Manhattan Associates, Inc.

Good afternoon. My name is Dilem and I'll be your conference facilitator today. At this time, all participants are on a listen-only mode. I'd like to welcome everyone to the Manhattan Associates Q2 earnings conference call. After the speaker's remarks, there'll be a question and answer session. If you'd like to ask a question during this time, slowly press star 1 1 on your telephone keypad. As a reminder, ladies and gentlemen, this call has been recorded today, July 26, 2022. I would now like to introduce Mr. Michael Bauer, Head of Investor Relations of Manhattan Associates. Mr. Bauer, you may begin your conference.

Thank you, Dylan, and good afternoon, everyone. Welcome to Manhattan Associates' 2022 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 the 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 filed 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 2021 and the risk factor discussion in that report, as well as any risk factor updates we provide in our subsequent Form 10Qs. We note in particular that turbulent global macro environment could impact our performance and cause actual results to differ materially from our projections. We are under no obligation to update 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 menh.com. Now, I'll turn the call over to Eddie.

Thanks, Mike. Well, good afternoon, everyone, and thank you for joining us as we review our second quarter results and discuss the increased outlook that we have for full year 2022. Manhattan delivered a record Q2 and record first half results. generating Q2 total revenue of $192 million and adjusted earnings per share of $0.69, both exceeding our expectations. Specifically, 48% growth in cloud revenue and 19% growth in services revenue drove our top line out performance and strong earnings leverage in the quarter. Our global teams are executing very well for our customers, and we continue to invest in our people and in R&D. Our consistent investment and unmatched industry expertise are key factors in our continued strong customer satisfaction levels and innovation that differentiates our mission-critical Manhattan Active platform and solutions. The industry-leading innovation that we're delivering to the market is a key component to our customer success. providing them with the ability to adapt quickly and efficiently to changing market conditions and profitably scale their businesses. Frankly, factors that contributed to our 75% win rates in the quarter. Now, despite FX headwinds, in Q2, RPO, the leading indicator of our growth, increased 84% to $898 million, excluding the FX impact due to the strong dollar RPO totaled $928 million, up 90%. And regardless of any FX movements, we're on pace to exceed our prior outlook of $1 billion in RPO for the second half of this year. Demand for our cloud solutions is strong and broad-based across products, industry verticals, and geographic locations. It also remains robust from both new and existing customers. Similar to Q1, demand from net new customers was particularly strong and contributed 50% of our total bookings in the quarter. And while the mix of bookings will certainly vary on a quarterly basis, We believe that net new customers generating about 55% of our cloud bookings in the first half of the year exemplifies the unique value that we're delivering to the market and our large and growing opportunity. From a vertical perspective, retail, manufacturing, and wholesale continue to drive more than 80% of our bookings in the quarter. Across our cloud solutions, the sub-verticals are pretty diverse. For example, in the quarter-clad deals, one includes a manufacturer of recreational vehicles, a food distribution wholesaler, a Japanese multinational conglomerate that specializes in electronics and industrial products, a specialty retailer of automotive parts, an industrial manufacturer, and a large fashion brand, as well as a number of others. So, as you can see, pretty diverse. And our cloud pipeline continues to be robust with solid demand across our product suites, and net new customers represent about 35% of that demand. On the services front, our global team continues to execute very well, conducting well over 100. Everybody, I'm very sorry about the technical difficulties, but I'll pick back up. and talk a little bit about our cloud pipeline. I think I had mentioned that the vertical diversity that we experienced in Q2. But our cloud pipeline, I think I mentioned this, continues to be robust with a solid demand across our product suite. And our net new customers represent about 35% of the demand in our pipeline. And on the services front, our global team continues to execute incredibly well. They conducted well over 100 go-lives in the quarter. And company-wide, we continue to make really great progress against that hiring. We added over 300 