8 million and $4.7 million for the quarters ended September 30, 2017 and 2016, respectively.
Operating Expenses
|
| Three Months Ended September 30, |
|
| Three Months Ended September 30, |
| ||||||||||||||||||
|
| 2017 |
|
| 2016 |
|
| % Change vs. Prior Year |
|
| 2023 |
|
| 2022 |
|
| % Change vs. |
| ||||||
|
| (in thousands) |
|
|
|
|
|
| (in thousands) |
|
|
|
| |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Research and development |
| $ | 14,747 |
|
| $ | 13,389 |
|
|
| 10 | % |
| $ | 33,093 |
|
| $ | 29,375 |
|
|
| 13 | % |
Sales and marketing |
|
| 10,739 |
|
|
| 10,003 |
|
|
| 7 | % |
|
| 17,650 |
|
|
| 15,742 |
|
|
| 12 | % |
General and administrative |
|
| 11,031 |
|
|
| 11,225 |
|
|
| -2 | % |
|
| 21,371 |
|
|
| 18,392 |
|
|
| 16 | % |
Depreciation and amortization |
|
| 2,275 |
|
|
| 2,334 |
|
|
| -3 | % |
|
| 1,440 |
|
|
| 1,664 |
|
|
| -13 | % |
Restructuring charge |
|
| (77 | ) |
|
| - |
|
|
| 100 | % | ||||||||||||
Operating expenses |
| $ | 38,715 |
|
| $ | 36,951 |
|
|
| 5 | % |
| $ | 73,554 |
|
| $ | 65,173 |
|
|
| 13 | % |
Research and development. Research and development expenses primarily consist of salaries and other personnel-related costs for personnel involved in our research and development activities. Research and development expenses for the quarter ended September 30, 2017 increased by $1.4 million, or 10%, as compared to the same quarter of 2016 principally due to a $1.1 million increase in compensation and other-personnel related expenses resulting from increased headcount to support R&D activities.
Development.Our principal R&D activities have focused on the expansion and integration of new products and releases, including cloud-based solutions, while expanding the product footprint of our software solution suites in Supply Chain, Inventory Optimization, Omnichannel and Omni-Channel operations, including point-of-salepoint-of-sale.
R&D expenses primarily consist of salaries and tablet retailing.
For each ofother personnel-related costs for personnel involved in our R&D activities. R&D expenses for the quartersquarter ended September 30, 20172023 increased by $3.7 million, compared to the same quarter of 2022 principally due to an increase in compensation and 2016, we did not capitalize any R&D costs because the costs incurred following the attainment of technological feasibility for the related software product through the date of general release were insignificant.other personnel-related expenses.
Sales and marketing.Marketing. Sales and marketing expenses include salaries, commissions, travel and other personnel-related costs and the costs of our marketing and alliance programs and related activities. Sales and marketing expenses forincreased $1.9 million in the quarter ended September 30, 2017 increased by $0.7 million2023 compared to the same quarter in the prior year primarily due to increased commissions expense.a $1.2 million increase in compensation and other personnel-related expenses and a $0.3 million increase in marketing and campaign program expenses.
General and administrative. General and administrativeAdministrative (G&A). G&A expenses consist primarily of salaries and other personnel-related costs of executive, financial, human resources, information technology, and administrative personnel, as well as facilities, legal, insurance, accounting, and other administrative expenses. General and administrativeG&A expenses decreased by $0.2increased $3.0 million or 2%, in the current year quarter compared to the same quarter in the prior year.year, primarily due to a $2.2 million increase in compensation and other personnel-related expenses..
Depreciation and amortization.Amortization. Depreciation expense for both the third quarterand amortization of 2017intangibles and 2016 was $2.2 million. Amortizationsoftware expense associated with acquisitions for the three months ended September 30, 2017 and 2016 was immaterial.
Restructuring Charge. In connection with our restructuring initiatives, we recorded immaterial adjustments to our previous estimates recorded in the second quarter of 2017.
22
Operating income for the third quarter of 20172023 and 2022 was $51.1$1.4 million and $1.7 million, respectively.
