United States
Securities And Exchange Commission
Washington, DC 20549
______________
FORM 8-K
______________
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): October 24, 2017
Manhattan Associates, Inc.
(Exact Name of Registrant as Specified in Its Charter)
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Georgia |
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0-23999 |
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58-2373424 |
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(State or Other Jurisdiction of |
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(Commission |
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(I.R.S. Employer |
2300 Windy Ridge Parkway, Tenth Floor, Atlanta, Georgia
30339
(Address of Principal Executive Offices)
(Zip Code)
(770) 955-7070
(Registrant’s telephone number, including area code)
NONE
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
☐Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.02 Results of Operations and Financial Condition.
On October 24, 2017, Manhattan Associates, Inc. (“we”, “our”, “us” or the “Company”) issued a press release providing its financial results for the three and nine months ended September 30, 2017. A copy of this press release is attached as Exhibit 99.1. Pursuant to General Instruction B.2 of Form 8-K, this exhibit is “furnished” and not “filed” for purposes of Section 18 of the Securities Exchange Act of 1934.
Non-GAAP Financial Measures in the Press Release
The press release includes, as additional information regarding our operating results, our adjusted operating income, adjusted income tax provision, adjusted net income and adjusted diluted earnings per share (collectively, “adjusted results”), which exclude the impact of equity-based compensation, acquisition-related costs and a restructuring charge, and the related income tax effects of these items. We have developed our internal reporting, compensation and planning systems using these additional financial measures.
These various measures are not in accordance with, or alternatives for, financial measures calculated in accordance with generally accepted accounting principles in the United States (“GAAP”) and may be different from similarly titled non-GAAP financial measures used by other companies. Non-GAAP financial measures should not be used as a substitute for, or considered superior to, measures of financial performance prepared in accordance with GAAP.
Non-GAAP measures used in the press release exclude the impact of the items described above for the following reasons:
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Equity-based compensation expense typically does not require cash settlement by the Company. We do not include this expense and the related income tax effects when assessing our operating performance, and believe our peers also typically present non-GAAP results that exclude equity-based compensation expense. |
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From time to time, we incur acquisition-related costs consisting primarily of (i) accounting and legal expenses, whether or not we ultimately consummate a proposed acquisition, (ii) certain unusual costs, such as employee retention benefits, resulting from pre-acquisition arrangements, and (iii) amortization of acquisition-related intangible assets. These costs are difficult to predict and, if and when incurred, generally are not expenses associated with our core operations. We exclude these costs and the related income tax effects from our internal assessments of our operating performance, and believe our peers also typically present non-GAAP results that exclude similar acquisition-related costs. |
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We do not believe that the restructuring charge related to a reduction in our workforce recorded in 2017 is a common cost that results from normal operating activities; rather, we believe that it relates to the headwinds in the retail sector and a realignment of our capacity with demand forecasts. We have excluded the charge from our internal assessment of our operating performance and non-GAAP results. |
We believe reporting adjusted results facilitates investors’ understanding of our historical operating trends, because it provides supplemental measurement information in evaluating the operating results of our business. We also believe that adjusted results provide a basis for comparisons to other
1
companies in the industry and enable investors to evaluate our operating performance in a manner consistent with our internal basis of measurement. Management refers to adjusted results in making operating decisions because we believe they provide meaningful supplemental information regarding our operational performance and our ability to invest in research and development and fund acquisitions and capital expenditures. In addition, adjusted results facilitate management’s internal comparisons to our historical operating results and comparisons to competitors’ operating results.
Further, we rely on adjusted results as primary measures to review and assess the operating performance of our Company and our management team in connection with our executive compensation and bonus plans. Since most of our employees are not directly involved with decisions surrounding acquisitions, restructurings and other items that are not central to our core operations, we do not believe it is appropriate or fair to have their incentive compensation affected by these items.
Item 9.01 Financial Statements and Exhibits.
(d)Exhibits.
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Number |
Description |
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99.1 |
2
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Number |
Description |
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99.1 |
3
Pursuant to the requirements of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized.
Manhattan Associates, Inc.
By: /s/ Dennis B. Story
Dennis B. Story
Executive Vice President, Chief Financial Officer and Treasurer
Dated: October 24, 2017
4
Exhibit 99.1
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Contact: |
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Dennis Story |
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Rick Fernandez |
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Chief Financial Officer |
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Senior Manager, Corporate Communications |
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Manhattan Associates, Inc. |
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Manhattan Associates, Inc. |
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770-955-7070 |
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678-597-6988 |
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dstory@manh.com |
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rfernandez@manh.com |
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Manhattan Associates Reports Solid Third Quarter Performance
Continued Cloud Transition with Manhattan Active™ Omni Solutions
ATLANTA – October 24, 2017 – Leading Supply Chain and Omni-Channel Commerce Solutions provider Manhattan Associates, Inc. (NASDAQ: MANH) today reported GAAP diluted earnings per share for the third quarter ended September 30, 2017, of $0.47 compared to $0.47 in Q3 2016, on license revenue of $18.8 million and total revenue of $152.9 million. Non-GAAP adjusted diluted earnings per share for Q3 2017 was $0.51 compared to $0.50 in Q3 2016.
“We posted solid Q3 operating results in a tough retail macro environment. Importantly, Q3 represents the first full quarter post-launch of our Manhattan Active™ Solutions suite and we are very pleased with the market’s enthusiasm for our Manhattan Active Omni cloud solution,” said Eddie Capel, president and chief executive officer of Manhattan Associates. "It’s encouraging to see the market is demanding the cloud delivery model and validating that Manhattan’s technology is superior and differentiated from competitive alternatives. We expect continued adoption of our Manhattan Active Omni cloud business as customers seek a cloud-first approach.”
