UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

 

FORM 10‑Q

10-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, 2017March 31, 2021

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) 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

(Do not check if a smaller reporting company)

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,April 23, 2021, the latest practicable date, is as follows: 68,933,14863,617,361 shares of common stock, $0.01 par value per share.

 

 


 


MANHATTAN ASSOCIATES, INC.

FORM 10-Q

Quarter Ended September 30, 2017March 31, 2021

TABLE OF CONTENTS

PART I

 

 

Financial Information

 

 

 

 

Item 1.

Financial Statements.

 

 

 

 

Condensed Consolidated Balance Sheets as of September 30, 2017March 31, 2021 (unaudited) and December 31, 20162020

3

 

 

Condensed Consolidated Statements of Income for the three and nine months ended September 30, 2017March 31, 2021 and 20162020 (unaudited)

4

 

 

Condensed Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2017March 31, 2021 and 20162020 (unaudited)

5

 

Condensed Consolidated Statements of Cash Flows for the ninethree months ended September 30, 2017March 31, 2021 and 20162020 (unaudited)

6

 

 

Condensed Consolidated Statements of Stockholders’ Equity for the ninethree months ended September 30, 2017March 31, 2021 and 2020 (unaudited) and for the twelve months ended December 31, 2016

7

 

 

Notes to Condensed Consolidated Financial Statements (unaudited)(unaudited)

8

 

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations.

1614

 

 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk.

2724

 

 

 

Item 4.

Controls and Procedures.

2724

 

 

 

 

PART II

 

 

 

 

 

OTHER INFORMATION

 

 

 

 

Item 1.

Legal Proceedings.

2825

 

 

 

Item 1A.

Risk Factors.

2825

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds.

2825

 

 

 

Item 3.

Defaults Upon Senior Securities.

2825

 

 

 

Item 4.

Mine Safety Disclosures.

2825

 

 

 

Item 5.

Other Information.

2825

 

 

 

Item 6.

Exhibits.

2826

 

 

 

Signatures.

3127

 

 

 

 


2


PART I

FINANCIAL INFORMATION

ItemItem 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

 

 

March 31, 2021

 

 

December 31, 2020

 

 

(unaudited)

 

 

 

 

 

 

(unaudited)

 

 

 

 

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current Assets:

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

124,818

 

 

$

95,615

 

 

$

197,166

 

 

$

204,705

 

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 $3,451 and $3,497, at March 31, 2021 and December 31, 2020, respectively

 

 

106,274

 

 

 

109,202

 

Prepaid expenses and other current assets

 

 

11,638

 

 

 

11,118

 

 

 

26,611

 

 

 

20,134

 

Total current assets

 

 

238,368

 

 

 

207,018

 

 

 

330,051

 

 

 

334,041

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Property and equipment, net

 

 

15,275

 

 

 

17,424

 

 

 

16,484

 

 

 

17,903

 

Operating lease right-of-use assets

 

 

29,581

 

 

 

31,470

 

Goodwill, net

 

 

62,245

 

 

 

62,228

 

 

 

62,244

 

 

 

62,252

 

Deferred income taxes

 

 

2,691

 

 

 

2,867

 

 

 

2,117

 

 

 

5,760

 

Other assets

 

 

7,670

 

 

 

7,603

 

 

 

18,051

 

 

 

13,986

 

Total assets

 

$

326,249

 

 

$

297,140

 

 

$

458,528

 

 

$

465,412

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS' EQUITY

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accounts payable

 

$

15,136

 

 

$

12,052

 

 

$

18,327

 

 

$

17,805

 

Accrued compensation and benefits

 

 

17,173

 

 

 

20,700

 

 

 

44,643

 

 

 

41,962

 

Accrued and other liabilities

 

 

12,394

 

 

 

12,510

 

 

 

20,401

 

 

 

21,181

 

Deferred revenue

 

 

70,984

 

 

 

63,457

 

 

 

122,939

 

 

 

114,164

 

Income taxes payable

 

 

6,745

 

 

 

8,924

 

 

 

428

 

 

 

1,874

 

Total current liabilities

 

 

122,432

 

 

 

117,643

 

 

 

206,738

 

 

 

196,986

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating lease liabilities, long-term

 

 

26,132

 

 

 

27,843

 

Other non-current liabilities

 

 

9,463

 

 

 

10,131

 

 

 

20,998

 

 

 

21,686

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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, 0 shares issued or outstanding in 2021 and 2020

 

 

-

 

 

 

-

 

Common stock, $0.01 par value; 200,000,000 shares authorized; 63,616,713 and 63,527,186 shares issued and outstanding at March 31, 2021 and December 31, 2020, respectively

 

 

636

 

 

 

635

 

Retained earnings

 

 

202,717

 

 

 

184,558

 

 

 

222,815

 

 

 

236,524

 

Accumulated other comprehensive loss

 

 

(12,746

)

 

 

(15,894

)

 

 

(18,791

)

 

 

(18,262

)

Total shareholders' equity

 

 

194,354

 

 

 

169,366

 

 

 

204,660

 

 

 

218,897

 

Total liabilities and shareholders' equity

 

$

326,249

 

 

$

297,140

 

 

$

458,528

 

 

$

465,412

 

 

See accompanying Notes to Condensed Consolidated Financial Statements.

 

 

 

 

3



Item 1.

Financial Statements (continued)

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 March 31,

 

 

2017

 

 

2016

 

 

2017

 

 

2016

 

 

2021

 

 

2020

 

 

(unaudited)

 

 

(unaudited)

 

 

(unaudited)

 

 

(unaudited)

 

 

(unaudited)

 

 

(unaudited)

 

Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cloud subscriptions

 

$

26,643

 

 

$

17,260

 

Software license

 

$

18,794

 

 

$

21,633

 

 

$

64,009

 

 

$

62,871

 

 

 

7,838

 

 

 

9,735

 

Maintenance

 

 

36,159

 

 

 

35,744

 

Services

 

 

115,555

 

 

 

119,267

 

 

 

341,216

 

 

 

355,363

 

 

 

80,359

 

 

 

87,406

 

Hardware and other

 

 

18,534

 

 

 

11,313

 

 

 

45,288

 

 

 

38,731

 

Hardware

 

 

5,851

 

 

 

3,758

 

Total revenue

 

 

152,883

 

 

 

152,213

 

 

 

450,513

 

 

 

456,965

 

 

 

156,850

 

 

 

153,903

 

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 software license

 

 

556

 

 

 

555

 

Cost of cloud subscriptions, maintenance and services

 

 

73,509

 

 

 

74,276

 

Research and development

 

 

14,747

 

 

 

13,389

 

 

 

43,074

 

 

 

41,553

 

 

 

24,260

 

 

 

23,328

 

Sales and marketing

 

 

10,739

 

 

 

10,003

 

 

 

34,260

 

 

 

34,606

 

 

 

13,396

 

 

 

13,088

 

General and administrative

 

 

11,031

 

 

 

11,225

 

 

 

34,290

 

 

 

36,041

 

 

 

17,569

 

 

 

16,114

 

Depreciation and amortization

 

 

2,275

 

 

 

2,334

 

 

 

6,863

 

 

 

6,806

 

 

 

2,135

 

 

 

2,346

 

Restructuring charge

 

 

(77

)

 

 

-

 

 

 

2,945

 

 

 

-

 

Total costs and expenses

 

 

101,787

 

 

 

98,629

 

 

 

308,438

 

 

 

308,014

 

 

 

131,425

 

 

 

129,707

 

Operating income

 

 

51,096

 

 

 

53,584

 

 

 

142,075

 

 

 

148,951

 

 

 

25,425

 

 

 

24,196

 

Other income (loss), net

 

 

207

 

 

 

210

 

 

 

(232

)

 

 

1,384

 

Other (loss) income, net

 

 

(293

)

 

 

1,420

 

Income before income taxes

 

 

51,303

 

 

 

53,794

 

 

 

141,843

 

 

 

150,335

 

 

 

25,132

 

 

 

25,616

 

Income tax provision

 

 

18,704

 

 

 

20,298

 

 

 

49,876

 

 

 

56,018

 

 

 

2,489

 

 

 

3,086

 

Net income

 

$

32,599

 

 

$

33,496

 

 

$

91,967

 

 

$

94,317

 

 

$

22,643

 

 

$

22,530

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic earnings per share

 

$

0.47

 

 

$

0.47

 

 

$

1.33

 

 

$

1.31

 

 

$

0.36

 

 

$

0.35

 

Diluted earnings per share

 

$

0.47

 

 

$

0.47

 

 

$

1.32

 

 

$

1.30

 

 

$

0.35

 

 

$

0.35

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average number of shares:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

68,928

 

 

 

71,403

 

 

 

69,389

 

 

 

71,981

 

 

 

63,645

 

 

 

63,592

 

Diluted

 

 

69,135

 

 

 

71,743

 

 

 

69,614

 

 

 

72,340

 

 

 

64,466

 

 

 

64,342

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying Notes to Condensed Consolidated Financial Statements.

 

 

 

 

4



Item 1.

