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 the Manhattan Associates third quarter 2023 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there'll be a question and answer period. If you'd like to ask a question during this time, simply press star one on your telephone keypad. If you'd like to withdraw your question, please press star 2 on your telephone keypad. As a reminder, ladies and gentlemen, this call is being recorded today, October 24, 2023. I would now like to introduce your host, Mr. Michael Bauer, Head of Investor Relations of Manhattan Associates. Mr. Bauer, you may begin your conference.

Thank you, Robert. Good afternoon, everyone. Welcome to Manhattan Associates 2023 Third 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 Q&A 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 2022 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 the 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 these statements. In addition, our comments include certain non-GAAP financial measures to provide additional information to investors. We have reconciled all non-GAAP measures to 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.

Great, thanks, Mike. Well, good afternoon, everybody, and thank you for joining us as we review our third quarter results and discuss our increased full-year 2023 outlook. And a little later in the call, we'll provide some preliminary color, anyway, on our 2024 guidance. Q3 and year-to-date results set all-time records on both top and bottom lines. For the quarter, total revenue increased 20% to $238 million, and adjusted earnings per share increased 59% to $1.05. Both of these metrics were above our expectations. Q3 was our 10th consecutive all-time record revenue quarter. Driving top-line outperformance was 44% growth in cloud revenue and 24% growth in services revenue. This encompasses double-digit top-line growth across all our geographies as our global teams continue to execute very well for our customers. While the global macro environment certainly remains volatile, Manhattan's business fundamentals are solid. Demand for our solutions is robust, customer satisfaction is high, and as Dennis is going to elaborate later on in the call, our strong balance sheet and cash flow provides us with plenty of capacity to steadily invest across our growing supply chain execution, omni-channel, and retail point-of-sale end markets. Now, RPO, the leading indicator of our growth, increased 37% to just over $1.3 billion. Demand for our mission-critical cloud solutions remains strong and resilient across our entire 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 won include an omnichannel multi-brand retailer, a grocery distributor, a national e-commerce company, an aerospace parts distributor, a multi-channel apparel retailer, and a multinational food manufacturing distributor, as well as several others. For the quarter, competitive win rates were solid at about 75%. And we experienced strength from our new customers, with approximately 50% of new cloud bookings being generated from net new logos. In addition to the healthy new logo activity, we also experienced a good mix of conversions, upsells, and cross-sells. And certainly while the timing of large deals and the mix of bookings will vary on a quarterly basis, we believe the year-to-date variety and breadth of deals across sales categories and products exemplifies the value that we deliver and have multiple opportunities for sustainable growth. Our solution pipeline remains robust, with potential new customers representing about 35% of that demand. Our ability to deliver industry-leading solutions and service to our customers are key drivers for our steady demand. In fact, during Q3, Google recognized Manhattan for this core competency as a Google Cloud Partner of the Year. Our best-of-breed cloud-native platform and solutions provide unmatched access to innovation and are uniquely capable of unifying mission-critical commerce and supply chain functions. And this is differentiating and helps our clients improve customer service and loyalty, drive more revenue, and improve efficiency. As I mentioned earlier, our business fundamentals are solid, and we continue to invest for growth. This includes strategic investments in industry-leading innovation, further enablement of our customer success, and expanding our addressable market. From a hiring standpoint, we've added over 400 new team members year to date This represents about a 10% increase, and it's terrific progress towards our goal of adding 450 new hires in 2023. With our R&D investment at record levels and growing, let's move to a quick update or two on our industry-leading solutions. I'm happy to tell you that while small, our point of sale business continues to slowly build momentum. We're seeing success on both new sales and implementation fronts, with stores being activated at a record pace. It's now, I think, beyond dispute. The store network will remain an essential part of the overall consumer retail experience. And the vast majority of retailers are in need of a store technology refresh in order to maximize their store fleet's potential. Only with an omnichannel native point-of-sale system can retailers maximize revenue and margin while simultaneously delivering that seamless shopping experience that today's consumer demands. This quarter saw the fastest pace of point-of-sale activations in our history, with customers working quickly and efficiently to get our new technology in place before the holidays. And we look forward to seeing a record number of stores this holiday period, driving incremental sales via our endless aisle capabilities and providing seamless in-store fulfillment execution for pickup, shipping, curbside, same-day delivery, and beyond. Now speaking of best in class customer service, our Manhattan Active Customer Engagement Solution is also having an encouraging 2023. With a number of customers now live and several more activating before the end of the year, we're having success expanding our operational footprint to the contact center as well. Now as a reminder, our Customer Engagement Solution enables agents in the contact center to go far beyond just that basic order management. We enable call center agents to manage cases, manage interactions across a half a dozen inbound communication channels, and provide differentiated service capabilities like triggering refunds upon carrier scans and dynamic order fulfillment strategies. With some exciting go-lifes imminent and several recent wins for customer engagement, we're looking forward to the continued growth of this offering within the broader Manhattan Active Omni suite. And finally, on the Omnichannel front this quarter, we launched an exciting new capability called Fulfillment Insights. It's a first of a kind in the industry. Fulfillment Insights provides our customers with live omni-channel fulfillment performance benchmark data, allowing them to compare their performance against anonymized data from their peers and their competitors. Now our customers can track live performance versus the industry on important KPIs such as click-to-ship times, click-to-deliver times, store order rejection rates, BOPA's pickup rates, and a host of others. Here, service and experience continue to play a critical role defining the brand's image. Fulfillment Insights provides our Manhattan Active customers with a quantitative way to ensure that they're meeting or exceeding customer expectations. At the platform level, we continue to work closely with Google to bring generative AI solutions to life within our Manhattan Active solutions. And we're hard at work embedding a variety of Google's Vertex AI models within the Manhattan Active Platform to achieve a number of key benefits, including configuration management and automation, extension code development, guided intelligence for operations, and consumer-facing chatbots. And we'll have a lot more to say about generative AI at the NRF show in New York in January. And closing out my commentary on our products, I'll make a brief mention of the Manhattan Active supply chain solutions. We continue to see strong demand and win rates for our Manhattan Active warehouse management solution. This quarter, we'll set a record for the number of Manhattan Active WM go-lives. And like Point of Sale, one of the real advantages of our cloud-native technology is its rapid pace of rollout. Once global design has been completed, many of our customers have been very successful using our platform technology tools to get new sites ready for fast activation. So looking to next year and beyond, Manhattan is going to continue our aggressive investments in organic innovation that not only benefit our growing customer base, but also help us continue to expand our addressable markets. So that concludes my business update. Dennis will provide you with an update on our financial performance and our outlook. And then I'll close our prepared remarks with a brief summary before we move to Q&A. So, Dennis?