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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

 

FORM 10-Q

[Mark One]

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2021

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____________ to ____________

Commission File Number:  0-23999

MANHATTAN ASSOCIATES, INC.

(Exact Name of Registrant as Specified in Its Charter)

 

 

Georgia

 

 

58-2373424

(State or Other Jurisdiction of

Incorporation or Organization)

 

 

(I.R.S. Employer

Identification No.)

 

2300 Windy Ridge Parkway, Tenth Floor

 

 

 

Atlanta, Georgia

 

 

30339

(Address of Principal Executive Offices)

 

 

(Zip Code)

 

Registrant’s Telephone Number, Including Area Code: (770) 955-7070

 

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading

Symbol(s)

Name of each exchange on which registered

Common stock

MANH

Nasdaq Global Select Market

Indicate by check mark whether the Registrant:  (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.   Yes     No  

Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulations S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).   Yes      No  

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

Accelerated filer

Non-accelerated filer

 

Smaller reporting company

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.    

 

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   Yes     No  

The number of shares of the Registrant’s class of capital stock outstanding as of April 23, 2021, the latest practicable date, is as follows: 63,617,361 shares of common stock, $0.01 par value per share.

 

 


 

MANHATTAN ASSOCIATES, INC.

FORM 10-Q

Quarter Ended March 31, 2021

TABLE OF CONTENTS

PART I

 

 

Financial Information

 

 

 

 

Item 1.

Financial Statements.

 

 

 

 

Condensed Consolidated Balance Sheets as of March 31, 2021 (unaudited) and December 31, 2020

3

 

 

Condensed Consolidated Statements of Income for the three months ended March 31, 2021 and 2020 (unaudited)

4

 

 

Condensed Consolidated Statements of Comprehensive Income for the three months ended March 31, 2021 and 2020 (unaudited)

5

 

Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2021 and 2020 (unaudited)

6

 

 

Condensed Consolidated Statements of Stockholders’ Equity for the three months ended March 31, 2021 and 2020 (unaudited)

7

 

 

Notes to Condensed Consolidated Financial Statements (unaudited)

8

 

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations.

14

 

 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk.

24

 

 

 

Item 4.

Controls and Procedures.

24

 

 

 

 

PART II

 

 

 

 

 

OTHER INFORMATION

 

 

 

 

Item 1.

Legal Proceedings.

25

 

 

 

Item 1A.

Risk Factors.

25

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds.

25

 

 

 

Item 3.

Defaults Upon Senior Securities.

25

 

 

 

Item 4.

Mine Safety Disclosures.

25

 

 

 

Item 5.

Other Information.

25

 

 

 

Item 6.

Exhibits.

26

 

 

 

Signatures.

27

 

 

 

 

2


 

PART I

FINANCIAL INFORMATION

Item 1.

Financial Statements

MANHATTAN ASSOCIATES, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(in thousands, except share and per share data)

 

 

 

March 31, 2021

 

 

December 31, 2020

 

 

 

(unaudited)

 

 

 

 

 

ASSETS

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

197,166

 

 

$

204,705

 

Accounts receivable, net of allowance of $3,451 and $3,497, at March 31, 2021 and December 31, 2020, respectively

 

 

106,274

 

 

 

109,202

 

Prepaid expenses and other current assets

 

 

26,611

 

 

 

20,134

 

Total current assets

 

 

330,051

 

 

 

334,041

 

 

 

 

 

 

 

 

 

 

Property and equipment, net

 

 

16,484

 

 

 

17,903

 

Operating lease right-of-use assets

 

 

29,581

 

 

 

31,470

 

Goodwill, net

 

 

62,244

 

 

 

62,252

 

Deferred income taxes

 

 

2,117

 

 

 

5,760

 

Other assets

 

 

18,051

 

 

 

13,986

 

Total assets

 

$

458,528

 

 

$

465,412

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS' EQUITY

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

18,327

 

 

$

17,805

 

Accrued compensation and benefits

 

