Loading, Please Wait...

CST: 17/02/2019 00:14:28   

Manhattan Associates Reports Record Fourth Quarter 2018 Total Revenue

11 Days ago

ATLANTA, Feb. 05, 2019 (GLOBE NEWSWIRE) -- Leading Supply Chain and Omnichannel Commerce Solutions provider Manhattan Associates Inc. (NASDAQ: MANH) today reported GAAP diluted earnings per share for the fourth quarter ended December 31, 2018, of $0.40 compared to $0.36 in Q4 2017, on license revenue of $13.3 million, cloud subscriptions revenue of $6.8 million and record total revenue of $144.4 million, applying ASC 606 retrospectively. Non-GAAP adjusted diluted earnings per share for Q4 2018 was $0.46 compared to $0.45 in Q4 2017.

“We’re pleased with both our 2018 fourth quarter financial performance and full year results. We delivered record Q4 total revenue and strong earnings per share with a backdrop of solid software and global services revenue,” said Manhattan Associates president and CEO Eddie Capel. “In addition, we continue to receive very positive interest on our Manhattan Active™ suite of cloud-based solutions.”

“We remain bullish on our growth opportunity in 2019 and beyond.  While prudently cautious regarding current global geopolitical and economic volatility, we believe continued omnichannel and supply chain evolution in our target markets has created an acute need for Manhattan’s software that enables our clients to accelerate growth and Push Possible®,” added Mr. Capel.

FOURTH QUARTER 2018 FINANCIAL SUMMARY:

  • We have reclassified certain line items in prior period financial statements to conform to the current period presentation in the consolidated statements of income because of our business transition to cloud subscriptions.
  • GAAP diluted earnings per share was $0.40 in Q4 2018 compared to $0.36 in Q4 2017.
  • Adjusted diluted earnings per share, a non-GAAP measure, was $0.46 in Q4 2018, compared to $0.45 in Q4 2017.
  • Consolidated total revenue was $144.4 million in Q4 2018, compared to $144.1 million in Q4 2017. License revenue was $13.3 million in Q4 2018, compared to $14.7 million in Q4 2017. Cloud subscription revenue was $6.8 million in Q4 2018, compared to $3.2 million in Q4 2017.
  • GAAP operating income was $34.3 million in Q4 2018, compared to $43.6 million in Q4 2017.
  • Adjusted operating income, a non-GAAP measure, was $39.7 million in Q4 2018, compared to $48.8 million in Q4 2017.
  • Cash flow from operations was $34.0 million in Q4 2018, compared to $47.4 million in Q4 2017. Days Sales Outstanding was 64 days at December 31, 2018, compared to 60 days at September 30, 2018.
  • Cash and investments totaled $100.6 million at December 31, 2018, compared to $93.9 million at September 30, 2018.
  • During the three months ended December 31, 2018, the Company repurchased 518,548 shares of Manhattan Associates common stock under the share repurchase program authorized by our Board of Directors for a total investment of $24.8 million. In January 2019, our Board authorized the Company to repurchase up to an aggregate of $50 million of the Company’s common stock.

FULL YEAR 2018 FINANCIAL SUMMARY:

  • We have reclassified certain line items in prior period financial statements to conform to the current period presentation in the consolidated statements of income because of our business transition to cloud subscriptions.
  • GAAP diluted earnings per share for the twelve months ended December 31, 2018, was $1.58, compared to $1.68 for the twelve months ended December 31, 2017.  
  • Adjusted diluted earnings per share, a non-GAAP measure, was $1.79 for the twelve months ended December 31, 2018, compared to $1.87 for the twelve months ended December 31, 2017.
  • Consolidated revenue for the twelve months ended December 31, 2018, was $559.2 million, compared to $594.6 million for the twelve months ended December 31, 2017. License revenue was $45.4 million for the twelve months ended December 31, 2018, compared to $72.3 million for the twelve months ended December 31, 2017. Cloud subscription revenue was $23.1 million for the twelve months ended December 31, 2018, compared to $9.6 million for the twelve months ended December 31, 2017.
  • GAAP operating income was $133.9 million for the twelve months ended December 31, 2018, compared to $185.6 million for the twelve months ended December 31, 2017.
  • Adjusted operating income, a non-GAAP measure, was $154.2 million for the twelve months ended December 31, 2018, compared to $205.2 million for the twelve months ended December 31, 2017. 
  • Cash flow from operations was $137.3 million in the twelve months ended December 31, 2018, compared to $164.1 million in the twelve months ended December 31, 2017.
  • During the twelve months ended December 31, 2018, the Company repurchased 3,147,466 shares of Manhattan Associates common stock under the share repurchase program authorized by our Board of Directors, for a total investment of $143.3 million.