THIRD QUARTER 2017 FINANCIAL SUMMARY:
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GAAP diluted earnings per share was $0.47 in both Q3 2017 and Q3 2016. |
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Adjusted diluted earnings per share, a non-GAAP measure, was $0.51 in Q3 2017, compared to $0.50 in Q3 2016. |
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Consolidated total revenue was $152.9 million in Q3 2017, compared to $152.2 million in Q3 2016. License revenue was $18.8 million in Q3 2017, compared to $21.6 million in Q3 2016. |
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Adjusted operating income, a non-GAAP measure, was $54.9 million in Q3 2017, compared to $57.2 million in Q3 2016. |
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Cash flow from operations was $44.0 million in Q3 2017, compared to $42.0 million in Q3 2016. Days Sales Outstanding was 58 days at September 30, 2017, compared to 57 days at June 30, 2017. |
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Cash and investments totaled $129.7 million at September 30, 2017, compared to $86.6 million at June 30, 2017. |
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During the three months ended September 30, 2017, the Company did not repurchase any shares of Manhattan Associates common stock under the share repurchase program authorized by the Board of Directors. In October 2017, the Board of Directors confirmed the Company’s existing authority to repurchase up to an aggregate of $50 million of the Company’s common stock. |
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NINE MONTH 2017 FINANCIAL SUMMARY:
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GAAP diluted earnings per share for the nine months ended September 30, 2017 was a record $1.32, compared to $1.30 for the nine months ended September 30, 2016. |
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Adjusted diluted earnings per share, a non-GAAP measure, was a record $1.42 for the nine months ended September 30, 2017, compared to $1.41 for the nine months ended September 30, 2016. |
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Consolidated revenue for the nine months ended September 30, 2017, was $450.5 million, compared to $457.0 million for the nine months ended September 30, 2016. License revenue was a record $64.0 million for the nine months ended September 30, 2017, compared to $62.9 million for the nine months ended September 30, 2016. |
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GAAP operating income was $142.1 million for the nine months ended September 30, 2017, compared to $149.0 million for the nine months ended September 30, 2016. |
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Adjusted operating income, a non-GAAP measure, was $156.4 million for the nine months ended September 30, 2017, compared to $161.0 million for the nine months ended September 30, 2016. |
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Cash flow from operations was a record $116.6 million in the nine months ended September 30, 2017, compared to $101.5 million in the nine months ended September 30, 2016. |
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During the nine months ended September 30, 2017, the Company repurchased 1,539,208 shares of Manhattan Associates common stock under the share repurchase program authorized by the Board of Directors, for a total investment of $75.0 million. |
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SALES ACHIEVEMENTS:
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Recognized license revenue of $1.0 million or more on four new contracts during Q3 2017. |
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Completed software wins with new customers such as: APL Logistics, Art Supply Enterprises, Canada Goose, Centaur Services, Fuerst, John Hopkins Health System, Logistica y Transporte para la Salud, Momentum Textiles, New Prime, Ozark Motor Lines, PoolCorp and Topson Downs of California. |
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Expanded relationships with existing customers such as: Ahold USA, Alidi, B&G Foods, Burlington Coat Factory, Boston Scientific, C&A Marketing, CDiscount SA, Conair, CSS Industries, Damco Distribution Services, DHL Supply Chain Singapore, Delta Galil USA, Dubois Chemicals, Everything But Water, Foschini Retail Group, Geodis Logistics, Gerber Childrenswear, HEB Grocery, Hy-Vee, Imperial Group, Jasco Products, Kane Warehousing, Komar Distribution Services, Nine West, Nordstrom, Nueva Elektra de Milenio, OKAIDI, Orefield Cold Storage and Distribution Center, Precision Planting, Reitman’s, Rocky Brands, Ryder Integrated Logistics, Stella & DOT, Sugartown Worldwide, Uline, UPS Supply Chain Management, VF Services, Wacoal America, West Coast Distribution and Uniform Advantage. |
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Manhattan Associates reaffirms the following revenue and diluted earnings per share guidance for the full year 2017:
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Guidance Range - 2017 Full Year |
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($'s in millions, except EPS) |
$ Range |
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% Growth Range |
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Total revenue - current guidance |
$ |
590 |
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$ |
600 |
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-2% |
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-1% |
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Diluted earnings per share (EPS): |
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GAAP EPS - current guidance |
$ |
1.71 |
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$ |
1.75 |
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-1% |
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2% |
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Equity-based compensation, net of tax |
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0.11 |
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0.11 |
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Restructuring charge, net of tax |
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0.03 |
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0.03 |
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Adjusted EPS(1) - current guidance |
$ |
1.85 |
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$ |
1.89 |
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-1% |
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1% |
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(1) Adjusted EPS is a Non-GAAP measure which excludes the impact of equity-based compensation, restructuring |
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charge and acquisition-related costs, and the related income tax effects of these items. |
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For further information regarding our full year 2017 outlook, as well as our preliminary 2018 outlook, please see note 10 to the supplemental financial information accompanying this press release.
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
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The Company’s conference call regarding its third quarter financial results will be held today, October 24, 2017, at 4:30 p.m. Eastern Time. Investors are invited to listen 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.
For those who cannot listen to the live broadcast, a replay can be accessed 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 83067804 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’ fourth quarter 2017 earnings release.
GAAP VERSUS NON-GAAP PRESENTATION
The Company provides adjusted operating income, adjusted net income and adjusted diluted earnings per share 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 non-GAAP operating income, non-GAAP net income and non-GAAP earnings per share measures used by other companies. The Company believes that 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 that are 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 quarter and nine months ended September 30, 2017.
Non-GAAP adjusted operating income, 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 thereof, and a restructuring charge – all net of income tax effects. Reconciliations of the Company’s GAAP financial measures to non-GAAP adjustments are included in the supplemental information attached to this release.
