Manhattan Associates, Inc.

Good afternoon. My name is Ren, and I will be your conference facilitator today. At this time, I would like to welcome everyone to the Manhattan Associates Q2 2021 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star then the number one on your telephone keypad. If you would like to withdraw your questions, press the pound keys. As a reminder, ladies and gentlemen, this call is being recorded today, July 27th. I would now like to introduce Mr. Michael Bauer, Head of Investor Relations of Manhattan Associates. Sir, you may begin.

Thank you, Wren, and good afternoon, everyone. Welcome to Manhattan Associates 2021 Second Quarter Earnings Call. I will review our cautionary language and then turn the call over to Eddie Capel, our CEO. During this call, including the question and answer session, we may make forward-looking statements regarding future events or the future financial performance of Manhattan Associates. You will caution that these forward-looking statements involve risk and uncertainties, are not guarantees of future performance, and that actual results may differ materially from the projections contained in our forward-looking statements. I refer you to the reports Manhattan Associates files with the SEC for important factors that could cause actual results to differ materially from those in our projections, particularly our annual report on Form 10-K for fiscal year 2020 and the risk factor discussion in that report, as well as any risk factor updates we provide in our subsequent Form 10-Qs. We note in particular that uncertainty regarding the impact of the COVID-19 pandemic on our performance could cause actual results to differ materially from our projections. We are under no obligation to update these statements. In addition, our comments include certain non-GAAP financial measures in an effort to provide additional information to investors. We have reconciled all non-GAAP measures to the related GAAP measures in accordance with SEC rules. You'll find reconciliation schedules in the Form 8K we submitted to the SEC earlier today and on our website at manh.com. Now, I'll turn the call over to Eddie.

