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spk01: 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.
spk04: 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.
spk11: 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?
spk07: Thanks, Eddie. And as Eddie mentioned, record Q2 and first half results. In nearly every major metric category, we put up record numbers. Growth, profitability, cash flow, and balance sheet results were all solid for the quarter. Our quality of earnings performance was outstanding top to bottom. There are no one-time adjustments in these results, just great execution. And here is a summary of Q2 financial highlights. which includes our guidance for total revenue, operating profit, and earnings per share. You also can refer to today's earnings release for our adjusted and gap guidance. Also, unless otherwise stated, growth rates are on a year-over-year basis. So total revenue was up $166 million, or was $166 million up 22%. Our outperformance was broad and across all revenue line items. Like Q1, we again experienced notable strength in cloud. Based on our strong first half and second half outlook, we are raising our total revenue guidance from our previous range of $625 to $643 to $650 million. So our new range is $643 to $650 million on total revenue, targeting 10% growth at the midpoint of $646 million. Our underlying total revenue growth, excluding license and maintenance, which removes the revenue compression from our cloud transition, is targeted to be 18% at the midpoint. And for Q3, we expect total revenue of $162 to $165 million, or 9% growth at the midpoint. For adjusted EPS, EPS was up $0.61, or was $0.61 up 53%, and GAAP EPS was $0.48. For adjusted EPS, we are raising our full-year guidance range to $2 to $2.06, with a midpoint of $2.03, up 23% from our previous midpoint of $1.65. For GAAP earnings per share, our guidance range is $1.50 to $1.56, with a midpoint of $1.53, and that's up 33% from our previous midpoint of $1.15. For Q3, we expect adjusted EPS to be 53 cents to 55 cents. Moving to revenue lines, cloud revenue was $29 million, up 55%. For Q3, we expect cloud revenue of roughly $30.5 million and are raising our previous full year 2021 cloud revenue estimate of $111 to $113 million. We're raising that up to $117 to $119 million, equating to 48% growth at the midpoint. Q2 was a record second quarter with RPO, with bookings totaling $489 million, up 117% year over year, and 16% sequentially. With RPO continuing to compound positively, our visibility into future subscription revenue continues to strengthen. As mentioned in Q1, we will update our forward-looking guidepost on our Q4 call, and we intend to guide RPO on an annual basis as bookings can be lumpy, primarily based on sales cycle timing, the number and relative value of large deals, and product mix from quarter to quarter. That said, With our strong year-to-date RPO performance, we are raising our 2021 estimate of $450 to $550 million to $550 million to $600 million. License revenue for the quarter was $8.8 million as our base of existing customers added users in the quarter. And maintenance revenue was up, or I'm sorry, was $38 million, up 5%. on license revenue and solid cash collections. As previously discussed, we expect second half license and maintenance revenue to decline on customer conversions to cloud, which is positive for our company, our customers, RPO, and future subscription revenue growth. We expect license to decline to about $6 million in Q3 and $4.5 million in Q4. For maintenance revenue, we are targeting roughly $36 million in Q3 and $35.5 million in Q4. For perspective, on cloud demand full year 2020, license revenue was down 22% and maintenance down 1%. Our 2021 forecast has license down about 54% in the second half and down 29% for the full year. No question, cloud demand is outstripping license. Maintenance will be down about 1% for full year 2021. Also, maintenance will have a longer attrition tail as customers typically maintain customer support through the cloud conversion cycle. Moving to services revenue, services revenue was $85 million, up 18%. with our cloud momentum fueling our services and revenue growth. Our Q3 services revenue estimate is $86 million, and for Q4, our estimate is $83 million. The sequential decline is driven by Q4 retail peak season impact, as customers typically idle implementations. And our final revenue line, hardware, delivered $6 million in revenue, up 66%. So that covers growth, How about profitability? Our consolidated subscription, maintenance, and services margin for the quarter was 55.9%, up over 350 basis points compared to the year-ago period, and it was predominantly driven by revenue performance and cloud operating leverage. We expect Q3 consolidated cloud subscription, maintenance, and services margin to be about 55.2%, and Q4 margin to be 52.7%, again, driven by retail peak season, resulting in a second-half margin of approximately 54% ahead of our prior outlook of 51.1%. And how about the bottom line? Q2 operating income totaled $50 million, up 46%. Operating margin was 30.2%, up over 490 basis points. Gap operating margin was 23.7%. We are increasing our full year adjusted operating margin range to 25.5% to 26%, up about 400 basis points over prior guidance