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Manhattan Associates is a technology leader in supply chain and omni-channel 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 omni-channel 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 “2017 Guidance” and in note 10 to the supplemental financial information accompanying this press release, 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-service/cloud-based model, 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, 2016. 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)
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Three Months Ended September 30, |
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Nine Months Ended September 30, |
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2017 |
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2016 |
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2017 |
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2016 |
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(unaudited) |
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(unaudited) |
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(unaudited) |
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(unaudited) |
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Revenue: |
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Software license |
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$ |
18,794 |
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$ |
21,633 |
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$ |
64,009 |
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$ |
62,871 |
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Services |
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115,555 |
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119,267 |
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341,216 |
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355,363 |
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Hardware and other |
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18,534 |
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11,313 |
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45,288 |
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38,731 |
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Total revenue |
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152,883 |
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152,213 |
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450,513 |
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456,965 |
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Costs and expenses: |
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Cost of license |
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2,830 |
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2,966 |
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7,425 |
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8,401 |
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Cost of services |
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44,750 |
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49,436 |
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142,244 |
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149,733 |
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Cost of hardware and other |
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15,492 |
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9,276 |
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37,337 |
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30,874 |
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Research and development |
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14,747 |
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13,389 |
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43,074 |
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41,553 |
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Sales and marketing |
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10,739 |
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10,003 |
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34,260 |
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34,606 |
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General and administrative |
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11,031 |
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11,225 |
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34,290 |
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36,041 |
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Depreciation and amortization |
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2,275 |
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2,334 |
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6,863 |
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6,806 |
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Restructuring charge |
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(77 |
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- |
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2,945 |
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- |
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Total costs and expenses |
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101,787 |
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98,629 |
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308,438 |
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308,014 |
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Operating income |
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51,096 |
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53,584 |
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142,075 |
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148,951 |
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Other income (loss), net |
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207 |
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210 |
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(232 |
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1,384 |
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Income before income taxes |