NEW PRESENTATION OF CONSOLIDATED STATEMENTS OF INCOME

We have reclassified certain line items in prior period financial statements to conform to the current period presentation in the consolidated statements of income because of our business transition to cloud subscriptions. These reclassifications include: all revenue line items; cost of license; cost of cloud subscriptions, maintenance and services; and cost of hardware. These reclassifications did not affect total revenue, operating income or net income. For further detail, please see note 7 in the supplemental financial information accompanying this press release.

2019 GUIDANCE

Manhattan Associates provides the following revenue, operating margin and diluted earnings per share guidance for the full year 2019:

     
    Guidance Range - 2019 Full Year    
  ($'s in millions, except operating margin and EPS) $ Range     % Growth Range    
                                   
  Total revenue $ 564     $ 576     1 %     3 %    
                                   
  Operating Margin:                                
  GAAP operating margin   15.5 %     15.8 %                  
  Equity-based compensation   5.5 %     5.4 %                  
  Adjusted operating margin(1)   21.0 %     21.2 %                  
                                   
  Diluted earnings per share (EPS):                                
  GAAP EPS $ 1.03     $ 1.07     -35 %     -32 %    
  Equity-based compensation   0.35       0.35                    
  Adjusted EPS(1) $ 1.38     $ 1.42     -23 %     -21 %    
                                   
  (1) Adjusted operating margin and adjusted EPS are non-GAAP measures that exclude the impact of equity-based compensation    
    and acquisition-related costs, and the related income tax effects of these items if applicable.    
                                   

Manhattan Associates currently intends to publish in each quarterly earnings release certain expectations with respect to future financial performance. Those statements, including the guidance provided above, are forward looking. Actual results may differ materially. Those statements, including the guidance provided above, do not reflect the potential impact of mergers, acquisitions or other business combinations that may be completed after the date of the release.

Manhattan Associates will make its earnings release and published expectations available on its website (www.manh.com). Following publication of this earnings release, any expectations with respect to future financial performance contained in this release, including the guidance above, should be considered historical only, and Manhattan Associates disclaims any obligation to update them.

CONFERENCE CALL

The Company’s conference call regarding its fourth quarter and twelve months ended December 31, 2018, financial results will be held today, February 5, 2019, at 4:30 p.m. Eastern Time. We invite investors to a live webcast of the conference call through the Investor Relations section of Manhattan Associates' website at www.manh.com. To listen to the live webcast, please go to the website at least 15 minutes before the call to download and install any necessary audio software.

Those who cannot listen to the live broadcast may access a replay shortly after the call by dialing +1.855.859.2056 in the U.S. and Canada, or +1.404.537.3406 outside the U.S., and entering the conference identification number ­­­­­­­­9549358 or via the web at www.manh.com. The phone replay will be available for two weeks after the call, and the Internet webcast will be available until Manhattan Associates’ first quarter 2019 earnings release.

GAAP VERSUS NON-GAAP PRESENTATION

The Company provides adjusted operating income and margin, adjusted income tax provision, adjusted net income, adjusted diluted earnings per share, adjusted cost of services, and adjusted cost of cloud subscriptions, maintenance and services in this press release as additional information regarding the Company’s historical and projected operating results. These measures are not in accordance with – or alternatives to – GAAP, and may be different from similarly titled non-GAAP measures used by other companies. The Company believes the presentation of these non-GAAP financial measures facilitates investors’ ability to understand and compare the Company’s results and guidance, because the measures provide supplemental information in evaluating the operating results of its business, as distinct from results that include items not indicative of ongoing operating results, and because the Company believes its peers typically publish similar non-GAAP measures. This release should be read in conjunction with the Company’s Form 8-K earnings release filing for the three and twelve months ended December 31, 2018. 

Non-GAAP adjusted operating income and margin, adjusted income tax provision, adjusted net income and adjusted diluted earnings per share exclude the impact of equity-based compensation, acquisition-related costs and the amortization of these costs, and a restructuring charge – all net of income tax effects, and the impact of the Tax Cuts and Jobs Act. Adjusted cost of services and adjusted cost of cloud subscriptions, maintenance and services exclude the impact of equity-based compensation. We include reconciliations of the Company’s GAAP financial measures to non-GAAP adjustments in the supplemental information attached to this release.

ABOUT MANHATTAN ASSOCIATES

Manhattan Associates is a technology leader in supply chain and omnichannel commerce. We unite information across the enterprise, converging front-end sales with back-end supply chain execution. Our software, platform technology and unmatched experience help drive both top-line growth and bottom-line profitability for our customers. 

Manhattan Associates designs, builds and delivers leading edge cloud and on-premise solutions so that across the store, through your network or from your fulfillment center, you are ready to reap the rewards of the omnichannel marketplace. For more information, please visit www.manh.com.