 

44,643

 

 

 

41,962

 

Accrued and other liabilities

 

 

20,401

 

 

 

21,181

 

Deferred revenue

 

 

122,939

 

 

 

114,164

 

Income taxes payable

 

 

428

 

 

 

1,874

 

Total current liabilities

 

 

206,738

 

 

 

196,986

 

 

 

 

 

 

 

 

 

 

Operating lease liabilities, long-term

 

 

26,132

 

 

 

27,843

 

Other non-current liabilities

 

 

20,998

 

 

 

21,686

 

 

 

 

 

 

 

 

 

 

Shareholders' equity:

 

 

 

 

 

 

 

 

Preferred stock, no par value; 20,000,000 shares authorized, no shares issued or outstanding in 2021 and 2020

 

 

-

 

 

 

-

 

Common stock, $0.01 par value; 200,000,000 shares authorized; 63,616,713 and 63,527,186 shares issued and outstanding at March 31, 2021 and December 31, 2020, respectively

 

 

636

 

 

 

635

 

Retained earnings

 

 

222,815

 

 

 

236,524

 

Accumulated other comprehensive loss

 

 

(18,791

)

 

 

(18,262

)

Total shareholders' equity

 

 

204,660

 

 

 

218,897

 

Total liabilities and shareholders' equity

 

$

458,528

 

 

$

465,412

 

 

 

 

See accompanying Notes to Condensed Consolidated Financial Statements.

 

 

 

 

3


 

Item 1.

Financial Statements (continued)

MANHATTAN ASSOCIATES, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Income

(in thousands, except per share amounts)

 

 

 

Three Months Ended March 31,

 

 

 

2021

 

 

2020

 

 

 

(unaudited)

 

 

(unaudited)

 

Revenue:

 

 

 

 

 

 

 

 

Cloud subscriptions

 

$

26,643

 

 

$

17,260

 

Software license

 

 

7,838

 

 

 

9,735

 

Maintenance

 

 

36,159

 

 

 

35,744

 

Services

 

 

80,359

 

 

 

87,406

 

Hardware

 

 

5,851

 

 

 

3,758

 

Total revenue

 

 

156,850

 

 

 

153,903

 

Costs and expenses:

 

 

 

 

 

 

 

 

Cost of software license

 

 

556

 

 

 

555

 

Cost of cloud subscriptions, maintenance and services

 

 

73,509

 

 

 

74,276

 

Research and development

 

 

24,260

 

 

 

23,328

 

Sales and marketing

 

 

13,396

 

 

 

13,088

 

General and administrative

 

 

17,569

 

 

 

16,114

 

Depreciation and amortization

 

 

2,135

 

 

 

2,346

 

Total costs and expenses

 

 

131,425

 

 

 

129,707

 

Operating income

 

 

25,425

 

 

 

24,196

 

Other (loss) income, net

 

 

(293

)

 

 

1,420

 

Income before income taxes

 

 

25,132

 

 

 

25,616

 

Income tax provision

 

 

2,489

 

 

 

3,086

 

Net income

 

$

22,643

 

 

$

22,530

 

 

 

 

 

 

 

 

 

 

Basic earnings per share

 

$

0.36

 

 

$

0.35

 

Diluted earnings per share

 

$

0.35

 

 

$

0.35

 

 

 

 

 

 

 

 

 

 

Weighted average number of shares:

 

 

 

 

 

 

 

 

Basic

 

 

63,645

 

 

 

63,592

 

Diluted

 

 

64,466

 

 

 

64,342

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying Notes to Condensed Consolidated Financial Statements.

 

 

 

 

4


 

Item 1.

Financial Statements (continued)

MANHATTAN ASSOCIATES, INC. AND SUBSIDIARIES

Consolidated Statements of Comprehensive Income

(in thousands)

 

 

 

Three Months Ended March 31,

 

 

 

2021

 

 

2020

 

 

 

(unaudited)

 

 

(unaudited)

 

Net income

 

$

22,643

 

 

$

22,530

 

Foreign currency translation adjustment

 

 

(529

)

 

 

(3,471

)

Comprehensive income

 

$

22,114

 

 

$

19,059

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying Notes to Condensed Consolidated Financial Statements.