Financial Statements (continued)

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 March 31,

 

 

2017

 

 

2016

 

 

2017

 

 

2016

 

 

2021

 

 

2020

 

 

(unaudited)

 

 

(unaudited)

 

 

(unaudited)

 

 

(unaudited)

 

 

(unaudited)

 

 

(unaudited)

 

Net income

 

$

32,599

 

 

$

33,496

 

 

$

91,967

 

 

$

94,317

 

 

$

22,643

 

 

$

22,530

 

Foreign currency translation adjustment

 

 

376

 

 

 

75

 

 

 

3,148

 

 

 

(1,715

)

 

 

(529

)

 

 

(3,471

)

Comprehensive income

 

$

32,975

 

 

$

33,571

 

 

$

95,115

 

 

$

92,602

 

 

$

22,114

 

 

$

19,059

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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,

 

 

Three Months Ended March 31,

 

 

2017

 

 

2016

 

 

2021

 

 

2020

 

 

(unaudited)

 

 

(unaudited)

 

 

(unaudited)

 

 

(unaudited)

 

Operating activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

91,967

 

 

$

94,317

 

 

$

22,643

 

 

$

22,530

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

6,863

 

 

 

6,806

 

 

 

2,135

 

 

 

2,346

 

Equity-based compensation

 

 

11,041

 

 

 

11,724

 

 

 

10,051

 

 

 

7,564

 

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

)

(Gain) loss on disposal of equipment

 

 

(2

)

 

 

7

 

Deferred income taxes

 

 

741

 

 

 

(259

)

 

 

3,636

 

 

 

5,511

 

Unrealized foreign currency loss (gain)

 

 

93

 

 

 

(363

)

Unrealized foreign currency gain

 

 

(386

)

 

 

(1,130

)

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accounts receivable, net

 

 

5,095

 

 

 

(1,850

)

 

 

2,204

 

 

 

(12,217

)

Other assets

 

 

(940

)

 

 

(1,555

)

 

 

(9,467

)

 

 

(4,889

)

Accounts payable, accrued and other liabilities

 

 

(2,273

)

 

 

(14,033

)

 

 

2,661

 

 

 

(14,794

)

Income taxes

 

 

(2,151

)

 

 

6,063

 

 

 

(2,878

)

 

 

(5,385

)

Deferred revenue

 

 

6,169

 

 

 

633

 

 

 

9,288

 

 

 

12,045

 

Net cash provided by operating activities

 

 

116,639

 

 

 

101,498

 

 

 

39,885

 

 

 

11,588

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investing activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Purchase of property and equipment

 

 

(3,897

)

 

 

(5,465

)

 

 

(569

)

 

 

(1,245

)

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

 

 

(569

)

 

 

(1,245

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Financing activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Purchase of common stock

 

 

(81,700

)

 

 

(117,968

)

 

 

(46,402

)

 

 

(43,032

)

Proceeds from issuance of common stock from options exercised

 

 

-

 

 

 

18

 

Excess tax benefits from equity-based compensation

 

 

-

 

 

 

5,170

 

Net cash used in financing activities

 

 

(81,700

)

 

 

(112,780

)

 

 

(46,402

)

 

 

(43,032

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency impact on cash

 

 

2,648

 

 

 

(1,039

)

 

 

(453

)

 

 

(2,710

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net change in cash and cash equivalents

 

 

29,203

 

 

 

(7,585

)

 

 

(7,539

)

 

 

(35,399

)

Cash and cash equivalents at beginning of period

 

 

95,615

 

 

 

118,416

 

 

 

204,705

 

 

 

110,678

 

Cash and cash equivalents at end of period

 

$

124,818

 

 

$

110,831

 

 

$

197,166

 

 

$

75,279

 

See accompanying Notes to Condensed Consolidated Financial Statements.

6


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) 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.

 

 

7



Item 1.

Financial Statements (continued)

NotesMANHATTAN 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 March 31, 2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, December 31, 2020 (audited)

 

 

63,527,186

 

 

$

635

 

 

$

-

 

 

$

236,524

 

 

$

(18,262

)

 

$

218,897

 

Repurchase of common stock

 

 

(386,314

)

 

 

(4

)

 

 

(10,046

)

 

 

(36,352

)

 

 

-

 

 

 

(46,402

)

Restricted stock units issuance

 

 

475,841

 

 

 

5

 

 

 

(5

)

 

 

-

 

 

 

-

 

 

 

-

 

Equity-based compensation

 

 

-

 

 

 

-

 

 

 

10,051

 

 

 

-

 

 

 

-

 

 

 

10,051

 

Foreign currency translation adjustment

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(529

)

 

 

(529

)

Net income

 

 

-

 

 

 

-

 

 

 

-

 

 

 

22,643

 

 

 

-

 

 

 

22,643

 

Balance, March 31, 2021 (unaudited)

 

 

63,616,713

 

 

$

636

 

 

$

-

 

 

$

222,815

 

 

$

(18,791

)

 

$

204,660

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Three Months Ended March 31, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, December 31, 2019 (audited)

 

 

63,456,986

 

 

$

635

 

 

$

-

 

 

$

159,490

 

 

$

(17,847

)

 

$

142,278

 

Repurchase of common stock

 

 

(556,109

)

 

 

(6

)

 

 

(7,558

)

 

 

(35,468

)

 

 

-

 

 

 

(43,032

)

Restricted stock units issuance

 

 

594,810

 

 

 

6

 

 

 

(6

)

 

 

-

 

 

 

-

 

 

 

-

 

Equity-based compensation

 

 

-

 

 

 

-

 

 

 

7,564

 

 

 

-

 

 

 

-

 

 

 

7,564

 

Foreign currency translation adjustment

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(3,471

)

 

 

(3,471

)

Net income

 

 

-

 

 

 

-

 

 

 

-

 

 

 

22,530

 

 

 

-

 

 

 

22,530

 

Balance, March 31, 2020 (unaudited)

 

 

63,495,687

 

 

$

635

 

 

$

-

 

 

$

146,552

 

 

$

(21,318

)

 

$

125,869

 

See accompanying Notes to Condensed Consolidated Financial Statements.



Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

1.

Basis of Presentation and Principles of Consolidation

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,March 31, 2021, the results of operations for the three and nine months ended September 30, 2017March 31, 2021 and 2016,2020, and cash flows for the ninethree months ended September 30, 2017March 31, 2021 and 2016.2020. The results for the three and nine months ended September 30, 2017March 31, 2021 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, 2016.2020.

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 20172021

Stock Compensation

During the three months ended March 31, 2017, 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.Income Taxes

In May 2017,December 2019, the FASB issued ASU 2017-09, Compensation – Stock Compensation: Scope of Modification2019-12, Income Taxes (Topic 740): Simplifying the 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 classification of the award changes.Income Taxes. The new guidance is effectiveeliminates certain exceptions related to the approach for all entitiesintraperiod tax allocation, the methodology 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 guidancecalculating taxes during the three months ended June 2017,quarters and the adoption did not impact our financial statements.

Goodwill Impairment

In January 2017,recognition of deferred tax liabilities for outside basis differences. This guidance also simplifies aspects of the FASB issued ASU 2017-04, Intangibles - Goodwillaccounting for franchise taxes and Other (Topic 350)changes in tax laws or rates, as well as clarifies the accounting for transactions that simplifiesresult in a step-up in 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 excesstax basis 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. goodwill. We early adopted this guidance during the three months ended March 2017,31, 2021, and the adoption did not have a material impact on 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 goods or services to their customers unless 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, 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 recognize 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 and 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


2.

Revenue Recognition

The Company’sWe recognize revenue consistswhen we transfer control of feesthe promised products or services to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those products or services. We derive our revenue 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, cloud subscriptions, 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, which consistsusage-based taxes from revenue.

Nature of reimbursementsProducts and Services

Our perpetual software licenses provide the customer with a right to use the software as it exists at the time of out-of-pocket expenses incurred in connection with our professional services (collectively included in “Hardware and other” revenue in the Condensed Consolidated Statements of Income). Revenue generated from our hosting and SaaS arrangements represented approximately 10% of total software licensepurchase. We recognize revenue for distinct software licenses once the nine months ended September 30, 2017. All revenue is recognized net of any related sales taxes.license period has begun and we have made the software available to the customer.

The Company recognizes license revenue whenCloud subscriptions includes software as a service (SaaS) and arrangements which provide customers with the following criteria are met: (1)right to use our software within a signed contract is obtained covering all elementscloud-based environment that we provide and manage where the customer does not have the right 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 method ascustomer renews the producthosting 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.


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 future software functionality deliverables, the Company accounts for these deliverables as a separate element 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.agreement, typically twelve months.

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’sOur 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-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 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 Judgements

Our contracts with customers typically contain promises to transfer multiple products and services to a customer. Judgement is required to determine whether each product and service is considered to be a distinct performance obligation that should be accounted for separately under the contract. We allocate the transaction price to the distinct performance obligations based on relative standalone selling price (SSP). We estimate SSP based on the prices charged to customers, or by using 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. Services are typically billed 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.

Deferred revenue mainly represents amounts collected prior to having completed performance of maintenance, cloud subscriptions and professional services. In the three months ended March 31, 2021, we recognized $52.2 millionof revenue that was included in the deferred revenue balance as of December 31, 2020.

NaN revenue was recognized during the three months ended March 31, 2021 from performance obligations that were satisfied in prior periods.