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51,303 |
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53,794 |
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141,843 |
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150,335 |
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Income tax provision |
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18,704 |
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20,298 |
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49,876 |
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56,018 |
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Net income |
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$ |
32,599 |
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$ |
33,496 |
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$ |
91,967 |
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$ |
94,317 |
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Basic earnings per share |
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$ |
0.47 |
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$ |
0.47 |
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$ |
1.33 |
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$ |
1.31 |
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Diluted earnings per share |
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$ |
0.47 |
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$ |
0.47 |
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$ |
1.32 |
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$ |
1.30 |
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Weighted average number of shares: |
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Basic |
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68,928 |
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71,403 |
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69,389 |
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71,981 |
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Diluted |
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69,135 |
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71,743 |
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69,614 |
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72,340 |
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MANHATTAN ASSOCIATES, INC. AND SUBSIDIARIES
Reconciliation of Selected GAAP to Non-GAAP Measures
(in thousands, except per share amounts)
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Three Months Ended September 30, |
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Nine Months Ended September 30, |
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2017 |
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2016 |
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2017 |
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2016 |
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Operating income |
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$ |
51,096 |
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$ |
53,584 |
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$ |
142,075 |
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$ |
148,951 |
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Equity-based compensation (a) |
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3,773 |
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3,541 |
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11,041 |
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11,724 |
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Purchase amortization (c) |
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108 |
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107 |
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323 |
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322 |
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Restructuring charge (d) |
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(77 |
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- |
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2,945 |
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- |
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Adjusted operating income (Non-GAAP) |
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$ |
54,900 |
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$ |
57,232 |
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$ |
156,384 |
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$ |
160,997 |
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Income tax provision |
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$ |
18,704 |
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$ |
20,298 |
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$ |
49,876 |
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$ |
56,018 |
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Equity-based compensation (a) |
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1,377 |
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1,310 |
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4,030 |
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4,338 |
|
|
Tax benefit of stock awards vested (b) |
|
|
22 |
|
|
|
- |
|
|
|
1,897 |
|
|
|
- |
|
|
Purchase amortization (c) |
|
|
40 |
|
|
|
40 |
|
|
|
118 |
|
|
|
119 |
|
|
Restructuring charge (d) |
|
|
(28 |
) |
|
|
- |
|
|
|
1,075 |
|
|
|
- |
|
|
Adjusted income tax provision (Non-GAAP) |
|
$ |
20,115 |
|
|
$ |
21,648 |
|
|
$ |
56,996 |
|
|
$ |
60,475 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
32,599 |
|
|
$ |
33,496 |
|
|
$ |
91,967 |
|
|
$ |
94,317 |
|
|
Equity-based compensation (a) |
|
|
2,396 |
|
|
|
2,231 |
|
|
|
7,011 |
|
|
|
7,386 |
|
|
Tax benefit of stock awards vested (b) |
|
|
(22 |
) |
|
|
- |
|
|
|
(1,897 |
) |
|
|
- |
|
|
Purchase amortization (c) |
|
|
68 |
|
|
|
67 |
|
|
|
205 |
|
|
|
203 |
|
|
Restructuring charge (d) |
|
|
(49 |
) |
|
|
- |
|
|
|
1,870 |
|
|
|
- |
|
|
Adjusted net income (Non-GAAP) |
|
$ |
34,992 |
|
|
$ |
35,794 |
|
|
$ |
99,156 |
|
|
$ |
101,906 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted EPS |
|
$ |
0.47 |
|
|
$ |
0.47 |
|
|
$ |
1.32 |
|
|
$ |
1.30 |
|
|
Equity-based compensation (a) |
|
|