This press release contains “forward-looking statements” relating to Manhattan Associates, Inc.  Forward-looking statements in this press release include, without limitation, the information set forth under “2019 Guidance,” statements we make about market adoption of our cloud-based solution and other statements identified by words such as “may,” “expect,” “forecast,” “anticipate,” “intend,” “plan,” “believe,” “could,” “seek,” “project,” “estimate,” and similar expressions.  Prospective investors are cautioned that any such 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. Among the important factors that could cause actual results to differ materially from those indicated by such forward-looking statements are: uncertainty about the global economy, risks related from transitioning our business from a traditional perpetual license software company (generally hosted by our customers on their own premises and equipment) to a subscription-based software-as-a service/cloud-based model, disruption in the retail sector, the possible effect of new U.S. tariffs on imports from other countries (and possible responsive tariffs on U.S. exports by other countries) on international commerce, delays in product development, competitive pressures, software errors, information security breaches and the risk factors set forth in Item 1A of the Company’s Annual Report on Form 10-K for the year ended December 31, 2017 and in Item 1A of Part II in subsequent Quarterly Reports on Form 10-Q. Manhattan Associates undertakes no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes in future operating results.


MANHATTAN ASSOCIATES, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Income
(in thousands, except per share amounts)

  Three Months Ended December 31,     Year Ended December 31,  
  2018     2017     2018     2017  
  (unaudited)     (unaudited)                  
Revenue:                              
Cloud subscriptions $ 6,803     $ 3,188     $ 23,104     $ 9,596  
Software license   13,314       14,712       45,368       72,313  
Maintenance   36,466       37,325       147,033       142,998  
Services   84,525       77,183       329,685       326,502  
Hardware   3,258       11,678       13,967       43,190  
Total revenue   144,366       144,086       559,157       594,599  
Costs and expenses:                              
Cost of software license   682       1,377       5,297       5,483  
Cost of cloud subscriptions, maintenance and services   62,138       48,934       235,584       208,045  
Cost of hardware   -       8,416       -       32,205  
Research and development   18,208       14,630       71,896       57,704  
Sales and marketing   13,843       13,222       51,262       47,482  
General and administrative   13,222       11,764       52,618       46,054  
Depreciation and amortization   1,997       2,197       8,613       9,060  
Restructuring charge   -       (24 )     -       2,921  
Total costs and expenses   110,090       100,516       425,270       408,954  
Operating income   34,276       43,570       133,887       185,645  
Other (loss) income, net   (901 )     (580 )     2,344       (812 )
Income before income taxes   33,375       42,990       136,231       184,833  
Income tax provision   7,460       18,476       31,541       68,352  
Net income $ 25,915     $ 24,514     $ 104,690     $ 116,481  
                               
Basic earnings per share $ 0.40     $ 0.36     $ 1.58     $ 1.68  
Diluted earnings per share $ 0.40     $ 0.36     $ 1.58     $ 1.68  
                               
Weighted average number of shares:                              
Basic   65,199       68,485       66,201       69,175  
Diluted   65,526       68,791       66,434       69,424  
                               

MANHATTAN ASSOCIATES, INC. AND SUBSIDIARIES
Reconciliation of Selected GAAP to Non-GAAP Measures
(in thousands, except per share amounts)

    Three Months Ended December 31,     Year Ended December 31,  
    2018     2017     2018     2017  
                                 
Operating income   $ 34,276     $ 43,570     $ 133,887     $ 185,645  
Equity-based compensation (a)     5,291       5,188       19,864       16,229  
Purchase amortization (c)     108       107       430       430  
Restructuring charge (d)     -       (24 )     -       2,921  
Adjusted operating income (Non-GAAP)   $ 39,675     $ 48,841     $ 154,181     $ 205,225  
                                 
                                 
Income tax provision   $ 7,460     $ 18,476     $ 31,541     $ 68,352  
Equity-based compensation (a)     1,092       1,934       4,662       5,964  
Tax benefit of stock awards vested (b)     6       14       777       1,911  
Purchase amortization (c)     22       40       101       158  
Restructuring charge (d)     -       (2 )     -       1,073  
U.S. Tax Cuts and Jobs Act impact (e)     (146 )     (2,825 )     202       (2,825 )
Adjusted income tax provision (Non-GAAP)   $ 8,434     $ 17,637     $ 37,283     $ 74,633  
                                 
                                 
Net income   $ 25,915     $ 24,514     $ 104,690     $ 116,481  
Equity-based compensation (a)     4,199       3,254       15,202       10,265  
Tax benefit of stock awards vested (b)     (6 )     (14 )     (777 )     (1,911 )
Purchase amortization (c)     86       67       329       272  
Restructuring charge (d)     -       (22 )     -       1,848  
U.S. Tax Cuts and Jobs Act impact (e)     146       2,825       (202 )     2,825  
Adjusted net income (Non-GAAP)   $ 30,340     $ 30,624     $ 119,242     $ 129,780  
                                 