new team members during the first half of the year and expect to be at least 4,000 employees by the conclusion of 2022. These hires will contribute to our ability to meet our future customer needs, grow our market share, and extend our addressable market. Now, speaking of our team, we are very proud that we were recently voted by them a top place to work in Atlanta for the 10th consecutive year. And we've won similar awards this year in India, Australia, and Singapore. I'm also very happy to report that in mid-May, we hosted the In person, our annual customer conference, and it really was a great success. Attendance for the event was strong and terrific to see and talk and collaborate with our customers and partners face to face about our innovation and product strategy. At the conference, we brought together the industry's top agents of change, and we laid out our vision for agile and sustainable supply chain commerce. So let me spend a moment or two on a couple of the newer product concepts that we rolled out at the event. Solution Assembly and our Manhattan Active Platform Developer Portal. So regarding Solution Assembly, we see this concept as the logical next step for the solution unification strategy that we introduced in 2017. Now as a reminder, Solution unification refers to the unique way that we deliver best-in-class order management, point-of-sale, and customer relationship management into a single unified experience called Manhattan Active Omni. Now, this same concept holds true for the unification of active supply chain with warehouse management, transportation management, yard management, automation orchestration, and so on. And at Momentum this year, we introduced our customers to the concept of solution assemblies. And assemblies refer to the Manhattan-designed and developed end-to-end flows which span our major Manhattan active cloud offerings, Omni, Supply Chain, and Inventory. So let me give you a quick example to illustrate the power of assemblies and the strong cross-selling opportunities within our solutions. Given the challenge that inventory continues to pose, let's review a solution assembly in this area that we specifically demonstrated at Momentum. By assembling Manhattan Active Allocation and Manhattan Active Omni, we help have fashion and apparel customers maximize margin and sell through of their own inventory from the time the inventory arrives in the market to the end of the selling season. The key to this particular assembly is the way that allocation continuously informs order management about the health of every inventory position throughout the supply chain network. And armed with this real-time inventory health data, OMS uses the global view of direct consumer demand to proactively reduce inventory positions where they're running heavy and avoid those locations where they're running light. Assembling allocation and order management, it's really made possible via the unique way that we connect APIs across our cloud deployment. And this out-of-the-box assembly reduces both IT complexity and delivers material revenue margin uplink, in this case, for our specialty and apparel customers. Turning now to one of the other key highlights from Momentum, technology. Since we introduced the Manhattan Active Platform in 2017, its cloud-native, evergreen, and auto-scaling capabilities have delivered game-changing innovation for our customers. And as we've talked about, these technical capabilities have been really important differentiators for our solution across a number of application categories. Like the functional capabilities of the Manhattan Active applications, our technology, in particular the extensibility of our underlying tech platform, is vital to our technology-focused customers. So, at Momentum, we introduced the Manhattan Active Platform Developer Portal, a self-guided reference tool for the technologists and developers within our customer base. Now paired with Proactiv, our platform's tool for extending the base behavior of Manhattan Active Applications, the developer portal provides technologists with the ability to incorporate our extensive library of APIs into their broader technical landscape. And we believe that the strong demand that we're seeing from Manhattan Active Applications reflects the mission critical and strategic innovation that we continue to develop. Enhancing customer experiences and customer service remains top of mind for leading enterprises. And when combined with the capabilities that we offer around maximizing revenue and profitability of owned inventory, we expect demand for our solutions to remain strong. And that concludes my business update. Dennis is going to provide you with an update on our financial performance and our enhanced outlook. And then I'll close our prepared remarks with a brief summary before we move to Q&A. So, Dennis?