0.03 |
|
|
|
0.03 |
|
|
|
0.10 |
|
|
|
0.10 |
|
|
Tax benefit of stock awards vested (b) |
|
|
- |
|
|
|
- |
|
|
|
(0.03 |
) |
|
|
- |
|
|
Purchase amortization (c) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
Restructuring charge (d) |
|
|
- |
|
|
|
- |
|
|
|
0.03 |
|
|
|
- |
|
|
Adjusted diluted EPS (Non-GAAP) |
|
$ |
0.51 |
|
|
$ |
0.50 |
|
|
$ |
1.42 |
|
|
$ |
1.41 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fully diluted shares |
|
|
69,135 |
|
|
|
71,743 |
|
|
|
69,614 |
|
|
|
72,340 |
|
|
(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 with the SEC on the date hereof. Equity-based compensation is included in the following GAAP operating expense lines for the three and nine months ended September 30, 2017 and 2016: |
|
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
|
|
|
2017 |
|
|
2016 |
|
|
2017 |
|
|
2016 |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of services |
|
$ |
875 |
|
|
$ |
828 |
|
|
$ |
2,596 |
|
|
$ |
2,975 |
|
|
Research and development |
|
|
774 |
|
|
|
548 |
|
|
|
1,928 |
|
|
|
1,922 |
|
|
Sales and marketing |
|
|
490 |
|
|
|
558 |
|
|
|
1,550 |
|
|
|
1,838 |
|
|
General and administrative |
|
|
1,634 |
|
|
|
1,607 |
|
|
|
4,967 |
|
|
|
4,989 |
|
|
Total equity-based compensation |
|
$ |
3,773 |
|
|
$ |
3,541 |
|
|
$ |
11,041 |
|
|
$ |
11,724 |
|
|
based payments. Under the new guidance, all excess tax benefits and certain tax deficiencies are recognized as income tax expense or benefit in the income statements on a prospective basis, rather than recorded in additional paid-in capital. The adjustment represents 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, respectively. As discussed above, we excluded equity-based compensation from adjusted non-GAAP results to be consistent with other companies in the software industry. Therefore, we also excluded the related tax benefit (expense) generated upon their vesting. |
|
(c) |
Adjustments represent purchased intangibles amortization from a prior acquisition. Such amortization is excluded 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 on the date hereof. |
|
(d) |
In May 2017, we eliminated about 100 positions due to the headwinds in the retail sector and to align our services capacity with demand. This action does not impair nor alter our strategic investment plans in innovation and sales and marketing to increase market share and extend our competitive advantage. As a result of this initiative, we recorded a charge of approximately $3.0 million in 2017. The charge primarily consists of employee severance, employee transition cost and outplacement services. We do not believe that the charge is common cost that resulted from normal operating activities. Consequently, we have excluded this charge from adjusted non-GAAP results. |
MANHATTAN ASSOCIATES, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(in thousands, except share and per share data)
|
|
|
September 30, 2017 |
|
|
December 31, 2016 |
|
||
|
|
|
(unaudited) |
|
|
|
|
|
|
|
ASSETS |
|
|
|
|
|
|
|
|
|
Current Assets: |
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
124,818 |
|
|
$ |
95,615 |
|
|
Short-term investments |
|
|
4,901 |
|
|
|
- |
|
|
Accounts receivable, net of allowance of $3,163 and $3,595, respectively |
|
|
97,011 |
|
|
|
100,285 |
|
|
Prepaid expenses and other current assets |
|
|
11,638 |
|
|
|
11,118 |
|
|
Total current assets |
|
|
238,368 |
|
|
|
207,018 |
|
|
|
|
|
|
|
|
|
|
|
|
Property and equipment, net |
|
|
15,275 |
|
|
|
17,424 |
|
|
Goodwill, net |
|
|
62,245 |
|
|
|
62,228 |
|
|
Deferred income taxes |
|
|
2,691 |
|
|
|
2,867 |
|
|
Other assets |
|
|
7,670 |
|
|
|
7,603 |
|
|
Total assets |
|
$ |
326,249 |
|
|
$ |
297,140 |
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS' EQUITY |
|
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
|
Accounts payable |
|
$ |
15,136 |
|
|
$ |
12,052 |
|
|
Accrued compensation and benefits |
|
|
17,173 |
|
|
|
20,700 |
|
|
Accrued and other liabilities |
|
|
12,394 |
|
|
|
12,510 |
|
|
Deferred revenue |
|
|
70,984 |
|
|
|
63,457 |
|
|
Income taxes payable |
|
|
6,745 |
|
|
|
8,924 |
|
|
Total current liabilities |
|
|
122,432 |
|
|
|
117,643 |
|
|
|
|
|
|
|
|
|
|
|
|
Other non-current liabilities |
|
|
9,463 |
|
|
|
10,131 |
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders' equity: |
|
|
|
|
|
|
|
|
|
Preferred stock, no par value; 20,000,000 shares authorized, no shares issued or outstanding in 2017 and 2016 |
|
|
- |
|
|
|
- |
|
|
Common stock, $0.01 par value; 200,000,000 shares authorized; 68,930,029 and 70,233,955 shares issued and outstanding at September 30, 2017 and December 31, 2016, respectively |
|
|
689 |
|
|
|
702 |
|
|
Additional paid-in capital |
|
|
3,694 |
|
|
|
- |
|
|
Retained earnings |
|
|
202,717 |
|
|
|
184,558 |
|
|
Accumulated other comprehensive loss |
|
|
(12,746 |
) |
|
|
(15,894 |
) |
|
Total shareholders' equity |
|
|
194,354 |
|
|
|
169,366 |
|
|
Total liabilities and shareholders' equity |
|
$ |
326,249 |
|
|
$ |
297,140 |
|
MANHATTAN ASSOCIATES, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(in thousands)
|
|
|
Nine Months Ended September 30, |
|
|||||
|
|
|
2017 |
|
|
2016 |
|
||
|
|
|
(unaudited) |
|
|
(unaudited) |
|
||
|
Operating activities: |
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
91,967 |
|
|
$ |
94,317 |
|
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
6,863 |
|
|
|
6,806 |
|
|
Equity-based compensation |
|
|
11,041 |
|
|
|
11,724 |
|
|
Loss on disposal of equipment |
|
|
34 |
|
|
|
19 |
|
|
Tax benefit of stock awards exercised/vested |
|
|
- |
|
|
|
5,166 |
|
|
Excess tax benefits from equity-based compensation |
|
|
- |
|
|
|
(5,170 |
) |
|
Deferred income taxes |
|
|
741 |
|
|
|
(259 |
) |
|
Unrealized foreign currency loss (gain) |
|
|
93 |
|
|
|
(363 |
) |
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
|
Accounts receivable, net |
|
|
5,095 |
|
|
|
(1,850 |
) |
|
Other assets |
|
|
(940 |
) |
|
|
(1,555 |
) |
|
Accounts payable, accrued and other liabilities |
|
|
(2,273 |
) |
|
|
(14,033 |
) |
|
Income taxes |
|
|
(2,151 |
) |
|
|
6,063 |
|
|
Deferred revenue |
|
|
6,169 |
|
|
|
633 |
|
|
Net cash provided by operating activities |
|
|
116,639 |
|
|
|
101,498 |
|
|
|
|
|
|
|
|
|
|
|
|
Investing activities: |
|
|
|
|
|
|
|
|
|
