Log in
E-mail
Password
Remember
Forgot password ?
Become a member for free
Sign up
Sign up
New member
Sign up for FREE
New customer
Discover our services
Settings
Settings
Dynamic quotes 
OFFON

MarketScreener Homepage  >  Equities  >  Nasdaq  >  Manhattan Associates, Inc.    MANH

MANHATTAN ASSOCIATES, INC.

(MANH)
  Report
SummaryQuotesChartsNewsRatingsCalendarCompanyFinancialsConsensusRevisions 
SummaryMost relevantAll NewsPress ReleasesOfficial PublicationsSector newsMarketScreener Strategies

MANHATTAN ASSOCIATES : Management's Discussion and Analysis of Financial Condition and Results of Operations. (form 10-Q)

07/27/2020 | 04:41pm EST
The following discussion should be read in conjunction with the condensed
consolidated financial statements for the three and six months ended June 30,
2020 and 2019, including the notes to those statements, included elsewhere in
this quarterly report. We also recommend the following discussion be read in
conjunction with management's discussion and analysis and consolidated financial
statements included in our annual report on Form 10-K for the year ended
December 31, 2019. Statements in the following discussion that are not
statements of historical fact are "forward-looking statements." Actual results
may differ materially from the results predicted in such forward-looking
statements, for a variety of factors. See "Forward-Looking Statements" below.

References in this filing to the "Company," "Manhattan," "Manhattan Associates,"
"we," "our," and "us" refer to Manhattan Associates, Inc., our predecessors, and
our wholly owned and consolidated subsidiaries.

Business Overview


We develop, sell, deploy, service and maintain software solutions designed to
manage supply chains, inventory and omnichannel operations for retailers,
wholesalers, manufacturers, logistics providers and other organizations. Our
customers include many of the world's most premier and profitable brands.

Our business model is singularly focused on the development and implementation
of complex commerce enablement software solutions that are designed to optimize
supply chains, and retail store operations including point of sale effectiveness
and efficiency for our customers.

We have five principal sources of revenue:

• cloud subscriptions, including software as a service (SaaS) and hosting of

       software;


  • licenses of our software;


    •  customer support services and software enhancements (collectively,
       "maintenance");

• professional services, including solutions planning and implementation,

related consulting, customer training, and reimbursements from customers

       for out-of-pocket expenses (collectively, "services"); and


  • hardware sales.


In the three and six months ended June 30, 2020, we generated $135.6 million and
$289.5 million in total revenue, respectively. The revenue mix for the three
months ended June 30, 2020 was: cloud subscriptions 14%; software license 4%;
maintenance 26%; services 53%; and hardware 3%. The revenue mix for the six
months ended June 30, 2020 was: cloud subscriptions 12%; software license 5%;
maintenance 25%; services 55%; and hardware 3%.

We have three geographic reportable segments: North and Latin America (the
"Americas"), Europe, the Middle East and Africa (EMEA), and Asia-Pacific (APAC).
Geographic revenue is based on the location of the sale. Our international
revenue was approximately $44.3 million and $89.3 million for the three and six
months ended June 30, 2020, respectively, which represents approximately 33% and
31% of our total revenue for the three and six months ended June 30, 2020,
respectively. International revenue includes all revenue derived from sales to
customers outside the United States. At June 30, 2020, we employed approximately
3,500 employees worldwide. We have offices in Australia, Chile, China, France,
Germany, India, Italy, Japan, the Netherlands, Singapore, Spain, the United
Kingdom, and the United States, as well as representatives in Mexico and
reseller partnerships in Latin America, Eastern Europe, the Middle East, South
Africa, and Asia.

Future Expectations

Regarding the impact of the novel coronavirus disease ("COVID-19") pandemic, we
remain cautious about the global recovery, which we expect to be slow and
protracted. At mid-year, we are experiencing solid demand for our cloud-based
supply chain and omnichannel commerce solutions and our competitive win rates
remain strong. In May, we launched Manhattan Active Warehouse Management, the
next generation of Warehouse Management. We have rearchitected our warehouse
management solution from the ground up as a cloud native, microservices based,
versionless application. The reception has exceeded our expectations and
pipeline opportunities are building. Our solutions are mission critical,
supporting large and complex, global supply chains. While we expect demand to
continue to grow for our Cloud solutions, sales cycles will likely extend as
customers and prospects contend with the COVID-19 pandemic while evaluating our
solutions. Our Professional Services business revenue through the first half of
2020 is down approximately 13% as clients delay projects due to COVID-19. We
have had no notable cancellations in 2020. For the second half, we expect
Services revenue to decline, driven by COVID-19 impacts to customers, as well as
our traditional retail peak season impact, which typically occurs in the fourth
quarter. Therefore, we have taken a conservative approach and proactive measures
to position our company for uncertainty in the near-term while maintaining
flexibility to extend our market-leading position when a normalization of
business activity resumes.



                                       15
--------------------------------------------------------------------------------

We have taken steps to best ensure the health and safety of our employees globally. Our daily execution has evolved into a largely virtual model, and we continue to find innovative ways to engage with customers and prospects, ensuring that they are supported as they navigate their way through this period.


As previously announced, effective April 1, 2020, we reduced the salaries of the
chief executive officer and the fees of the board of directors by 25%; we
reduced the salary of the chief financial officer by 15% and other named
executive officers by 10%; we suspended our share repurchase program; and we
suspended our 401k plan company match. We are aggressively managing operating
expenses globally, including by instituting a partial hiring freeze.

Importantly, these expense reductions will not materially impact our ability to
support our customers or make key investments in research and development to
further extend our competitive positioning. We will continue to actively monitor
the situation and may take further actions that modify our business operations
as may be required by federal, state or local authorities or that we determine
are in the best interests of our employees, customers, and partners.

Going forward, we are investing significantly in our transition to a cloud
business, including enterprise investments in innovation, and strategic
operating expenses to support growth objectives. Our pace of investment and
timing combined with global macroeconomic conditions and disruptions related to
COVID-19 as a whole, have impacted and may continue to impact revenue and
earnings growth, based on timing of recovery. The pace at which the market for
our products transitions from perpetual license to cloud subscriptions,
resulting in revenue recognition spread out over the subscription period rather
than up front, combined with extended lead times for developing new business,
can cause uncertainty for our future expectations, impacting our ability to
accurately forecast bookings and revenues from quarter to quarter and over the
longer term.