                                 
Diluted EPS   $ 0.40     $ 0.36     $ 1.58     $ 1.68  
Equity-based compensation (a)     0.06       0.05       0.23       0.15  
Tax benefit of stock awards vested (b)     -       -       (0.01 )     (0.03 )
Purchase amortization (c)     -       -       -       -  
Restructuring charge (d)     -       -       -       0.03  
U.S. Tax Cuts and Jobs Act impact (e)     -       0.04       -       0.04  
Adjusted diluted EPS (Non-GAAP)   $ 0.46     $ 0.45     $ 1.79     $ 1.87  
                                 
Fully diluted shares     65,526       68,791       66,434       69,424  
                                 

(a)     Adjusted results exclude all equity-based compensation to facilitate comparison with our peers and for the other reasons explained in our Current Report on Form 8-K filed today with the SEC. Equity-based compensation is included in the following GAAP operating expense lines for the three and twelve months ended December 31, 2018, and 2017:

    Three Months Ended December 31,     Year Ended December 31,  
    2018     2017     2018     2017  
                                 
Cost of services   $ 1,583     $ 1,398     $ 5,787     $ 3,994  
Research and development     1,095       1,280       4,230       3,208  
Sales and marketing     545       690       2,041       2,240  
General and administrative     2,068       1,820       7,806       6,787  
Total equity-based compensation   $ 5,291     $ 5,188     $ 19,864     $ 16,229  
 

(b)     Adjustments represent the excess tax benefits and tax deficiencies of the stock awards vested during the period. Excess tax benefits (deficiencies) occur when the amount deductible for an award of equity instruments on our tax return is more (less) than the cumulative compensation cost recognized for financial reporting purposes. As discussed above, we excluded equity-based compensation from adjusted non-GAAP results to be consistent with other companies in the software industry and for the other reasons explained in our Current Report on Form 8-K filed with the SEC. Therefore, we also excluded the related tax benefit (expense) generated upon their vesting.

(c)     Adjustments represent purchased intangibles amortization from a prior acquisition. We exclude that amortization from adjusted results to facilitate comparison with our peers, to facilitate comparisons of the results of our core operations from period to period and for the other reasons explained in our Current Report on Form 8-K filed with the SEC.

(d)     In May 2017, we eliminated about 100 positions due to retail sector headwinds and to align our services capacity with demand. That action did not impair or alter our strategic investment plans in innovation and sales and marketing to increase market share and extend our competitive advantage. As a result of that initiative, we recorded a charge of approximately $2.9 million in 2017. The charge primarily consisted of employee severance, employee transition and outplacement costs. We excluded that charge from adjusted non-GAAP results because we do not believe the charge was a cost resulting from normal operating activities and for the other reasons explained in our Current Report on Form 8-K filed with the SEC.

(e)     In the fourth quarter of 2017, we recorded a provisional net one-time tax of $2.8 million because of the enactment of the Tax Cuts and Jobs Act in December 2017. We calculated that amount based on a reasonable estimate of the income tax effects, primarily from a tax on accumulated foreign earnings and the remeasurement of deferred tax assets. We finalized our calculations, resulting in a tax benefit of $0.2 million during the twelve months ended December 31, 2018.


MANHATTAN ASSOCIATES, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(in thousands, except share and per share data)

    December 31, 2018     December 31, 2017  
                 
ASSETS                
Current Assets:                
Cash and cash equivalents   $ 99,126     $ 125,522  
Short-term investments     1,440       -  
Accounts receivable, net of allowance of $2,589 and $2,692 at December 31, 2018 and December 31, 2017, respectively     100,108       92,231  
Prepaid expenses and other current assets     14,708       10,320  
Total current assets     215,382       228,073  
                 
Property and equipment, net     14,318       15,493  
Goodwill, net     62,240       62,248  
Deferred income taxes     5,442       1,877  
Other assets     9,768       7,304  
Total assets   $ 307,150     $ 314,995  
                 
LIABILITIES AND SHAREHOLDERS' EQUITY                
Current liabilities:                
Accounts payable   $ 18,181     $ 14,028  
Accrued compensation and benefits     29,485       15,826  
Accrued and other liabilities     12,161       12,105  
Deferred revenue     81,894       75,068  
Income taxes payable     3,543       7,228  
Total current liabilities     145,264       124,255  
                 
Other non-current liabilities     14,739       15,784  
                 
Shareholders' equity:                
Preferred stock, no par value; 20,000,000 shares authorized, no shares issued or outstanding at December 31, 2018 and December 31, 2017     -       -  
Common stock, $.01 par value; 200,000,000 shares authorized; 64,860,419 and 67,776,138 shares issued and outstanding at December 31, 2018 and December 31, 2017, respectively     649       678  
Retained earnings     163,359       186,117  
Accumulated other comprehensive loss     (16,861 )     (11,839 )
Total shareholders' equity     147,147       174,956  
Total liabilities and shareholders' equity   $ 307,150     $ 314,995  


MANHATTAN ASSOCIATES, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(in thousands)