Purchase of property and equipment |
|
|
(3,897 |
) |
|
|
(5,465 |
) |
|
Net (purchases) maturities of investments |
|
|
(4,487 |
) |
|
|
10,201 |
|
|
Net cash (used in) provided by investing activities |
|
|
(8,384 |
) |
|
|
4,736 |
|
|
|
|
|
|
|
|
|
|
|
|
Financing activities: |
|
|
|
|
|
|
|
|
|
Purchase of common stock |
|
|
(81,700 |
) |
|
|
(117,968 |
) |
|
Proceeds from issuance of common stock from options exercised |
|
|
- |
|
|
|
18 |
|
|
Excess tax benefits from equity-based compensation |
|
|
- |
|
|
|
5,170 |
|
|
Net cash used in financing activities |
|
|
(81,700 |
) |
|
|
(112,780 |
) |
|
|
|
|
|
|
|
|
|
|
|
Foreign currency impact on cash |
|
|
2,648 |
|
|
|
(1,039 |
) |
|
|
|
|
|
|
|
|
|
|
|
Net change in cash and cash equivalents |
|
|
29,203 |
|
|
|
(7,585 |
) |
|
Cash and cash equivalents at beginning of period |
|
|
95,615 |
|
|
|
118,416 |
|
|
Cash and cash equivalents at end of period |
|
$ |
124,818 |
|
|
$ |
110,831 |
|
SUPPLEMENTAL INFORMATION
|
1. |
GAAP and Adjusted earnings per share by quarter are as follows: |
|
|
|
|
2016 |
|
|
2017 |
|
||||||||||||||||||||||||||||||
|
|
|
|
1st Qtr |
|
|
2nd Qtr |
|
|
3rd Qtr |
|
|
4th Qtr |
|
|
Full Year |
|
|
1st Qtr |
|
|
2nd Qtr |
|
|
3rd Qtr |
|
|
YTD |
|
|||||||||
|
GAAP Diluted EPS |
|
|
$ |
0.38 |
|
|
$ |
0.46 |
|
|
$ |
0.47 |
|
|
$ |
0.42 |
|
|
$ |
1.72 |
|
|
$ |
0.40 |
|
|
$ |
0.45 |
|
|
|
0.47 |
|
|
$ |
1.32 |
|
|
Adjustments to GAAP: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity-based compensation |
|
|
|
0.04 |
|
|
|
0.03 |
|
|
|
0.03 |
|
|
|
0.04 |
|
|
|
0.14 |
|
|
|
0.04 |
|
|
|
0.03 |
|
|
|
0.03 |
|
|
|
0.10 |
|
|
Tax benefit of stock awards vested |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(0.03 |
) |
|
|
- |
|
|
|
- |
|
|
|
(0.03 |
) |
|
Purchase amortization |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
Restructuring charge |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
0.03 |
|
|
|
|
|
|
|
0.03 |
|
|
Adjusted Diluted EPS |
|
|
$ |
0.42 |
|
|
$ |
0.49 |
|
|
$ |
0.50 |
|
|
$ |
0.46 |
|
|
$ |
1.87 |
|
|
$ |
0.42 |
|
|
$ |
0.50 |
|
|
$ |
0.51 |
|
|
$ |
1.42 |
|
|
Fully Diluted Shares |
|
|
|
73,020 |
|
|
|
72,228 |
|
|
|
71,743 |
|
|
|
71,148 |
|
|
|
72,060 |
|
|
|
70,247 |
|
|
|
69,421 |
|
|
|
69,135 |
|
|
|
69,614 |
|
|
2. |
Revenues and operating income by reportable segment are as follows (in thousands): |
|
|
|
|
2016 |
|
|
2017 |
|
||||||||||||||||||||||||||||||
|
|
|
|
1st Qtr |
|
|
2nd Qtr |
|
|
3rd Qtr |
|
|
4th Qtr |
|
|
Full Year |
|
|
1st Qtr |
|
|
2nd Qtr |
|
|
3rd Qtr |
|
|
YTD |
|
|||||||||
|
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas |
|
|
$ |
128,807 |
|
|
$ |
131,018 |
|
|
$ |
130,099 |
|
|
$ |
123,660 |
|
|
$ |
513,584 |
|
|
$ |
113,115 |
|
|
$ |
123,658 |
|
|
$ |
124,833 |
|
|
$ |
361,606 |
|
|
EMEA |
|
|
|
15,686 |
|
|
|
18,185 |
|
|
|
15,078 |
|
|
|
17,333 |
|
|
|
66,282 |
|
|
|
23,360 |
|
|
|
22,028 |
|
|
|
18,453 |
|
|
|
63,841 |
|
|
APAC |
|
|
|
5,367 |
|
|
|
5,689 |
|
|
|
7,036 |
|
|
|
6,599 |
|
|
|
24,691 |
|
|
|
7,014 |
|
|
|
8,455 |
|
|
|
9,597 |
|
|
|
25,066 |
|
|
|
|
|
$ |
149,860 |
|
|
$ |
154,892 |
|
|
$ |
152,213 |
|
|
$ |
147,592 |
|
|
$ |
604,557 |
|
|
$ |
143,489 |
|
|
$ |
154,141 |
|
|
$ |
152,883 |
|
|
$ |
450,513 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP Operating Income: |
|
||||||||||||||||||||||||||||||||||||
|
Americas |
|
|
$ |
37,454 |
|
|
$ |
44,126 |
|
|
$ |
46,213 |
|
|
$ |
37,154 |
|
|
$ |
164,947 |
|
|
$ |
28,713 |
|
|
$ |
35,717 |
|
|
$ |
39,295 |
|
|
$ |
103,725 |
|
|
EMEA |
|
|
|
4,439 |
|
|
|
6,854 |
|
|
|
4,822 |
|
|
|
5,945 |
|
|
|
22,060 |
|
|
|
10,754 |
|
|
|
9,995 |
|
|
|
7,128 |
|
|
|
27,877 |
|
|
APAC |
|
|
|
1,206 |
|
|
|
1,288 |
|
|
|
2,549 |
|
|
|
2,257 |
|
|
|
7,300 |
|
|
|
2,253 |
|
|
|
3,547 |
|
|
|
4,673 |
|
|
|
10,473 |
|
|
|
|
|
$ |
43,099 |
|
|
$ |
52,268 |
|
|
$ |
53,584 |
|
|
$ |
45,356 |
|
|
$ |
194,307 |
|
|
$ |
41,720 |
|
|
$ |
49,259 |
|
|
$ |
51,096 |
|
|
$ |
142,075 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments (pre-tax): |
|
||||||||||||||||||||||||||||||||||||
|
Americas: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity-based compensation |
|
|
$ |
4,688 |
|
|
$ |
3,495 |
|
|
$ |
3,541 |
|
|
$ |
4,210 |
|
|
$ |
15,934 |
|
|
$ |
4,472 |
|
|
$ |
2,796 |
|
|
|
3,773 |
|
|
$ |
11,041 |
|
|
Purchase amortization |
|
|
|
107 |
|
|
|
108 |
|
|
|
107 |
|
|
|
108 |
|
|
|
430 |
|
|
|
107 |
|
|
|
108 |
|
|
|
108 |
|
|
|
323 |
|
|
Restructuring charge |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
2,908 |
|
|
|
(77 |
) |
|
|
2,831 |
|
|
|
|
|
$ |
4,795 |
|
|
$ |
3,603 |
|
|
$ |
3,648 |
|
|
$ |
4,318 |
|
|
$ |
16,364 |
|
|
$ |
4,579 |
|
|
$ |
5,812 |
|
|
$ |
3,804 |
|
|
$ |
14,195 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EMEA: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restructuring charge |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
114 |
|
|
|
- |
|
|
|
114 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted non-GAAP Operating Income: |
|
||||||||||||||||||||||||||||||||||||
|
Americas |
|
|
$ |
42,249 |
|
|
$ |
47,729 |
|
|
$ |
49,861 |
|
|
$ |
41,472 |
|
|
$ |
181,311 |
|
|
$ |
33,292 |
|
|
$ |
41,529 |
|
|
$ |
43,099 |
|
|
$ |
117,920 |
|
|
EMEA |
|
|
|
4,439 |
|
|
|
6,854 |
|
|
|
4,822 |
|
|
|
5,945 |
|
|
|
22,060 |
|
|
|
10,754 |
|
|
|
10,109 |
|
|
|
7,128 |
|
|
|
27,991 |
|
|
APAC |
|
|
|
1,206 |
|
|
|
1,288 |
|
|
|
2,549 |
|
|
|
2,257 |
|
|
|
7,300 |
|
|
|
2,253 |
|
|
|
3,547 |
|
|
|
4,673 |
|
|
|
10,473 |
|
|
|
|
|
$ |
47,894 |
|
|
$ |
55,871 |
|
|
$ |
57,232 |
|
|
$ |
49,674 |
|
|
$ |
210,671 |
|
|
$ |
46,299 |
|
|
$ |
55,185 |
|
|
$ |
54,900 |
|
|
$ |
156,384 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3. |
Our services revenue consists of fees generated from professional services and customer support and software enhancements related to our software products as follows (in thousands): |
|
|
|
|
2016 |
|
|
2017 |
|
||||||||||||||||||||||||||||||
|
|
|
|
1st Qtr |
|
|
2nd Qtr |
|
|
3rd Qtr |
|
|
4th Qtr |
|
|
Full Year |
|
|
1st Qtr |
|
|
2nd Qtr |
|
|
3rd Qtr |
|
|
YTD |
|
|||||||||
|
Professional services |
|
|
$ |
84,506 |
|
|
$ |
86,992 |
|
|
$ |
84,843 |
|
|
$ |
77,097 |
|
|
$ |
333,438 |
|
|
$ |
75,457 |
|
|
$ |
80,869 |
|
|
$ |
79,217 |
|
|
$ |
235,543 |
|
|
Customer support and software enhancements |