For 2020, our five strategic goals are:

• Focus on customer success and drive sustainable long-term growth;

• Invest in innovation to expand our products and total addressable market;


  • Expand our Manhattan Active Suite of Cloud Solutions;

• Develop and grow our cloud business and cloud subscription revenue; and


  • Expand our global sales and marketing teams.




Cloud Subscription

Historically, our software licenses were sold as perpetual licenses, under which
customers own the software license and revenue is recognized at the time of
sale. In 2017, we released Manhattan Active™ Solutions, accelerating our
business transition to cloud subscriptions. Under a cloud subscription,
customers pay a periodic fee for the right to use our software within a
cloud-based environment that we provide and manage over a specified period of
time. As part of our subscription program, we allow our existing customers to
convert their maintenance contracts to cloud subscription contracts. Some
customers have converted their maintenance contracts to cloud subscriptions, and
we expect there will be continued opportunities to convert existing maintenance
contracts to cloud subscription contracts in the future.

With the launch of Manhattan Active™ Solutions, the transition to a cloud
subscription model has had, and may continue to have, an adverse impact on
revenue, earnings and cash flow relative to periods in which we primarily sell
perpetual licenses. This effect will continue until a stable, recurring mix of
perpetual license to cloud subscription revenue develops.

Global Economic Trends and Industry Factors


Global macro-economic trends, technology spending, and supply chain management
market growth are important barometers for our business. In the three and six
months ended June 30, 2020, approximately 67% and 69% of our total revenue was
generated in the United States, respectively, 16% in EMEA in both periods, and
the remaining balance in APAC, Canada, and Latin America. In addition, Gartner
Inc. ("Gartner"), an information technology research and advisory company,
estimates that nearly 80% of every supply chain software solutions dollar
invested is spent in North America and Western Europe; consequently, the health
of the U.S. and the Western European economies have a meaningful impact on our
financial results.

We sell technology-based solutions with total pricing, including software and
services, in many cases exceeding $1.0 million. Our software is often a part of
our customers' and prospects' much larger capital commitment associated with
facilities expansion and business improvement. We believe that, given the
uncertainty in the global macro environment due to the COVID-19 pandemic, the
current sales cycles for large license sales and cloud subscriptions of $1.0
million or greater in our target markets have been extended. The impact of
COVID-19 on the current business climate within the United States and geographic
regions we operate in have and will continue to affect customers' and prospects'
decisions regarding timing of strategic investments. Delays with respect to such
decisions can have a material adverse impact on our business and may further
intensify competition in our already highly competitive markets.



                                       16

--------------------------------------------------------------------------------


While we are encouraged by our results, we, along with many of our customers,
still remain cautious regarding macroeconomic conditions. We believe global
geopolitical and economic volatility likely will continue to shape customers'
and prospects' enterprise software buying decisions, making it challenging to
forecast sales cycles for our products and the timing of large enterprise cloud
subscription and software license sales.

Revenue


Cloud Subscriptions and Software License revenue. Cloud subscriptions revenue
and remaining performance obligation growth are the leading indicators of our
business performance, primarily derived from cloud subscription fees that
customers pay for supply chain solutions. Since we announced our transition to
becoming a cloud-first company in 2017 with our launch of Manhattan Active
Solutions, we have continued to see a significant shift in demand for cloud
solutions versus software license. By comparison, in 2016, cloud subscriptions
and software license revenue represented 7% and 93%, respectively, of our total
cloud and software license revenue mix. In the full year ended 2020, we estimate
cloud subscriptions and software license revenue to be 75% and 25%,
respectively, of our total cloud and software license revenue mix. From 2016 to
2020 forecast, we estimate software license revenue to decline on an annual
compounded negative growth of 22%, driven by the overall strong demand for cloud
solutions. In the first half of 2020, cloud subscriptions revenue surpassed
software license revenue, representing 70% of the total cloud and software
license revenue mix. Going forward, we expect cloud revenue to increase as a
percentage of total software and cloud revenue mix as market demand for cloud
solutions is supplanting legacy perpetual license demand.

In the three months ended June 30, 2020, cloud subscriptions revenue totaled
$18.5 million or 14% of total revenues. In the six months ended June 30, 2020,
cloud subscriptions revenue totaled $35.8 million or 12% of total revenues.

The Americas, EMEA and APAC segments recognized $16.3 million, $1.8 million and
$0.4 million in cloud subscriptions revenue, respectively, in the three months
ended June 30, 2020. The Americas, EMEA and APAC segments recognized $31.6
million, $3.3 million and $0.9 million in cloud subscriptions revenue,
respectively, in the six months ended June 30, 2020. Cloud subscriptions revenue
is recognized ratably over the term of the agreement, typically 36 to 60 months.
In the three and six months ended June 30, 2020, the percentage mix of new to
existing customers for the combination of software license and cloud
subscriptions sales was approximately 30/70 and 20/80, respectively.

In the three months ended June 30, 2020, software license revenue totaled $5.7
million, or 4% of total revenue. In the six months ended June 30, 2020, software
license revenue totaled $15.4 million or 5% of total revenue. Software license
revenue recognized by the Americas, EMEA, and APAC segments totaled $3.9
million, $0.4 million, and $1.4 million, respectively, in the three months ended
June 30, 2020. Software license revenue recognized by the Americas, EMEA, and
APAC segments totaled $12.3 million, $1.4 million, and $1.7 million,
respectively, in the six months ended June 30, 2020.

Cloud subscriptions and software license revenue growth are influenced by the
strength of general economic and business conditions and the competitive
position of our software products. These revenues generally have long sales
cycles. In addition, the timing of the closing of a few large software license
transactions can have a material impact on our software license revenues,
operating profit, operating margins and earnings per share. For example, $0.8
million of either pre-tax profit or expense in the second quarter of 2020
equates to approximately one cent of diluted earnings per share impact.

