Manhattan Associates, Inc.

Ladies and gentlemen, thank you for your patience. The conference will be starting in just a few moments. Again, thank you for your patience. We'll be beginning in just a few moments. so so Thank you. Good afternoon. My name is Sherry and I will be your conference facilitator today. At this time, I would like to welcome everybody to Manhattan Associates' fourth quarter 2023 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 would like to ask a question during this time, simply press star and then the number one on your telephone keypad. If you would like to withdraw your question, press star and then the number two. As a reminder, ladies and gentlemen, this call is being recorded today, January 30th, 2024. 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.

Okay. Thank you, Sherry, and good afternoon, everyone. Welcome to Manhattan Associates 2023 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 the future events or the future financial performance of Manhattan Associates. You'll 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 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 10Qs. We note the turbulent global macro environment could impact our performance and cause actual results to differ materially from our projections. We're 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 the related GAAP measures in accordance with SEC rules. You'll find reconciliation schedules in the Form 8K we submitted to the SEC earlier today and on our website at manh.com. Now, I'll turn the call over to Eddie. Thanks, Mike.

Good afternoon, everybody, and a belated Happy New Year. And thanks for joining us as we review our results for the fourth quarter and full year 2023, as well as provide our outlook for 2024. So 2023 was a very successful year for Manhattan, setting new records in total revenue, RPO, operating profit, free cash flow, and earnings per share. And to drive future growth and innovation, we also invested record amounts in our people and in research and development. In 2023, We increased our headcount by about 10%, and our R&D investment was over $125 million. Now, for perspective, over the past five years, we've invested over a half a billion dollars in R&D across mission-critical commerce and supply chain technology solutions. And this level of consistent commitment is really unmatched in our industry and is one of Manhattan's important differentiators. And given the size of the opportunity and growing demand, we're committed to increasing these investments in 2024 and beyond. These investments will also contribute to our industry-leading levels of customer satisfaction, growing our addressable market, and extending our position as the leading innovator in supply chain execution, omnichannel, and point-of-sale solutions. Now, while we remain appropriately cautious regarding the global economy, our business fundamentals are solid and we're optimistic about a long-term market opportunity. Like prior years, we're entering 2024 with good visibility and benefiting from several growth drivers, which include the acquisition of new customers, conversions of on-premise customers to cloud, and cross-selling our growing unified product portfolio. So pivoting to our quarterly results, Q4 was a record quarter that frankly exceeded our expectations. Revenue increased 20% as reported to $238 million, highlighted by 38% growth in cloud, 19% growth in services, and double-digit revenue growth across all of our geographies. These strong results drove top-line outperformance and solid earnings leverage in the quarter, with adjusted earnings per diluted share increasing 27% to $1.03. RPO, the leading indicator of that growth, increased 36% to $1.4 billion at the end of 2023. Customer satisfaction levels are high, and win rates remain at about 75%. with demand for our cloud solutions continuing to be 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, and the following is just a sample of some of the cloud deals we won this quarter. An industrial automation and energy management conglomerate, an airline, a fast food restaurant chain, a sporting goods retailer, a health care and supplies company, and a specialty retailer, as well as a number of others. And this quarter's wins contributed to a healthy mix of bookings across sub-verticals for the full year. Additionally, and aided by secular tailwinds and the clear benefit of resilient modern supply chains, Roughly one third of our total bookings were generated from new logos for the full year 2023. Our pipeline continues to be strong with solid demand across our product suites. Net new potential customers represent about 35% of that demand and we have significant conversion opportunity. As we enter 2024 with over 85% of our on-premise customers yet to begin their migration to our cloud solutions. For this quarter's brief product update, I'd like to start with three exciting announcements that we made at the National Retail Federation Conference in mid-January, two of which have to do with a pretty large step forward with our Manhattan application Active Omni applications, and the third is an important new partnership for us. So starting with the product announcements, this quarter we announced general availability of Iris, the next big step forward for our store