Manhattan Associates, Inc.

Good afternoon. My name is Robert, and I'll be your conference facilitator today. At this time, I'd like to welcome everyone to Manhattan Associates' fourth quarter earnings conference 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 period. If you'd like to ask a question during this time, simply press star then the number one on your telephone keypad. If you'd like to withdraw your question, please press star, then the number two on your telephone keypad. As a reminder, ladies and gentlemen, this call is being recorded today, February 2nd. I would now like to introduce your host, Mr. Michael Bauer, head of investor relations of the Manhattan Associates. Mr. Bauer, you may begin your conference.

Thank you, Rob, and good afternoon, everyone. Welcome to Manhattan Associates' 2022 fourth 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. We 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 to the SEC for important factors that could cause the actual results to differ materially from those in health 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 10-Qs. We note in particular the turbulent global macro environment could impact our performance and cause actual results to differ materially from health 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.

Okay, thanks, Mike. Well, good afternoon, everyone, and thank you for joining us as we review our fourth quarter and full year 2022 results, as well as our outlook for 2023. So 2022 was a remarkable year for Manhattan, setting all-time records in total revenue, RPO, operating profits, cash collections, and earnings per share. And to drive future growth and innovation, We also invested record amounts in our people and in R&D. In 2022, we spent over 110 million on research and development, which is up 15% from the previous year. We also increased our total headcanon by 16% in response to the high demand for our solutions and services. We're confident that these investments will contribute to our already high levels of customer satisfaction and extend our position as the leading innovator in core supply chain execution, omni-channel solutions, and retail point-of-sale commerce. Given the size of our opportunity and the long-term favorable business momentum, we plan to continue the investments, including hiring between 400 and 600 new associates in 2023. which we're guiding to be our fourth record revenue year since introducing our goal to become a cloud-first company five years ago. Now, while we remain appropriately cautious regarding the global economy, demand for our solutions remains robust, and we're optimistic about our long-term market opportunity. Now, recall our solutions are mission critical, and they're key components to our customer success. And additionally, we're entering 2023 with pretty good visibility and several growth drivers, including the acquisition of new customers, the conversion of our on-premise customers to the cloud, and cross-selling a unified product portfolio into our customer base. Now, specifically pivoting to our quarterly results, Q4 was a record quarter that exceeded our expectations. Revenue increased 16% as a reported $198 million, as highlighted by 49% growth in cloud, 22% growth in services, and double-digit revenue growth across all of our geographies. And these strong results drove our top-line outperformance and solid earnings leverage in the quarter, with adjusted earnings per diluted share increasing 69% to 81%. Now, RPO, the leading indicator of that growth, increased 50% to $1.1 billion by the end of 2022. And importantly, customer satisfaction levels are high, win rates remain at 75% plus, and demand for our cloud solutions continues to be pretty solid across our product portfolio. From a vertical perspective, retail, manufacturing, and wholesale continue to drive more than 80% of our bookings in the quarter. And across our solutions, the sub-verticals are pretty diverse. For example, in the quarter, cloud deals one include a global cosmetics manufacturer, a grocery retailer, a diversified automotive company, a manufacturer of home goods, a food wholesaler, and an e-commerce retailer, as well as numerous others. And this contributed to a healthy mix of bookings across sub-verticals for the full year. And additionally, aided by the clear benefit of resilient modern supply chains, over 40% of our bookings were generated from new logos and over 30% from cross-sell opportunities in 2022. Importantly, our pipeline continues to be strong with solid demand across our product suites. Net new potential customers represent about 35% of that demand. And as of year end, we had converted less than 10% of our on-premise customers to the cloud. Now turning to the product front. We're coming off a very exciting National Retail Federation Conference in New York. Customers and prospects were back in force this year. And we have some exciting product innovations to share with them. Those include the work we're doing around fully enabling RFID with our Manhattan Active Store solution. We've added native support for RFID directly into checkouts and returns, inventory management, and store fulfillment functions so that retailers can make more accurate promises, increase conversion rates, and maximize inventory exposure for selling. The value of RFID in stores has proven to be quite significant. As a digital experience becomes an integral part of bricks and mortar shopping, it's vital that our customers know how much of a particular product that they have and where each specific unit is located inside of their store. And what's more, RFID allows our customers to deliver these improved experiences and to do it with significantly less labor. And speaking of our store technology, we just finished a very successful retail peak season, and specifically with our point-of-sale application. A number of our customers are showing very positive results from the rollout of our Omnicart capabilities. That's the ability to sell items from alternate locations in a single transaction. And only a unified commerce solution with a built-in point-of-sale and order management capabilities can deliver a seamless, Omnicard process. Now regarding implementations, we're seeing some really very positive operational results tied to the first wave of deployments of Manhattan Active Warehouse Management. And I thought I'd share a couple of anecdotes on the positive operational impact from the deployments of our cloud-native WMS. Now I've spoken before about employee engagement, one of the WMS features which is unique to our application. And one of our early adopter Manhattan Active WM customers has now activated all the features of employee engagement, including enabling their associates to complete and gamify challenges and accumulate points. And these points are redeemable for a variety of tangible items in a digital incentive store. And the result for this customer is an incremental 5% productivity improvement in the DC on top of their traditional engineered labor standards an incentive program. And staying on productivity enhancements for a moment, one of our high volume apparel customers in Brazil is showing a double digit throughput increase in their distribution center after implementing Manhattan Active WM. Even though the facility was already outfitted with pretty extensive automation, the workflow optimization inside of Manhattan Active WM is helping them extract record levels of productivity from their material handling automation. Now even in a less automated DC, Manhattan Active WM really shines there too. One of our large wholesale drug customers is reporting a picking productivity improvement in excess of 30%. And this improvement is attributable to the latest pick path optimization algorithms native to Manhattan Active WM. Now before I hand off to Dennis, I want to take this opportunity to briefly recognize and thank each and every member of the Manhattan Global Team. And Manhattan is committed to creating an inclusive culture where team members advance their careers, contribute to our company-wide goals, feel valued, and engage with the communities in which they live and work. And in 2022, they clearly went above and beyond to deliver a remarkable year with remarkable results for our valued customers. And I'm confident in the future success of this company largely because of this team. So that concludes my business update. Dennis is going to provide you with an update of our financial performance and outlook. And then I'll close our prepared remarks with a brief summary before we move to Q&A.