    Year Ended December 31,
    2018     2017    
                   
Operating activities:                  
Net income   $ 104,690     $ 116,481    
Adjustments to reconcile net income to net cash provided by operating activities:                  
Depreciation and amortization     8,613       9,060    
Equity-based compensation     19,864       16,229    
Loss on disposal of equipment     59       152    
Deferred income taxes     (4,265 )     1,574    
Unrealized foreign currency loss     298       196    
Changes in operating assets and liabilities:                  
Accounts receivable, net     (9,341 )     10,139    
Other assets     (4,357 )     661    
Accounts payable, accrued and other liabilities     18,603       (5,354 )  
Income taxes     (4,390 )     1,876    
Deferred revenue     7,575       13,052    
Net cash provided by operating activities     137,349       164,066    
                   
Investing activities:                  
Purchases of property and equipment     (7,306 )     (6,199 )  
Net (purchases) maturities of short-term investments     (2,532 )     429    
Net cash used in investing activities     (9,838 )     (5,770 )  
                   
Financing activities:                  
Purchase of common stock     (149,322 )     (131,707 )  
Net cash used in financing activities     (149,322 )     (131,707 )  
                   
Foreign currency impact on cash     (4,585 )     3,318    
                   
Net change in cash and cash equivalents     (26,396 )     29,907    
Cash and cash equivalents at beginning of period     125,522       95,615    
Cash and cash equivalents at end of period   $ 99,126     $ 125,522    
                   


MANHATTAN ASSOCIATES, INC.
SUPPLEMENTAL INFORMATION

1.    GAAP and Adjusted earnings per share by quarter are as follows:

  2017     2018  
  1st Qtr     2nd Qtr     3rd Qtr     4th Qtr     Full Year     1st Qtr     2nd Qtr     3rd Qtr     4th Qtr     Full Year  
GAAP Diluted EPS $ 0.40     $ 0.45     $ 0.47     $ 0.36     $ 1.68     $ 0.33     $ 0.42     $ 0.43     $ 0.40     $ 1.58  
Adjustments to GAAP:                                                                              
Equity-based compensation   0.04       0.03       0.03       0.05       0.15       0.05       0.06       0.06       0.06       0.23  
Tax benefit of stock awards vested   (0.03 )     -       -       -       (0.03 )     (0.01 )     -       -       -       (0.01 )
Purchase amortization   -       -       -       -       -       -       -       -       -       -  
Restructuring charge   -       0.03       -       -       0.03       -       -       -       -       -  
U.S. Tax Cuts and Jobs Act impact   -       -       -       0.04       0.04       (0.01 )     -       -       -       -  
Adjusted Diluted EPS $ 0.42     $ 0.50     $ 0.51     $ 0.45     $ 1.87     $ 0.37     $ 0.47     $ 0.49     $ 0.46     $ 1.79  
Fully Diluted Shares   70,247       69,421       69,135       68,791       69,424       67,736       66,535       65,901       65,526       66,434  
                                                                               

2.    Revenues and operating income by reportable segment are as follows (in thousands):

  2017     2018  
  1st Qtr     2nd Qtr     3rd Qtr     4th Qtr     Full Year     1st Qtr     2nd Qtr     3rd Qtr     4th Qtr     Full Year  
Revenue:  
Americas $ 113,115     $ 123,658     $ 124,833     $ 115,543     $ 477,149     $ 104,615     $ 112,945     $ 113,886     $ 114,040     $ 445,486  
EMEA   23,360       22,028       18,453       21,508       85,349       19,164       21,356       21,181       23,043       84,744  
APAC   7,014       8,455       9,597       7,035       32,101       6,790       7,570       7,284       7,283       28,927  
  $ 143,489     $ 154,141     $ 152,883     $ 144,086     $ 594,599     $ 130,569     $ 141,871     $ 142,351     $ 144,366     $ 559,157  
                                                                               
GAAP Operating Income:  
Americas $ 28,713     $ 35,717     $ 39,295     $ 32,968     $ 136,693     $ 20,318     $ 26,589     $ 26,200     $ 24,422     $ 97,529  
EMEA   10,754       9,995       7,128       7,952       35,829       5,475       6,252       7,413       7,297       26,437  
APAC   2,253       3,547       4,673       2,650       13,123       2,037       2,844       2,483       2,557       9,921  
  $ 41,720     $ 49,259     $ 51,096     $ 43,570     $ 185,645     $ 27,830     $ 35,685     $ 36,096     $ 34,276     $ 133,887  
                                                                               
Adjustments (pre-tax):  
Americas:                                                                              
Equity-based compensation $ 4,472     $ 2,796     $ 3,773     $ 5,188     $ 16,229     $ 4,343     $ 4,927       5,303     $ 5,291     $ 19,864  
Purchase amortization   107       108       108       107       430       107       108       107       108       430  
Restructuring charge   -       2,908       (77 )     (18 )     2,813       -       -       -       -       -  
  $ 4,579     $ 5,812     $ 3,804     $ 5,277     $ 19,472     $ 4,450     $ 5,035     $ 5,410     $ 5,399     $ 20,294  
                                                                               