of 21% to 22%. For Q3, We expect a range of 27% to 27.5%. And for Q4, a range estimate of 22.5% to 23%. Just a reminder, our second half license and maintenance of TRID expectations combined with Q4 retail peak seasonality is factored into our Q4 estimates. That said, we are very pleased with our earnings leverage And we are continuing to invest significantly in our business to drive long-term sustainable, double-digit, top-line growth, balanced with top quartile operating margins. Now, turning to cash, cash flow, taxes, and cap structure, another solid performance. We closed with Q2 cash on hand, totaling $209 million with zero debt. Our operating cash flow was $46 million, resulting in year-to-date operating cash flow of $85 million, up 41%. Our Q2 free cash flow margin was 27%. And note, our CapEx estimate for 2021 continues to be $6 to $8 million. Also, we invested $33 million in share buybacks in Q2, resulting in $60 million in buybacks year-to-date. For the third quarter and full year, we estimate our diluted shares outstanding to be about 64.4 million shares, which assumes no buyback activity. And also, our board raised our buyback authority to $50 million. Regarding taxes, our adjusted effective income tax rate for Q2 was 21.7%, and our GAAP tax rate was 23%. For full year 2021, We continue to expect an adjusted tax rate of about 21.5% and a gap tax rate of approximately 20%. So that covers the financial update. Thank you, and back to Eddie.
spk11: Very good. Thanks, Dennis. Well, we're very pleased with our strong second quarter and year-to-date results. And while the global macro environment remains somewhat turbulent, Manhattan Associates is entering into the second half of 2021 with some tailwinds. You know, we've accelerated the pace of our innovation and are delivering the right solutions at the right time. And the result is a strong business momentum and a great opportunity for us to deliver success to our customers and help shape their digital transformation. And before opening up for questions, I do want to take this opportunity to thank all of my Manhattan Associate teammates across the globe. Many of you have started to return to our offices and I continue to be inspired by your flexibility, resilience, and ongoing commitment to ensure our customers are successful. So thanks again. I'll second that. Bren, we're now open to take questions.
spk01: As a reminder, to ask a question, you will need to press star 1 on your telephone keypad. Again, that's star 1 on your telephone keypad. Your first question comes from the line of Terry Tillman from Trubis Securities. Your line is open.
spk09: Hey, gentlemen. Good afternoon, and definitely congratulations on the results and the outlook update. I have two questions. The first one, Eddie, for you, in terms of now delivering on the innovation around ActiveWM and TM and combined, are you actually seeing sales cycles where they actually want to buy both of the products at the same time, or is it more of a differentiator and it's just helping spur the conversations and improve close rates on just either or. That's the first question.
spk11: Yeah, good question, Terry. Well, it's early. Of course, we're six weeks past release of Manhattan Active TM, but the answer is yes. We have sold at least one that comes to mind, brand new customer, so new logo, not done business with us before. And they contracted for both Manhattan Active WM and Manhattan Active TM. So I feel pretty good about that. And off to a good start, you know, six weeks in.
spk09: That's great. And then just the follow-up question, Dennis, for you, and thanks for all the financial color, is what I'm curious about is I think – I forgot if it was the fourth quarter or the first quarter call. I think it was the fourth quarter call. You gave us kind of a long-term roadmap and how, like, the cloud subscription revenue, how it's going to layer on from this growing RPO. But what I'm curious about is, yes, you guys are well ahead of expectations on RPO, but also your cloud subscription revenue has been coming along faster than I would have expected. Does that change kind of how the glide path or the acceleration curve is going to be that you talked about in a couple years on cloud subscription revenue? Or could it be maybe more evened out because of what you're seeing? Thank you.
spk07: Yeah. It is the former versus the latter, Terry. It will change, and we'll address that. We'll address those updates in the Q4 call for sure. Great visibility, forward visibility. Sounds great.
spk01: Your next question comes from the line of Joe Ruhing from Beard. Your line is open.
spk03: Great. Hi, everyone. I wanted to go to the comment just on existing customers maybe choosing to migrate a little more quickly, or I think you said accelerating somewhat. Is that just a function of maybe time and comfort, the fact that we're over a year now with active WM in market, so there's been a chance to see it? There's maybe some reference examples. Or is there something else going on there where, given what's happening from an industry backdrop, just the elevated importance of supply chain, maybe comfort with cloud ultimately feeds in as well, that more customers are arriving at the conclusion that now is the right time to maybe embrace the new products?