Thanks, Eddie. Our Manhattan global teams continue to execute exceptionally well as we delivered strong financial results across the board while significantly investing in the business. We are tracking well compared to the rule of 40. As top to bottom line, we continue to raise the bar in a choppy macro environment. delivering strong quality of earnings that includes growth, profitability, cash flow, and great balance sheet metrics. I'll start with a quick recap of the quarter, with growth rates on a year-over-year basis, unless otherwise stated. So total revenue was a record $192 million, up 16%, as reported, and up 18% in constant currency. Excluding license and maintenance revenue, which removes the compression driven by our cloud transition, as reported, total revenue was up 26%. Q2 cloud revenue totaled $42 million, up 48%. We ended the quarter with RPO of $898 million, growing 84% and 11% sequentially. As Eddie mentioned, excluding approximately $30 million in first half FX headwinds, RPO totaled $928 million, up 90%. We are well positioned to exceed the high end of our $1 billion RPO outlook during the second half of this year, of which we estimate $15 to $20 million in potential FX headwinds. Regarding RPO, we expect to update guideposts on our Q3 earnings call. Q2 services revenue knocked it out of the park passing the century mark, recording $101 million up 19% as cloud sales continue to fuel services revenue growth globally. Our Q2 operating profit totaled $53 million, with adjusted operating margin of 27.5%. And importantly, we continue to invest for future growth. In Q2, revenue growth combined with operating leverage drove the outperformance versus our prior 24% operating margin target for the quarter. This resulted in record Q2 earnings per share of 69 cents, up 13%, and GAAP EPS was 49 cents. Turning to cash is king. Q2 operating cash flow was a solid $53 million, up 16%. Adjusted EBITDA margin was 28%, and free cash flow margin was 27%. As we discussed last quarter, our Q2 cash flow absorbed $13 million of incremental cash tax associated with the U.S. Tax Cuts and Jobs Act that did not impact us a year ago in the year ago period. I refer you to item eight on our earnings release for more information on the timing of cash tax payments under this new law. Regarding our balance sheet, let's start with solid. Deferred revenue increased 42% year over year to $179 million. We ended the quarter with $214 million in cash and zero debt. In the quarter, We invested $50 million in share repurchases, resulting in $100 million in buybacks invested year-to-date. Also, our board has approved the replenishment of our $75 million share repurchase authority. Now turning to our updated 2022 guidance. As consistently mentioned, our financial objective is to deliver sustainable double-digit top line growth, and top quartile operating margins, benchmarked against enterprise SaaS comps, of which we are doing. With our strong first half performance and increasing visibility, we are again raising our 2022 outlook. We are raising our total revenue range to $733 to $741 million, with a $737 million midpoint. representing 11% growth as reported and 14% growth removing FX impacts. This is up from our prior guidance midpoint of $723.5 million and 9% growth. Excluding license and maintenance attrition, growth would be 21% as reported and 24% removing FX. For Q3, we expect total revenue of $183 to $187 million, with $185 million midpoint, delivering 9% growth year over year. Excluding license and maintenance revenue, Q3's expected growth at the midpoint is 18%, and removing FX growth would be 22%. We are increasing our operating margin range to 25.5% to 25.7% up from our prior midpoint of 24.5% and our original midpoint of 23.25%. And we have previously highlighted our 2022 operating margin guidance factors in continued investments for growth, including hiring talent. Yes, I said we are hiring. talent retention and performance-based compensation, as well as the return of pandemic-impacted expenses, such as our in-person momentum conference, as well. Also, just a reminder, our margin is also impacted by license and maintenance attrition on customer demand for our cloud solutions. Regarding full year adjusted, Earnings per share, we are raising the range to $2.35 to $2.39 with a $2.37 midpoint, which is up 9% from our prior midpoint of $2.18. And for GAAP EPS, our guidance range is moving up to $1.63 to $1.67. For Q3, We expect adjusted EPS of 56 to 58 cents and GAAP EPS of 36 cents to 38 cents, with the difference between adjusted EPS and GAAP EPS solely representing investment in equity-based compensation. Further drilling down on revenue for the full year 2022. We are increasing our cloud revenue range to 170 to 172 million, representing 40% growth at the midpoint. We estimate cloud revenue will be approximately $44 million in Q3 and $47 million in Q4 at the midpoint. And for our services revenue, we're increasing our forecast to 382 to $387 million. At the midpoint, this represents 15% growth and on a quarterly basis represents Q3 services revenue of $101 million, and for Q4, $93 million for accounting for traditional retail peak seasonality. For maintenance revenue, we are slightly refining our revenue range. Okay, so just backing up here a little bit. For maintenance revenue, we are slightly refining our revenue range to $135.5 to $136.5 million. At the midpoint for Q3, we anticipate maintenance revenue of $33 million and $32 million in Q4. We expect license revenue to be about 2.5% of total revenue, averaging about $3 million in license revenue per quarter for the remainder of the year. For hardware, we expect about $4 million in Q3 and $5.5 million in Q4. what we do well, which is profitability. For consolidated subscription maintenance and services, we expect margin to be about 54% in Q3 and 53% in Q4. For operating margin, at the midpoint, we expect about 25% for Q3 and 23% in Q4. Remember, the Q4 sequential decline in margin accounts for retail peak seasonality. All said, at the midpoint of our guide, we expect to achieve full year operating margin of 25.6%. Finally, we expect our tax rate to be 21.7% and diluted share count to be approximately 63.5 million shares, which assumes no buyback activity. And finally, in all caps, that covers a resilient financial performance update for Q2 and first half of the year. Thank you, and back to Eddie for some closing remarks.