Remaining Performance Obligations

As of March 31, 2021, approximately $421.2 million of revenue is expected to be recognized from remaining performance obligations for cloud subscriptions, maintenance contracts, and application managed services with a customer. Asnon-cancelable term greater than 1 year (including deferred revenue as well as amounts that will be invoiced and recognized as revenue in future periods).  We expect to recognize revenue on approximately 45% 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 0t recorded a provision for the Companycost of returns and product warranty claims.


We record an allowance for doubtful accounts 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$0.7 million and $4.8$1.4 million for the three months ended September 30, 2017March 31, 2021 and 2016, respectively,2020, respectively.

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 $13.8the 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 $18.8 million as of March 31, 2021, of which $13.9 million is included in other assets and $4.9 million is included in prepaid expenses and other current assets. Sales commission expense is included in Sales and Marketing expense in the accompanying Consolidated Statements of Income. Amortization of sales commissions was $1.1 million and $13.9$0.7 million for the ninethree months ended September 30, 2017March 31, 2021 and 2016,2020, respectively.

NaN impairment losses were recognized during the periods.

 

3.

Fair Value Measurement

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 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 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.

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’sMarch 31, 2021, our cash and cash equivalents were $186.0 million and $11.2 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 March 31, 2021. 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 no0 investments classified asat Level 2 or Level 3.3 at March 31, 2021.

4.

Leases

We lease our facilities and some of our equipment under noncancelable operating lease arrangements that expire at various dates through 2029. For a few of our facility leases, we have certain options to extend the lease term for up to 10 years, at our sole discretion. We have no finance leases.

 

 


We present below the operating lease right-of-use assets and lease liabilities as of March 31, 2021 (in thousands):

 

 

 

 

 

 

 

March 31, 2021

 

ASSETS

 

 

 

 

Operating lease right-of-use assets

 

$

29,581

 

 

 

 

 

 

LIABILITIES

 

 

 

 

Operating lease liabilities, current (included in accrued and other liabilities)

 

$

6,224

 

Operating lease liabilities, long-term

 

 

26,132

 

Total operating lease liabilities

 

$

32,356

 

Aggregate future minimum lease payments under noncancelable operating leases as of March 31, 2021 are as follows (in thousands):

Year Ending December 31,

 

 

 

 

2021 (excluding the three months ended March 31, 2021)

 

$

5,056

 

2022

 

 

6,409

 

2023

 

 

6,563

 

2024

 

 

6,348

 

2025

 

 

5,448

 

Thereafter

 

 

7,953

 

Total minimum payments required

 

 

37,777

 

Less short-term leases

 

 

-

 

Less imputed interest

 

 

(5,421

)

Total operating lease liabilities

 

$

32,356

 

The total lease cost for the three months ended March 31, 2021 and 2020 were $2.0 million, consisting of $1.9 million of operating lease costs, and $0.1 million of short-term lease costs for both periods. Our variable lease costs for the three months ended March 31, 2021 and 2020 were immaterial.

Other information related to operating leases are as follows:

Weighted average remaining lease term

 

5.9 years

 

Weighted average discount rate

 

 

3

%

Supplemental cash flow information - operating cash flows (in thousands):

 

 

 

 

Cash paid for amounts included in the measurement of lease liabilities

 

 

 

 

Operating cash flows for operating leases

 

$

1,926

 

4.5.

Equity-Based Compensation

The CompanyWe granted 97,458324,591 and 71,025511,633 restricted stock units (“RSUs”)(RSUs) during the three months ended September 30, 2017March 31, 2021 and 2016, respectively, and 458,449 and 420,256 RSUs during the nine months ended September 30, 2017 and 2016,2020, respectively. The Company recorded equity-basedEquity-based compensation expense related to RSUs of $3.8was $10.1 million and $3.5$7.6 million during the three months ended September 30, 2017March 31, 2021 and 2016, respectively, and $11.0 million and $11.7 million during the nine months ended September 30, 2017 and 2016,2020, respectively.

11


AWe present below a summary of changes in unvested shares/units forduring the ninethree months ended September 30, 2017 is as follows:March 31, 2021 in our unvested units of restricted stock:

 

 

 

Number of shares/units

 

Outstanding at December 31, 20162020

 

 

1,029,2301,462,864

 

Granted

 

 

458,449324,591

 

Vested

 

 

(393,380475,841

)

Forfeited

 

 

(46,35311,121

)

Outstanding at September 30, 2017March 31, 2021

 

 

1,047,9461,300,493

 

 

 


5.6.

Income Taxes

The Company’sOur effective tax rate was 36.5%9.9% and 37.7%12.0% for the three months ended September 30, 2017March 31, 2021 and 2016, respectively, and 35.2% and 37.3% for the nine months ended September 30, 2017 and 2016,2020, respectively. The decrease in the effective tax rate for the ninethree months ended September 30, 2017 was primarilyMarch 31, 2021 is due to the implementation 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 restrictedforeign jurisdiction business incentives and change in deductible stock which would have been recorded in additional paid-in-capital under the previous guidance.compensation.

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,March 31, 2021, there were no material changes to the Company’sour uncertain tax positions. There has been no change to the Company’sour policy that recognizes potential interest and penalties related to uncertain tax positions within itsour global operations in income tax expense.

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 the 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.

 

6.7.

Basic and Diluted Net EarningsIncome Per Share

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, 2017March 31, 2021 and 2016 (in2020(in thousands, except per share data):

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

Three Months Ended March 31,

 

 

2017

 

 

2016

 

 

2017

 

 

2016

 

 

2021

 

 

2020

 

 

(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

 

 

$

22,643

 

 

$

22,530

 

Earnings per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.47

 

 

$

0.47

 

 

$

1.33

 

 

$

1.31

 

 

$

0.36

 

 

$

0.35

 

Effect of CESs

 

 

-

 

 

 

-

 

 

 

(0.01

)

 

 

(0.01

)

 

 

(0.01

)

 

 

-

 

Diluted

 

$

0.47

 

 

$

0.47

 

 

$

1.32

 

 

$

1.30

 

 

$

0.35

 

 

$

0.35

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average number of shares:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

68,928

 

 

 

71,403

 

 

 

69,389

 

 

 

71,981

 

 

 

63,645

 

 

 

63,592

 

Effect of CESs

 

 

207

 

 

 

340

 

 

 

225

 

 

 

359

 

 

 

821

 

 

 

750

 

Diluted

 

 

69,135

 

 

 

71,743

 

 

 

69,614

 

 

 

72,340

 

 

 

64,466

 

 

 

64,342

 

 

The number of anti-dilutive CESs during 2017the three months ended March 31, 2021 and 20162020 was immaterial.

 

7.8.

Contingencies

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 Company productscompany’s product 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 in the ordinary course of business or other 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.

8.9.

Operating Segments

The Company manages itsWe manage our business by geographic segment. The Company has threeregion and have 3 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 evaluate 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$1.6 million and $0.9$0.7 million for the three months ended September 30, 2017March 31, 2021 and 2016,2020, respectively, and approximately $5.4 million and $2.1 million for the nine months ended September 30, 2017 and 2016, 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 our operations in India.

In accordance with the Company’s India operations.

13


The following table presentssegment reporting topic of the revenues, expenses and operating incomeFASB Accounting Standards Codification, we present below certain financial information by reportable segmentfor the three and nine months ended September 30, 2017March 31, 2021 and 2016 (in thousands):

 

 

Three Months Ended September 30,

 

 

 

2017

 

 

2016

 

 

 

Americas

 

 

EMEA

 

 

APAC

 

 

Consolidated

 

 

Americas

 

 

EMEA

 

 

APAC

 

 

Consolidated

 

Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Software license

 

$

14,741

 

 

$

2,158

 

 

$

1,895

 

 

$

18,794

 

 

$

18,050

 

 

$

1,843

 

 

$

1,740

 

 

$

21,633

 

Services

 

 

92,517

 

 

 

15,615

 

 

 

7,423

 

 

 

115,555

 

 

 

101,344

 

 

 

12,787

 

 

 

5,136

 

 

 

119,267

 

Hardware and other

 

 

17,575

 

 

 

680

 

 

 

279

 

 

 

18,534

 

 

 

10,705

 

 

 

448

 

 

 

160

 

 

 

11,313

 

Total revenue

 

 

124,833

 

 

 

18,453

 

 

 

9,597

 

 

 

152,883

 

 

 

130,099

 

 

 

15,078

 

 

 

7,036

 

 

 

152,213

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Costs and Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of revenue

 

 

50,777

 

 

 

8,493

 

 

 

3,802

 

 

 

63,072

 

 

 

51,207

 

 

 

7,169

 

 

 

3,302

 

 

 

61,678

 

Operating expenses

 

 

32,746

 

 

 

2,701

 

 

 

1,070

 

 

 

36,517

 

 

 

30,538

 

 

 

2,957

 

 

 

1,122

 

 

 

34,617

 

Depreciation and amortization

 

 

2,092

 

 

 

131

 

 

 

52

 

 

 

2,275

 

 

 

2,141

 

 

 

130

 

 

 

63

 

 

 

2,334

 

Restructuring charge

 

 

(77

)

 

 

-

 

 

 

-

 

 

 

(77

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Total costs and expenses

 

 

85,538

 

 

 

11,325

 

 

 

4,924

 

 

 

101,787

 

 

 

83,886

 

 

 

10,256

 

 

 

4,487

 

 

 

98,629

 

Operating income

 

$

39,295

 

 

$

7,128

 

 

$

4,673

 

 

$

51,096

 

 

$

46,213

 

 

$

4,822

 

 

$

2,549

 

 

$

53,584

 

 

 

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 related to the Company’s warehouse and non-warehouse product groups for the three and nine months ended September 30, 2017 and 2016 are as follows2020 (in thousands):

 

 

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, for the three and nine months ended September 30, 2017 and 2016 are as follows (in thousands):

 

 

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

 

 

 

 

9.