20
Operating Income
Operating income in the third quarter of 2023 was $53.4 million compared to $53.6$36.8 million in the same quarter in the prior year. Operating margin was 22.4% for the third quarter of 2016. Operating margins were 33.4% for the third quarter of 20172023 versus 35.2%18.6% for the same quarter in the prior year. Operating income decreasedand margin increased primarily due to the decline in licenseincreased cloud subscriptions and services revenue.revenues.
Other Income and Income Taxes
|
| Three Months Ended September 30, |
|
| Three Months Ended September 30, |
| ||||||||||||||||||
|
| 2017 |
|
| 2016 |
|
| % Change vs. |
|
| 2023 |
|
| 2022 |
|
| % Change vs. |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Other income, net |
| $ | 207 |
|
| $ | 210 |
|
|
| -1 | % |
| $ | 1,739 |
|
| $ | 1,612 |
|
|
| 8 | % |
Income tax provision |
|
| 18,704 |
|
|
| 20,298 |
|
|
| -8 | % |
|
| 5,766 |
|
|
| 8,708 |
|
|
| -34 | % |
Other income, net. Other income, net principallyprimarily includes interest income, foreign currency gains and losses, and other non-operating expenses. Other income, net remained flatincreased $0.1 million in the third quarter of 20172023 compared to the same quarter in the prior year primarily due to a $1.3 million increase in interest income partially offset by a $1.2 million decrease in foreign currency gains. The decrease of 2016.foreign currency gains is mainly due to gains or losses on intercompany transactions denominated in foreign currencies with subsidiaries due to the fluctuation of the U.S. dollar relative to other foreign currencies, primarily the Indian Rupee. We recorded net foreign currency gains of $0.4 million in the third quarter of 2023, and a $1.6 million of net foreign currency gains in the same quarter in the prior year.
Income tax provision. Our effective income tax rates were 36.5%rate was 10.4% and 37.7%22.7% for the quarters ended September 30, 20172023 and 2016,2022, respectively.
Summary of The decrease in the First Nine Month of 2017 Condensed Consolidated Financial Results
Diluted earnings per shareeffective tax rate for the ninethree months ended September 30, 2017 was $1.32, compared2023 is due to $1.30 fora decrease of tax with respect to foreign tax creditability in the nine months ended September 30, 2016. United States, allowable United States research and development credits, and favorable return to provision estimates.
Condensed Consolidated revenue for the nine months ended September 30, 2017 was $450.5 million, compared to $457.0Financial Summary – First Nine Months of 2023
Operating income was $142.12023 compared to $124.8 million for the nine months ended September 30, 2017, compared to $149.02022.
Services revenue: $368.7 million for the nine months ended September 30, 2023, compared to $294.3 million for the nine months ended September 30, 2022.
21
Below we discuss our consolidated results of operations was $116.6for the nine months ended September 30, 2023 and 2022.
|
| Nine Months Ended September 30, |
| |||||||||||||||||
|
|
|
| % Change vs. |
|
| % of Total Revenue |
| ||||||||||||
|
| 2023 |
|
| 2022 |
|
| Prior Year |
|
| 2023 |
|
| 2022 |
| |||||
|
| (in thousands) |
|
|
|
|
|
|
|
|
|
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Cloud subscriptions |
| $ | 183,196 |
|
| $ | 124,767 |
|
|
| 47 | % |
|
| 27 | % |
|
| 22 | % |
Software license |
|
| 12,967 |
|
|
| 19,869 |
|
|
| -35 | % |
|
| 2 | % |
|
| 3 | % |
Maintenance |
|
| 106,772 |
|
|
| 107,115 |
|
|
| 0 | % |
|
| 15 | % |
|
| 19 | % |
Services |
|
| 368,744 |
|
|
| 294,284 |
|
|
| 25 | % |
|
| 53 | % |
|
| 52 | % |
Hardware |
|
| 18,791 |
|
|
| 22,946 |
|
|
| -18 | % |
|
| 3 | % |
|
| 4 | % |
Total revenue |
| $ | 690,470 |
|
| $ | 568,981 |
|
|
| 21 | % |
|
| 100 | % |
|
| 100 | % |
Cloud Subscription Revenue. Cloud subscriptions revenue increased $58.4 million in the nine months ended September 30, 2017,2023 compared to $101.5the same period in the prior year, as customers continued to purchase our SaaS offerings rather than a traditional perpetual license. Our customers have demonstrated a clear preference for cloud-based solutions, including existing customers that are migrating from on-premise to cloud-based offerings. Cloud subscriptions revenue for the Americas, EMEA and APAC segments increased $42.7 million, $13.9 million and $1.8 million, respectively, in the nine months ended September 30, 2023.