Thanks, Mike, and good afternoon, everybody, and thank you for joining us as we review our second quarter results and discuss our updated full-year outlook. So Q2 and first half 2021 results were an all-time record for Manhattan Associates, with Q2 total revenue increasing 22 percent to $166 million and adjusted earnings per diluted share increasing 53 percent to 61 cents. And both of these metrics exceeded our expectations. Our global teams are very busy and continue to execute extremely well, as broad revenue outperformance translated into strong top line growth and also earnings leverage. Furthermore, demand continues to strengthen for our growing set of cloud solutions, resulting in record second quarter bookings, with RPO increasing 117% year over year, and 16% sequentially to $489 million. So with momentum accelerating and forward revenue visibility improving, once again, we're increasing our 2021 guidance, including RPO. Now, as many of you are aware, our solutions are mission critical and that we're focused on providing modern cloud native solutions that are architected to unify commerce, and supply chain experiences. Technology is differentiating and industry-leading, and by providing solutions that are scalable, versionless, and extensible, our customers are able to adapt more quickly to changing market conditions and are better positioned to profitably scale their businesses. On the sales front, competitive win rates remain strong at about 70%, is that commitment to innovation keeps Manhattan Associates atop our industry rankings. From a vertical perspective, retail, manufacturing, and wholesale drove more than 80% of our bookings in the quarter. And if we drill in a little to the sub-verticals, they're pretty diverse, including apparel, department stores, food and beverage, industrial, as well as durable and non-durable goods. Now, our Manhattan Active Solution Pipeline continues to grow nicely, too, benefiting from our market leadership position, our unparalleled technology, global infrastructure, and favorable market tailwinds, which are all driving strong demand for our modern, adaptable, scalable, and resilient supply chain, inventory, and omnichannel solutions. We're experiencing solid demand across all of our product suites. About 90% of our pipeline consists of cloud opportunities, with existing customers conversion accelerating somewhat. And in addition, net new potential customers represent about 40% of the pipeline demand. America's pipeline is particularly strong, but we're starting to see Europe and APEC strengthen heading into the second half as well. Now, our global services team executed amazingly well in Q2. They conducted over 100 go-lives. And as expected, our services segment returned to growth in this quarter, increasing 18% compared with the prior year period. Now, with strong demand for our services, we're aggressively recruiting talent globally. But like everyone, we expect the market to be extremely competitive for services and technical talent in the second half. which we have factored into our operational planning and guidance. Now, on the innovation front, it's still quite early in our journey to unify mission-critical commerce and supply chain systems. But that said, given our solution breadth, industry expertise, and commitment to innovation, we are uniquely positioned to successfully do so. With our R&D spend approaching $90 million annually, growing opportunities to innovate within white space, and a large opportunity to drive penetration of our Manhattan active solutions with new and existing customers, we're very well positioned for long-term sustainable growth. Now, as most of you know, in late May and for the second straight year, we held our annual user conference, Momentum Connect, virtually. Like last year, we saw strong registration attendance at the conference, which offered a mix of live sessions and a plethora of on-demand sessions as well. And also for the second year running, we made a major product announcement, this time regarding our transportation management solution. Now, before we get into the details of Manhattan Active Transportation Management, a quick short recap of our multi-year product strategy is probably in order. And back in 2014, we started on our mission to modernize our product lines to ensure both Manhattan and our customers were strategically positioned for future needs. Our strategy really had two key elements. Relaunching industry-leading solutions like WMS, OMS, and TMS as true cloud-native solutions and leveraging our leading edge cloud native platform to create solution capability and unification to a degree that really was previously impossible. Now in 2017, we launched Manhattan Active Omni, the first of these unified cloud native suite of solutions. Manhattan Active Omni unifies contact center, order management, customer engagement, point of sale, and store inventory and fulfillment into a single offering. It allows our customers to deliver unparalleled omni-channel customer experiences without ever needing to install additional applications or ever perform an upgrade. Now, in 2020, we shipped Manhattan Active Warehouse Management, the industry's first Tier 1 cloud-native WMS. And this year, at Momentum Connect, we announced Manhattan Active Transportation Management, with the industry's fastest and smartest multimodal transportation optimization engine. And together with Manhattan Active WM, Manhattan Active TM forms the Manhattan Active Supply Chain, the industry's first unified supply chain execution platform. And we believe Manhattan Active Supply Chain is really a game changer for our customers. For the last couple of decades, we've had a a front row seat to see the challenges and opportunities that come with integrating WMS and TMS in high volume, high complexity digital supply chains. And along the way, we came to realize that the way to solve this problem was not just better integration, but rather through a truly unified distribution and transportation solution. And fortunately, the advent of microservices and a cloud-native architecture presented us with the unique opportunity to build such a unified offering. And we launched it in May of this year. Now, solution unification delivers some obvious benefits like single user experiences for all things supply chain execution, a dramatically simplified integration picture, and a common technology platform for our customers to extend the solution and innovate alongside us. But we believe the opportunities that the unified supply chain platform brings are actually much larger than that. Unification of a WMS and a TMS allows us to solve an entirely new set of problems, a holistic approach to solving problems that benefits our customers in our base application. And it also allows them to solve problems creatively using our entire catalog of microservices. And perhaps most importantly of all, it allows our customers to break down their organizational silos between distribution and transportation and to think about optimizing capabilities inventory flow, and customer deliveries. Because now more than ever, supply chain professionals are effectively customer service associates because their actions directly impact customer outcomes and brand loyalty. So Manhattan Active Supply Chain comprises the newly Manhattan Active Transportation Management combined with Manhattan Active Warehouse Management. And frankly, it's been a great first year for Manhattan Active WM Market response for Manhattan Active WM has really exceeded our expectations, and our product and delivery teams are fully engaged with the busy summer of go-lives. In hindsight, it does appear that there was a significant market demand for a Tier 1 cloud-native WMS, and this quarter's new Manhattan Active WM subscriptions continue to show a nice diversification of geographies and industries. and a nice mix of net new WM logos and conversions from our existing on-premise WMS. And early reports are that customers are seeing significant benefit from innovations like customer-grade mobile experience for warehouse associates, order streaming, and its first-of-a-kind employee engagement capability built directly into WMS. Now, I close out my product remarks today with just a few updates on our other major Manhattan active platform, Manhattan Active Omni. Last quarter, I updated you on some pretty nice signings and growing pipeline for our point of sale application. And this quarter, I'll just tell you a little bit about what we're seeing in order management. We kicked off projects this year at a number of large, well-known global retailers to implement our core order management applications. And not only will they activate core OMS, They'll also take advantage of the Manhattan exclusive innovations like interactive inventory for dynamic order promising. And they're also using now digital self-service capabilities to allow their customers to change order pickup windows, to create their own returns, to create their own exchanges, all directly on their own mobile devices. And we continue to push the boundaries of the problems we solve with Manhattan Active Omni. and with an increasing frequency of our only channel microservices that are at the center of our customers' headless commerce architectures, all for the future good of the industry. Now that concludes my brief business update. Dennis is going to provide you with an update on our financial performance and outlook, and then I'll close our prepared remarks with a brief summary before we move to Q&A. So, Dennis?