Our software solutions are focused on core supply chain commerce operations
(Warehouse Management, Transportation Management and Labor Management),
Inventory optimization and Omnichannel operations (e-commerce, retail store
operations and point of sale), which are intensely competitive markets
characterized by rapid technological change. We are a market leader in the
supply chain management and omnichannel software solutions market as defined by
industry analysts such as ARC Advisory Group and Gartner. Our goal is to extend
our position as a leading global supply chain solutions provider by growing our
software license and cloud subscriptions revenues faster than our competitors
through investment in innovation. We expect to continue to face increased
competition from Enterprise Resource Planning (ERP) and Supply Chain Management
applications vendors and business application software vendors that may broaden
their solutions offerings by internally developing, or by acquiring or
partnering with independent developers of supply chain planning and execution
software. Increased competition could result in price reductions, fewer customer
orders, reduced gross margins, and loss of market share.

Maintenance Revenue. Our maintenance revenue for the three months ended June 30,
2020 totaled $35.9 million, or 26% of total revenue. For the six months ended
June 30, 2020, maintenance revenue totaled $71.6 million or 25% of total
revenue. The Americas, EMEA and APAC segments recognized $28.2 million, $5.6
million and $2.1 million in maintenance revenue, respectively, in the three
months ended June 30, 2020. For the six months ended June 30, 2020, maintenance
revenue recognized by the Americas, EMEA, and APAC segments totaled $56.6
million, $10.8 million and $4.2 million, respectively. For maintenance, we offer
a comprehensive 24 hours per day, 365 days per year program that provides our
customers with software upgrades, when and if available, which include
additional or improved functionality and technological advances incorporating
emerging supply chain and industry initiatives. The growth of maintenance
revenues is influenced by: (1) new software license revenue growth; (2) annual
renewal of support contracts; (3) increase in customers through acquisitions;
(4) fluctuations in currency rates, and (5) conversion of maintenance contracts
to cloud subscription contracts. Substantially all of our customers renew their
annual support contracts. Over the last three years, our annual revenue renewal
rate of customers subscribing to comprehensive support and enhancements has been



                                       17
--------------------------------------------------------------------------------

greater than 90%. Maintenance revenue is generally paid in advance and recognized ratably over the term of the agreement, typically twelve months. Maintenance renewal revenue is recognized over the renewal period once we have a contract upon payment from the customer.


Services revenue. In the three months ended June 30, 2020, our services revenue
totaled $71.8 million, or 53% of total revenue. The Americas, EMEA and APAC
segments recognized $55.2 million, $13.7 million and $2.9 million in services
revenue, respectively, in the three months ended June 30, 2020. In the six
months ended June 30, 2020, our services revenue totaled $159.2 million, or 55%
of total revenue. The Americas, EMEA and APAC segments recognized $122.4
million, $30.4 million and $6.4 million in services revenue, respectively, in
the six months ended June 30, 2020. Due to our large services revenue mix as a
percentage of total revenue, our consolidated operating margin profile may be
lower than those of our competitors, and while we believe our services margins
are strong, they do lower our operating margin profile.

Our professional services organization provides our customers with expertise and
assistance in planning and implementing our solutions. To ensure a successful
product implementation, consultants assist customers with the initial
installation of a system, the conversion and transfer of the customer's
historical data onto our system, and ongoing training, education, and system
upgrades. We believe our professional services enable customers to implement our
software rapidly, ensure the customer's success with our solutions, strengthen
our customer relationships, and add to our industry-specific knowledge base for
use in future implementations and product innovations.

Although our professional services are optional, the majority of our customers
use at least some portion of these services for their planning, implementation,
or related needs. Professional services are typically rendered under time and
materials-based contracts with services typically billed on an hourly
basis. Professional services are sometimes rendered under fixed-fee based
contracts with payments due on specific dates or milestones.

Services revenue growth is contingent upon our software license revenue, cloud
subscriptions and customer upgrade cycles, which are influenced by the strength
of general economic and business conditions and the competitive position of our
software products. In addition, our professional services business has
competitive exposure to offshore providers and other consulting companies. All
of these factors potentially create the risk of pricing pressure, fewer customer
orders, reduced gross margins, and loss of market share.

Hardware Revenue. Our hardware revenue, which we recognize net of related costs,
totaled $3.8 million in the three months ended June 30, 2020 representing 3% of
total revenue. For the six months ended June 30, 2020, hardware revenue totaled
$7.5 million or 3%. In conjunction with the licensing of our software, and as a
convenience for our customers, we resell a variety of hardware products
developed and manufactured by third parties. These products include computer
hardware, radio frequency terminal networks, RFID chip readers, bar code
printers and scanners, and other peripherals. We resell all third-party hardware
products and related maintenance pursuant to agreements with manufacturers or
through distributor-authorized reseller agreements pursuant to which we are
entitled to purchase hardware products and services at discount prices. We
generally purchase hardware from our vendors only after receiving an order from
a customer. As a result, we do not maintain hardware inventory.

Product Development


We continue to invest significantly in research and development (R&D) to provide
leading solutions that help global retailers, manufacturers, wholesalers,
distributors, and logistics providers successfully manage accelerating and
fluctuating demands as well as the increasing complexity and volatility of their
local and global supply chains, retail store operations and point of sale. Our
R&D expenses were $19.9 million and $43.3 million for the three and six months
ended June 30, 2020, respectively.

We expect to continue to focus our R&D resources on the development and
enhancement of our core supply chain, inventory optimization, omnichannel and
point of sale software solutions. We offer what we believe to be the broadest
solutions portfolio in the supply chain solutions marketplace, to address all
aspects of inventory optimization, transportation management, distribution
management, planning, and omnichannel operations including order management,
store inventory & fulfillment, call center and point of sale.

We also plan to continue to enhance our existing solutions and to introduce new
solutions to address evolving industry standards and market needs. We identify
opportunities to further enhance our solutions and to develop and provide new
solutions through our customer support organization, as well as through ongoing
customer consulting engagements and implementations, interactions with our user
groups, association with leading industry analysts and market research firms,
and participation in industry standards and research committees. Our solutions
address the needs of customers in various vertical markets, including retail,
consumer goods, food and grocery, logistics service providers, industrial and
wholesale, high technology and electronics, life sciences, and government.



                                       18

--------------------------------------------------------------------------------

Cash Flow and Financial Condition


For the three and six months ended June 30, 2020, we generated cash flow from
operating activities of $48.8 million and $60.4 million, respectively. Our cash
and cash equivalents at June 30, 2020 totaled $123.6 million, with no debt on
our balance sheet. We currently have no credit facilities. Our primary uses of
cash have been for funding investments in R&D, in operations to drive revenue
and earnings growth, and repurchases of our common stock.