 

 

 

 

5


 

 

Item 1.

Financial Statements (continued)

MANHATTAN ASSOCIATES, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(in thousands)

 

 

 

Three Months Ended March 31,

 

 

 

2021

 

 

2020

 

 

 

(unaudited)

 

 

(unaudited)

 

Operating activities:

 

 

 

 

 

 

 

 

Net income

 

$

22,643

 

 

$

22,530

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

2,135

 

 

 

2,346

 

Equity-based compensation

 

 

10,051

 

 

 

7,564

 

(Gain) loss on disposal of equipment

 

 

(2

)

 

 

7

 

Deferred income taxes

 

 

3,636

 

 

 

5,511

 

Unrealized foreign currency gain

 

 

(386

)

 

 

(1,130

)

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable, net

 

 

2,204

 

 

 

(12,217

)

Other assets

 

 

(9,467

)

 

 

(4,889

)

Accounts payable, accrued and other liabilities

 

 

2,661

 

 

 

(14,794

)

Income taxes

 

 

(2,878

)

 

 

(5,385

)

Deferred revenue

 

 

9,288

 

 

 

12,045

 

Net cash provided by operating activities

 

 

39,885

 

 

 

11,588

 

 

 

 

 

 

 

 

 

 

Investing activities:

 

 

 

 

 

 

 

 

Purchase of property and equipment

 

 

(569

)

 

 

(1,245

)

Net cash used in investing activities

 

 

(569

)

 

 

(1,245

)

 

 

 

 

 

 

 

 

 

Financing activities:

 

 

 

 

 

 

 

 

Purchase of common stock

 

 

(46,402

)

 

 

(43,032

)

Net cash used in financing activities

 

 

(46,402

)

 

 

(43,032

)

 

 

 

 

 

 

 

 

 

Foreign currency impact on cash

 

 

(453

)

 

 

(2,710

)

 

 

 

 

 

 

 

 

 

Net change in cash and cash equivalents

 

 

(7,539

)

 

 

(35,399

)

Cash and cash equivalents at beginning of period

 

 

204,705

 

 

 

110,678

 

Cash and cash equivalents at end of period

 

$

197,166

 

 

$

75,279

 

 

 

 

 

 

 

 

 

 

See accompanying Notes to Condensed Consolidated Financial Statements.

 

 

 

6


 

Item 1.

Financial Statements (continued)

MANHATTAN ASSOCIATES, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Shareholders’ Equity

(in thousands, except share data)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

 

Other

 

 

Total

 

 

 

Common Stock

 

 

Paid-In

 

 

Retained

 

 

Comprehensive

 

 

Shareholders'

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Earnings

 

 

Loss

 

 

Equity

 

For the Three Months Ended March 31, 2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, December 31, 2020 (audited)

 

 

63,527,186

 

 

$

635

 

 

$

-

 

 

$

236,524

 

 

$

(18,262

)

 

$

218,897

 

Repurchase of common stock

 

 

(386,314

)

 

 

(4

)

 

 

(10,046

)

 

 

(36,352

)

 

 

-

 

 

 

(46,402

)

Restricted stock units issuance

 

 

475,841

 

 

 

5

 

 

 

(5

)

 

 

-

 

 

 

-

 

 

 

-

 

Equity-based compensation

 

 

-

 

 

 

-

 

 

 

10,051

 

 

 

-

 

 

 

-

 

 

 

10,051

 

Foreign currency translation adjustment

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(529

)

 

 

(529

)

Net income

 

 

-

 

 

 

-

 

 

 

-

 

 

 

22,643

 

 

 

-

 

 

 

22,643

 

Balance, March 31, 2021 (unaudited)

 

 