spk11: Yeah, I think you've answered the question well there, Joe. We're a year in or a year or so, and certainly it takes a little time, not so much from a referenceability perspective, but the budgeting cycles, and even though our existing customers, if you want to call them sales cycles, take a while. We're starting to see more of them come to fruition, but also the accelerating need for digital transformation in that core supply chain execution space. You know, we've talked about this before that, you know, distribution centers don't look the same today as they did five or certainly 10 years ago. And the need for that modern software engine and technology to be able to power those distribution centers is certainly something that's fueling, you know, fueling the growth too.
spk03: Okay, that's great. And then just on the development of cloud and other gross margins and the upside you're starting to see, I guess, Bigger picture because there's a couple of quarters in a row now of sequential gross margin improvement. Do you think you're at the point within the context of the broader transition and really the investment in cloud infrastructure and personnel that you've been making over a number of years now, you're at a point where there just should be greater leverage behind that past investment. And so, understandably, There's seasonal changes in gross margin, but maybe as we look to the out years, there's an opportunity to build on 2021's levels.
spk11: Yeah, well, Dennis will take some of the details here as well, but certainly there's opportunity to build on scale and leverage and so forth. I do think we had a virtual momentum conference this year, so we ended some underspend there, frankly. We still have the opportunity that we believe to invest more in marketing and awareness. We're doing okay, clearly, but we've got to get the message out and make sure we're not, you know, one of the world's best kept secrets from a technology and a supply chain perspective. So there's still, you know, still some underspend there from our perspective. And, you know, we'll continue to make, you know, make those investments as well as material investments in research and development.
spk07: Yeah, Joe, I'll piggyback on Eddie, too. So we're in year four of five, so I'd say we're probably, when we look at where we're at, we're probably a year ahead of what we expected. We're pretty excited about that, but bottom line is we're going to continue to invest in TNT, and that's talent and technology. We think our overall objective is to you know, as I said in this call and continue to say is the objective is really to create long-term sustainable double-digit top-line growth and be a top quartile margin performer against any tech comps out there. And I think we're doing pretty good there.
spk03: Okay. That's great. Thank you very much.
spk11: Thank you, Joe.
spk01: Your next question comes from the line of Brian Peterson from Raymond James. Your line is open.
spk08: Thanks, gentlemen, and congrats on a really strong RPO number. So, Dennis, maybe a follow-up on that last question. You know, I think we've seen the initial outlook of the last three years imply a decline in operating margins, but now we're seeing an expansion in 2020. We'll see margins up again this year. You know, I know there's still a lot of moving parts. But are we at the point where we can kind of call a trough in operating margins? Or is there any dynamic related to hiring or investments that we need to keep in mind there?
spk07: We're not going to call a trough at this stage. So we'll evaluate that and discuss that in the Q4 earnings call, Brian. We are going to continue to invest in the business. But suffice to say, we're pretty confident in our ability to generate operating leverage.
spk08: Got it. And maybe just one follow-up for me on the RPO. That was pretty strong again this quarter. You know, I'm curious, if you had to look back in the first half of the year and, you know, clearly RPO exceeded our expectations, do you think the upside was more related to volume or just like the sales cycle's or maybe related to deal value in any way that you could kind of slice and dice it that way. I'd just be curious to get your thoughts there. Thanks.
spk11: That's pretty, pretty balanced, Brian, actually, you know, so we've, you know, we've, we've seen nice deal volume. We've seen some, some bigger deals, not much, but a little bit on the longer contract side. So, you know, a really, a really nice balance is driving that, that RPO number, frankly.
spk07: Yeah. We're seeing a nice balance of not just our install base, but net new customers in our portfolio as well. Pretty exciting.
spk11: Good to hear. Thanks, guys. Thank you, Brian.
spk01: Your next question comes from the line of Mark Schapel from Benchmark. Your line is open.
spk06: Hi, good afternoon, and thank you for taking my question. Let me start off by saying congratulations. Nice job on the quarter, another good quarter. I just want to drive down into some of the drivers of growth in the quarter. Were there particular product areas that you saw, you know, certain outperformance more so than others? I mean, it appears just based on some of your commentary in your prepared remarks that WMS kind of led the way. Is that a good read?