During the three months ended March 31, 2020, we repurchased 337,007 shares of
Manhattan Associates' outstanding common stock for approximately $25.0 million
under the share repurchase program approved by our Board of Directors. In April
2020, the Company suspended its share repurchase program because of
COVID-19-related considerations. Accordingly, during the three months ended June
30, 2020, the Company did not repurchase any shares of Manhattan Associates
common stock under the share repurchase program. The Company's authorized
repurchase limit remains at $50 million.

For the remainder of 2020, our priorities for use of cash will continue to be
investments in product development and growth of our business. We expect to
continue to evaluate acquisition opportunities that are complementary to our
product footprint and technology direction. We also expect to continue to weigh
our share repurchase options against cash for acquisitions and investing in the
business. We do not anticipate any borrowing requirements for the remainder of
2020 for general corporate purposes.

Results of Operations

In the following table, we present a summary of our consolidated results for the three and six months ended June 30, 2020 and 2019.




                                                Three Months Ended June 30,           Six Months Ended June 30,
                                                 2020                 2019              2020               2019
                                                            (in thousands, except per share data)

Revenue                                     $      135,630$      154,341$     289,533$  302,745
Costs and expenses                                 108,938              126,759           238,645          246,887
Operating income                                    26,692               27,582            50,888           55,858
Other (loss) income, net                              (158 )                (71 )           1,262             (442 )
Income before income taxes                          26,534               27,511            52,150           55,416
Net income                                  $       19,204$       20,925$      41,734$   41,897
Diluted earnings per share                  $         0.30       $         0.32     $        0.65$     0.64
Diluted weighted average number of shares           64,126               65,093            64,234           65,148






                                       19
--------------------------------------------------------------------------------


We have three geographic reportable segments: the Americas, EMEA, and APAC.
Geographic revenue information is based on the location of sale. The revenues
represented below are from external customers only. The geography-based expenses
include costs of personnel, direct sales, marketing expenses, and general and
administrative costs to support the business. There are certain corporate
expenses included in the Americas segment that we do not charge to the other
segments, including R&D, certain marketing and general and administrative costs
that support the global organization, and the amortization of acquired developed
technology. Included in the Americas costs are all R&D costs, including the
costs associated with our operations in India. During the three and six months
ended June 30, 2020 and 2019, we derived the majority of our revenues from sales
to customers within our Americas segment. In the following table, we present a
summary of revenue and operating income by segment:



                                    Three Months Ended June 30,                      Six Months Ended June 30,
                                                           % Change vs.                                   % Change vs.
                               2020            2019         Prior Year          2020          2019         Prior Year
Revenue:                            (in thousands)                                  (in thousands)
Cloud subscriptions
Americas                         16,345          7,684               113 %       31,588        14,604               116 %
EMEA                              1,811          1,124                61 %        3,299         1,868                77 %
APAC                                347            201                73 %          876           396               121 %
Total cloud subscriptions        18,503          9,009               105 %       35,763        16,868               112 %

Software license
Americas                          3,853          8,152               -53 %       12,303        14,280               -14 %
EMEA                                415          2,877               -86 %        1,439         8,922               -84 %
APAC                              1,413            692               104 %        1,674           933                79 %
Total software license            5,681         11,721               -52 %       15,416        24,135               -36 %

Maintenance
Americas                         28,211         29,304                -4 %       56,671        58,405                -3 %
EMEA                              5,591          5,633                -1 %       10,762        10,524                 2 %
APAC                              2,096          2,386               -12 %        4,209         4,493                -6 %
Total maintenance                35,898         37,323                -4 %       71,642        73,422                -2 %

Services
Americas                         55,189         74,301               -26 %      122,438       143,624               -15 %
EMEA                             13,741         15,409               -11 %       30,360        30,017                 1 %
APAC                              2,848          4,241               -33 %        6,386         8,941               -29 %
Total services                   71,778         93,951               -24 %      159,184       182,582               -13 %

Hardware
Americas                          3,770          2,337                61 %        7,514         5,738                31 %
EMEA                                  -              -               N/A             11             -               N/A
APAC                                  -              -               N/A              3             -               N/A
Total hardware and other          3,770          2,337                61 %        7,528         5,738                31 %

Total Revenue
Americas                        107,368        121,778               -12 %      230,514       236,651                -3 %
EMEA                             21,558         25,043               -14 %       45,871        51,331               -11 %
APAC                              6,704          7,520               -11 %       13,148        14,763               -11 %
Total revenue               $   135,630$ 154,341               -12 %   $  289,533$ 302,745                -4 %

Operating income:
Americas                         18,984         16,826                13 %       35,266        34,877                 1 %
EMEA                              5,515          8,057               -32 %       11,828        15,791               -25 %
APAC                              2,193          2,699               -19 %        3,794         5,190               -27 %
Total operating income      $    26,692$  27,582                -3 %   $   50,888$  55,858                -9 %






                                       20
--------------------------------------------------------------------------------

Condensed Consolidated Financial Summary - Second Quarter 2020

• Consolidated total revenue: $135.6 million for the second quarter of 2020,

compared to $154.3 million for the second quarter of 2019;

• Cloud subscription revenue: $18.5 million for the second quarter of 2020,

compared to $9.0 million for the second quarter of 2019;

• Software license revenue: $5.7 million for the second quarter of 2020,

compared to $11.7 million for the second quarter of 2019;

• Operating income: $26.7 million for the second quarter of 2020, compared to

$27.6 million for the second quarter of 2019;

• Operating margins: 19.7% for the second quarter of 2020, compared to 17.9%

for the second quarter of 2019;

• Diluted earnings per share: $0.30 for the second quarter of 2020 compared

to $0.32 for the second quarter of 2019;

• Cash flow from operations: $48.8 million in the second quarter of 2020,

compared to $37.2 million in the second quarter of 2019;

• Days sales outstanding: 73 days at June 30, 2020, compared to 67 days at

March 31, 2020;

• Cash and investments: $123.6 million at June 30, 2020, compared to $75.3

       million at March 31, 2020;


    •  Share repurchases: In April 2020, the Company suspended its share

repurchase program because of COVID-19-related considerations. Accordingly,

during the three months ended June 30, 2020, the Company did not repurchase

any shares of Manhattan Associates common stock under the share repurchase

program. The Company's authorized repurchase limit remains at $50 million.