|
|
|
31,757 |
|
|
|
32,841 |
|
|
|
34,424 |
|
|
|
34,826 |
|
|
|
133,848 |
|
|
|
33,376 |
|
|
|
35,959 |
|
|
|
36,338 |
|
|
|
105,673 |
|
|
Total services revenue |
|
|
$ |
116,263 |
|
|
$ |
119,833 |
|
|
$ |
119,267 |
|
|
$ |
111,923 |
|
|
$ |
467,286 |
|
|
$ |
108,833 |
|
|
$ |
116,828 |
|
|
$ |
115,555 |
|
|
$ |
341,216 |
|
|
4. |
Hardware and other revenue includes the following items (in thousands): |
|
|
|
|
2016 |
|
|
2017 |
|
||||||||||||||||||||||||||||||
|
|
|
|
1st Qtr |
|
|
2nd Qtr |
|
|
3rd Qtr |
|
|
4th Qtr |
|
|
Full Year |
|
|
1st Qtr |
|
|
2nd Qtr |
|
|
3rd Qtr |
|
|
YTD |
|
|||||||||
|
Hardware revenue |
|
|
$ |
8,761 |
|
|
$ |
9,554 |
|
|
$ |
6,543 |
|
|
$ |
9,070 |
|
|
$ |
33,928 |
|
|
$ |
7,559 |
|
|
$ |
10,413 |
|
|
$ |
13,540 |
|
|
$ |
31,512 |
|
|
Billed travel |
|
|
|
4,229 |
|
|
|
4,874 |
|
|
|
4,770 |
|
|
|
4,474 |
|
|
|
18,347 |
|
|
|
4,324 |
|
|
|
4,458 |
|
|
|
4,994 |
|
|
|
13,776 |
|
|
Total hardware and other revenue |
|
|
$ |
12,990 |
|
|
$ |
14,428 |
|
|
$ |
11,313 |
|
|
$ |
13,544 |
|
|
$ |
52,275 |
|
|
$ |
11,883 |
|
|
$ |
14,871 |
|
|
$ |
18,534 |
|
|
$ |
45,288 |
|
|
5. |
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):
|
|
|
|
2016 |
|
|
2017 |
|
||||||||||||||||||||||||||||||
|
|
|
|
1st Qtr |
|
|
2nd Qtr |
|
|
3rd Qtr |
|
|
4th Qtr |
|
|
Full Year |
|
|
1st Qtr |
|
|
2nd Qtr |
|
|
3rd Qtr |
|
|
YTD |
|
|||||||||
|
Revenue |
|
|
$ |
(810 |
) |
|
$ |
(474 |
) |
|
$ |
(784 |
) |
|
$ |
(1,425 |
) |
|
$ |
(3,493 |
) |
|
$ |
(1,547 |
) |
|
$ |
(1,219 |
) |
|
$ |
536 |
|
|
$ |
(2,230 |
) |
|
Costs and expenses |
|
|
|
(1,292 |
) |
|
|
(702 |
) |
|
|
(782 |
) |
|
|
(1,028 |
) |
|
|
(3,804 |
) |
|
|
(789 |
) |
|
|
(396 |
) |
|
|
723 |
|
|
|
(462 |
) |
|
Operating income |
|
|
|
482 |
|
|
|
228 |
|
|
|
(2 |
) |
|
|
(397 |
) |
|
|
311 |
|
|
|
(758 |
) |
|
$ |
(823 |
) |
|
|
(187 |
) |
|
|
(1,768 |
) |
|
Foreign currency gains (losses) in other income |
|
|
|
165 |
|
|
|
331 |
|
|
|
(72 |
) |
|
|
211 |
|
|
|
635 |
|
|
|
(646 |
) |
|
|
(348 |
) |
|
|
(81 |
) |
|
|
(1,075 |
) |
|
|
|
|
$ |
647 |
|
|
$ |
559 |
|
|
$ |
(74 |
) |
|
$ |
(186 |
) |
|
$ |
946 |
|
|
$ |
(1,404 |
) |
|
$ |
(1,171 |
) |
|
$ |
(268 |
) |
|
$ |
(2,843 |
) |
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):
|
|
|
|
2016 |
|
|
2017 |
|
||||||||||||||||||||||||||||||
|
|
|
|
1st Qtr |
|
|
2nd Qtr |
|
|
3rd Qtr |
|
|
4th Qtr |
|
|
Full Year |
|
|
1st Qtr |
|
|
2nd Qtr |
|
|
3rd Qtr |
|
|
YTD |
|
|||||||||
|
Operating income |
|
|
$ |
682 |
|
|
$ |
459 |
|
|
$ |
259 |
|
|
$ |
159 |
|
|
$ |
1,559 |
|
|
$ |
(70 |
) |
|
$ |
(326 |
) |
|
$ |
(338 |
) |
|
$ |
(734 |
) |
|
Foreign currency (losses) gains in other income |
|
|
|
(109 |
) |
|
|
212 |
|
|
|
(44 |
) |
|
|
159 |
|
|
|
218 |
|
|
|
(320 |
) |
|
|
(190 |
) |
|
|
71 |
|
|
|
(439 |
) |
|
Total impact of changes in the Indian Rupee |
|
|
$ |
573 |
|
|
$ |
671 |
|
|
$ |
215 |
|
|
$ |
318 |
|
|
$ |
1,777 |
|
|
$ |
(390 |
) |
|
$ |
(516 |
) |
|
$ |
(267 |
) |
|
$ |
(1,173 |
) |
6.Other income includes the following components (in thousands):
|
|
|
|
2016 |
|
|
2017 |
|
||||||||||||||||||||||||||||||
|
|
|
|
1st Qtr |
|
|
2nd Qtr |
|
|
3rd Qtr |
|
|
4th Qtr |
|
|
Full Year |
|
|
1st Qtr |
|
|
2nd Qtr |
|
|
3rd Qtr |
|
|
YTD |
|
|||||||||
|
Interest income |
|
|
$ |
335 |
|
|
$ |
329 |
|
|
$ |
281 |
|
|
$ |
216 |
|
|
$ |
1,161 |
|
|
$ |
293 |
|
|
$ |
264 |
|
|
$ |
314 |
|
|
$ |
871 |
|
|
Foreign currency gains (losses) |
|
|
|
165 |
|
|
|
331 |
|
|
|
(72 |
) |
|
|
211 |
|
|
|
635 |
|
|
|
(646 |
) |
|
|
(348 |
) |
|
|
(81 |
) |
|
|
(1,075 |
) |
|
Other non-operating income (expense) |
|
|
|
20 |
|
|
|
(6 |
) |
|
|
1 |
|
|
|
(11 |
) |
|
|
4 |
|
|
|
(18 |
) |
|
|
16 |
|
|
|
(26 |
) |
|
|
(28 |
) |
|
Total other income (loss) |
|
|
$ |
520 |
|
|
$ |
654 |
|
|
$ |
210 |
|
|
$ |
416 |
|
|
$ |
1,800 |
|
|
$ |
(371 |
) |
|
$ |
(68 |
) |
|
$ |
207 |
|
|
$ |
(232 |
) |
7.Capital expenditures are as follows (in thousands):
|
|
|
|
2016 |
|
|
2017 |
|
||||||||||||||||||||||||||||||
|
|
|
|
1st Qtr |
|
|
2nd Qtr |
|
|
3rd Qtr |
|
|
4th Qtr |
|
|
Full Year |
|
|
1st Qtr |
|
|
2nd Qtr |
|
|
3rd Qtr |
|
|
YTD |
|
|||||||||
|
Capital expenditures |
|
|
$ |
1,906 |
|
|
$ |
2,201 |
|
|
$ |
1,358 |
|
|
$ |
1,378 |
|
|
$ |
6,843 |
|
|
$ |
789 |
|
|
$ |
1,914 |
|
|
$ |
1,194 |
|
|
$ |
3,897 |
|
|
8. |
Stock Repurchase Activity (in thousands): |
|
|
|
|
2016 |
|
|
2017 |
|
||||||||||||||||||||||||||||||
|
|
|
|
1st Qtr |
|
|
2nd Qtr |
|
|
3rd Qtr |
|
|
4th Qtr |
|
|
Full Year |
|
|
1st Qtr |
|
|
2nd Qtr |
|
|
3rd Qtr |
|
|
YTD |
|
|||||||||
|
Shares purchased under publicly-announced buy-back program |
|
|
892 |
|
|
|
552 |
|
|
|
420 |
|
|
|
957 |
|
|
|
2,821 |
|
|
|
1,004 |
|
|
|
535 |
|
|
|
- |
|
|
|
1,539 |
|
|
|
Shares withheld for taxes due upon vesting of restricted stock |
|
|
163 |
|
|
|
- |
|
|
|
3 |
|
|
|
1 |
|
|
|
167 |
|
|
|
131 |
|
|
|
1 |
|
|
|
2 |
|
|
|
134 |
|
|
|
Total shares purchased |
|
|
|
1,055 |
|
|
|
552 |
|
|
|
423 |
|
|
|
958 |
|
|
|
2,988 |
|
|
|
1,135 |
|
|
|
536 |
|
|
|
2 |
|
|
|
1,673 |
|
|
Total cash paid for shares purchased under publicly-announced buy-back program |
|
$ |
48,499 |
|
|
$ |
34,995 |
|
|
$ |
24,998 |
|
|
$ |
49,901 |
|
|
$ |
158,393 |
|
|
$ |
49,978 |
|
|
$ |
24,974 |
|
|
$ |
- |
|
|
$ |
74,952 |
|
|
|
Total cash paid for shares withheld for taxes due upon vesting of restricted stock |
|
|
9,292 |
|
|
|
26 |
|
|
|
158 |
|
|
|
64 |
|
|
|
9,540 |
|
|
|
6,641 |
|
|
|
27 |
|
|
|
80 |
|
|
|
6,748 |
|
|
|
Total cash paid for shares repurchased |
|
|
$ |
57,791 |
|
|
$ |
35,021 |
|
|
$ |
25,156 |
|
|
$ |
49,965 |
|
|
$ |
167,933 |
|
|
$ |
56,619 |
|
|
$ |
25,001 |
|
|
$ |
80 |
|
|
$ |
81,700 |
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, |
|
|
|
|
|
|||||||||||
|
|
|
|
|
|
|
|
2016 |
|
|
2017 |
|
|
|
|
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities, as stated |
|
$ |
101,498 |
|
|
$ |
116,639 |
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Add: excess tax benefit from equity-based compensation |
|
|
5,170 |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Revised net cash provided by operating activities |
|
$ |
106,668 |
|
|
$ |
116,639 |
|
|
|
|
|
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in financing activities, as stated |
|
$ |
(112,780 |
) |