Restructuring Charge

 

 

Three Months Ended March 31,

 

 

 

2021

 

 

2020

 

 

 

Americas

 

 

EMEA

 

 

APAC

 

 

Consolidated

 

 

Americas

 

 

EMEA

 

 

APAC

 

 

Consolidated

 

Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cloud subscriptions

 

$

22,489

 

 

$

3,578

 

 

$

576

 

 

$

26,643

 

 

$

15,243

 

 

$

1,488

 

 

$

529

 

 

$

17,260

 

Software license

 

 

4,160

 

 

 

3,152

 

 

 

526

 

 

 

7,838

 

 

 

8,450

 

 

 

1,024

 

 

 

261

 

 

 

9,735

 

Maintenance

 

 

28,236

 

 

 

5,562

 

 

 

2,361

 

 

 

36,159

 

 

 

28,460

 

 

 

5,171

 

 

 

2,113

 

 

 

35,744

 

Services

 

 

62,180

 

 

 

16,039

 

 

 

2,140

 

 

 

80,359

 

 

 

67,249

 

 

 

16,619

 

 

 

3,538

 

 

 

87,406

 

Hardware

 

 

5,748

 

 

 

103

 

 

 

-

 

 

 

5,851

 

 

 

3,744

 

 

 

11

 

 

 

3

 

 

 

3,758

 

    Total revenue

 

 

122,813

 

 

 

28,434

 

 

 

5,603

 

 

 

156,850

 

 

 

123,146

 

 

 

24,313

 

 

 

6,444

 

 

 

153,903

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Costs and Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of revenue

 

 

55,307

 

 

 

15,424

 

 

 

3,334

 

 

 

74,065

 

 

 

57,347

 

 

 

14,024

 

 

 

3,460

 

 

 

74,831

 

Operating expenses

 

 

49,505

 

 

 

4,434

 

 

 

1,286

 

 

 

55,225

 

 

 

47,428

 

 

 

3,770

 

 

 

1,332

 

 

 

52,530

 

Depreciation and amortization

 

 

1,885

 

 

 

202

 

 

 

48

 

 

 

2,135

 

 

 

2,089

 

 

 

206

 

 

 

51

 

 

 

2,346

 

Total costs and expenses

 

 

106,697

 

 

 

20,060

 

 

 

4,668

 

 

 

131,425

 

 

 

106,864

 

 

 

18,000

 

 

 

4,843

 

 

 

129,707

 

Operating income

 

$

16,116

 

 

$

8,374

 

 

$

935

 

 

$

25,425

 

 

$

16,282

 

 

$

6,313

 

 

$

1,601

 

 

$

24,196

 

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 accrualmajority of our software license revenue relates to our warehouse management product group (over 80%) for the ninethree months ended September 30, 2017:March 31, 2021. Cloud subscriptions revenue primarily relates to our Manhattan Active omnichannel, warehouse management solutions, and transportation management solutions for the three months ended March 31, 2021.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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 compensationAt March 31, 2021, total assets for the Americas, EMEA and benefits” in the Company’s Condensed Consolidated Balance Sheets. The remaining balance is expected to be paid by the end of 2017.APAC segments were $390.0 million, $55.6 million and $12.9 million, respectively.

 

 

 

15



 

ItemItem 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, 2017March 31, 2021 and 2016,2020, 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, 2016.2020. 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, 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 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 and software as a service (“SaaS”) arrangements;

cloud subscriptions, including software as a service (SaaS) and hosting of software;

professional services, including solutions planning and implementation, related consulting, customer training, and customer support services and software enhancements (collectively, “services”); and

licenses of our software;

customer support services and software enhancements (collectively, “maintenance”);

hardware sales and other revenue.

professional services, including solutions planning and implementation, related consulting, customer training, and reimbursements from customers for out-of-pocket expenses (collectively, “services”); and

hardware sales.

In the three and nine months ended September 30, 2017,March 31, 2021, we generated $152.9 million and $450.5$156.9 million in total revenue, respectively, with arevenue. The revenue mix of: license revenue 12%; services revenue 76%; and hardware and other revenue 12% for the three months ended September 30, 2017, andMarch 31, 2021 was: cloud subscriptions 17%; software license revenue 14%5%; maintenance 23%; services revenue 76%51%; and hardware and other revenue 10% for the nine months ended September 30, 2017.4%.

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 million and $125.1$47.9 million for the three and nine months ended September 30, 2017, respectively,March 31, 2021, which represents approximately 27% and 28%31% of our total revenue for the three and nine months ended September 30, 2017,March 31, 2021, respectively. International revenue includes all revenue derived from sales to customers outside the United States. At September 30, 2017,March 31, 2021, we employed approximately 2,8303,500 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

Regarding the impact of the novel coronavirus disease (“COVID-19”) pandemic, we remain cautious about the global recovery, which we expect to be slow and protracted. We experienced solid demand for our cloud solutions during the first quarter of 2021. Our solutions are mission critical, supporting complex global supply chains. 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. This alignment is contributing to our strong financial results, higher demand and strong win rates for our solutions in the quarter.  

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. As previously announced, we have reversed the temporary actions that we had previously taken, effective on April 1, 2020, to manage operating expenses and cash flow due to the COVID-19 pandemic, and our Board of Directors has reinstated our share repurchase program.

We have taken steps to best ensure the health and safety of our employees globally.  Our daily execution has evolved into a largely virtual model, and we continue to find innovative ways to engage with customers and prospects, ensuring that they are supported as they navigate their way through this period.  


We continue to monitor and aggressively manage operating expenses globally. We also will continue to actively monitor the COVID-19 pandemic and will take further actions to modify our business operations as may be required by federal, state or local authorities or that we determine are in the best interests of our employees, customers, and partners.

Going forward, we are investing significantly in our transition to a cloud business, including enterprise investments in innovation, and strategic operating expenses to support growth objectives. Our pace of investment and timing combined with global macroeconomic conditions and disruptions related to COVID-19 as a whole, have impacted and may continue to impact revenue and earnings growth, based on timing of recovery. The pace at which the market for our products transitions from perpetual license to cloud subscriptions, resulting in revenue recognition spread out over the subscription period rather than up front, combined with extended lead times for developing new business, can cause uncertainty for our future expectations, impacting our ability to accurately forecast bookings and revenues from quarter to quarter and over the longer term.

For the remainder of 2021, our five strategic goals remain:

Focus on customer success and drive sustainable long-term growth;

Invest in innovation to expand our products and total addressable market;

Expand our Manhattan Active Suite of Cloud Solutions;

Develop and grow our cloud business and cloud subscription revenue; and

Expand our global sales and marketing teams.

Cloud Subscription

Historically, our software licenses were sold as perpetual licenses, under which customers own the software license and revenue is recognized at the time of sale. In 2017, we released Manhattan Active™ Solutions, accelerating our business transition to cloud subscriptions. Under a cloud subscription, customers pay a periodic fee for the right to use our software within a cloud-based environment that we provide and manage over a specified period of time. As part of our subscription program, we allow our existing customers to convert their maintenance contracts to cloud subscription contracts. Some customers have converted their maintenance contracts to cloud subscriptions, and we expect there will be continued opportunities to convert existing maintenance contracts to cloud subscription contracts in the future.

With the launch of Manhattan Active™ Solutions, in year 4 of our cloud transition, demand for our cloud solutions is the dominant preference of customers. Our perpetual license solutions are rapidly attritting due to market demand for Cloud with 90% of our pipeline representing cloud. Cloud is our fastest growing revenue line and represents 77% of total software revenue in the first quarter of 2021. We believe the reduction in License and maintenance revenue in favor of our Cloud based 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 the three and nine months ended September 30, 2017,March 31, 2021, approximately 73% and 72%, respectively70% 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% 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 including the COVID-19 pandemic and geopolitical uncertainty, the current sales cycles for large cloud subscriptions and, to a lesser degree, license dealssales of $1.0 million or greater in our target markets have beencould be extended. TheWhile cloud 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 associated with the pandemic 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 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 subscription fees that customers pay for supply chain commerce solutions. LicenseSince we announced our transition to becoming a cloud-first company in 2017 with our launch of Manhattan Active Solutions, we have continued to see a significant shift in demand for cloud solutions versus software license. By comparison, in 2016, cloud subscriptions and software license revenue totaled $18.8 million, or 12%represented 7% and 93%, respectively, of our total cloud and software license revenue with gross marginsmix. In the full year ended 2021, we estimate cloud subscriptions and software license revenue to be 80% and 20%, respectively, of 84.9% forour total cloud and software license revenue mix. In the three months ended September 30, 2017,March 31, 2021, cloud subscriptions revenue represented 77% of the total cloud and $64.0software license revenue mix. Going forward, we expect cloud revenue to increase as a percentage of total software and cloud revenue mix as market demand for cloud solutions is supplanting legacy perpetual license demand.