63,616,713

 

 

$

636

 

 

$

-

 

 

$

222,815

 

 

$

(18,791

)

 

$

204,660

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Three Months Ended March 31, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, December 31, 2019 (audited)

 

 

63,456,986

 

 

$

635

 

 

$

-

 

 

$

159,490

 

 

$

(17,847

)

 

$

142,278

 

Repurchase of common stock

 

 

(556,109

)

 

 

(6

)

 

 

(7,558

)

 

 

(35,468

)

 

 

-

 

 

 

(43,032

)

Restricted stock units issuance

 

 

594,810

 

 

 

6

 

 

 

(6

)

 

 

-

 

 

 

-

 

 

 

-

 

Equity-based compensation

 

 

-

 

 

 

-

 

 

 

7,564

 

 

 

-

 

 

 

-

 

 

 

7,564

 

Foreign currency translation adjustment

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(3,471

)

 

 

(3,471

)

Net income

 

 

-

 

 

 

-

 

 

 

-

 

 

 

22,530

 

 

 

-

 

 

 

22,530

 

Balance, March 31, 2020 (unaudited)

 

 

63,495,687

 

 

$

635

 

 

$

-

 

 

$

146,552

 

 

$

(21,318

)

 

$

125,869

 

 

 

See accompanying Notes to Condensed Consolidated Financial Statements.


 

7


 

 

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

1.

Basis of Presentation and Principles of Consolidation

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of Manhattan Associates, Inc. and its subsidiaries (the “Company,” “we,” “us,” “our,” or “Manhattan”) have been prepared in accordance with accounting principles generally accepted in the United States (GAAP) for interim financial information, with the instructions to Form 10-Q and with Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required for complete financial statements. In the opinion of management, these condensed consolidated financial statements contain all normal recurring adjustments considered necessary for a fair presentation of our financial position at March 31, 2021, the results of operations for the three months ended March 31, 2021 and 2020, and cash flows for the three months ended March 31, 2021 and 2020. The results for the three months ended March 31, 2021 are not necessarily indicative of the results to be expected for the full year or any other interim period. These statements should be read in conjunction with our audited consolidated financial statements and management’s discussion and analysis included in our annual report on Form 10-K for the year ended December 31, 2020.

Principles of Consolidation

The accompanying condensed consolidated financial statements include our accounts and the accounts of our wholly owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.

New Accounting Pronouncements Adopted in Fiscal Year 2021

Income Taxes

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. The new guidance eliminates certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating taxes during the quarters and the recognition of deferred tax liabilities for outside basis differences. This guidance also simplifies aspects of the accounting for franchise taxes and changes in tax laws or rates, as well as clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill. We adopted this guidance during the three months ended March 31, 2021, and the adoption did not have a material impact on our financial statements.

2.

Revenue Recognition

We recognize revenue when we transfer control of the promised products or services to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those products or services. We derive our revenue from software licenses, cloud subscriptions, customer support services and software enhancements (“maintenance”), implementation and training services, and sales of hardware. We exclude sales and usage-based taxes from revenue.

Nature of Products and Services

Our perpetual software licenses provide the customer with a right to use the software as it exists at the time of purchase. We recognize revenue for distinct software licenses once the license period has begun and we have made the software available to the customer.

Cloud subscriptions includes software as a service (SaaS) and arrangements which provide customers with the right to use our software within a cloud-based environment that we provide and manage where the customer does not have the right to take possession of the software without significant penalty. SaaS and hosting revenues are recognized ratably over the contract period. For contracts that include a perpetual license and hosting services, we generally consider the arrangement as an overall service, recognized over the initial hosting term. The software license fee typically due at the outset of the arrangement is not payable again if the customer renews the hosting services, so that the customer’s option to renew the hosting services is a material right, the revenue from which, if the option is exercised, we will recognize over the applicable renewal period.