Yeah, perfect. Thanks, Dennis. Well, listen, I apologize again for the technical blips that we may have had during the call. I hope it didn't impede your ability to understand the breadth of our Q2, because despite the FX drag that we saw in the quarter, we're very pleased with our second quarter results and, frankly, our year-to-date results. While we continue to operate, in a turbulent global macro environment, our teams are executing incredibly well, and our business momentum remains very positive. Demand for our solutions is strong, and our pipelines continue to progress very well, as new and existing customers both want to shift to our industry-leading cloud-native applications. So thanks, everybody, again, for joining at Cole, and also thank you to our employees for all the fabulous work that you are doing around the globe. With that, Dulem will be happy to take any questions.

Thank you, sir. As a reminder, to ask a question, you will need to slowly press star 1 1 on your telephone. Please stand by while we compile the Q&A roster. And I show our first question comes from the line of Terry Tillman from Truist. Please go ahead.

Yeah, first, congratulations. And you can't be silent despite a bad conference call operation. So it's good to see the results. And I guess if it wasn't for currency, you got pretty darn close to even getting the low end of the ending of your RPO. So that was good to see. And thanks for the FX impact color. All right, enough of my preamble. One question I was going to ask you, Dennis, just relates to there was a pretty meaningful subscription or cloud subscription revenue acceleration in 2Q. It was up to 48%. I know you're not giving any update on guideposts, but, like, the idea is the way subscription revenue would build, it would actually really accelerate into 24%, if I'm not mistaken. I know you're not giving any updates, but we're already seeing an acceleration in 2Q. How are you thinking about cloud subrevenue and the visibility over the next couple quarters and into next year?

All right, Dylan. Well, I think we've concluded the call. We'd be happy to take any questions that might be in line.

Sure. Mr. Tillman, your line is open. Could you please repeat your question?

Yeah, and this gives me an opportunity to clean the question up. It was a sloppy question, so now I'm going to make it real tight. So, Dennis, the question is this. The cloud subscription revenue accelerated actually notably up to 48%. I know you're not changing any of the guideposts across the KPIs, but is there any potential change from what you all were thinking originally about how the cloud sub-revenue builds over the next couple of years, including the acceleration in 2024?

I would say we're optimistic about that, Terry, but given the guideposts that we provided were, you know, were multi-year, we did make it clear that we'll only revise those longer-term estimates, you know, on an annual basis. So, you know, we're definitely encouraged, but I think, you know, we'll defer, frankly, that question and the answer to the question until the end of the year.

Okay, got it. Maybe, Dennis, for you, though, on the cash flow, anything to think about? I mean, I know there's seasonality on expenses and then PS revenue, but you had the cash impact, the tax cash impact, but you still had strong cash flow. Any sense on how we think about 3Q and 4Q cash flow? And then I had a final question for Eddie.

Our cash flow margin will probably be similar to our operating margin, right in that range.

both quarters yes okay cash impact uh but you start strong cash flow any sense on how we think about 3q and 4q cash flow and then i had a final question for eddie um our cash flow margin will probably be similar to our operating margin right in that range for both quarters yes okay cool thanks for that and then uh maybe eddie just uh It feels like old days of me wanting to ask about a WMS refresh cycle. In your case, you've got the cloud innovation that's going to draw people in to wanting to do that. Can you give us an update on where you are in terms of customers that are now embarking on the Cloud WM strategy? I know you gave us an update over the last couple of quarters. Where is it building now in terms of how many folks are in process? Thank you.

Yeah, that's a great question. I think it changes every few days. So I might be off plus or minus one or two, but we're at about 73 customers under contract, Terry, across I think we're either 11 or 12 countries now, one of the two. And we're over 40 sites are live across the customer base. We're frankly a pretty busy country. you know, summer season here of go-lives and so forth. So it's definitely very encouraging.

That's great. Nice job, and good luck in the second half. Thanks.

Thank you. Thank you, Terry. Appreciate it.

Thank you. And our next question comes from the line of Brian Peterson from Raymond James. Please go ahead.