In the three months ended March 31, 2021, cloud subscriptions revenue totaled $26.6 million or 14%17% of total revenues.

The Americas, EMEA and APAC segments recognized $22.5 million, $3.6 million, and $0.5 million in cloud subscriptions revenue, with gross margin of 88.4% forrespectively, in the ninethree months ended September 30, 2017. ForMarch 31, 2021. Cloud subscriptions revenue is recognized ratably over the term of the agreement, typically 36 to 60 months. In the three and nine months ended September 30, 2017,March 31, 2021, the percentage mix of new to existing customers for the combination of software license and cloud subscriptions sales was approximately 20/8025/75, respectively.

In the three months ended March 31, 2021, software license revenue totaled $7.8 million, or 5% of total revenue. Software license revenue recognized by the Americas, EMEA, and 40/60, respectively.APAC segments totaled $4.2 million, $3.1 million, and$0.5 million, respectively, in the three months ended March 31, 2021.

LicenseCloud subscriptions and software license revenue growth isare influenced by the strength of general economic and business conditions and the competitive position of our software products. Our license revenueThese revenues generally hashave long sales cycles andcycles. In addition, the timing of the closing of a few large software license transactions can have a material impact on our quarterlysoftware license revenues, operating profit, operating margins and earnings per share. For example, $1.1$0.7 million of license revenueeither pre-tax profit or expense in the thirdfirst quarter of 20172021 equates to approximately one cent of diluted earnings per share impact.

Our software solutions are focused on core supply chain commerce operations (Warehouse Management, Transportation Management and Labor Management), Inventory optimization and Omni-channelOmnichannel operations (e-commerce, retail store operations and point of sale), 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 solutionsolutions 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.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 $341.2March 31, 2021 totaled $36.2 million, or 76%23% of total revenue. The Americas, EMEA and APAC segments recognized $28.2 million, $5.6 million and $2.4 million in maintenance revenue, with gross margins of 58.3% forrespectively, in the ninethree months ended September 30, 2017. ProfessionalMarch 31, 2021. For maintenance, 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 include additional or improved functionality and technological advances incorporating emerging supply chain and industry initiatives. The growth of maintenance revenues is influenced by: (1) new software license revenue growth; (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. Over the last three years, our annual revenue renewal rate of customers subscribing to comprehensive support and enhancements has been greater than 90%. 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 March 31, 2021, our services accounted for approximately 69%revenue totaled $80.4 million, or 51% of total revenue. The Americas, EMEA and APAC segments recognized $62.2 million, $16.0 million and $2.2 million in services revenue, respectively, in both the three and nine months ended September 30, 2017. While we believe our services margins are very strong, our consolidated operating margin profile may be lower than those of various other technology companies dueMarch 31, 2021. Due to our large services revenue mix as a percentage of total revenue, asour consolidated operating margin profile may be lower than those of our competitors, and while we believe our services margins are inherently lower than license revenue margins.strong, they may impact our operating margin profile.

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 our cloud subscriptions, software license revenue, 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$5.9 million representing 12% of total revenue with gross margins of 16.4% forin the three months ended September 30, 2017, and $45.3 million,March 31, 2021 representing 10%4% of total revenue with gross margin of 17.6% for the nine months ended September 30, 2017.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 discounteddiscount 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 solutions that help global retailers, manufacturers, wholesalers, distributors, retailers, and logistics providers 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 point of sale. Our research and developmentR&D expenses were $14.7 million and $43.1$24.3 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.March 31, 2021.

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 sale software solutions.  We offer what we believe to be the broadest solutionsolutions portfolio in the supply chain solutions marketplace, to address 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.

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.


Cash Flow and Financial Condition

For the three and nine months ended September 30, 2017,March 31, 2021, we generated cash flow from operating activities of $44.0 million and $116.6 million, respectively.$39.9 million. Our cash and cash equivalents at September 30, 2017March 31, 2021 totaled $129.7$197.2 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 and operationsacross our enterprise in transition to becoming a cloud-first company to drive revenue and earnings growth and repurchases of our common stock.growth.

WeDuring the three months ended March 31, 2021, we repurchased 1,539,208214,422 shares of Manhattan Associates’ outstanding common stock for approximately $27.0 million under ourthe share repurchase program during the nine months ended September 30, 2017. In October 2017,approved by our Board of Directors confirmed our existing authority to repurchase up to an aggregate of $50.0 million of Manhattan Associates’ outstanding common stock.Directors.

18


For the remainder of 2017, we anticipate that2021, our priorities for the use of cash will continue to be in continued investmentinvestments in product development and growth ofin our business supporting the business.transition to Cloud. We expect to continue to evaluate acquisition opportunities that are complementary to our product footprint and technology direction. We also expect to continue to weigh our share repurchase options against cash for acquisitions and investing in the business. We do not anticipate any borrowing requirements infor the remainder of 20172021 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, 2017March 31, 2021 and 2016.2020.

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

Three Months Ended March 31,

 

 

2017

 

 

2016

 

 

2017

 

 

2016

 

 

2021

 

 

2020

 

 

(in thousands, except per share data)

 

(in thousands, except per share data)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue

 

$

152,883

 

 

$

152,213

 

 

$

450,513

 

 

$

456,965

 

 

$

156,850

 

 

$

153,903

 

Costs and expenses

 

 

101,787

 

 

 

98,629

 

 

 

308,438

 

 

 

308,014

 

 

 

131,425

 

 

 

129,707

 

Operating income

 

 

51,096

 

 

 

53,584

 

 

 

142,075

 

 

 

148,951

 

 

 

25,425

 

 

 

24,196

 

Other income (loss), net

 

 

207

 

 

 

210

 

 

 

(232

)

 

 

1,384

 

Other (loss) income, net

 

 

(293

)

 

 

1,420

 

Income before income taxes

 

 

51,303

 

 

 

53,794

 

 

 

141,843

 

 

 

150,335

 

 

 

25,132

 

 

 

25,616

 

Net income

 

$

32,599

 

 

$

33,496

 

 

$

91,967

 

 

$

94,317

 

 

$

22,643

 

 

$

22,530

 

Diluted earnings per share

 

$

0.47

 

 

$

0.47

 

 

$

1.32

 

 

$

1.30

 

 

$

0.35

 

 

$

0.35

 

Diluted weighted average number of shares

 

 

69,135

 

 

 

71,743

 

 

 

69,614

 

 

 

72,340

 

 

 

64,466

 

 

 

64,342

 

 

 

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, 2017March 31, 2021 and 2016,2020, 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,

 

 

Three Months Ended March 31,

 

 

2017

 

 

2016

 

 

% Change vs.

Prior Year

 

 

2017

 

 

2016

 

 

% Change vs.

Prior Year

 

 

2021

 

 

2020

 

 

% Change vs.

Prior Year

 

Revenue:

 

(in thousands)

 

 

 

 

(in thousands)

 

 

 

 

(in thousands)

 

 

 

Cloud subscriptions

 

 

 

 

 

 

 

 

 

 

 

 

Americas

 

 

22,489

 

 

 

15,243

 

 

 

48

%

EMEA

 

 

3,578

 

 

 

1,488

 

 

 

140

%

APAC

 

 

576

 

 

 

529

 

 

 

9

%

Total cloud subscriptions

 

 

26,643

 

 

 

17,260

 

 

 

54

%

 

 

 

 

 

 

 

 

 

 

 

 

Software license

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Americas

 

$

14,741

 

 

$

18,050

 

 

 

-18

%

 

$

42,110

 

 

$

54,343

 

 

 

-23

%

 

 

4,160

 

 

 

8,450

 

 

 

-51

%

EMEA

 

 

2,158

 

 

 

1,843

 

 

 

17

%

 

 

17,232

 

 

 

4,815

 

 

 

258

%

 

 

3,152

 

 

 

1,024

 

 

 

208

%

APAC

 

 

1,895

 

 

 

1,740

 

 

 

9

%

 

 

4,667

 

 

 

3,713

 

 

 

26

%

 

 

526

 

 

 

261

 

 

 

102

%

Total software license

 

 

18,794

 

 

 

21,633

 

 

 

-13

%

 

 

64,009

 

 

 

62,871

 

 

 

2

%

 

 

7,838

 

 

 

9,735

 

 

 

-19

%

 

 

 

 

 

 

 

 

 

 

 

 

Maintenance

 

 

 

 

 

 

 

 

 

 

 

 

Americas

 

 

28,236

 

 

 

28,460

 

 

 

-1

%

EMEA

 

 

5,562

 

 

 

5,171

 

 

 

8

%

APAC

 

 

2,361

 

 

 

2,113

 

 

 

12

%

Total maintenance

 

 

36,159

 

 

 

35,744

 

 

 

1

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Services

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Americas

 

 

92,517

 

 

 

101,344

 

 

 

-9

%

 

 

276,576

 

 

 

298,715

 

 

 

-7

%

 

 

62,180

 

 

 

67,249

 

 

 

-8

%

EMEA

 

 

15,615

 

 

 

12,787

 