Below we discuss our consolidated results of operations for the second quarters
of 2020 and 2019.



Revenue



                                            Three Months Ended June 30,
                                                  % Change vs.         % of Total Revenue
                        2020          2019         Prior Year         2020            2019
                          (in thousands)

Cloud subscriptions   $  18,503$   9,009               105 %          14 %             6 %
Software license          5,681        11,721               -52 %           4 %             8 %
Maintenance              35,898        37,323                -4 %          26 %            24 %
Services                 71,778        93,951               -24 %          53 %            61 %
Hardware                  3,770         2,337                61 %           3 %             1 %
Total revenue         $ 135,630$ 154,341               -12 %         100 %           100 %




Cloud Subscriptions revenue. In 2017, we released Manhattan Active™ Solutions
accelerating our business transition to cloud subscriptions. In the second
quarter of 2020, cloud subscriptions revenue increased $9.5 million compared to
the same quarter in the prior year, as customers began to purchase our SaaS
offerings rather than a traditional perpetual license. Our customers
increasingly prefer cloud-based solutions, including existing customers that are
migrating from on-premise to cloud-based offerings. Cloud subscriptions revenue
for the Americas, EMEA and APAC segments increased $8.7 million, $0.7 million
and $0.1 million in the second quarter of 2020, respectively.

Software License revenue. Software license revenue decreased $6.0 million in the
second quarter of 2020 compared to the same quarter in the prior year as
customers began to purchase our SaaS offerings rather than a traditional
perpetual license. We also noticed some shifts in the expected timing of deal
closings from the second quarter of 2020 to the second half of the year as a
result of the COVID-19 pandemic. Our license revenue performance depends on the
number and relative value of large deals we close in the period. License revenue
for the Americas and EMEA segment decreased $4.3 million and $2.4 million in the
first quarter of 2020, respectively, while license revenue for the APAC segment
increased $0.7 million.

The perpetual license sales percentage mix across our product suite in the second quarter ended June 30, 2020 was over 80% warehouse management solutions.




                                       21

--------------------------------------------------------------------------------

Maintenance revenue. Maintenance revenue decreased $1.4 million in the second quarter of 2020 compared to the same quarter in the prior year. Maintenance revenue for the Americas and APAC segment decreased $1.1 million and $0.3 million, respectively, in the second quarter of 2020 compared to the same quarter in the prior year. The EMEA segment was relatively flat.


Services revenue. Services revenue decreased $22.2 million in the second quarter
of 2020 compared to the same quarter in the prior year. Services revenue for the
Americas, EMEA and APAC segments decreased $19.1 million, $1.7 million, and $1.4
million, respectively, compared to the same quarter in the prior year. The
decline in services revenue was primarily due to some customers delaying project
implementation and upgrades as a result of the COVID-19 pandemic.

Hardware revenue. Hardware sales increased $1.4 million in the second quarter of 2020 compared to the same quarter in the prior year. The majority of our hardware revenue is derived from our Americas segment. Sales of hardware is largely dependent upon customer-specific desires, which fluctuate.

Cost of Revenue



                                                         Three Months Ended June 30,
                                                                                 % Change vs.
                                                   2020              2019         Prior Year
Cost of software license                        $       591$      623                -5 %
Cost of cloud subscriptions, maintenance and
services                                             62,434           70,955               -12 %
Total cost of revenue                           $    63,025$   71,578               -12 %




Cost of Software License. Cost of software license consists of the costs
associated with software reproduction; media, packaging and delivery;
documentation, and other related costs; and royalties on third-party software
sold with or as part of our products. Cost of software license remained
relatively flat in the second quarter of 2020 compared with the same quarter in
the prior year.

Cost of Cloud Subscriptions, Maintenance and Services. Costs of cloud
subscriptions, maintenance and services consist primarily of salaries and other
personnel-related expenses of employees dedicated to cloud subscriptions;
maintenance services; and professional and technical services as well as hosting
fees. The $8.5 million decrease in the quarter ended June 30, 2020 compared to
the same quarter in the prior year was principally due to a $5.1 million
decrease in performance-based compensation expense and a $5.7 million decrease
in travel expense, offset by a $1.4 million increase in compensation and other
personnel-related expenses and a $1.4 million increase in computer
infrastructure costs related to cloud business transition.

Operating Expenses



                                        Three Months Ended June 30,
                                                               % Change vs.
                                   2020             2019        Prior Year
                                      (in thousands)

Research and development        $    19,931$ 21,997                -9 %
Sales and marketing                   9,709         14,520               -33 %
General and administrative           14,016         16,805               -17 %
Depreciation and amortization         2,257          1,859                21 %
Operating expenses              $    45,913$ 55,181               -17 %




Research and Development. Our principal R&D activities have focused on the
expansion and integration of new products and releases, while expanding the
product footprint of our software solution suites in Supply Chain, Inventory
Optimization and Omnichannel, including cloud-based solutions, point-of-sale and
tablet retailing.

For each of the quarters ended June 30, 2020 and 2019, we did not capitalize any
R&D costs because the costs incurred following the attainment of technological
feasibility for the related software product through the date of general release
were insignificant.

R&D expenses primarily consist of salaries and other personnel-related costs for
personnel involved in our R&D activities. R&D expenses for the quarter ended
June 30, 2020 decreased by $2.1 million, compared to the same quarter of 2019
principally due to a $1.7 million decrease in performance-based compensation
expense.

Sales and Marketing. Sales and marketing expenses include salaries, commissions,
travel and other personnel-related costs and the costs of our marketing and
alliance programs and related activities. Sales and marketing expenses decreased
$4.8 million in the quarter ended June 30, 2020 compared to the same quarter in
the prior year primarily due to a $2.3 million decrease in marketing and
campaign programs, a $1.0 million decrease in performance-based compensation
expense, a $0.9 million decrease in travel expense, and a $0.5 million decrease
in compensation and other personnel-related expense.