Software License Revenue. Softwarelicense revenue decreased $6.9 million in the nine months ended September 30, 2016.
Cash and investments on-hand was $129.7 million at September 30, 2017,2023 compared to $95.6 million at December 31, 2016.
During the nine months ended September 30, 2017, we repurchased 1,539,208 shares of Manhattan Associates common stock, reducing shares of common stock outstanding by 2%, under the share repurchase program authorized by our Board of Directors, for a total investment of $75.0 million.
The results of our consolidated operations for the nine months ended September 30, 2017 and 2016 are discussed below.
|
| Nine Months Ended September 30, |
| |||||||||||||||||
|
|
|
| % Change vs. |
|
| % of Total Revenue |
| ||||||||||||
|
| 2017 |
|
| 2016 |
|
| Prior Year |
|
| 2017 |
|
| 2016 |
| |||||
|
| (in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Software license |
| $ | 64,009 |
|
| $ | 62,871 |
|
|
| 2 | % |
|
| 14 | % |
|
| 14 | % |
Services |
|
| 341,216 |
|
|
| 355,363 |
|
|
| -4 | % |
|
| 76 | % |
|
| 78 | % |
Hardware and other |
|
| 45,288 |
|
|
| 38,731 |
|
|
| 17 | % |
|
| 10 | % |
|
| 8 | % |
Total revenue |
| $ | 450,513 |
|
| $ | 456,965 |
|
|
| -1 | % |
|
| 100 | % |
|
| 100 | % |
Our revenue consists of fees generated from the licensing, hosting of software and SaaS arrangements; professional services, customer support services and software enhancements; hardware sales of complementary radio frequency and computer equipment; and other revenue representing amounts associated with reimbursements from customers for out-of-pocket expenses.
23
License revenue. License revenue increased $1.1 million, or 2%, in the nine months ended September 30, 2017 over the same period in the prior year. Our license revenue performance depends heavilyyear on the number and relative value of large deals andstrong market preference for our cloud-native solutions. The perpetual versus cloud deals mix we close in the period. We recognized twelve and eleven new separate contracts greater than $1.0 million in the nine months ended September 30, 2017 and 2016, respectively.
The license sales percentage mix across our product suite in the nine months ended September 30, 20172023 was approximately 65%over 80% warehouse management solutions and 35% non-warehouse management solutions.
Services revenue. ServicesMaintenance Revenue. Maintenance revenue decreased $14.1 million, or 4%, in the nine months ended September 30, 2017 compared to the same period in the prior year due to a $20.8 million decrease in professional services revenue, partially offset by a $6.7 million increase in customer support and software enhancements. In the nine months ended September 30, 2017 compared to the same period in the prior year, services revenue for the Americas segment decreased $22.1 million, and services revenue for the EMEA and APAC segments increased $2.3 million and $5.7 million, respectively. The decline in services revenue was in the Americas segment, due to some retail customers delaying project implementations and upgrades, combined with our services teams improving the speed of implementations.
Hardware and other. Hardware sales increased by $6.6 million, or 27%, to $31.5$0.3 million in the nine months ended September 30, 20172023 compared to $24.9 million for the same period in the prior year. The majority of hardware sales aremaintenance revenue is derived from ourthrough the Americas segment. Hardware sales are largely dependent upon customer-specific desires, which fluctuate. Other
Services Revenue. Services revenue represents reimbursements for professional service travel expenses that are required to be classified as revenue. Reimbursements by customers for out-of-pocket expenses were approximately $13.8increased $74.5 million and $13.9 million for the nine months ended September 30, 2017 and 2016, respectively.
