Earnings Call: Manhattan Associates Reports Robust Q3 Growth, Raises Outlook

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Earnings Call: Manhattan Associates Reports Robust Q3 Growth, Raises Outlook

Manhattan Associates (NASDAQ:MANH), a leader in supply chain and omnichannel commerce technology, reported strong financial results for the third quarter of 2024. The company announced a total revenue of $267 million, reflecting a 12% year-over-year increase, and a 29% rise in adjusted earnings per share to $1.35. Cloud subscription revenue saw a notable 33% increase, while the company's remaining performance obligation (RPO) also grew by 27% to approximately $1.7 billion.

These results were driven by strong demand for Manhattan's innovative cloud services, particularly its new Manhattan Active Supply Chain Planning solution. With a strong cash position and no debt, Manhattan Associates is optimistic about fourth-quarter performance and expects to reach the high end of its 2024 RPO order guidance.

Key Highlights:

  • Total Q3 revenue increased 12% year-over-year to $267 million.
  • Adjusted earnings per share rose 29% to $1.35.
  • Cloud subscription revenue increased by 33%.
  • Remaining performance obligation (RPO) increased by 27%, reaching $1.7 billion.
  • Manhattan Associates anticipates strong Q4 performance and aims to reach the high end of its RPO order guidance.
  • Plans to enhance GenAI capabilities and collaborate with Google.
  • Revenue guidance for 2024 has been narrowed to a range of $1.039 billion to $1.041 billion, with an operating margin midpoint increased to 34%.
  • Preliminary targets for 2025 include total revenue between $1.13 billion and $1.14 billion and a 23% growth in cloud revenue.

Company Outlook:

  • Total revenue for 2024 Q4 is expected to be around $253.5 million, with cloud revenue projected at $89.5 million.
  • Manhattan Associates has set preliminary revenue targets between $1.13 billion and $1.14 billion for 2025, aiming for growth of 9% to 10%.
  • Focuses on innovation and talent acquisition while targeting a 33.5% operating margin for 2025.

Declining Areas:

  • The share of orders from new customers fell to 14%, with existing customers preferring transitions over new purchases.
  • Customer budgeting is shifting to a frugal approach, with a decrease in one-time license payments.

Rising Areas:

  • Strong demand for Manhattan's cloud and service offerings, especially the Manhattan Active Supply Chain Planning solution.
  • Notable demand for Point of Sale and Supply Chain Planning solutions, with a promising pipeline.
  • The company's land-and-expand strategy effectively increases its total addressable market.

Shortcomings:

  • There was no Point of Sale deal in Q3, but a deal was closed at the start of Q4.

Q&A Highlights:

  • Executives discussed a steady trend in five-year contracts and a strong demand environment consistent with previous quarters.
  • Margin benefits resulted from favorable product mix and scaling.
  • The company’s partner ecosystem is growing, with increased engagement from major global system integrators.

Manhattan Associates' performance in the third quarter of 2024 demonstrates the robust growth trajectory supported by strong demand for its cloud-based solutions and services. The financial health characterized by a strong cash position and debt-free status positions the company well for ongoing investments in innovation and global market expansion. With plans to launch advanced GenAI capabilities and a focus on long-term customer contracts, Manhattan Associates is poised to sustain its momentum through 2025. The next earnings call is planned for 90 days, which will provide more updates and guidance for the fourth quarter and the coming year.

InvestingPro Insights: Manhattan Associates' strong financial performance in Q3 2024 is reflected in several key metrics from InvestingPro. The company’s impressive market capitalization of $17.9 billion underscores its significant presence in the supply chain and omnichannel commerce technology sector.

InvestingPro data shows that as of Q2 2024, Manhattan Associates achieved a strong revenue growth rate of 17.49% over the last twelve months, aligning with the 12% year-over-year revenue increase reported for Q3. The company’s profitability is also noteworthy, with a gross profit margin of 54.09% and an operating income margin of 23.9% for the same period.

An InvestingPro Tip highlights that seven analysts have revised their earnings forecasts upward for the coming period, supporting the company’s optimistic outlook for Q4 and the goal of reaching the high end of RPO order guidance. Another relevant InvestingPro Tip indicates that the stock is trading near its 52-week high, reflecting investor confidence in Manhattan Associates' performance and future prospects.

It is important to note that Manhattan Associates operates with moderate debt, consistent with its strong cash position and debt-free status mentioned in the earnings report. This financial stability positions the company well for sustained investments in innovation and expansion.

For investors seeking more comprehensive analysis, InvestingPro offers 18 additional tips on Manhattan Associates, providing deeper insights into the company's financial health and market position.

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