 

8


 

Our perpetual software licenses are typically sold with maintenance under which we provide a comprehensive 24 hours per day, 365 days per year program that provides customers with software upgrades, when and if available, which include additional or improved functionality and technological advances incorporating emerging supply chain and industry initiatives. Revenue related to maintenance is generally paid in advance and recognized ratably over the term of the agreement, typically twelve months.

Our services revenue consists of fees generated from implementation, training, and application managed services, including reimbursements of out-pocket expenses in connection with our implementation services. Implementation services include system planning, design, configuration, testing, and other software implementation support, and are typically optional and distinct from our software. Following implementation, customers may purchase application managed services to support and maintain our software. Fees for our services are separately priced and are generally billed on an hourly basis, and revenue is recognized over time as the services are performed. In certain situations, we render professional services under agreements based upon a fixed fee for portions of or all of the engagement. Revenue related to fixed-fee-based services contracts is recognized over time based on the proportion performed.

As part of a complete solution, our customers periodically purchase hardware products developed and manufactured by third parties from us for use with the software licenses purchased from us. These products include computer hardware, radio frequency terminal networks, radio frequency identification (RFID) chip readers, bar code printers and scanners, and other peripherals. As we do not physically control the hardware that we sell, we are acting as an agent in the transaction and recognize our hardware revenue net of related cost. We recognize hardware revenue when control is transferred to the customer upon shipment.

Significant Judgements

Our contracts with customers typically contain promises to transfer multiple products and services to a customer. Judgement is required to determine whether each product and service is considered to be a distinct performance obligation that should be accounted for separately under the contract. We allocate the transaction price to the distinct performance obligations based on relative standalone selling price (SSP). We estimate SSP based on the prices charged to customers, or by using information such as market conditions and other observable inputs. However, the selling price of our software licenses is highly variable. Thus, we estimate SSP for software licenses using the residual approach, determined based on total transaction price less the SSP of other goods and services promised in the contract.

Contract Balances

Timing of invoicing to customers may differ from timing of revenue recognition. Payment terms for our software licenses vary. We have an established history of collecting under the terms of our software license contracts without providing refunds or concessions to our customers. Cloud subscriptions and maintenance are typically billed annually in advance. Services are typically billed monthly as performed. In instances where the timing of revenue recognition differs from the timing of invoicing, we have determined that our contracts generally do not include a significant financing component. The primary purpose of our invoicing terms is to provide customers with predictable ways to purchase our software and services, not to provide or receive financing. Additionally, we are applying the practical expedient to exclude from consideration any contracts with payment terms of one year or less as we rarely offer terms extending beyond one year.

Deferred revenue mainly represents amounts collected prior to having completed performance of maintenance, cloud subscriptions and professional services. In the three months ended March 31, 2021, we recognized $52.2 million of revenue that was included in the deferred revenue balance as of December 31, 2020.

No revenue was recognized during the three months ended March 31, 2021 from performance obligations that were satisfied in prior periods.

Remaining Performance Obligations

As of March 31, 2021, approximately $421.2 million of revenue is expected to be recognized from remaining performance obligations for cloud subscriptions, maintenance contracts, and application managed services with a non-cancelable term greater than 1 year (including deferred revenue as well as amounts that will be invoiced and recognized as revenue in future periods).  We expect to recognize revenue on approximately 45% of these remaining performance obligations over the next 24 months with the balance recognized thereafter.  We have elected not to provide disclosures regarding remaining performance obligations for contracts with a term of 1 year or less.

Returns and Allowances

We have not experienced significant returns or warranty claims to date and, as a result, have not recorded a provision for the cost of returns and product warranty claims.

 

9


 

We record an allowance for doubtful accounts based on historical experience of write-offs and a detailed assessment of accounts receivable. Additions to the allowance for credit losses generally represent a sales allowance on services revenue, which are recorded to operations as a reduction to services revenue. The total amount charged to operations was $0.7 million and $1.4 million for the three months ended March 31, 2021 and 2020, respectively.

