Manhattan Associates, Inc.

Good afternoon. My name is Alicia and I'll be your conference facilitator today. At this time, I would like to welcome everyone to the Manhattan Associates Q2 2024 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 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, July 23rd, 2024. I would now like to introduce you to your host, Michael Baer, head of investor relations of Manhattan Associates. Mr. Baer, you may begin your conference.

Great. Thanks, Alicia. And good afternoon, everyone. Welcome to Manhattan Associates 2024 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 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 objections contained in our forward-looking statements. I would 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 2023 and the risk factor discussion in that report, as well as any risk factor updates we provide on subsequent Form 10-Qs. We note that 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.

All right. Thanks, Mike. Well, good afternoon, everyone, and thanks for joining us as we review our second quarter results. and discuss our increased full-year financial 2024 outlook. Manhattan delivered record Q2 and first-half results. For the quarter, total revenue increased 15% to $265 million, and adjusted earnings per share increased 34% to $1.18, both exceeding our expectations. Driving the top line at performance and earnings leverage was 35% growth in cloud revenue and 10% growth in services revenue. And this encompasses double digit top line growth across all of 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 is solid and we're very optimistic about our business opportunity. Demand for our solutions are robust, customer satisfaction is high, and investment in R&D and our associates continue to widen our technological leadership across our supply chain planning, execution, and omnichannel retail offerings. Now, RPO, the leading indicator of our growth, increased 29% to just over $1.6 billion. Demand for our mission-critical cloud solutions remains strong and resilient, across all of 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, deals one include a global apparel and home fashions retailer, a global developer and manufacturer of construction equipment, a grocery chain, a global manufacturer of HVAC and refrigeration products, a global supply chain management company, a beauty and wellness retailer, as well as a number of others. Overall, competitive win rates remain solid at about 75%. 20% of our Q2 new bookings were generated from net new logos, and we continue to have a healthy mix of conversions, upsells, and cross-sells. While the timing of large deals and bookings mix will certainly vary on a quarterly basis, we believe our sales breadth exemplifies the many and varied opportunities for sustainable future growth. The key to this growth and steady execution is unparalleled combination of industry-leading solutions and world-class service that we provide to our customers. Our best-of-breed cloud-native platform and solutions provide continuous access to innovation and are a key component of our customer success. These mission-critical solutions help our clients strengthen their relationships with their end customers, drive more revenue, and improve efficiency. These powerful benefits are translating into record solutions pipeline for us with new potential customers representing about 35% of the demand. Our solid product demand is also fueling opportunities for growth of our internal services organization, as well as the growing roster of Manhattan value partners. Now, like the last few quarters, our global services team completed over 100 go-lives in Q2 and continue to perform very well for our customers. we remain appropriately cautious on the global economy. We continue to invest to drive growth from our numerous opportunities. This includes monetizing strategic investments in industry-leading innovation, further enablement of our customer success, and the expansion of our addressable market. From a hiring perspective, we've hired just over 100 new team members year-to-date, and plan on continuing a hiring posture for the remainder of the year. Turning now to just a few updates on our products, but before I cover the important new product announcements we made in May at our Momentum Customer Conference, I'd like to highlight some recent external validation of the innovation that we've been delivering within applications. And certainly while the most important validation we get is from our customers, it is also gratifying to see our products recognized by some of these third parties. So first, we had two of our applications named Innovation of the Year by two industry publications. The first recipient was our recently released Fulfillment Experience Insight Dashboard, part of Manhattan Active Omni. This new capability allows our Manhattan Active Omni customers to benchmark that omni-channel fulfillment performance against a group of peers. And Manhattan Yard Management was also recognized as an innovation of the year. This is part of our Manhattan Active supply chain execution platform, and the solution unifies distribution and logistics where they come together in the physical world. And a quick mention of the most recently published Gartner Magic Quadrants, for warehouse management and transportation management. For the 16th consecutive year, Manhattan was the definitive leader in the WMS Magic Quadrant. And for the sixth consecutive year, Manhattan was amongst a small group of vendors in the leaders category in the TMS Magic Quadrant. And we're certainly very appreciative of Gartner's recognition of our