Cost of Revenue
|
| Nine Months Ended September 30, |
| |||||||||
|
| 2017 |
|
| 2016 |
|
| % Change vs. Prior Year |
| |||
Cost of license |
| $ | 7,425 |
|
| $ | 8,401 |
|
|
| -12 | % |
Cost of services |
|
| 142,244 |
|
|
| 149,733 |
|
|
| -5 | % |
Cost of hardware and other |
|
| 37,337 |
|
|
| 30,874 |
|
|
| 21 | % |
Total cost of revenue |
| $ | 187,006 |
|
| $ | 189,008 |
|
|
| -1 | % |
Cost of license. Cost of license consists of the costs associated with software reproduction; hosting services; media, packaging and delivery, documentation, and other related costs; and royalties on third-party software sold with or as part of our products. Cost of license decreased by $1.0 million, or 12%, in the nine months ended September 30, 20172023 compared to the same period in the prior year. Services revenue for the Americas, EMEA and APAC segments increased $53.4 million, $16.7 million and $4.4 million in the nine months ended September 30, 2023, respectively, compared with the same period in the prior year, principally dueprimarily driven by the increase in cloud subscriptions.
Hardware Revenue. Hardware sales decreased $4.2 million in the nine months ended September 30, 2023 compared to decreased sales of third-party software.the same period in the prior year.
Cost of services. Revenue
|
| Nine Months Ended September 30, |
| |||||||||
|
| 2023 |
|
| 2022 |
|
| % Change vs. |
| |||
|
|
|
|
|
|
|
|
|
| |||
|
|
|
|
|
|
|
|
|
| |||
Cost of software license |
| $ | 967 |
|
| $ | 1,749 |
|
|
| -45 | % |
Cost of cloud subscriptions, maintenance and services |
| 322,914 |
|
|
| 266,482 |
|
|
| 21 | % | |
Total cost of revenue |
| $ | 323,881 |
|
| $ | 268,231 |
|
|
| 21 | % |
Cost of Software License.Cost of software license slightly decreased by $0.8 million in the nine months ended September 30, 2023 compared with the same period in the prior year.
Cost of Cloud Subscriptions, Maintenance and Services. Costs of cloud subscriptions, maintenance and services consistsconsist primarily of salaries and other personnel-related expenses of employees dedicated to cloud operations; maintenance services; and professional and technical services and customer support services.as well as computer infrastructure costs. The $7.5$56.4 million or 5%, decrease in cost of servicesincrease in the nine months ended September 30, 20172023 compared to the same period in the prior year was principally due to a $3.7$42.8 million decrease in performance-based compensation expenses and a $3.4 million decreaseincrease in compensation and other personnel-related expenses, a $2.5 million increase in performance-based compensation expense, resulting from decreased headcount.a $5.8 million increase in travel expense, and a $3.5 million increase in computer infrastructure cost.
Cost of hardware and other. Cost of hardware and other increased by $6.4 million to approximately $37.3 million in the nine months ended September 30, 2017 compared to $30.9 million in the same period of 2016. Cost of hardware and other includes out-of-pocket expenses to be reimbursed by customers of approximately $13.5 million for both the nine months ended September 30, 2017 and 2016.
2422
Operating Expenses
|
| Nine Months Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||||||||||
|
| 2017 |
|
| 2016 |
|
| % Change vs. |
|
| 2023 |
|
| 2022 |
|
| % Change vs. |
| ||||||
|
| (in thousands) |
|
|
|
|
|
| (in thousands) |
|
|
|
| |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Research and development |
| $ | 43,074 |
|
| $ | 41,553 |
|
|
| 4 | % |
| $ | 95,487 |
|
| $ | 84,754 |
|
|
| 13 | % |
Sales and marketing |
|
| 34,260 |
|
|
| 34,606 |
|
|
| -1 | % |
| 54,278 |
|
|
| 47,881 |
|
|
| 13 | % | |
General and administrative |
|
| 34,290 |
|
|
| 36,041 |
|
|
| -5 | % |
|
| 61,561 |
|
|
| 54,963 |
|
|
| 12 | % |
Depreciation and amortization |
|
| 6,863 |
|
|
| 6,806 |
|
|
| 1 | % |
|
| 4,247 |
|
|
| 5,157 |
|
|
| -18 | % |
Restructuring charge |
|
| 2,945 |
|
|
| - |
|
|
| 100 | % | ||||||||||||
Operating expenses |
| $ | 121,432 |
|
| $ | 119,006 |
|
|
| 2 | % |
| $ | 215,573 |
|
| $ | 192,755 |
|
|
| 12 | % |
Research and development. Research and development expenses primarily consist of salaries and other personnel-related costs for personnel involved in our research and development activities. Research and developmentDevelopment.R&D expenses for the nine months ended September 30, 20172023 increased by $1.5$10.7 million or 4%, compared to the same period in 2016. The increase was mainly attributable to a $1.7 million increase in compensation and other-personnel-related expenses resulting from increased headcount to support R&D activities, offset by a $0.9 million decrease in performance-based compensation expenses. For each of the nine months ended September 30, 2017 and 2016, we did not capitalize any research and development costs.