Hey, gentlemen, congrats on the strong quarter. So I wanted to unpack the services strength a bit. It was up 19% on an 18% comp. You know, and obviously the guidance is up for the year. You know, how do you think about the trajectory of that business? I mean, we're all seeing the news in terms of, you know, the macro, but obviously the RPO growth is really strong. There just seems to be a lot of cross-currents out there. So, yeah, as we think about, you know, maybe the kind of two to three-year outlook for services, like, how do we think about that, you know, in the current macro?

Yeah, well, again, we'll, you know, from when we think about the two to three-year outlook, Brian, we'll update that at the end of the year. I think, you know, updating two or three-year outlooks every couple quarters might be, you know, might be have a bit too much volatility built into it. But having said that, You know, as you know, we have good visibility into our services demand, frankly, because of all the software sales.

Ladies and gentlemen, please continue to hold. Your call will resume momentarily.

Can you guys hear us now? Yes, we can.

Yeah, if I'm live, Eddie, I can hear you.

Okay, very good. Thank you, Brian. Sorry about that. So, you know, obviously services, you know, kind of lags a little bit. The software sales, we've seen very strong software sales. We see strong demand for our services. You can see that, frankly, in the hiring profile that we have. We've added 300 people so far this year. We're going to add another couple of hundred at least you know, in the balance of the year to top 4,000, you know, 4,000 associates. We've got good visibility at the next several, you know, several quarters from a services demand perspective. And, you know, we feel, obviously we feel, you know, we feel terrific about it. There is, you know, I know there's been some questions about will the services attach rate be the same for, you know, for our cloud solutions as they were on-prem, And we've been saying yes to that, and I think now you can actually see that coming to the fore in that services revenue growth.

That's great. And, Eddie, maybe just following up, and sorry for double dipping on the macro questions here, but you mentioned the kind of diversification into the verticals. I'd love to get your sense of the health of the diversification of the customer base today. maybe versus, you know, prior, you know, economic challenge periods is out of nine. And, you know, I'd love to just hear kind of how the product portfolio has changed and maybe where in terms of customer exposure or health is different today versus, you know, maybe five years ago.

Yeah. I mean, clearly more diversity across verticals for us, you know, helps with, um, you know, less, you know, less exposure and so forth, but, but, but in general, um, the, you know, the, the, um, even where particular segments of the market might be challenged, there is still a desire to make sure they maximize market share, maximize customer satisfaction, and maximize customer retention. And that's what we can help with. So even in a market that tightens up a little bit, there is still obviously competition to ensure that customers are being serviced with inventory, serviced at the levels that they expect and so forth. And those are the areas that, you know, that we can help. Hence, the reason I believe we continue to see, you know, kind of strong demand for both our solutions and our services.

Fifty percent in that new logos year to date.

Yeah. Understood. Thanks, guys. Congrats.

Thank you, Brian.

Thank you. And I show our next question. comes from the line of Matt Fowle from William Blair. Please go ahead.

Hey, guys. Thanks for taking my question and great results. I wanted to ask on the new customers that you added and the strength that you're seeing there. So maybe just what do you think is driving that? And I appreciate that it can change from quarter to quarter. And then when we look at that 50% coming from net new customers and the cloud pipeline is at 35%, Does that indicate that your close rates are better with new customers or what accounts for that discrepancy? Thanks.

Yes. I think the second piece is just a little bit of variability quarter by quarter, Matt. There's nothing, frankly, too analytical to build into that. But in terms of what we think is driving the new logo acquisition overall, is really a couple things. One is, you know, we're seeing our penetration into verticals that we've not been as strong in before, you know, manufacturing particularly, and that tends to be driven by those manufacturing companies beginning to go direct to consumer, okay, and needing the types of sophisticated supply chain capabilities that we offer. Secondly, we are having some pretty good success replacing some older systems, whether it be competitors from the bygone years or take away from current competitors, again, because of the underlying technology strategy that we have and the advanced capabilities that we're delivering to the market that are, frankly, needed today.

Got it. And, you know, then just in terms of getting to switch over to the macro, the demand that you're seeing, you know, obviously some of your retail customers or prospects could be feeling pressure in their business. You know, partly that's driven by inflation and higher costs, which your solutions can help solve. Is that playing a role in terms of what products are interested in or how they're thinking about adopting your solutions at all?

You know, I would tell you that I think that's likely going forward. You know, to date, it's been more focused on how do we, how do our customers, you know, attract and retain and service their customers? And I think they're, I believe their focus certainly is turbulent times approach. on making sure that they have great customer loyalty and they have great inventory management. Again, both of those things we can help with.