                                       22

--------------------------------------------------------------------------------


General and administrative (G&A). G&A expenses consist primarily of salaries and
other personnel-related costs of executive, financial, human resources,
information technology, and administrative personnel, as well as facilities,
legal, insurance, accounting, and other administrative expenses. G&A expenses
decreased $2.8 million, in the current year quarter compared to the same quarter
in the prior year, primarily due to a $1.0 million decrease in performance-based
compensation expense, a $0.8 million decrease in compensation and other
personnel related expenses, and a $0.6 million decrease in travel expense and
professional fees.

Depreciation and Amortization. Depreciation and amortization of intangibles and
software expense for the second quarter of 2020 and 2019 was $2.3 million and
$1.9 million, respectively. Amortization of acquisitions expense for the second
quarter of 2020 and 2019 was immaterial.

Operating Income


Operating income in the second quarter of 2020 was $26.7 million compared to
$27.6 million for the second quarter of 2019. Operating margin was 19.7% for the
second quarter of 2020 versus 17.9% for the same quarter in the prior year.
Operating income decreased primarily due to lower services revenue as we noticed
some delays as a result of the COVID-19 pandemic. Operating margin increased
primarily due to lower performance-based compensation expense and lower travel
expense. With the impact of COVID-19, we have largely suspended hiring until the
global demand environment improves.

Other Income and Income Taxes



                                Three Months Ended June 30,
                                                       % Change vs.
                          2020             2019         Prior Year

Other loss, net        $     (158 )$      (71 )             123 %
Income tax provision        7,330            6,586                11 %






Other income (loss), net. Other income (loss), net primarily includes interest
income, foreign currency gains and losses, and other non-operating expenses.
Other income (loss), net remained flat in the second quarter of 2020 compared to
the same quarter in the prior year.

Income tax provision. Our effective income tax rates were 27.6% and 23.9% for
the quarters ended June 30, 2020 and 2019, respectively. The increase in the
effective tax rate for the three months ended June 30, 2020 is due to an
increase in non-deductible equity-based compensation, reduction in expected
business credits and deductions, and a decrease of $0.1 million in excess tax
benefits on restricted stock vestings.



Condensed Consolidated Financial Summary - First Six Months of 2020

• Consolidated revenue: $289.5 million for the six months ended June 30, 2020

       compared to $302.7 million for the six months ended June 30, 2019.

• Cloud subscription revenue: $35.8 million for the six months ended June 30,

2020 compared to $16.9 million for the six months ended June 30, 2019.

• Software license revenue: $15.4 million for the six months ended June 30,

       2020, compared to $24.1 million for the six months ended June 30, 2019.


    •  Operating income: $50.9 million for the six months ended June 30, 2020,

compared to $55.9 million for the six months ended June 30, 2019.

• Operating margins: 17.6% for the six months ended June 30, 2020 compared to

18.5% for the six months ended June 30, 2019.

• Diluted earnings per share: $0.65 for the six months ended June 30, 2020

compared to $0.64 for the six months ended June 30, 2019.

• Cash flow from operations: $60.4 million for the six months ended June 30,

       2020, compared to $72.4 million for the six months ended June 30, 2019.


    •  Cash and investments: $123.6 million at June 30, 2020, compared to $110.7

million at December 31, 2019.

• Share repurchases: During the six months ended June 30, 2020, we reduced

our common shares outstanding by approximately 0.1% primarily through the

       repurchase of approximately 0.3 million shares of our common stock, under
       the




                                       23
--------------------------------------------------------------------------------

share repurchase program authorized by our board of directors, for a total

investment of $25.0 million. However, as noted above, the Company's share

repurchase program is currently suspended.



Below we discuss our consolidated results of operations for the six months ended
June 30, 2020 and 2019.



                                             Six Months Ended June 30,
                                                  % Change vs.         % of Total Revenue
                        2020          2019         Prior Year         2020            2019
                          (in thousands)

Cloud subscriptions   $  35,763$  16,868               112 %          12 %             6 %
Software license         15,416        24,135               -36 %           5 %             8 %
Maintenance              71,642        73,422                -2 %          25 %            24 %
Services                159,184       182,582               -13 %          55 %            60 %
Hardware                  7,528         5,738                31 %           3 %             2 %
Total revenue         $ 289,533$ 302,745                -4 %         100 %           100 %






Cloud Subscription Revenue. Due to the release of Manhattan Active™ Solutions,
cloud subscriptions revenue increased $18.9 million in the six months ended
June 30, 2020 compared to the same period in the prior year, as customers began
to purchase our SaaS offerings rather than a traditional perpetual license. Our
customers increasingly prefer cloud-based solutions, including existing
customers that are migrating from on-premise to cloud-based offerings. Cloud
subscriptions revenue for the Americas, EMEA and APAC segments increased $17.0
million, $1.4 million and $0.5 million, respectively, in the six months ended
June 30, 2020.

Software License Revenue. Software license revenue decreased $8.7 million in the
six months ended June 30, 2020 compared to the same period in the prior year as
customers began to purchase our SaaS offerings rather than a traditional
perpetual license. We also noticed some shifts in the expected timing of deal
closings from the second quarter of 2020 to the second half of the year as a
result of the COVID-19 pandemic. Our license revenue performance depends on the
number and relative value of large deals we close in the period. License revenue
for the Americas and EMEA segments decreased $2.0 million and $7.5 million,
respectively, and license revenue for the APAC segment increased $0.8 million,
in the six months ended June 30, 2020.

The license sales percentage mix across our product suite in the six months ended June 30, 2020 was over 80% warehouse management solutions.


Maintenance Revenue. Maintenance revenue decreased $1.8 million in the six
months ended June 30, 2020 compared to the same period in the prior year.
Maintenance revenue for the Americas and APAC segments decreased $1.7 million
and $0.3 million, respectively, and maintenance revenue for the EMEA segment
increased $0.2 million, in the six months ended June 30, 2020 compared to the
same period in the prior year.

Services revenue. Services revenue decreased $23.4 million in the six months
ended June 30, 2020 compared to the same period in the prior year. The decline
was primarily due to some customers delaying project implementation and upgrades
as a result of the COVID-19 pandemic. Services revenue for the Americas and APAC
segments decreased $21.2 million and $2.5 million, respectively, while services
revenue for the EMEA segment increased $0.3 million in the six months ended
June 30, 2020 compared with the same period in the prior year.