Sales and marketing. Sales and marketing expenses include salaries, commissions, travel and other personnel-related costs and the costs of our marketing and alliance programs and related activities. Sales and marketing expenses decreased by $0.3 million, or 1%, in the nine months ended September 30, 2017 compared to the same period of the prior year.
General and administrative. General and administrative expenses consist primarily of salaries and other personnel-related costs of executive, financial, human resources, information technology, and administrative personnel, as well as facilities, legal, insurance, accounting, and other administrative expenses. General and administrative expenses decreased by $1.8 million, or 5%, during the nine months ended September 30, 2017 compared to the same period in the prior year. The decrease was primarilyyear principally due to a $0.9$9.4 million decreaseincrease in compensation and other personnel-related expenses, and a $0.7 million decreaseincrease in performance-based compensation expenses.expense.
DepreciationSales and amortization. Depreciation expense amounted to $6.5Marketing. Sales and marketing expenses increased $6.4 million for bothin the nine months ended September 30, 20172023 compared to the same period in the prior year primarily due to a $2.9 million increase in marketing and 2016, respectively. Amortizationcampaign programs, and a $3.0 million increase in compensation and other personnel related expenses.
General and Administrative.General and administrative expenses increased $6.6 million in the nine months ended September 30, 2023 compared to the same period in the prior year, primarily due to a $4.6 million increase in compensation and other personnel related expenses, a $0.6 million increase in performance-based compensation expense, and a $0.6 million increase in other professional expenses.
Depreciation and Amortization.Depreciation and amortization of intangibles and software expense for the nine months ended September 30, 20172023 and 20162022 was immaterial.$4.2 million and $5.2 million, respectively.
Restructuring Charge. In May 2017, the Company eliminated about 100 positions due to retail sector headwinds, aligning services capacity with demand. The Company recorded a restructuring charge of approximately $2.9 million pretax ($1.9 million after-tax or $0.03 per fully diluted share) in the nine months ended September 30, 2017. The charge primarily consists of employee severance, employee transition cost and outplacement services. The charge is classified in “Restructuring charge” in the Company’s Consolidated Statements of Income.
Operating Income
Operating income for the nine months ended September 30, 20172023 was $142.1$151.0 million compared to $149.0$108.0 million for the same period in the prior year. Operating margins were 31.5% formargin was 21.9% the first nine months of 20172023 versus 32.6%19.0% for the same period in 2016.the prior year. Operating income and margin decreasedincreased primarily due to decline in revenueincreased cloud subscriptions and the restructuring charge in the nine months ended September 30, 2017.services revenues.
Other Income and Income Taxes
|
| Nine Months Ended September 30, |
| |||||||||||||||||||||
|
| 2017 |
|
| 2016 |
|
| % Change vs. Prior Year |
|
| Nine Months Ended September 30, |
| ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| 2023 |
|
| 2022 |
|
| % Change vs. |
| |||
Other (loss) income, net |
| $ | (232 | ) |
| $ | 1,384 |
|
|
| -117 | % | ||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||
Other income, net |
| $ | 2,923 |
|
| $ | 4,593 |
|
|
| -36 | % | ||||||||||||
Income tax provision |
|
| 49,876 |
|
|
| 56,018 |
|
|
| -11 | % |
|
| 26,107 |
|
|
| 21,497 |
|
|
| 21 | % |
25
Other income, net.Other income, net principally includes interest income, foreign currency gains and losses, and other non-operating expenses. Other income, net decreased $1.6$1.7 million in the nine months ended September 30, 20172023 compared to the same period in 2016the prior year primarily relateddue to a $5.3 million decrease in foreign currency gains partially offset by a $3.6 million increase in interest income. The decrease of foreign currency gains is mainly due to gains or losses resulting fromon intercompany transactions denominated in foreign currencies with subsidiaries due to the fluctuation of the U.S. dollar relative to other foreign currencies, principallyprimarily the Indian RupeeRupee. We recorded net foreign currency losses of $0.9 million in the first nine months of 2023, and Great British Pound Sterling.$4.3 million of net foreign currency gains in the first nine months of 2022.