serial investment in innovation. Now, let's turn to a couple of important product updates. First, let's talk about generative AI. As I've mentioned on prior calls, since the initial availability of generative AI models, our engineers have been hard at work designing and building and testing, of course, generative AI-based capabilities. At Momentum, we announced the first of these capabilities in the form of a new product called Manhattan Active Maven. part of a Manhattan Active Omni platform. The Manhattan Active Maven is a Gen AI powered application which provides both best-in-class consumer-facing chatbots and the powerful set of capabilities to assist contact center agents. Chartered of AI technologies, provided they've been trained on the right underlying data, are particularly well-suited to automating customer service tasks because of their ability to answer a very wide range of questions. And leveraging the underlying data is where the Manhattan Active Platform really shines. Because from day one, we've built the Manhattan Active Platform applications as API first. Literally everything in our applications and everything our applications do is available via an API. And this approach gives Manhattan a major advantage when it comes to leveraging generative AI. Our API-first approach is one of the key reasons Manhattan Active Maven is proving to be so very powerful. Going far beyond answering the basic questions of, you know, where's my order, Maven can answer detailed questions about payments, check inventory at local stores, or even change delivery methods for orders that are already being processed. Manhattan Active Maven also provides power efficiency enhancing capabilities for call center agents as well. Manhattan Active Maven makes its debut this month, and like all Manhattan Active platform applications, will get better and better and better each quarter thereafter. At Momentum, we also announced Manhattan Assist, a GenAI-powered feature available across all Manhattan Active applications. Manhattan Assist's first set of capabilities focus on helping our customers get maximum value from their investments in our platform applications. Our users can now ask Assist detailed questions about the best way to achieve a particular business objective, how to configure a specific behavior, and then be guided directly to the relevant configuration screens. And last, but certainly not least, though, I'd like to spend a few minutes talking about the biggest announcement that we made a few months back at Momento. Coming this fall, we'll be releasing Manhattan Active Supply Chain Planning, the culmination of about a decade of investment to move our enterprise applications to an industry-leading cloud-native platform. The release of Manhattan Active Supply Chain Planning will complete our work to fully transform our solution portfolio to being cloud-first. And just as importantly, we'll be the first and only vendor to enable a unified cloud-nating offering, spanning both supply chain planning and supply chain execution. And consistent with the vision that we brought to market with Manhattan Active Omni and Manhattan Active Supply Chain execution, Manhattan Active Supply Chain planning customers will benefit substantially from the power of unification. Now, in this case, unification works at several levels. First, via composable set of APIs we use to unify demand forecasting, allocation, and replenishment all into a single application. the vast majority of businesses you see distribute and sell both allocated and replenished products. And today, this dual inventory flow method really necessitates either using two disparate systems with the enterprise or planning one pool of items without systemic support for all of them. And now for the first time, customers are going to be able to use a single demand forecast to drive both allocated and replenished products. But it's actually the second and larger form of unification, which is proving to be the most exciting and interesting to our customers so far. We call this next level of unification unified business planning because it enables our customers to drive their inventory, labor, and transportation forecasts, all from a single demand forecast and order projection. Now our supply chain practitioners are going to be able to see everything from a transportation forecasts on a particular outbound transit lane six months out to a required picking associate forecast 26 hours out, and everything in between. And this detailed operational forecast enables much more effective labor planning and ensuring that adequate labor capacity to meet customer demand and orders is driven without expensive overtime. On the transportation front, the ability for our customers to collaborate with their strategic carriers using detailed transportation capacity forecasts ensure that they've got the exact capacity they need at the best of available rates, limiting how often they have to go out to the spot market. But beyond forecast visibility, Manhattan Active Supply Chain planning is going to enable dynamic collaboration between planning and execution. whether it's turning an inbound purchase order quantity to enable the more efficient transportation or dynamically changing the quantities of in-flight store replenishment orders based upon the very latest sales data. Manhattan Active Supply Chain Planning uses dynamic, always-on optimization to process and adjust the plan in real time based on sales and operating data. It's truly the first of a kind, and we're very excited to debut this in the fall of this year. Now, this concludes my 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?