EMEA:                                                                              
Restructuring charge   -       114       -       (6 )     108       -       -       -       -       -  
                                                                               
Adjusted non-GAAP Operating Income:  
Americas $ 33,292     $ 41,529     $ 43,099     $ 38,245     $ 156,165     $ 24,768     $ 31,624     $ 31,610     $ 29,821     $ 117,823  
EMEA   10,754       10,109       7,128       7,946       35,937       5,475       6,252       7,413       7,297       26,437  
APAC   2,253       3,547       4,673       2,650       13,123       2,037       2,844       2,483       2,557       9,921  
  $ 46,299     $ 55,185     $ 54,900     $ 48,841     $ 205,225     $ 32,280     $ 40,720     $ 41,506     $ 39,675     $ 154,181  
                                                                               

 3.   Impact of Currency Fluctuation

The following table reflects the increases (decreases) in the results of operations for each period attributable to the change in foreign currency exchange rates from the prior period as well as foreign currency gains (losses) included in other income, net for each period (in thousands):

                                                                               
  2017     2018  
  1st Qtr     2nd Qtr     3rd Qtr     4th Qtr     Full Year     1st Qtr     2nd Qtr     3rd Qtr     4th Qtr     Full Year  
Revenue $ (1,547 )   $ (1,219 )   $ 536     $ 1,820     $ (410 )   $ 2,781     $ 1,699     $ (581 )   $ (1,068 )   $ 2,831  
Costs and expenses   (789 )     (396 )     723       1,485       1,023       2,328       831       (1,177 )     (1,774 )     208  
Operating income   (758 )     (823 )     (187 )     335       (1,433 )     453       868       596       706       2,623  
Foreign currency gains (losses) in other income   (646 )     (348 )     (81 )     (771 )     (1,846 )     366       705       1,431       (1,185 )     1,317  
  $ (1,404 )   $ (1,171 )   $ (268 )   $ (436 )   $ (3,279 )   $ 819     $ 1,573     $ 2,027     $ (479 )   $ 3,940  
                                                                               

Manhattan Associates has a large research and development center in Bangalore, India.  The following table reflects the increases (decreases) in the financial results for each period attributable to changes in the Indian Rupee exchange rate (in thousands):

  2017     2018  
  1st Qtr     2nd Qtr     3rd Qtr     4th Qtr     Full Year     1st Qtr     2nd Qtr     3rd Qtr     4th Qtr     Full Year  
Operating income $ (70 )   $ (326 )   $ (338 )   $ (345 )   $ (1,079 )   $ (360 )   $ 359     $ 828     $ 1,066     $ 1,893  
Foreign currency gains (losses) in other income   (320 )     (190 )     71       (43 )     (482 )     210       1,120       1,572       (1,074 )     1,828  
Total impact of changes in the Indian Rupee $ (390 )   $ (516 )   $ (267 )   $ (388 )   $ (1,561 )   $ (150 )   $ 1,479     $ 2,400     $ (8 )   $ 3,721  
                                                                               

 4.            Other income includes the following components (in thousands):

  2017     2018  
  1st Qtr     2nd Qtr     3rd Qtr     4th Qtr     Full Year     1st Qtr     2nd Qtr     3rd Qtr     4th Qtr     Full Year  
Interest income $ 293     $ 264     $ 314     $ 303     $ 1,174     $ 347     $ 241     $ 201     $ 278     $ 1,067  
Foreign currency gains (losses)   (646 )     (348 )     (81 )     (771 )     (1,846 )     366       705       1,431       (1,185 )     1,317  
Other non-operating income (expense)   (18 )     16       (26 )     (112 )     (140 )     8       40       (94 )     6       (40 )
Total other income (loss) $ (371 )   $ (68 )   $ 207     $ (580 )   $ (812 )   $ 721     $ 986     $ 1,538     $ (901 )   $ 2,344  
                                                                               

 5.            Capital expenditures are as follows (in thousands):

  2017     2018  
  1st Qtr     2nd Qtr     3rd Qtr     4th Qtr     Full Year     1st Qtr     2nd Qtr     3rd Qtr     4th Qtr     Full Year  
Capital expenditures $ 789     $ 1,914     $ 1,194     $ 2,302     $ 6,199     $ 2,174     $ 1,881     $ 1,481     $ 1,770     $ 7,306  
                                                                               

 6.            Stock Repurchase Activity (in thousands):

  2017     2018  
  1st Qtr     2nd Qtr     3rd Qtr     4th Qtr     Full Year     1st Qtr     2nd Qtr     3rd Qtr     4th Qtr     Full Year  
Shares purchased under publicly-announced buy-back program   1,004       535       -       1,156       2,695       1,158       1,082       389       519       3,148  
Shares withheld for taxes due upon vesting of restricted stock   131       1       2       1       135       111       1       3       -       115  
Total shares purchased   1,135       536       2       1,157       2,830       1,269       1,083       392       519       3,263  
                                                                               