Income tax provision.Our effective income tax rate was 35.2%17.0% and 37.3%19.1% for the nine months ended September 30, 20172023 and 2016,2022, respectively. The decrease in the effective tax rate for the nine months was primarily due to the implementation of ASU 2016-09, Improvements to Employee Share-Based Payment Accounting in 2017. The income tax provision for the nine months ended September 30, 2017 includes excess2023 is due to a decrease of tax benefits of $1.9 million on vesting of restricted stock, which would have been recorded as additional paid-in-capital underwith respect to foreign tax creditability in the previous guidance.United States, allowable United States research and development credits, and favorable return to provision estimates.
Liquidity and Capital Resources
InDuring the first nine months of 2017,2023, we funded our business exclusively through cash flow generated from operations. Our cash and cash equivalents as of September 30, 20172023 included $62.1$122.7 million held in the U.S. and $67.6$59.6 million held by our foreign subsidiaries. We believe that our cash balances in the U.S. are sufficient to fund our U.S. operations. In the future, if we elect to repatriate the
23
unremitted earnings of our foreign subsidiaries, in the form of dividends or otherwise, we would not be subject to additional U.S. income taxes which would result in a higher effective tax rate. However, our current intent ison such earnings, but we could be subject to indefinitely reinvest these funds outside of the U.S., and we do not have a current cash requirement need requiring U.S. repatriation.additional local withholding taxes.
OurCash flow from operating activities generated cash flow of approximately $116.6totaled $157.9 million and $101.5$124.4 million forin the nine months ended September 30, 20172023 and 2016, respectively, reflecting strong global cash collections.2022, respectively. Typical factors affecting our cash provided by operating activities include our level of revenue and earnings for the period, the timing and amount of employee bonus payments and income tax payments, and the timing of cash collections from our customers which is our primary source of operating cash flow.
Our investing activities used cash of approximately $8.4 million during the nine months ended September 30, 2017, and generated cash Cash flow of approximately $4.7 million during the nine months ended September 30, 2016. The uses of cash for investingfrom operating activities for the nine months ended September 30, 2017 were $4.52023 increased $33.5 million compared to the same period in net purchasesthe prior year, which is mainly due to earnings growth for the first nine months of short-term investments2023, and $3.9 million in capital expenditures to support company growth. The primary generationthe timing of cash forcollections from our customers.
Cash flow used in investing activities fortotaled $2.8 million and $4.2 million in the nine months ended September 30, 2016 was $10.2 million in net maturities2023 and 2022, respectively. Our investing activities for both the nine months ended September 30, 2023 and 2022 consisted of short-term investments, partially offset by $5.5 million in capital expenditures.spending to support company growth.
Our financingFinancing activities used cash of approximately $81.7$195.7 million and $112.8$179.0 million for the nine months ended September 30, 20172023 and 2016,2022, respectively. The principal use of cash for financing activities for the nine months ended September 30, 2017in both periods was to purchase approximately $81.7 million of our common stock, including $6.7 million in shares withheld for taxes due upon vesting of restricted stock units. The principal usestock. Repurchases of cash for financing activitiesour common stock for the nine months ended September 30, 2016 was to purchase approximately $118.02023 and 2022 totaled $195.7 million of our common stock,and $179.0 million, respectively, including $9.5 million in shares withheld for taxes due upon vesting of restricted stock units, partially offset by a $5.2$29.7 million excess tax benefit from equity-based compensation. We did not have the offset related to the excess tax benefit from equity-based compensation in the nine months ended September 30, 2017 as we adopted ASU 2016-09 in the period. Under the new guidance, excess tax benefits recognized on share-based compensation expense are classified as an operating activity on the statements of cash flows rather than as a financing activity, and we have applied this provision on a prospective basis.$28.9 million, respectively.