spk11: You know, certainly WMS was the preponderance. You know, you know our heritage there and so forth, and it tends to be sort of the lead product. But much like Q1, there was very nice balance across the product portfolios. WMS was strong for sure, and it was the lead dog. But MAO really stepped up in Q2 and delivered some nice numbers. And TMS, point of sale and inventory participated as well. So pretty nice balance, frankly.
spk07: Yeah, and the pipeline continues to strengthen as well. So we're similar across, yeah, similar balance in the pipeline.
spk06: Okay, great. And then just diving down a little bit on the point of sale, uh, um, uh, product that you have, you know, on the Q1 call, you know, you were seeing a pickup in some large point of sale projects. And, uh, the sense was that retailers were just kind of restarting some of the strategic initiatives that they had. And I was wondering if that momentum carried over into the second quarter here. It appears that it appears that it did.
spk11: Yeah. Yeah. Continue, you know, continues to have nice, uh, nice momentum. Um, you know, the, the good news is that, uh, Some of these implementation timelines are getting shorter and shorter. So we've actually had three point-of-sale customers go live just in the back half of this quarter. And the nice thing about the point-of-sale pipeline for us is, you know, about 50% of the pipeline, again, brand new customers that we've never done business with before. So, you know, this is, as we've said many, many times, not going to be an overnight success, but we really do feel like, you know, the flywheel, given the, you know, the winds, some go lights we're getting under our belt now, and the pipeline, you know, that we're starting to see, you know, the flywheel pick up some momentum.
spk06: Okay, very good. And then finally here, you know, just stepping back, taking like a 30,000-foot view, Eddie, you know, based on the overperformance, it appears that you're seeing a sense of heightened urgency from your customers regarding modernizing their supply chains. And I was just wondering if you could just address how customers are maybe thinking differently about supply chain modernization today than say they were, you know, a year or two ago.
spk11: Yeah, well, I think, you know, a combination of needing or recognizing that they need a resilience in their supply chain. They need contingency in the supply chain. And frankly, it's a very competitive, you know, competitive world out there. You know, I said a little bit of a different way than I said in the, in the script, you know, supply chain these days is a customer service attribute. All right. So each one of the customer supply chain associates and our customers feel like they're customer service advocates. And so I think that, you know, the need continues to grow. The need continues to heighten to bring supply chain to the forefront and be a competitive differentiator for our customers. Okay, great. Thank you.
spk06: That's all from me. Nice job. Thanks, Mark.
spk01: Your next question comes from the line of Yoon Kim from Loop Capital Markets. Your line is open.
spk02: Thank you. So congrats on another strong quarter, Eddie and Dennis. Thank you. Yeah, Eddie, now that you rolled out Active PM, I believe that's the last of the high-profile products to be activated into the active product family, if I can say that. So can you just give us an update on what your overall thought on what's next? Maybe this is a good time to update us on your acquisition strategy. Thanks.
spk11: Yeah, there was still plenty of work to do, Yoon, in the supply chain space. You know, we have, frankly, a much longer list of innovations in the hopper than we can get to in the next quarter or two. So we're continuing to bear down on the investment strategy, build out the innovation into the white space that we see. I do think that, you know, there's a couple of areas, you know, in addition to the constant build-out, the constant changing markets, that drive new needs in the Omni suite of solutions, into WMS, into TMS, there's two categories I think that are popping out as a continuum. One is greater and greater levels of customer engagement. And so all of this work in digital self-service, what we've called consumer-grade CRM, still, I think, is a very vibrant market and a white space for us to drive into. And then the second piece is inventory optimization. I'm not suggesting that any of our customers or the market is not focused on inventory optimization, but there is still a real race to drive customer satisfaction and meet all of those SLAs. And we have yet to see a real acute focus on on inventory optimization in the omni-channel world. And we believe that's coming, and we're investing ahead of that trend.
spk02: Okay. That's great. Thanks. And Dennis, we used to get a metric number of deals above $1 million in the good old licensed revenue days. So how should we think about what is a similar metric for large subscription deals? Should we look at it from the total RPO perspective? Should we be asking you how much of your RPO growth is driven by these large deals or something like that? Just wanted to get your sense on how we should assess your overall exposure to big deal activity Because you have mentioned that RPO growth could be lumpy depending on the, you know, sizable bookings and whatnot. Thanks.