 

 

22

%

 

 

44,927

 

 

 

42,656

 

 

 

5

%

 

 

16,039

 

 

 

16,619

 

 

 

-3

%

APAC

 

 

7,423

 

 

 

5,136

 

 

 

45

%

 

 

19,713

 

 

 

13,992

 

 

 

41

%

 

 

2,140

 

 

 

3,538

 

 

 

-40

%

Total services

 

 

115,555

 

 

 

119,267

 

 

 

-3

%

 

 

341,216

 

 

 

355,363

 

 

 

-4

%

 

 

80,359

 

 

 

87,406

 

 

 

-8

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Hardware and Other

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Hardware

 

 

 

 

 

 

 

 

 

 

 

 

Americas

 

 

17,575

 

 

 

10,705

 

 

 

64

%

 

 

42,920

 

 

 

36,866

 

 

 

16

%

 

 

5,748

 

 

 

3,744

 

 

 

54

%

EMEA

 

 

680

 

 

 

448

 

 

 

52

%

 

 

1,682

 

 

 

1,478

 

 

 

14

%

 

 

103

 

 

 

11

 

 

 

836

%

APAC

 

 

279

 

 

 

160

 

 

 

74

%

 

 

686

 

 

 

387

 

 

 

77

%

 

 

-

 

 

 

3

 

 

 

-100

%

Total hardware and other

 

 

18,534

 

 

 

11,313

 

 

 

64

%

 

 

45,288

 

 

 

38,731

 

 

 

17

%

 

 

5,851

 

 

 

3,758

 

 

 

56

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Revenue

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Americas

 

 

124,833

 

 

 

130,099

 

 

 

-4

%

 

 

361,606

 

 

 

389,924

 

 

 

-7

%

 

 

122,813

 

 

 

123,146

 

 

 

0

%

EMEA

 

 

18,453

 

 

 

15,078

 

 

 

22

%

 

 

63,841

 

 

 

48,949

 

 

 

30

%

 

 

28,434

 

 

 

24,313

 

 

 

17

%

APAC

 

 

9,597

 

 

 

7,036

 

 

 

36

%

 

 

25,066

 

 

 

18,092

 

 

 

39

%

 

 

5,603

 

 

 

6,444

 

 

 

-13

%

Total revenue

 

$

152,883

 

 

$

152,213

 

 

 

0

%

 

$

450,513

 

 

$

456,965

 

 

 

-1

%

 

$

156,850

 

 

$

153,903

 

 

 

2

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Americas

 

$

39,295

 

 

$

46,213

 

 

 

-15

%

 

$

103,725

 

 

$

127,793

 

 

 

-19

%

 

 

16,116

 

 

 

16,282

 

 

 

-1

%

EMEA

 

 

7,128

 

 

 

4,822

 

 

 

48

%

 

 

27,877

 

 

 

16,115

 

 

 

73

%

 

 

8,374

 

 

 

6,313

 

 

 

33

%

APAC

 

 

4,673

 

 

 

2,549

 

 

 

83

%

 

 

10,473

 

 

 

5,043

 

 

 

108

%

 

 

935

 

 

 

1,601

 

 

 

-42

%

Total operating income

 

$

51,096

 

 

$

53,584

 

 

 

-5

%

 

$

142,075

 

 

$

148,951

 

 

 

-5

%

 

$

25,425

 

 

$

24,196

 

 

 

5

%

 

Summary of the Third Quarter 2017


Condensed Consolidated Financial Results

Diluted earnings per share was $0.47 in both the third quarter of 2017 and 2016.

Consolidated total revenue was $152.9 million in the third quarter of 2017, compared to $152.2 million in the third quarter of 2016. License revenue was $18.8 million in the third quarter of 2017, compared to $21.6 million in the third quarter of 2016.

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 58 days at September 30, 2017, compared to 57 days at June 30, 2017.

Cash and investments on-hand was $129.7 million at September 30, 2017, compared to $86.6 million at June 30, 2017.

20


Summary - First Quarter 2021

During

Consolidated total revenue: $156.9 million for the first quarter of 2021, compared to $153.9 million for the first quarter of 2020;

Cloud subscription revenue: $26.6 million for the first quarter of 2021, compared to $17.3 million for the first quarter of 2020;

Software license revenue:  $7.8 million for the first quarter of 2021, compared to $9.7 million for the first quarter of 2020;

Operating income: $25.4 million for the first quarter of 2021, compared to $24.2 million for the first quarter of 2020;

Operating margins: 16.2% for the first quarter of 2021, compared to 15.7% for the first quarter of 2020;

Diluted earnings per share: $0.35 for both the first quarter of 2021 and 2020;

Cash flow from operations: $39.9 million in the first quarter of 2021, compared to $11.6 million in the first quarter of 2020;

Days sales outstanding: 61 days at March 31, 2021, compared to 68 days at December 31, 2020;

Cash: $197.2 million at March 31, 2021, compared to $204.7 million at December 31, 2020;

Share repurchases: In the three months ended September 30, 2017, March 31, 2021, we did notreduced our common shares outstanding by approximately 0.1%, primarily through the repurchase anyof approximately 0.2 million shares of Manhattan Associatesour common stock.stock, under the share repurchase program authorized by our board of directors for a total investment of $27.0 million. In October 2017,April 2021, our Board of Directors confirmed our existing authority to repurchase up to an aggregate of $50.0 million of our outstanding common stock.stock.

 

TheBelow we discuss our consolidated results of our operations for the thirdfirst quarters of 20172021 and 2016 are discussed below.2020.

Revenue

 

 

Three Months Ended September 30,

 

 

Three Months Ended March 31,

 

 

 

 

% Change vs.

 

 

% of Total Revenue

 

 

 

 

% Change vs.

 

 

% of Total Revenue

 

 

2017

 

 

2016

 

 

Prior Year

 

 

2017

 

 

2016

 

 

2021

 

 

2020

 

 

Prior Year

 

 

2021

 

 

2020

 

 

(in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cloud subscriptions

 

$

26,643

 

 

$

17,260

 

 

 

54

%

 

 

17

%

 

 

11

%

Software license

 

$

18,794

 

 

$

21,633

 

 

 

-13

%

 

 

12

%

 

 

14

%

 

 

7,838

 

 

 

9,735

 

 

 

-19

%

 

 

5

%

 

 

6

%

Maintenance

 

 

36,159

 

 

 

35,744

 

 

 

1

%

 

 

23

%

 

 

23

%

Services

 

 

115,555

 

 

 

119,267

 

 

 

-3

%

 

 

76

%

 

 

79

%

 

 

80,359

 

 

 

87,406

 

 

 

-8

%

 

 

51

%

 

 

57

%

Hardware and other

 

 

18,534

 

 

 

11,313

 

 

 

64

%

 

 

12

%

 

 

7

%

Hardware

 

 

5,851

 

 

 

3,758

 

 

 

56

%

 

 

4

%

 

 

3

%

Total revenue

 

$

152,883

 

 

$

152,213

 

 

 

0

%

 

 

100

%

 

 

100

%

 

$

156,850

 

 

$

153,903

 

 

 

2

%

 

 

100

%

 

 

100

%

 

Our revenue consists of fees generated fromCloud Subscriptions Revenue. In 2017, we released Manhattan Active™ Solutions accelerating our business transition to cloud subscriptions. In 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.

License revenue.  License revenue decreased $2.8 million, or 13%, in the thirdfirst quarter of 20172021, cloud subscriptions revenue increased $9.4 million compared to the same quarter in the prior year, influenced byas customers’ demand for our Manhattan ActiveTM Solutions transition to Cloud asSaaS offerings is outpacing traditional perpetual license deals convertedsolutions. Our customers increasingly prefer cloud-based solutions, including existing customers that are migrating from on-premise to cloud-based offerings. Cloud deals based on customer demand. Oursubscriptions revenue for the Americas, EMEA and APAC segments increased $7.2 million, $2.1 million and $0.1 million in the first quarter of 2021, respectively.

Software License Revenue.  Software license revenue performance depends on the number and relative value of large deals and perpetual versus cloud mix we closedecreased $1.9 million in the period. We recognizedfirst quarter of 2021 compared to the same quarter in the prioryear as customers began to purchase our SaaS offerings rather than a traditional perpetual license.License revenue for the Americas decreased $4.3 million in the first quarter of 2021, while license revenue of $1.0for the EMEA and APAC segments increased $2.1 million or greater on four new separate contracts in the third quarter of 2017. and $0.3 million, respectively.

The perpetual license sales percentage mix across our product suite in the thirdfirst quarter ended September 30, 2017March 31, 2021 was approximately 60%over 80% warehouse management solutions and 40% non-warehouse management solutions.

Services revenue.  ServicesMaintenance Revenue. Maintenance revenue decreased $3.7increased $0.4 million or 3%, in the thirdfirst quarter of 20172021 compared to the same quarter in the prior year. Maintenance revenue for the Americas segment decreased $0.2 million in the first quarter of 2021 compared to the same quarter in the prior year, duewhile the EMEA and APAC segments increased $0.4 million and $0.2 million, respectively.