Periodically, opportunities may arise to grow our business through the acquisition of complementary and synergistic companies, products, and technologies. Any material acquisition could result in a decrease to our working capital depending on the amount, timing, and nature of the consideration to be paid. We believe that our existing balances of cash and investments will be sufficient to meet our working capital and capital expenditure needs at least for the next twelve months, although there can be no assurance that this will be the case. InWe continue to focus on managing liquidity, while investing in and growing our headcount capacity to support our customers and grow our business. For the remainder of 2017,2023, we expectanticipate that our priorities for the use of cash will be insimilar to prior years, with our first priority being continued investment in product development and growth of the business.profitably investing in our business to extend our market leadership. We expect towill continue to weigh our share repurchase options against using cash for acquisitions and investing in the business andbusiness. We will also continue to evaluate acquisition opportunities that are complementary to our product footprint and technology direction. WeAt this time, we do not anticipate any borrowing requirements infor the remainder of 20172023 for general corporate purposes.
Aggregate Contractual Obligations
Our principal commitments consist of multiple non-cancellable contracts for cloud infrastructure services and obligations under operating leases. As of September 30, 2023, our cloud infrastructure obligations are approximately $105.1 million over the next 5 years. We also enter into non-cancellable subscriptions in the ordinary course of business for internal software to support our operations. Our obligations, as of September 30, 2023, are approximately $17.3 million over the next 5 years. We expect to fulfill all these commitments from our working capital.
Critical Accounting Policies and Estimates
In the first nine months of 2017,2023, there were no significant changes to our critical accounting policies and estimates from those disclosed in the section “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our annual report on Form 10-K for the year ended December 31, 2016 other than the adoption of ASU 2016-09 related to equity-based compensation.2022.
26
Certain statements contained in this filing are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, including but not limited to statements related to expectations about global macroeconomic trends and industry developments, plans for future business development activities, anticipated costs of revenues, product mix and service revenues, research and development, and selling, general and administrative activities, and liquidity and capital needs and resources. When used in this quarterly report, the words “may,” “expect,” “forecast,” “anticipate,” “intend,” “plan,” “believe,” “could,” “seek,” “project,” “estimate,” and similar expressions are generally intended to identify forward-looking statements. Undue reliance should not be placed on these forward-looking statements, which reflect opinions only as of the date of this quarterly report. Such forward-looking statements are subject to risks, uncertainties, and other factors that could cause actual results to differ materially from future results expressed or implied by such forward-looking statements. Investors are cautioned that 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.
Some of the factors that could cause actual results to differ materially from the results discussed in forward-looking statements include:
24
our ability to attract and retain highly skilled employees;
competition;
our dependence on a single line of business;
our dependence on generating license revenue from software licenses and cloud subscriptions to drive business;
risks associated with large system implementations;
the requirement to maintain high quality professional service capabilities;
possible compromises of our data protection and IT security measures;
risks associated with large system implementations;
the wars in Ukraine and the Middle East;
possible liability to customers if our products fail;
undetected errors or “bugs” in our software;
the long sales cycle associated with our products;
the difficulty of predicting operating results;
the need to continually improve our technology;
risks associated with managing growth;
reliance on third party and open source software;
the need for our products to interoperate with other systems;
the need to protect our intellectual property, and our exposure to intellectual property claims of others;
economic conditions and regulatory changes caused by the United Kingdom’s likely exit from the European Union;possible effects on international commerce of new or increased tariffs, or a “trade war”; and
other risks described under the heading “Risk Factors” in this Form 10-Q and in our Annual Report on Form 10-K for the year ended December 31, 2016,2022, as these may be updated from time to time in subsequent quarterly reports.
We undertake no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes in future operating results.
Item 3. Quantitative and Qualitative Disclosures about Market Risk.
There were no material changes to the Quantitative and Qualitative Disclosures about Market Risk previously disclosed in our annual report on Form 10-K for the year ended December 31, 2016.2022.
Item 4. Controls and Procedures.
Disclosure Controls and Procedures
We maintain disclosure controls and procedures designed to provide reasonable assurance that information required to be disclosed in reports filed under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and our Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
No system of controls, no matter how well designed and operated, can provide absolute assurance that the objectives of the system of controls are met, and no evaluation of controls can provide absolute assurance that the system of controls has operated effectively in all cases. Our disclosure controls and procedures however are designed to provide reasonable assurance that the objectives of disclosure controls and procedures are met.