Hardware Revenue. Hardware sales increased $1.8 million in the six months ended
June 30, 2020 compared to the same period in the prior year. The majority of our
hardware revenue is derived from our Americas segment. Sales of hardware is
largely dependent upon customer-specific desires, which fluctuate.



Cost of Revenue

                                                         Six Months Ended June 30,
                                                                               % Change vs.
                                                   2020            2019         Prior Year
Cost of software license                        $     1,146$    1,215                -6 %
Cost of cloud subscriptions, maintenance and
services                                            136,710        137,533                -1 %
Total cost of revenue                           $   137,856$  138,748                -1 %


Cost of Software License. Cost of software license remained relatively flat in
the six months ended June 30, 2020 compared with the same period in the prior
year.



                                       24
--------------------------------------------------------------------------------


Cost of Cloud Subscriptions, Maintenance and Services. Costs of cloud
subscriptions, maintenance and services consist primarily of salaries and other
personnel-related expenses of employees dedicated to cloud operations;
maintenance services; and professional and technical services as well as hosting
fees. The $0.8 million decrease in the six months ended June 30, 2020 compared
to the same period in the prior year was principally due to a $6.7 million
decrease in performance-based compensation expense, $6.4 million decrease in
travel expense, offset by a $7.5 million increase in compensation and other
personnel-related expense, and a $5.1 million increase in computer
infrastructure costs related to cloud business transition.



Operating Expenses



                                        Six Months Ended June 30,
                                                             % Change vs.
                                   2020          2019         Prior Year
                                     (in thousands)

Research and development        $   43,259$  43,210                 0 %
Sales and marketing                 22,797        29,301               -22 %
General and administrative          30,130        31,855                -5 %
Depreciation and amortization        4,603         3,773                22 %
Operating expenses              $  100,789$ 108,139                -7 %




Research and Development. R&D expenses for the six months ended June 30, 2020
remained relatively flat compared to the same period in the prior year. For the
same reasons included in the quarterly R&D discussion above, no R&D costs were
capitalized during the six months ended June 30, 2020 and 2019.

Sales and Marketing. Sales and marketing expenses decreased $6.5 million in the
six months ended June 30, 2020 compared to the same period in the prior year
primarily due to a $2.8 million decrease in performance-based compensation
expense, a $2.2 million decrease in marketing and campaign programs, and a $1.1
million decrease in travel expense.

General and Administrative. General and administrative expenses decreased $1.7
million in the six months ended June 30, 2020 compared to the same period in the
prior year, primarily due to a $1.4 million increase in performance-based
compensation expense.

Depreciation and Amortization. Depreciation and amortization of intangibles and
software expense for the six months ended June 30, 2020 and 2019 was $4.6
million and $3.8 million, respectively. Amortization of acquisitions expense for
the six months ended June 30, 2020 and 2019 was immaterial.



Operating Income


Operating income for the six months ended June 30, 2020 was $50.9 million
compared to $55.9 million for the same period in the prior year. Operating
margin was 17.6% for the first six months of 2020 versus 18.5% for the same
period in the prior year. Operating income and margin have primarily decreased
due to lower services revenue as we noticed some delays as a result of the
COVID-19 pandemic. With the impact of COVID-19, we have largely suspended hiring
until the global demand environment improves. Operating income increased $0.4
million in the Americas segment, and decreased $4.0 million and $1.4 million in
the EMEA and APAC segments, respectively.



Other Income and Income Taxes



                                   Six Months Ended June 30,
                                                        % Change vs.
                              2020          2019         Prior Year

Other income (loss), net   $    1,262$   (442 )             -386 %
Income tax provision           10,416       13,519                -23 %




Other income, net. Other income, net increased $1.7 million in the six months
ended June 30, 2020 compared to the same period in the prior year, primarily due
to gains or losses on intercompany transactions denominated in foreign
currencies with subsidiaries due to the fluctuation of the U.S. dollar relative
to other foreign currencies, primarily the Indian Rupee. We recorded net foreign
currency gains of $1.2 million in the six months ended June 30, 2020 and net
foreign currency losses of $1.0 million in the six months ended June 30, 2019.



                                       25
--------------------------------------------------------------------------------


Income tax provision. Our effective income tax rates were 20.0% and 24.4% for
the six months ended June 30, 2020 and 2019, respectively. The decrease is the
result of an increase of $3.7 million in excess tax benefits on restricted stock
vestings, partially offset by an increase in non-deductible equity-based
compensation, and reduction in expected business credits and deductions.

Liquidity and Capital Resources


During the first six months of 2020, while our UK and Australia foreign
subsidiaries paid a distribution to the U.S., we funded our business exclusively
through cash generated from operations. Our cash and cash equivalents as of
June 30, 2020 included $95.0 million held in the U.S. and $28.6 million held by
our foreign subsidiaries. We believe that our cash balances in the U.S. are
sufficient to fund our U.S. operations, and we do not intend to further
repatriate foreign funds to the U.S. In the future, if we elect to repatriate
the unremitted earnings of our foreign subsidiaries, we would no longer be
subject to additional U.S. income taxes on such earnings due to the enactment of
the Tax Cuts and Jobs Act in December 2017, but we could be subject to
additional local withholding taxes.

Cash flow from operating activities totaled $60.4 million and $72.4 million in
the six months ended June 30, 2020 and 2019, respectively. Typical factors
affecting our cash provided by operating activities include our level of revenue
and earnings for the period, the timing and amount of employee bonus and income
tax payments, and the timing of cash collections from our customers which is our
primary source of operating cash flow. Cash flow from operating activities for
the six months ended June 30, 2020 decreased $12.0 million compared to the same
period in the prior year, which is mainly due to an increase in employee bonus
payments and the timing of cash collections, partially offset by a decrease in
income tax payments.

Cash flow used in investing activities totaled $1.8 million and $1.9 million in
the six months ended June 30, 2020 and 2019, respectively. Our investing
activities for both the six months ended June 30, 2020 and 2019 consisted of
capital spending to support company growth and short-term investing. For the six
months ended June 30, 2020 capital spending was $1.8 million. For the six months
ended June 30, 2019, net maturities of investments totaled $1.4 million, while
capital spending was $3.3 million.