Services Revenue.  Services revenue decreased $7.0 million in the first quarter of 2021 compared to a $5.6the same quarter in the prior year. Services revenue for the Americas, EMEA and APAC segments decreased $5.0 million, decrease$0.6 million, and $1.4 million, respectively, compared to the same quarter in professional services revenue, partially offset by a $1.9 million increase in customer support and software enhancements.the prior year. The decline in services revenue was primarily due to a reduction in professional services hiring in 2020 and a decrease in billed-travel revenue, as a result of the COVID-19 pandemic.

Hardware Revenue.  Hardware sales increased $2.1 million 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 thirdfirst quarter of 20172021 compared to the same quarter of 2016.

Hardware and other.  Hardware sales increased by $7.0 million to $13.5 million in the third quarter of 2017 compared to $6.5 million for the third quarter of 2016.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.

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 March 31,

 

 

 

2021

 

 

2020

 

 

% Change vs.

Prior Year

 

Cost of software license

 

$

556

 

 

$

555

 

 

 

0

%

Cost of cloud subscriptions, maintenance and services

 

 

73,509

 

 

 

74,276

 

 

 

-1

%

Total cost of revenue

 

$

74,065

 

 

$

74,831

 

 

 

-1

%

 

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 millionremained flat in the thirdfirst quarter of 20172021 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 hosting fees. The $4.7$0.8 million or 9%, decrease in cost of services in the quarter ended September 30, 2017March 31, 2021 compared to the same quarter in the prior year was principally due to a $3.1$4.1 million decrease in compensation and other-personnel related expensestravel expense, and a $1.4$1.2 million decrease in computer infrastructure costs, offset by a $4.0 million increase in performance-based compensation.

Cost of hardwarecompensation expense, 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,

 

 

 

2017

 

 

2016

 

 

% Change vs.

Prior Year

 

 

 

(in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

$

14,747

 

 

$

13,389

 

 

 

10

%

Sales and marketing

 

 

10,739

 

 

 

10,003

 

 

 

7

%

General and administrative

 

 

11,031

 

 

 

11,225

 

 

 

-2

%

Depreciation and amortization

 

 

2,275

 

 

 

2,334

 

 

 

-3

%

Restructuring charge

 

 

(77

)

 

 

-

 

 

 

100

%

Operating expenses

 

$

38,715

 

 

$

36,951

 

 

 

5

%

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$0.9 million increase in compensation and other-personnel related expenses resulting from increased headcount to support R&D activities.other personnel-related expenses.

Operating Expenses

 

 

Three Months Ended March 31,

 

 

 

2021

 

 

2020

 

 

% Change vs.

Prior Year

 

 

 

(in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

$

24,260

 

 

$

23,328

 

 

 

4

%

Sales and marketing

 

 

13,396

 

 

 

13,088

 

 

 

2

%

General and administrative

 

 

17,569

 

 

 

16,114

 

 

 

9

%

Depreciation and amortization

 

 

2,135

 

 

 

2,346

 

 

 

-9

%

Operating expenses

 

$

57,360

 

 

$

54,876

 

 

 

5

%

Research and 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-sale and tablet retailing.point-of-sale.

For each of the quarters ended September 30, 2017March 31, 2021 and 2016,2020, 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.

R&D expenses primarily consist of salaries and other personnel-related costs for personnel involved in our R&D activities. R&D expenses for the quarter ended March 31, 2021 increased by $0.9 million, compared to the same quarter of 2020 principally due to a $1.4 million increase in performance-based compensation expense, offset by a $0.6 million decrease in compensation and 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 forremained relatively flat in the quarter ended September 30, 2017 increased by $0.7 millionMarch 31, 2021 compared to the same quarter in the prior year, primarily due to increased commissions expense.year.

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 $1.5 million or 2%, in the current year quarter compared to the same quarter in the prior year.year, primarily due to a $0.9 million increase in compensation and other personnel related expenses, and a $0.8 million increase performance-based compensation expense.


Depreciation and amortization.Amortization.  Depreciation and amortization of intangibles and software expense for both the thirdfirst quarter of 20172021 and 20162020 was $2.2 million.$2.1 million and $2.3 million, respectively. Amortization of acquisitions 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 secondfirst quarter of 2017.2021 and 2020 was immaterial.

22


Operating Income

Operating income forin the thirdfirst quarter of 20172021 was $51.1$25.4 million compared to $53.6$24.2 million in the first quarter of 2020. Operating margin was 16.2% for the thirdfirst quarter of 2016. Operating margins were 33.4% for the third quarter of 20172021 versus 35.2%15.7% for the same quarter in the prior year. Operating income decreasedand operating margin increased primarily due to the decline in licenseincreased cloud subscriptions revenue and servicesincreased hardware revenue.

Other Income and Income Taxes

 

 

Three Months Ended September 30,

 

 

Three Months Ended March 31,

 

 

2017

 

 

2016

 

 

% Change vs.

 

 

2021

 

 

2020

 

 

% Change vs.

Prior Year

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income, net

 

$

207

 

 

$

210

 

 

 

-1

%

Other (loss) income, net

 

$

(293

)

 

$

1,420

 

 

 

-121

%

Income tax provision

 

 

18,704

 

 

 

20,298

 

 

 

-8

%

 

 

2,489

 

 

 

3,086

 

 

 

-19

%

 

 

Other (loss) income, net.  Other (loss) income, net principallyprimarily includes interest income, foreign currency gains and losses, and other non-operating expenses. Other (loss) income, net remained flatdecreased $1.7 million in the thirdfirst quarter of 20172021 compared to the same quarter of 2016.

Income tax provision.  Our effective income tax rates were 36.5% and 37.7% for the quarters ended September 30, 2017 and 2016, respectively.

Summary of the First Nine Month of 2017 Condensed Consolidated Financial Results

Diluted earnings per share for the nine months ended September 30, 2017 was $1.32, compared to $1.30 for the nine months ended September 30, 2016.  

Consolidated revenue for the nine months ended September 30, 2017 was $450.5 million, compared to $457.0 million for the nine months ended September 30, 2016. License revenue was $64.0 million for the nine months ended September 30, 2017, compared to $62.9 million for the nine months ended September 30, 2016.  

Operating income was $142.1 million for the nine months ended September 30, 2017, compared to $149.0 million for the nine months ended September 30, 2016.

Cash flow from operations was $116.6 million in the nine months ended September 30, 2017, compared to $101.5 million in the nine months ended September 30, 2016.

Cash and investments on-hand was $129.7 million at September 30, 2017, 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 heavily on the number and relative value of large deals and 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, 2017 was approximately 65% warehouse management solutions and 35% non-warehouse management solutions.

Services revenue.  Services 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 million in the nine months ended September 30, 2017 compared to $24.9 million for the same period in the prior year. The majority of hardware sales are derived from our Americas segment.  Hardware sales are 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. Reimbursements by customers for out-of-pocket expenses were approximately $13.8 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, 2017 compared to the same period in the prior year principally due to decreased sales of third-party software.

Cost of services.  Cost of services consists primarily of salaries and other personnel-related expenses of employees dedicated to professional and technical services and customer support services.  The $7.5 million, or 5%, decrease in cost of services in the nine months ended September 30, 2017 compared to the same period in the prior year was principally due to a $3.7 million decrease in performance-based compensation expenses and a $3.4 million decrease in compensation and other personnel-related expense resulting from decreased headcount.

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.

24


Operating Expenses

 

 

Nine Months Ended September 30,

 

 

 

2017

 

 

2016

 

 

% Change vs.

 

 

 

(in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

$

43,074

 

 

$

41,553

 

 

 

4

%

Sales and marketing

 

 

34,260

 

 

 

34,606

 

 

 

-1

%

General and administrative

 

 

34,290

 

 

 

36,041

 

 

 

-5

%

Depreciation and amortization

 

 

6,863

 

 

 

6,806

 

 

 

1

%

Restructuring charge

 

 

2,945

 

 

 

-

 

 

 

100

%

Operating expenses

 

$

121,432

 

 

$

119,006

 

 

 

2

%

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 nine months ended September 30, 2017 increased by $1.5 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 primarily due to a $0.9 million decreasegains or losses on intercompany transactions denominated in compensation and other personnel-related expenses and a $0.7 million decrease in performance-based compensation expenses.

Depreciation and amortization.  Depreciation expense amounted to $6.5 million for both the nine months ended September 30, 2017 and 2016, respectively. Amortization expense for the nine months ended September 30, 2017 and 2016 was immaterial.

Restructuring Charge.  In May 2017, the Company eliminated about 100 positionsforeign currencies with subsidiaries 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, 2017 was $142.1 million compared to $149.0 million for the same period in the prior year. Operating margins were 31.5% for the first nine months of 2017 versus 32.6% for the same period in 2016. Operating income and margin decreased primarily due to decline in revenue and the restructuring charge in the nine months ended September 30, 2017.

Other Income and Income Taxes

 

 

Nine Months Ended September 30,

 

 

 

2017

 

 

2016

 

 

% Change vs.

Prior Year

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other (loss) income, net

 

$

(232

)

 

$

1,384

 

 

 

-117

%

Income tax provision

 

 

49,876

 

 

 

56,018

 

 

 

-11

%

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 million in the nine months ended September 30, 2017 compared to the same period in 2016 primarily related to foreign currency losses resulting from the fluctuation of the U.S. dollar relative to other foreign currencies, principallyprimarily the Indian RupeeRupee. We recorded net foreign currency losses of $0.3 million in the first quarter of 2021, and Great British Pound Sterling.

net foreign currency gains of $1.4 million in the first quarter of 2020.