|
$ |
(81,700 |
) |
|
|
|
|
|
|
|
|
|
|
|||||
|
Less: excess tax benefit from equity-based compensation |
|
|
(5,170 |
) |
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Revised net cash used in financing activities |
|
$ |
(117,950 |
) |
|
$ |
(81,700 |
) |
|
|
|
|
|
|
|
|
|
|
|||||
|
10. |
2018 Outlook |
|
|
|
|
|
|
|
|
2017 Outlook (Midpoint of Range) |
|
|
2018 Outlook(2) |
|
|
||||||||||
|
($'s in millions, except EPS) |
|
Current |
|
|
ASC 606(1) |
|
|
Low |
|
|
High |
|
|
|||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Revenue |
|
|
|
|
|
|
$ |
595 |
|
|
$ |
564 |
|
|
$ |
556 |
|
(2) |
$ |
568 |
|
(2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
|
GAAP - Operating Margin % |
|
|
31.2 |
% |
|
|
32.9 |
% |
|
|
20.8 |
% |
(3), (4) |
|
20.7 |
% |
(3), (4) |
|||||
|
Equity-based compensation, net of tax |
|
|
2.5 |
% |
|
|
2.7 |
% |
|
|
3.5 |
% |
|
|
3.5 |
% |
|
|||||
|
Amortization |
|
|
0.1 |
% |
|
|
0.1 |
% |
|
|
0.0 |
% |
|
|
0.0 |
% |
|
|||||
|
Restructuring charge, net of tax |
|
|
0.5 |
% |
|
|
0.5 |
% |
|
|
0.0 |
% |
|
|
0.0 |
% |
|
|||||
|
Adjusted - Operating Margin % |
|
|
34.3 |
% |
|
|
36.2 |
% |
|
|
24.3 |
% |
(3), (4) |
|
24.2 |
% |
(3), (4) |
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP EPS |
|
|
|
|
|
|
$ |
1.73 |
|
|
$ |
1.73 |
|
|
$ |
1.10 |
|
|
$ |
1.13 |
|
|
|
Equity-based compensation, net of tax |
|
|
0.11 |
|
|
|
0.11 |
|
|
|
0.16 |
|
|
|
0.16 |
|
|
|||||
|
Restructuring charge, net of tax |
|
|
0.03 |
|
|
|
0.03 |
|
|
|
- |
|
|
|
- |
|
|
|||||
|
Adjusted EPS |
|
|
|
|
|
|
$ |
1.87 |
|
|
$ |
1.87 |
|
|
$ |
1.26 |
|
|
$ |
1.29 |
|
|
|
|
(1) |
We will adopt 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 expect to adopt the standard using the modified retrospective method with the cumulative effect of initially adopting the standard recorded as an adjustment to retained earnings. Currently we are in the process of reviewing our historical contracts to quantify the impact that the adoption of the standard will have on performance obligations. We expect to recognize our hardware revenue net of related cost under the new standard which will reduce both hardware revenue and cost of sales as compared to our current accounting. For comparison purposes only, had we implemented ASC 606 in 2017, at the midpoint of our current guidance, we estimate that the netting of hardware expense against revenue would lower our projected revenue by approximately $31 million. |
We are also continuing to evaluate the impact of the standard on our recognition of costs related to obtaining customer contracts. Currently, sales commissions are expensed in sales and marketing expense when earned. We believe these commissions represent direct incremental costs of obtaining our contracts with customers. Under the new standard, these costs must be expensed on a systematic basis that is consistent with the transfer of the related goods and services to the customer. Based on expected renewals of customer support and software enhancements and sales of optional implementation services, we believe a portion of our commissions expense should be deferred and amortized over time as the corresponding services are transferred to
the customer under the new standard. We currently do not expect this change will have a material effect on our projected financial results.
|
|
(2) |
At the midpoint of our 2017 total revenue guidance range, we expect total software revenue to be about $84 million, of which cloud-based revenue is expected to represent between 10% and 11%, with the remainder expected to represent traditional perpetual license revenue. Our 2018 preliminary outlook assumes total software revenue will remain flat at approximately $84 million with cloud-based revenue representing between 25% to 35% of the total. Based on our expectations of SaaS / Cloud sales, beginning in Q1 2018, we will report Cloud Revenue and Cost of Cloud expense on separate line items in our Statements of Income. Because our cloud-based contracts are subscription in nature, the total value of the contract will be recognized over a three to five-year period, as opposed to our perpetual license revenue that is typically recognized upon contract execution. We believe our customers will transition to the SaaS / Cloud model, which will result in the shift of revenues from license revenue recognized pursuant to the residual method to cloud revenue recognized over time creating near term revenue growth headwinds. For our 2018 preliminary outlook, while we expect total software revenue to remain flat, attributable to cloud transition, we expect license revenue to decline between 16% to 27% while we expect cloud revenue to double or triple in size with growth between 135% and 225%. We expect our license gross margin to range between 88% and 91%, and our cloud gross margin to be about 44%, reflecting our initial investment in cloud operations. |
|
|
(3) |
From an operating expense perspective, we plan to set aside approximately $10 to $15 million in 2018 to cover investments in global marketing and sales operations, technical resources, automation tools and infrastructure based on demand driven growth and market share capture from our transition into cloud-based offerings to our customers. Based on our 2018 outlook revenue range, the estimated impact of these investments on our GAAP and adjusted operating margin will be between 1.8% to 2.6%, and the estimated impact on our GAAP and adjusted EPS will be between $0.09 and $0.14. |
|
|
(4) |
Due to lower than planned revenue in 2017, the expected payouts on our variable compensation plans to our employees are significantly lower than the payouts in previous years. These plans worked as designed, by sharing the negative impact of lower than planned revenue performance between employees and our shareholders. In 2018, compensation plans will reset with the expectation of achieving our financial goals in the coming year with an estimated financial impact of approximately $15 million of additional expense. Based on our 2018 outlook revenue range, the estimated impact of the additional compensation on our GAAP and adjusted operating margin will be between 2.6% and 2.7%, and the estimated impact on our GAAP and adjusted EPS will be approximately $0.14. |