spk07: Yeah, so, you know, from an RPO point of view, it can be lumpy from quarter to quarter, but bottom line is it's compounding from a growth point of view, and that's a very linear line in essence. So, yeah. You know, that's from a – what I would judge our performance by is really the RPO, overall RPO growth from quarter to quarter and the guidance we're giving.
spk02: Gotcha. And then a question that I always ask, any meaningful change in the overall contract length that may have a meaningful impact on the RPO?
spk11: No. No, not at all.
spk02: All right. Sounds good. Thank you very much.
spk11: Thank you.
spk01: Once again, to ask a question, you will need to press Star 1 on your telephone keypad. Again, that's Star 1 on your telephone keypad. Your next question comes from the line of Matt Sal from William Blair. Your line is open.
spk05: Hey, guys. Thanks for taking my questions. Eddie, I think in your prepared remarks, you mentioned that you are seeing existing customers accelerate their conversion to the cloud. Maybe just care to expand on those comments a little bit in terms of what's driving that.
spk11: I just think timing, Matt, for the most part. We're about a year from release. Upgrade cycles, budgeting for upgrade cycles and so forth take some time. So I think that's, you know, that's one factor. And then, you know, and then the continuing need to modernize the distribution center and, you know, get access to get, you know, almost immediate access to the innovation that we're, you know, that we're developing.
spk07: Hey, Matt, the other, you know, just jumping in here is this broader suite of solutions. You know, we've been delivering new innovation over the last four years, and what we're seeing is really, you know, from a pipeline build and just in the sales process, pretty nice diversity across the solutions.
spk05: Got it. And then, you know, from a geographic perspective, I think you called out the Americas as being particularly strong in the pipeline, but also seeing, you know, some improvement in EMEA and APAC. Is that just, you know, driven by America, you know, reopening quicker, being more open than some of those other geographies? Or what's sort of behind the pipeline strength there?
spk11: Yeah, I think that's it, Matt. Because even within, you know, APAC and EMEA returning, you can see the micro trends. You know, there are certain countries and so forth, you know, that are still lagging from a trend. a perspective of opening and opening up the doors and so forth. So, yeah, I just think it's a little bit of a lag and a little bit of timing there before we see the same kind of modernization trends really start to blossom in those markets. But we can certainly see it. I think it's on the doorstep, frankly.
spk05: Okay. Great, guys. That's all I have. Thanks a lot.
spk11: Thank you, Matt. See you.
spk01: Your next question comes from the line of Mark from Rosenblatt Securities. Your line is open.
spk10: Thank you. Good evening, guys. Hey, Mark. Just a quick follow-up to the earlier question on the RPO strength. Obviously, blew through it through just the first couple quarters. And I was wondering how much of your original guidance had or how much macro conservatism might have been built in and sort of how that may or may not still be extended into the second half of the year relative to the obvious incremental strength that you've been seeing?
spk11: Yeah, I mean, there's no question. Coming into the year, we were a little cautious about how things were going to shape up here and around the world. But now, obviously, we're seeing the demand. We're seeing the bookings. We're seeing the pipeline grow. So, you know, feeling, you know, feeling stronger about it. Hence all the raises, you know, the raises across the board. So, you know, we are, we certainly try to be an under-promised over-deliver organization. So we'd like to keep that trend going. But I think as you can see from, you know, the raises that we've provided, that we've delivered and guidance that we've given and so forth, we're not exactly holding back. You know, now we're fairly more confident.
spk10: Got it. And just a last one on Europe. A comment on strength there, just to follow on to the last question. Is there some quantification to that strength, or is it too early to tell just how strong Europe will come back? Just maybe some color as you're looking at Europe over the next six to 12 months.
spk11: Yeah, it's just been a little flatter, you know, relative to the US over the last two or three quarters. And we see it coming, you know, coming back to normality, if you want to, if you'd like to put it that way. You know, typically, we've seen Europe represent, you know, somewhere between 12 and 15% of software, you know, software revenues. And it's been a little lower, you know, Not materially, but a little bit lower than that for the last couple, three quarters. And we see it coming back to normal ranges, you know, here in the near future.
spk10: Got it. Awesome. Thanks, guys.
spk11: My pleasure, Mark. Thank you.
spk01: Ladies and gentlemen, this concludes Manhattan Associates Q2 2021 earnings call. Thank you for participating. You may now disconnect.
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