Total cash paid for shares purchased under publicly-announced buy-back program $ 49,978     $ 24,974     $ -     $ 49,953     $ 124,905     $ 49,972     $ 47,876     $ 20,669     $ 24,757     $ 143,274  
Total cash paid for shares withheld for taxes due upon vesting of restricted stock   6,641       27       80       54       6,802       5,843       23       175       7       6,048  
Total cash paid for shares repurchased $ 56,619     $ 25,001     $ 80     $ 50,007     $ 131,707     $ 55,815     $ 47,899     $ 20,844     $ 24,764     $ 149,322  
                                                                               

7.           Impact of Cloud Transition

Because of our business transition to Cloud Subscriptions, we have revised our presentations of revenue and related cost line items in our consolidated statements of income. We have reclassified certain line items in prior period financial statements to conform to the current period presentation in the consolidated statements of income. These reclassifications include: all revenue line items; cost of license; cost of cloud subscriptions, maintenance and services; and cost of hardware. These reclassifications did not affect total revenue, operating income or net income. The following table reflects the comparison between the former and new presentation (in thousands):

  2017     2018  
  1st Qtr     2nd Qtr     3rd Qtr     4th Qtr     Full Year     1st Qtr     2nd Qtr     3rd Qtr     4th Qtr     Full Year  
                                                                               
Former Presentation:  
Software license $ 22,773     $ 22,442     $ 18,794     $ 17,900     $ 81,909     $ 12,024     $ 18,350     $ 17,981     $ 20,117     $ 68,472  
Services   108,833       116,828       115,555       110,394       451,610       111,701       115,051       116,911       116,256       459,919  
Hardware and other   11,883       14,871       18,534       15,792       61,080       6,844       8,470       7,459       7,993       30,766  
  $ 143,489     $ 154,141     $ 152,883     $ 144,086     $ 594,599     $ 130,569     $ 141,871     $ 142,351     $ 144,366     $ 559,157  
                                                                               
Cost of license $ 2,240     $ 2,355     $ 2,830     $ 3,169     $ 10,594     $ 3,982     $ 5,534     $ 5,789     $ 6,023     $ 21,328  
Cost of services   49,743       47,751       44,750       43,053       185,297       50,348       49,475       50,984       52,093       202,900  
Cost of hardware and other   9,638       12,207       15,492       12,505       49,842       3,464       4,072       4,413       4,704       16,653  
  $ 61,621     $ 62,313     $ 63,072     $ 58,727     $ 245,733     $ 57,794     $ 59,081     $ 61,186     $ 62,820     $ 240,881  
                                                                               
                                                                               
New Presentation:  
Cloud subscriptions (a) $ 1,496     $ 2,378     $ 2,534     $ 3,188     $ 9,596     $ 4,469     $ 5,377     $ 6,455     $ 6,803     $ 23,104  
Software license   21,277       20,064       16,260       14,712       72,313       7,555       12,973       11,526       13,314       45,368  
Maintenance   33,376       35,959       36,338       37,325       142,998       36,397       36,993       37,177       36,466       147,033  
Services   79,781       85,327       84,211       77,183       326,502       78,757       82,267       84,136       84,525       329,685  
Hardware   7,559       10,413       13,540       11,678       43,190       3,391       4,261       3,057       3,258       13,967  
  $ 143,489     $ 154,141     $ 152,883     $ 144,086     $ 594,599     $ 130,569     $ 141,871     $ 142,351     $ 144,366     $ 559,157  
                                                                               
Cost of license $ 1,352     $ 1,438     $ 1,316     $ 1,377     $ 5,483     $ 1,308     $ 2,096     $ 1,211     $ 682     $ 5,297  
Cost of cloud subscriptions, maintenance and services (b)   54,899       53,109       51,103       48,934       208,045       56,486       56,985       59,975       62,138       235,584  
Cost of hardware   5,370       7,766       10,653       8,416       32,205       -       -       -       -       -  
  $ 61,621     $ 62,313     $ 63,072     $ 58,727     $ 245,733     $ 57,794     $ 59,081     $ 61,186     $ 62,820     $ 240,881  
                                                                               


                                                                               
Reconciliation of Selected GAAP to Non-GAAP Measure:  
                                                                               
  2017     2018  
  1st Qtr     2nd Qtr     3rd Qtr     4th Qtr     Full Year     1st Qtr     2nd Qtr     3rd Qtr     4th Qtr     Full Year  
                                                                               
Former Presentation:  
Cost of services $ 49,743     $ 47,751     $ 44,750     $ 43,053     $ 185,297     $ 50,348     $ 49,475     $ 50,984     $ 52,093     $ 202,900  
Equity-based compensation (c)   (1,141 )     (580 )     (875 )     (1,398 )     (3,994 )     (1,117 )     (1,556 )     (1,531 )     (1,583 )     (5,787 )
Adjusted Cost of services $ 48,602     $ 47,171     $ 43,875     $ 41,655     $ 181,303     $ 49,231     $ 47,919     $ 49,453     $ 50,510     $ 197,113  
                                                                               
