Manhattan Associates, Inc.

Good afternoon. My name is Julian Bell, and I'll be your conference facilitator for today. At this time, I would like to welcome everyone to Manhattan Associates Q4 2024 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 and then one on your telephone keypad. If you'd like to withdraw your question, press star and then two. As a reminder, ladies and gentlemen, this call is being recorded today, January 28th, 2025. I would now like to introduce you to our host, Mr. Michael Bauer, Head of Investor Relations of Manhattan Associates. Mr. Bauer, you may begin your conference.

Great. Thank you, Julian, and good afternoon, everyone. Welcome to Manhattan Associates' 2024 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 of 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 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 2023 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 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. And good afternoon, everybody. Before we start, I'll just note that I've got a little bit of a sore throat, so I apologize if my voice is croaky. But thank you. Thank you for joining us as we review our results for the fourth quarter and full year, 2024, as well as our outlook for 2025. So 2024 was another very successful year for Manhattan. We surpassed the $1 billion total revenue milestone and achieved new records in RPO, total revenue, operating profit, free cash flow, and earnings per share. I'm also pleased to share with you that our Q4 RPO performance exceeded our expectations. We're entering 2025 with strong business momentum, and we're optimistic about that growing market opportunity. We do remain cautious on the global economy, though, which has become more acute. Near-term headwinds for our services business have surfaced, as about 10% of our customers with in-flight implementations reduced their planned services work for the upcoming calendar and fiscal year. And we've adjusted our outlook accordingly. Now, services continues to be very important to Manhattan. Firstly, because that team ensures our customers' success. And secondly, it keeps us close to our customers. And these tight partnerships help us provide clarity on our customers' needs, which in turn allows us to incorporate that in our future waves of innovation, helping us drive future subscription growth. Now, in 2025, we'll have a record number of customer implementations, and those customers will continue to spend significantly on Manhattan services, albeit a little less than we had previously planned. So to summarize, this shift in professional services work to future periods, some deal pushes that we highlighted throughout 2024 and to a lesser extent. reduced customization and higher partner utilization will cause services revenue to trough in the first quarter of 2025. With new service implementation projects steadily increasing throughout 2025, we anticipate solid sequential services revenue growth in the middle of the year before returning to year-over-year growth in Q4. Importantly, though, our business fundamentals are solid. And we have a large opportunity in front of us. And just like Q4, Q1 is off to a great start from a new software bookings perspective. And we enter 2025 with the benefit of several growth drivers, which include the acquisition of new customers, conversions of on-premise customers to the cloud, and cross-selling into our growing unified product portfolio. These growth drivers, along with our strong pipeline, provide us confidence that we'll achieve 20% plus cloud subscription revenue growth over the next several years, with cloud subscription revenue surpassing services revenue likely by the end of 2026. Now, let's pivot to our quarterly results just for a moment. Q4 was a record quarter that exceeded expectations. Revenue increased 7%, as reported, to $256 million, highlighted by 26% growth in CLAD. And adjusted earnings per diluted share increased 14% to $1.70. RPO, or remaining performance obligation, increased 25% to $1.8 billion. And if Foreign exchange headwinds impacts are removed. RPO exceeded $1.8 billion in our prior outlook. In Q4, customer satisfaction levels remain high. Win rates were strong at about 70%, and demand for our client solutions was 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. Some of the cloud deals that we won this quarter, a global multi-brand specialty retailer, a diversified healthcare services company, a global home furnishings company, a supermarket chain, a global life sciences company, a global designer, retailer, and distributor of outdoor products, and many others. In Q4, About one quarter of our new bookings was generated from net new logos, and we continue to have a healthy mix of conversions, upsells, and cross-sells. And we believe this demonstrates the many and varied opportunities for sustainable future growth. 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 opportunities. As we enter 2025 with just a little over 80% of our on-premise customers yet to begin their migration to our cloud solutions. A key driver in our strong solutions pipeline is Manhattan's commitment to innovation. And in 2024, we invested about $138 million in research and development. This equates to nearly a billion dollars of total investment across our supply chain planning, execution, and omni-channel solutions since we began our journey for the cloud. As I stated before, I believe this level of consistent commitment is unmatched in our industry, and our investments are certainly paying off. For example, Late in 2024, we launched Manhattan Active Supply Chain Planning. We introduced IRIS, our next iteration of point of sale, and developed numerous advancements across supply chain execution. And this innovation is expanding our total adjustable market, and interest levels from our customers and prospects are certainly encouraging. In Q4, we signed our first Manhattan Active Supply Chain Planning customer, We closed two significant point-of-sale transactions, widened our leadership position in supply chain execution, and strengthened our already industry-leading levels of customer satisfaction. And turning now to some of the specifics of our products. On the point-of-sale front, 2024 was a good year for us in terms of successful deployments with some great retail brands. we successfully deployed our point-of-sale systems rapidly and at scale with leading retailers such as PacSun and Arcteryx. Both of these customers were able to roll out that cloud-native point-of-sale to their entire store fleet in a matter of weeks. And both of those companies were kind enough to speak on our behalf at the National Retail Federation Conference just a few weeks ago. And they spoke at a number of different settings at that conference, which was great. And at 2024 holiday peak data, we're finally seeing an equilibrium being reached between the percentage of sales transacted online and in-store. And as we suspected when we entered the point-of-sale business a few years ago, it's clear that store presence and performance still remains a vital ingredient for the vast majority of retailers. We believe that large-scale store technology replacement cycle is emerging, which is gonna fully decouple hardware from software in the store. In many of our store systems, customers are now running on two operating systems in the store, and sometimes even all three of the major operating systems. Now, nowhere was the resurgent interest in point of sale more apparent than the National Retail Federation Conference. The customer activity level that we had at our booth around point of sale far outpaced anything we'd seen in prior years. Now, this uptick in interest in that point of sale was no doubt driven, at least in part, from our recent terrific showing in the Forrester Wave point of sale. For the first time, we were named a leader. And we're certainly honored by this recognition. We believe it reflects the sustained investment that we've made in designing and building world-class user experience, industry-leading feature depth, and truly differentiated omni-channel capabilities, as well as unmatched ability to scale during peak periods. And speaking of Forrester, last week and for the sixth time, we were named a leader in the Forrester Omni-Channel Order Management Week. Now, no other software provider has ever received this distinction six times, and certainly no other provider has been named a leader in both point of sale and order management. And one final note on point of sale. This past quarter, Q4, we won what we believe was one of the most significant point of sale opportunities available in the Americas in 2024. We were honored to be selected by a leading tool and equipment retailer to power the next generation of store systems. And winning this business represents an important milestone for us as our leading technology platform and next-generation associate experience allowed us to demonstrate differentiating value outside of our historic sweet spot of the smaller footprint specialty retail stores. Turning to one of our other newer offerings, as I noted earlier, we signed our first Manhattan Active supply chain planning customer in the quarter, and we anticipate having this pet supplies retailer live with planning by about the middle of the year, at which point they'll be using Manhattan Active warehouse management, transportation management, store fulfillment, and planning. And this early adopter shares certainly our belief that the combination of cloud-native technology and unified applications are the key to enabling operational excellence. And to close out my product update here, I'll mention that our transportation management business ended the year on a nice high note. We closed several important and highly competitive deals right at the end of the year, with a few of these being replacements of other Gartner MQ Magic Quadrant leaders. And we believe the power of the unified supply chain execution platform and our leading technology, again, made the difference. So that 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?