Okay, great. Thanks, guys. Appreciate it.

Thank you, Matt.

Thank you. And I show our next question comes from the line of Mark Chappelle from Loop Capital. Please go ahead.

Hi. Thank you for taking my question and a nice job on the quarter. Eddie, I was wondering if you could just comment on your point-of-sale solutions, your point-of-sale business during the quarter. If I recall correctly, you started seeing larger projects return to that business a few quarters ago, and I was wondering if that's still the case.

It is. It is. In fact, you know, we had a couple very nice wins in the quarter, you know, more to come a little bit, you know, a little bit later. But, you know, some very strategic wins across multi-brand businesses. across a multi-brand conglomerate. You know, at-go lives are going well. We've seen, you know, two or three smaller, granted, you know, 100, 150, 250 store chains complete rollout of our point of sale across their entire network. And that, in turn, you know, as we've talked about many times, is, you know, is building some nice momentum for us. So, Very excited about the opportunity, very excited about the reception, and again, multi-year strategy, clearly, but definitely encouraged about where we are.

Okay, great. Thank you. And then as a follow-up, just to build on an earlier question, I was wondering if you'd just comment on what you're seeing specifically in the retail sector. It just appears from your results and guide that you're not seeing any signs of a slowdown.

Yeah, I mean, pipelines are strong, demand's strong, win rate is strong, and that is obviously true on the software side, but the pull-through on the services side is also strong too. And obviously what that indicates is that once software is purchased, our customers are anxious to get that software live and delivering value for them. So You know, we feel pretty good about the demand profile for sure, again, based on the pipeline and the visibility we have for the services business, you know, over the next several quarters.

Great. Thank you. That's all for me. Thank you, Mark.

Thank you.

And I show our next question comes from the line of Blair Abinardi from Rules & Blat Securities. Please go ahead.

Thanks. Nice quarter, guys. Thank you, Blair. First question just around following up on the point-of-sale side of things. I'm just wondering if you can refresh us on your go-to-market here in pursuing new customers in the point-of-sale side. Are you relying upon channel partners here, or what's sort of your strategy here?

No, our strategy is one of going direct, Blair. So we're direct in the market. Of course, we've got partners who help with implementations and those kinds of things. But our go-to-market strategy is definitely through our direct sales force, and that's where we're seeing the success.

Okay, great. And then just shifting over to the cloud. So the net new cloud customers, can you give us a sense of what they're, you know, is there an average or sort of range at which they're landing at, these new customers, and then after, you know, a year, sort of how those businesses are growing for you?

Well, we don't disclose the deal size, Blair, I'm sorry, so can't comment on that. But in terms of the implementations post-sale, they're going well. A, they're going well, and B, as I mentioned, I think, a little earlier, we've got a very busy summer and fall in front of us. Some really terrific brands, both here in the U.S. and around the world, and getting great feedback, frankly.

Great. Thanks very much for your help.

Our pleasure, Blair, and thanks for taking the time.

Thank you. And I show our last question comes from the line of Joe Verink from Barrett. Please go ahead.

Great. Hi, everyone. I want to go back to macro a little bit. One thing that's been kind of fascinating, you know, we had big supply chain trade shows throughout the spring, summer, your customer conference was thrown in there. And really, every indication we heard throughout that timeframe was supply chain project inquiries going up, you know, year has started stronger than 2021 left off. And that's obviously a big point in contrast to the incremental updates we've been getting from kind of the retail macro where it seems like everything is kind of moderating and, you know, a lot of your customers are maybe resetting expectations. How would you maybe characterize the divergence between the two things? And is it maybe the case where a lot of your customers obviously realize criticality around supply chain, new investments. So last year was maybe a year of getting budgets ready, vendor assessments in place. And now we're simply moving into the period of allocating these dollars and making the commitment.

Yes, I can hear you. I have Mr. Verwink still on the line. He may proceed with your questions.

Very good. Well, again, everyone, we certainly very much appreciate your patience this afternoon, given the technical difficulties you had. We are very appreciative of your support. We'll be sure not to have any technical difficulties 90 days from now when we look forward to reviewing that Q3 results video. In the meantime, please enjoy the rest of the summer. Thank you.

This concludes today's conference call thank you for participating.