Income tax provision.Our effective income tax rate was 35.2%rates were 9.9% and 37.3%12.0% for the nine monthsquarters ended September 30, 2017March 31, 2021 and 2016,2020, respectively. The decrease in the effective tax rate for the ninethree months was primarilyended March 31, 2021 is due to the implementation of ASU 2016-09, Improvements to Employee Share-Based Payment Accountingforeign jurisdiction business incentives and change in 2017. The income tax provision for the nine months ended September 30, 2017 includes excess tax benefits of $1.9 million on vesting of restricteddeductible stock which would have been recorded as additional paid-in-capital under the previous guidance.compensation.

Liquidity and Capital Resources

InDuring the first ninethree months of 2017,2021, we funded our business exclusively through cash flow generated from operations. Our cash and cash equivalents as of September 30, 2017March 31, 2021 included $62.1$155.9 million held in the U.S. and $67.6$41.3 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 unremitted earnings of our foreign subsidiaries, in the form of dividends or otherwise, we would no longer be subject to additional U.S. income taxes which would result in a higher effective tax rate.  However, our current intent ison such earnings due to indefinitely reinvest these funds outsidethe enactment of the U.S.,Tax Cuts and Jobs Act in December 2017, but we do not have a current cash requirement need requiring U.S. repatriation.could be subject to additional local withholding taxes.

OurCash flow from operating activities generated cash flow of approximately $116.6totaled $39.9 million and $101.5$11.6 million forin the ninethree months ended September 30, 2017March 31, 2021 and 2016, respectively, reflecting strong global cash collections.2020, 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. Cash flow from operating activities for the three months ended March 31, 2021 increased $28.3 million compared to the same period in the prior year, which is mainly due to a decrease in employee bonus payments and the timing of cash collections from our customers.

Cash flow used in investing activities totaled $0.6 million and $1.2 million in the three months ended March 31, 2021 and 2020, respectively. Our investing activities for both the three months ended March 31, 2021 and 2020 consisted of capital spending to support company growth.

Financing activities used cash of approximately $8.4 million during the nine months ended September 30, 2017, and generated cash flow of approximately $4.7 million during the nine months ended September 30, 2016. The uses of cash for investing activities for the nine months ended September 30, 2017 were $4.5 million in net purchases of short-term investments and $3.9 million in capital expenditures to support company growth. The primary generation of cash for investing activities for the nine months ended September 30, 2016 was $10.2 million in net maturities of short-term investments, partially offset by $5.5 million in capital expenditures.

Our financing activities used cash of approximately $81.7$46.4 million and $112.8$43.0 million for the ninethree months ended September 30, 2017March 31, 2021 and 2016,2020, respectively. The use of cash for financing activities for the nine months ended September 30, 2017 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 use of cash for financing activities for the nine months ended September 30, 2016in both periods was to purchase approximately $118.0 million of our common stock, including $9.5 million in shares withheld for taxes due upon vesting of restricted stock units, partially offset by$19.4 million and $18.0 million for the three months ended March 31, 2021 and 2020, respectively.


As disclosed in our Annual Report on Form 10-K, our principal commitments consist of obligations under operating leases. As we continue our business transition to a $5.2cloud subscription model, we have entered into multiple non-cancellable contracts for cloud infrastructure services. As of March 31, 2021, our cloud infrastructure obligations are approximately $70 million excess tax benefit from equity-based compensation.over the next 5 years.  We did not have the offset related to the excess tax benefit from equity-based compensationalso enter into non-cancellable subscriptions in the nine months ended September 30, 2017ordinary course of business for internal software to support our operations.  Our obligations, as we adopted ASU 2016-09 inof March 31, 2021, are approximately $10 million over the period. Under the new guidance, excess tax benefits recognized on share-based compensation expense are classified as an operating activity on the statementsnext 3 years. We expect to fulfill all of cash flows rather than as a financing activity, and we have applied this provision on a prospective basis.these commitments from our working capital.

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. InWith the COVID-19 impact, we are focused on preserving liquidity and protecting our headcount capacity to support our customers and grow our business when global economic activity begins to recover. For the remainder of 2017,2021, 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 and growing our business to extend our market leadership. We expect towill continue to weigh our share repurchase options against using cash for investing in the business andevaluate acquisition opportunities that are complementary to our product footprint and technology direction. We will also continue to weigh our share repurchase options against cash for acquisitions and investing in the business. At this time, we do not anticipate any borrowing requirements infor the remainder of 20172021 for general corporate purposes.

Critical Accounting Policies and Estimates

In the first ninethree months of 2017,2021, 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.2020.

26


Forward-Looking Statements

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:

economic, political and market conditions;

the duration and severity of the coronavirus disease (COVID-19) pandemic and of measures taken to combat its spread, and the effects of both on our employees, customers, partners and the global economy;

ongoing disruption and transformation in our vertical markets, including the aggravating effects of the COVID-19 pandemic on the sector;

the operational and financial effects of our business transition to cloud subscription-based solutions;

economic, political and market conditions;

our ability to attract and retain highly skilled employees;

competition;

our dependence on a single line of business;

our dependence on generating revenue from software licenses and cloud subscriptions to drive business;

undetected errors or “bugs” in our software;

the risk of defects, delays or interruptions in our cloud subscription services;

possible compromises of our data protection and IT security measures;

ability


risks associated with large system implementations;

possible liability to customers if our products fail;

the requirement to maintain high quality professional service capabilities;

the risks of international operations, including foreign currency exchange risk;

the possibility that research and development investments may not yield sufficient returns;

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 exit from the European Union;

the 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, 2020, as these may be updated from time to time in subsequent quarterly reports.

We undertake no obligation to attract and retain highly skilled employees;

competition;

our dependence on a single lineupdate or revise forward-looking statements to reflect changed assumptions, the occurrence of business;

our dependence on generating license revenue 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;

the risks of international operations, including foreign currency exchange risk;

the possibility that research and developments investments may not yield sufficient returns;

possible liability to customers if our products fail;

undetected errorsunanticipated events or “bugs”changes in our software;

the long sales cycle associated with our products;

the difficulty of predictingfuture operating results;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; 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, as these may be updated from time to time in subsequent quarterly reports.

ItemItem 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, 2016.2020.

ItemItem 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 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,March 31, 2021, 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.

 

 


 

PART II

OTHER INFORMATION

ItemItem 1.

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.

ItemItem 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, 2017.2020.

ItemItem 2.

Unregistered Sales of Equity Securities and Use of Proceeds.

We did not make anyThe 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.March 31, 2021.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

January 1 - January 31, 2021

 

 

-

 

 

$

-

 

 

 

-

 

 

 

50,000,000

 

February 1 - February 28, 2021

 

 

92,439

 

 

 

131.81

 

 

 

92,439

 

 

 

37,815,955

 

March 1 - March 31, 2021

 

 

121,983

 

 

 

121.36

 

 

 

121,983

 

 

 

23,011,802

 

Total

 

 

214,422

 

 

 

 

 

 

 

214,422

 

 

 

 

 

ItemItem 3.

Defaults Upon Senior Securities.

No events occurred during the quarter covered by thethis report that would require a response to this item.

ItemItem 4.

Mine Safety Disclosures.

Not applicable.

ItemItem 5.

Other Information.

No events occurred during the quarter covered by the report that would require a response to this item.None


Item 6.

Exhibits.

Item 6.Exhibits.

Exhibit 10.1

Amendment No. 3 to Manhattan Associates, Inc. 2007 Stock Incentive Plan

 

 

Exhibit 31.1

Certification of Principal Executive Officer pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

 

 

28


Exhibit 31.2

Certification of Principal Financial Officer pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

 

 

Exhibit 32*

Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

 

 

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

Exhibit 104

The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2021, has been formatted in Inline XBRL.

*

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.


 

 

29


EXHIBIT INDEX

Exhibit 10.1

Amendment No. 3 to Manhattan Associates, Inc. 2007 Stock Incentive Plan

Exhibit 31.1

Certification of Principal Executive Officer pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

Exhibit 31.2

Certification of Principal Financial Officer pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

Exhibit 32*

Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Exhibit 101.INS

XBRL Instance Document

Exhibit 101.SCH

XBRL Taxonomy Extension Schema Document

Exhibit 101.CAL

XBRL Taxonomy Extension Calculation Linkbase Document

Exhibit 101.DEF

XBRL Taxonomy Extension Definition Linkbase Document

Exhibit 101.LAB

XBRL Taxonomy Extension Label Linkbase Document

Exhibit 101.PRE

XBRL Taxonomy Extension Presentation Linkbase Document

*

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.


 

30


SIGNATURES

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 30, 2017April 29, 2021

/s/ Eddie Capel

 

 

Eddie Capel

 

 

President and Chief Executive Officer

 

 

(Principal Executive Officer)

 

 

 

 

       Date:

October 30, 2017April 29, 2021

/s/ Dennis B. Story

 

 

Dennis B. Story

 

 

Executive Vice President, Chief Financial Officer and Treasurer

 

 

(Principal Financial Officer)

 

 

27

31