New Presentation:  
Cost of cloud subscriptions, maintenance and services (b) $ 54,899     $ 53,109     $ 51,103     $ 48,934     $ 208,045     $ 56,486     $ 56,985     $ 59,975     $ 62,138     $ 235,584  
Equity-based compensation (c)   (1,141 )     (580 )     (875 )     (1,398 )     (3,994 )     (1,117 )     (1,556 )     (1,531 )     (1,583 )     (5,787 )
Adjusted Cost of cloud subscriptions, maintenance and services $ 53,758     $ 52,529     $ 50,228     $ 47,536     $ 204,051     $ 55,369     $ 55,429     $ 58,444     $ 60,555     $ 229,797  
                                                                               
  1. Cloud subscriptions includes software as a service (“SaaS”) and arrangements that provide customers with the right to use our software within a cloud-based environment provided by and managed by us where the customer does not have the right to take possession of the software without significant penalties.
     
  2. Cost of cloud subscriptions, maintenance and services consists primarily of salaries and other personnel-related expenses of employees dedicated to cloud subscriptions; maintenance services; professional and technical services; and hosting fees.
     
  3. Adjusted results exclude all equity-based compensation to facilitate comparison with our competitors and peers and for the other reasons explained in our Current Report on Form 8-K filed today with the SEC.

8.        ASC 606 Adoption

We adopted the new revenue recognition standard, FASB ASC Topic 606, Revenue from Contracts with Customers, in the first quarter of 2018. The new standard provides accounting guidance for all revenue arising from contracts with customers and affects substantially all entities. We adopted the standard using the modified retrospective method with the cumulative effect of initially adopting the standard recorded as an adjustment to retained earnings as of January 1, 2018. We recorded historical hardware sales prior to the adoption of ASC 606 on a gross basis, as we were the principal in the transaction in accordance with ASC 605-45. Under the new standard, we are an agent in the transaction as we do not physically control the hardware we sell. Accordingly, we recognize our hardware revenue net of related cost, which reduces both hardware revenue and cost of sales compared to our accounting prior to 2018. We recognize and present our hardware revenue net of related cost under the new standard prospectively. For comparison purposes only, had we implemented ASC 606 using the full retrospective method, we would have presented hardware revenue net of expense in our 2017 quarterly financial results below (in thousands):

  2017     2018  
  1st Qtr     2nd Qtr     3rd Qtr     4th Qtr     Full Year     1st Qtr     2nd Qtr     3rd Qtr     4th Qtr     Full Year  
                                                                               
Presentation of Hardware Revenue - Pre ASC 606 adoption:  
                                                                               
Revenue                                                                              
Hardware Revenue $ 7,559     $ 10,413     $ 13,540     $ 11,678     $ 43,190     $ 11,224     $ 16,252     $ 10,575     $ 11,863     $ 49,914  
                                                                               
Cost of Revenue                                                                              
Cost of Hardware   (5,370 )     (7,766 )     (10,653 )     (8,416 )     (32,205 )     (7,833 )     (11,991 )     (7,518 )     (8,605 )     (35,947 )
                                                                               
Hardware Revenue, net $ 2,189     $ 2,647     $ 2,887     $ 3,262     $ 10,985     $ 3,391     $ 4,261     $ 3,057     $ 3,258     $ 13,967  
                                                                               
Proforma Presentation of Hardware Revenue - Post ASC 606 Using Full Retrospective Method:  
                                                                               
Hardware Revenue $ 2,189     $ 2,647     $ 2,887     $ 3,262     $ 10,985     $ 3,391     $ 4,261     $ 3,057     $ 3,258     $ 13,967  
                                                                               

9.        Remaining Performance Obligations

Under the new revenue recognition standard, we now disclose revenue we expect to recognize from our remaining performance obligations.  Our reported performance obligations primarily represent cloud subscriptions with a non-cancelable term greater than one year (including cloud deferred revenue as well as cloud amounts that will be invoiced and recognized as revenue in future periods).  Our deferred revenue on the balance sheet primarily relates to our maintenance contracts, which are typically one year in duration and are not included in the remaining performance obligations.  Below are our remaining performance obligations as of the end of each period (in thousands):

  December 31, 2017     March 31, 2018     June 30, 2018     September 30, 2018     December 31, 2018  
Remaining Performance Obligations $ 27,535     $ 33,999     $ 58,434     $ 64,175     $ 76,990  


Contact:   Dennis Story   Rick Fernandez
    Chief Financial Officer   Senior Manager, Corporate Communications
    Manhattan Associates, Inc.   Manhattan Associates, Inc.
    770-955-7070   678-597-6988
    dstory@manh.com   rfernandez@manh.com
         

Is your business listed correctly on America’s largest city directory network of 1,000 portals?