associate app. Running on top of our Manhattan Active Omni platform, Iris offers unmatched transactional performance, resiliency that's purpose-built for the connectivity issues inherent in store networks, and a great new associate experience design. And we believe that IRIS is the first cloud native point of sale truly designed and built to offer the next best of both worlds, continuous innovation in the form of quarter releases and onboard resiliency to handle centralized cloud deployments of scale. Many of our customers face ongoing battles to provide fast and reliable network connectivity to every register in every store. And Iris insulates the store associate from the whims of networks, offering unmatched checkout performance, whether the device is connected, partially disconnected, or completely offline. And Iris also offers a great new visual experience for the store associate, seamlessly blending the three Cs of a best-in-class point-of-sale system, cart, catalog, and customer. Iris empowers store associates to maximize sales conversion rates in the store, the ability to sell both what's in the physical store and what's in the broader supply chain in a single transaction. ensuring every possible sale is converted. Furthermore, the highly visual customer profile within Iris empowers a store associate to truly deliver a personalized selling experience. Staying with retail stores just for a moment, our point-of-sale system performed incredibly well during this recent holiday selling period. with about 30,000 retail associates using our solution and customer transaction volumes exceeding any other Clang-native point-of-sale solution in the market. Now at NRF, we also highlighted our Fulfillment Experience Insight Dashboard. This capability is unique to Manhattan Active Omni and allows our omnichannel customers to compare their fulfillment performance against their peers and competitors. Key omni-channel fulfillment experience metrics like click-to-deliver, order rejection rates, pickup in-store penetration percentage, and abandonment rates, among others, are displayed dynamically for each of our customers. And we built this capability so that our Manhattan Active Omni customers can understand exactly how they stack up against the field. Fulfillment Experience Insights lays out these metrics for them in a clear and comprehensive manner. And frankly, armed with this information, our professional services team members can provide corresponding process and technology recommendations to help move these metrics forward in the right direction over time. And finally, we're also excited to announce our new partnership with Shopify. Over the last several years, we've witnessed Shopify surfacing more and more often in our Manhattan Active Omni prospect and customer base. And we thought the time was right to team up with Shopify to offer the market end-to-end omni-channel commerce solutions. Shopify shares our vision of providing solutions which lower purchase friction, increase conversion, and improve transparency and reliability during the fulfillment process. And for our customers, both Manhattan and Shopify are focused on delivering functionality-rich solutions which can be implemented on time, on budget. And we start delivering value immediately for them. We believe that in the near to medium term, the market will further emphasize total cost of ownership and lower project risk. And the Manhattan Active Omni and Shopify partnership is well-suited to deliver on both of these. Now, speaking of partners, I am proud to report that we finished 2023 by adding a record number of new partners to our Manhattan Value Partner or MVP program. Whether it's SAS providers like Shopify or Add-In, transportation visibility providers like Forkites or Project 44 or Shipio, or material handling and robotics vendors for use within the four walls of the DC. Manhattan active platform applications are easy to connect and offer our partners access to a world-class customer base. And we'll continue to add and strengthen our relationships with premier third-party integration and advisory firms as well. our network of technology and consulting partners help us connect with the broader market of target customers and improve the speed and success of our deployments. So next quarter, I'll likely focus my product updates within our Manhattan active supply chain execution suite. But for now, I'll simply mention that we continue to see strong demand and deal activity for our market-leading unified supply chain execution offering consisting basically of WMS and TMS. This demand is coming from across the globe and across industries. And finally, throughout 2024, we'll also continue to update you on the progress that our R&D team is making as we incorporate the latest generative AI technologies into our supply chain and omnichannel retail solutions. So in summary, 2023 was a terrific year for Manhattan, and we're very excited for the numerous opportunities that lie ahead to deliver simply world-class innovation into our growing industry. customer base. So that concludes my business update. Dennis is going to provide you with an update of financial performance for 2023 and an outlook for 2024. And then I'll close our prepared remarks with a brief summary before we move on to Q&A. So, Dennis?