27
As of the end of the period covered by this report, our management evaluated, with the participation of our Chief Executive Officer and Chief Financial Officer, the effectiveness of our disclosure controls and procedures. Based on the evaluation, our Chief
25
Executive Officer and Chief Financial Officer concluded that, as of the end of the period covered by this report, our disclosure controls and procedures were effective to provide reasonable assurance that the objectives of disclosure controls and procedures are met.
Changes in Internal Control over Financial Reporting
During the three months ended September 30, 2017,2023, there were no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting, including any corrective actions with regard to material weaknesses.
26
Item 1. Legal Proceedings.
From time to time, we may be a party to legal proceedings arising in the ordinary course of business, and we could be a party to legal proceedings not in the ordinary course of business. The Company isWe are not currently a party to any legal proceeding the result of which it believeswe believe could have a material adverse impact upon itsour business, financial position, results of operations, or cash flows.
Many of our product installations involve software products that are critical to the operations of our customers’ businesses. Any failure in our products could result in a claim for substantial damages against us, regardless of our responsibility for such failure. Although we attempt to contractually limit our liability for damages arising from product failures or negligent acts or omissions, there can be no assurance that the limitations of liability set forth in our contracts will be enforceable in all instances.
Item 1A. Risk Factors.
In addition to the other information set forth in this report, you should carefully consider the risk factors disclosed in Item 1A, “Risk Factors,” of the Company’sour annual report on Form 10-K for the year ended December 31, 2016, as supplemented in the Company’s quarterly report on Form 10-Q for the quarter ended June 30, 2017.2022.
We did not make anyItem 2. Unregistered Sales of Equity Securities and Use of Proceeds.
The following table provides information regarding common stock repurchasespurchases under our publicly-announcedpublicly announced repurchase program for the quarter ended September 30, 2017. In October 2017, our Board of Directors confirmed our existing authority to repurchase up to an aggregate of $50.0 million of our outstanding common stock.2023.
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Period |
| Total Number of Shares Purchased |
|
| Average Price Paid per Share |
|
| Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs |
|
| Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs |
| ||||
July 1 - July 31, 2023 |
|
| - |
|
| $ | - |
|
|
| - |
|
| $ | 75,000,000 |
|
August 1 - August 31, 2023 |
|
| 65,267 |
|
|
| 191.07 |
|
|
| 65,267 |
|
|
| 62,529,337 |
|
September 1 - September 30, 2023 |
|
| 62,866 |
|
|
| 200.45 |
|
|
| 62,866 |
|
|
| 49,928,113 |
|
Total |
|
| 128,133 |
|
|
|
|
|
| 128,133 |
|
|
|
|
Item 3. Defaults Upon Senior Securities.
No events occurred during the quarter covered by thethis report that would require a response to this item.
Item 4. Mine Safety Disclosures.
Not applicable.
No events occurred duringItem 5. Other Information.
Rule 10b5-1 Trading Plans
During the quarter covered byended September 30, 2023, no director or officer of the report that would requireCompany adopted or terminated a response to this item."Rule 10b5-1 trading agreement" or "non-Rule 10b5-1 trading arrangement," as each term is defined in item 408(a) of Regulation S-K.
28
Exhibit 101.INS | Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. |
Exhibit 101.SCH | Inline XBRL Taxonomy Extension Schema Document |
Exhibit 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document |
Exhibit 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document |
Exhibit 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document |
Exhibit 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document |
|
|
29
|
|
Exhibit | |
| |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* In accordance with Item 601(b)(32)(ii) of the SEC’s Regulation S-K, this Exhibit is hereby furnished to the SEC as an accompanying document and is not deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that Section, nor shall it be deemed incorporated by reference into any filing under the Securities Act of 1933.
3028
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
MANHATTAN ASSOCIATES, INC.
Date: | October | /s/ Eddie Capel |
Eddie Capel | ||
President and Chief Executive Officer | ||
(Principal Executive Officer) | ||
Date: | October | /s/ Dennis B. Story |
Dennis B. Story | ||
Executive Vice President, Chief Financial Officer and Treasurer | ||
(Principal Financial Officer) |
29
31