Financing activities used cash of $43.2 million and $50.2 million for the six
months ended June 30, 2020 and 2019, respectively. The principal use of cash for
financing activities in both periods was to purchase our common stock, including
shares withheld for taxes due upon vesting of restricted stock. Repurchases of
our common stock for the six months ended June 30, 2020 and 2019 totaled $43.2
million and $50.2 million, respectively, including shares withheld for taxes of
$18.2 million and $5.3 million, respectively. We have suspended the share
repurchase program to position our Company for uncertainty in the near-term as a
result of the COVID-19 pandemic.

As disclosed in our Annual Report on Form 10-K, our principal commitments
consist of obligations under operating leases. As we continue our business
transition to a cloud subscription model, we have entered into multiple
non-cancellable contracts for cloud infrastructure services. As of June 30,
2020, our cloud infrastructure obligations are approximately $52 million over
the next 5 years. We also enter into non-cancellable subscriptions in the
ordinary course of business for internal software to support our operations. Our
obligations, as of June 30, 2020, are approximately $7 million over the next 3
years. We expect to fulfill all of these commitments from our working capital.

Periodically, opportunities may arise to grow our business through the
acquisition of complementary products, and technologies. Any material
acquisition could result in a decrease to our working capital depending on the
amount, timing, and nature of the consideration to be paid. We believe that our
existing cash and investments will be sufficient to meet our working capital and
capital expenditure needs at least for the next twelve months, although there
can be no assurance that this will be the case. With the COVID-19 impact, we are
focused on preserving liquidity and protecting our headcount capacity to support
our customers and grow our business when global economic activity begins to
recover. For the remainder of 2020, we anticipate that our priorities for use of
cash will be similar to prior years, with our first priority being continued
investment in product development and profitably and growing our business to
extend our market leadership. We will continue to evaluate acquisition
opportunities that are complementary to our product footprint and technology
direction. We will also continue to weigh our share repurchase options against
cash for acquisitions and investing in the business. At this time, we do not
anticipate any borrowing requirements for the remainder of 2020 for general
corporate purposes.



Critical Accounting Policies and Estimates


In the first six months of 2020, there were no significant changes to our
critical accounting policies and estimates from those disclosed in the section
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" in our annual report on Form 10-K for the year ended December 31,
2019 other than the adoption of the ASC 326 Financial Instruments - Credit
Losses.

Forward-Looking Statements


Certain statements contained in this filing are "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995,
including but not limited to statements related to expectations about global
macroeconomic trends and industry developments, plans for future business
development activities, anticipated costs of revenues, product mix and service



                                       26
--------------------------------------------------------------------------------


revenues, research and development, selling, general and administrative
activities, and liquidity and capital needs and resources. When used in this
quarterly report, the words "may," "expect," "forecast," "anticipate," "intend,"
"plan," "believe," "could," "seek," "project," "estimate," and similar
expressions are generally intended to identify forward-looking statements. Undue
reliance should not be placed on these forward-looking statements, which reflect
opinions only as of the date of this quarterly report. Such forward-looking
statements are subject to risks, uncertainties, and other factors that could
cause actual results to differ materially from future results expressed or
implied by such forward-looking statements. Investors are cautioned that
forward-looking statements are not guarantees of future performance and involve
risks and uncertainties, and that actual results may differ materially from
those contemplated by such forward-looking statements.

Some of the factors that could cause actual results to differ materially from the results discussed in forward-looking statements include:

• the duration and severity of the coronavirus disease (COVID-19) pandemic

and of measures taken to combat its spread, and the effects of both on our

employees, customers, partners and the global economy;

• ongoing disruption and transformation in our vertical markets, including

the aggravating effects of the COVID-19 pandemic on the sector;

• the operational and financial effects of our business transition to cloud

       subscription-based solutions;


  • economic, political and market conditions;


  • our ability to attract and retain highly skilled employees;


  • competition;


  • our dependence on a single line of business;

• our dependence on generating revenue from software licenses and cloud

       subscriptions to drive business;


  • undetected errors or "bugs" in our software;

• the risk of defects, delays or interruptions in our cloud subscription

       services;


  • possible compromises of our data protection and IT security measures;


  • risks associated with large system implementations;


  • possible liability to customers if our products fail;

• the requirement to maintain high quality professional service capabilities;

• the risks of international operations, including foreign currency exchange

risk;

• the possibility that research and development investments may not yield

       sufficient returns;


  • the long sales cycle associated with our products;


  • the difficulty of predicting operating results;


  • the need to continually improve our technology;


  • risks associated with managing growth;


  • reliance on third party and open source software;


  • the need for our products to interoperate with other systems;


    •  the need to protect our intellectual property, and our exposure to
       intellectual property claims of others;

• economic conditions and regulatory changes caused by the United Kingdom's

pending exit from the European Union;

• the possible effects on international commerce of new or increased tariffs,

or a "trade war"; and

• other risks described under the heading "Risk Factors" in this Form 10-Q

and in our Annual Report on Form 10-K for the year ended December 31, 2019,

as these may be updated from time to time in subsequent quarterly reports.



We undertake no obligation to update or revise forward-looking statements to
reflect changed assumptions, the occurrence of unanticipated events or changes
in future operating results.



                                       27

--------------------------------------------------------------------------------

© Edgar Online, source Glimpses

All news about MANHATTAN ASSOCIATES, INC.
01/08Manhattan Associates Announces Date for Reporting Fourth Quarter 2020 Financi..
GL
2020GROCERY IN 2021 : A Look Ahead
PU
2020MANHATTAN ASSOCIATES : Key considerations for selecting a TMS
PU
2020MANHATTAN ASSOCIATES : Decathlon Modernizes Ecommerce Warehousing Capabilities i..
PU
2020Insider at Manhattan Associates (MANH) Makes Significant Sale of Stock
MT
2020INSIDER TRENDS : Insider Prolongs 90-Day Selling Trend at Manhattan Associates
MT
2020Insider Selling at Manhattan Associates (MANH) is Significant
MT
2020INSIDER TRENDS : Insider Sales Continue 90-Day Trend at Manhattan Associates
MT
2020MANHATTAN ASSOCIATES : Management's Discussion and Analysis of Financial Conditi..
AQ
2020MANHATTAN ASSOCIATES : 3Q Earnings Snapshot
AQ
More news