Manhattan Associates (NASDAQ: MANH) - Q4 2024 Earnings Call

Thanks Mike. Good afternoon everybody. I have a sore throat, so I apologize. 2024 was a very successful year for Manhattan. We surpassed $1 billion total revenue and achieved records in RPO, total revenue, operating profit, free cash flow, and EPS. Q4 RPO performance exceeded expectations. We're entering 2025 with strong business momentum and optimism about a growing market opportunity. However, we remain cautious on the global economy, which has become a more acute near-term headwind for our services business. About 10% of our customers with in-flight implementations reduced planned services work, and we adjusted our outlook accordingly. Services remain critical for customer success and close partnerships. In 2025, we'll have a record number of customer implementations. Services revenue will trough in Q1 2025 and then steadily increase, returning to year-over-year growth in Q4. Business fundamentals are solid. Q1 is off to a great start from a software bookings perspective. We have several growth drivers: new customers, conversions, cross-selling. We expect 20% plus cloud subscription revenue growth over the next several years, with cloud surpassing services revenue likely by end of 2026. Q4 results: Revenue up 7% to $256 million, cloud up 26%, adjusted EPS up 14% to $0.17. RPO up 25% to $1.8 billion. Win rates about 70%. Demand solid across portfolio. Retail, manufacturing, wholesale drove over 80% of bookings. About a quarter of new bookings from net new logos. We have significant conversion opportunities with over 80% of on-premise customers yet to migrate. In 2024 we invested about $138 million in R&D. We launched Manhattan Active Supply Chain Planning, introduced Iris POS, and advanced supply chain execution. We signed our first planning customer. In POS, 2024 was a good year with successful deployments at Paxar and Artex. Forrester named us a leader in both POS and omni-channel order management. We won a significant POS opportunity in the Americas from a leading tool and equipment retailer. Transportation management ended the year strong with several competitive wins. Now Dennis will provide financials, then I'll close.

2024 was very successful. Q4 achieved record bookings, Q1 off to a great start. While there is FX noise and macro choppiness causing near-term services headwinds, structurally Manhattan's business fundamentals are very solid. We are the industry leader with world-class technology, record R&D investment, 70% plus win rates, and industry-leading customer satisfaction. We have a strong pipeline and numerous drivers for durable growth. Thank you to our global team and customers. That concludes our prepared remarks. We'd be happy to take any questions.

I'll answer the same as before. No real seasonality, sometimes mid-year slowdown due to vacations. Q4 was a record, Q1 strong start. Good balance across product portfolio, customers, geographies.

No question we are becoming more efficient in implementations, which impacts services. Our leadership position and tier-one partners also impact. But there is budget pressure as customers went into their budgeting cycle in fall 2024. They were more bullish then, but now budgets pulled back slightly. Still, we expect significant services spending in 2025 from our customers.

Not really, Joe. That has been happening for several years. Customers often commit to a subset of their facilities initially. It's not a new dynamic and not having a near-term impact.

In reverse order, not really a big difference in services attach rate across products. For RPO breakdown, the preponderance is from WMS, followed by OMS, then TMS, then others. Point of sale activity is slowly picking up.

We have a little more than 150 live customers, over 600 facilities. Just below 80% of customers still on premise, so not quite 20% migrated.

I can quantify enthusiasm but not specifics. There is enthusiasm for store technology replacement cycles driven by hardware aging and need for omni-channel strategy. We saw a lot of unsolicited interest at NRF.

No, they have not all closed. Some closed, some haven't. Those deals haven't been lost. Sometimes companies push out a full year. Not uncommon.

Great question. In 2026 we expect software revenue to exceed services revenue. Software grows faster. Services still important for customer success and innovation input. No intentions to move away from services, but software will continue to grow faster.

If we compare January 2024 to January 2025, the tone was much more enthusiastic at NRF.

We signed our first customer in the quarter, which was a surprise. Initial estimate was mid-2025. We saw enthusiasm for unifying planning and execution. Having our first visionary adopter after 65 days gives us enthusiasm.

Efficiency continues to grow. Attrition is very low in Professional Services. We are balancing supply and demand. We've seen a downtick in demand, so we'll monitor closely. Expect it to pick up in the back half of 2025, but we have time to decide hiring profile.

My pleasure.

We won't break down the $50 million specifically. The phenomenon: customers with large scale programs that planned to expand across more facilities or brands are doing fewer this year. No projects cancelled, just budgets clipped.

Data is ready. They have the data from overnight batch jobs. We use same data but process in real time, enabling planning speed to catch up with execution pace. No concerns about data availability; change management is the challenge.

We are monitoring, no tariffs expected on our business directly. Our customers are in finished goods supply chain, so goods hit ports from wherever. Probably little impact on Manhattan.

We will increase R&D investment in 2025, as we have for 15 years. Also more in sales and marketing given broader portfolio. FX noise and topline revenue decline have impact.

My pleasure, George.

Thanks everybody for toughing it out with my croaky voice. While we've seen some choppiness and a downturn in services business for 2025, our fundamentals are very strong, built around product innovation. The demand for that innovation is strong. We are as encouraged as ever about our long-term future. We look forward to telling you more in 90 days. Thanks again.