Our analysis involved utilizing a model of internal historical losses data. In estimating the allowance for credit losses, we considered the age of the accounts receivable, our historical write-offs, and the historical creditworthiness of the customer, among other factors. Should any of these factors change, the estimates made by us will also change accordingly, which could affect the level of our future allowances. We also analyzed future expected credit losses given ever present changes to future risks in projected economic conditions and future risks of customer collection.

Deferred Commissions

We consider sales commissions to be incremental costs of obtaining a contract with a customer. We defer and recognize an asset for sales commissions related to performance obligations with an expected period of benefit of more than one year. We apply the practical expedient to expense sales commissions when the amortization period would have been one year or less. Deferred commissions were $18.8 million as of March 31, 2021, of which $13.9 million is included in other assets and $4.9 million is included in prepaid expenses and other current assets. Sales commission expense is included in Sales and Marketing expense in the accompanying Consolidated Statements of Income. Amortization of sales commissions was $1.1 million and $0.7 million for the three months ended March 31, 2021 and 2020, respectively. No impairment losses were recognized during the periods.

 

3.

Fair Value Measurement

We measure our investments based on a fair value hierarchy disclosure framework that prioritizes and ranks the level of market price observability used in measuring assets and liabilities at fair value. Market price observability is affected by a number of factors, including the type of asset or liability and its characteristics.  This hierarchy prioritizes the inputs into three broad levels as follows:

 

Level 1–Quoted prices in active markets for identical instruments.

 

Level 2–Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets.

 

Level 3–Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.

Investments with maturities of 90 days or less from the date of purchase are classified as cash equivalents; investments with maturities of greater than 90 days from the date of purchase but less than one year are generally classified as short-term investments; and investments with maturities of one year or greater from the date of purchase are generally classified as long-term investments.  Unrealized holding gains and losses are reflected as a net amount in a separate component of shareholders’ equity until realized.  For the purposes of computing realized gains and losses, cost is determined on a specific identification basis.

At March 31, 2021, our cash and cash equivalents were $186.0 million and $11.2 million, respectively. We had neither short-term investments nor long-term investments at March 31, 2021. Cash equivalents consist of highly liquid money market funds. For money market funds, we use quoted prices from active markets that are classified at Level 1, the highest level of observable input in the disclosure hierarchy framework. We had no investments classified at Level 2 or Level 3 at March 31, 2021.

4.

Leases

We lease our facilities and some of our equipment under noncancelable operating lease arrangements that expire at various dates through 2029. For a few of our facility leases, we have certain options to extend the lease term for up to 10 years, at our sole discretion. We have no finance leases.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

10


 

 

We present below the operating lease right-of-use assets and lease liabilities as of March 31, 2021 (in thousands):

 

 

 

 

 

 

 

 

March 31, 2021

 

ASSETS

 

 

 

 

Operating lease right-of-use assets

 

$

29,581

 

 

 

 

 

 

LIABILITIES

 

 

 

 

Operating lease liabilities, current (included in accrued and other liabilities)

 

$

6,224

 

Operating lease liabilities, long-term

 

 

26,132

 

Total operating lease liabilities

 

$

32,356

 

 

Aggregate future minimum lease payments under noncancelable operating leases as of March 31, 2021 are as follows (in thousands):

 

Year Ending December 31,

 

 

 

 

2021 (excluding the three months ended March 31, 2021)

 

$

5,056

 

2022

 

 

6,409

 

2023

 

 

6,563

 

2024

 

 

6,348

 

2025

 

 

5,448

 

Thereafter

 

 

7,953

 

Total minimum payments required

 

 

37,777

 

Less short-term leases

 

 

-

 

Less imputed interest

 

 

(5,421

)

Total operating lease liabilities

 

$

32,356

 

 

The total lease cost for the three months ended March 31, 2021 and 2020 were $2.0 million, consisting of $1.9 million of operating lease costs, and $0.1 million of short-term lease costs for both periods. Our variable lease costs for the three months ended March 31, 2021 and 2020 were immaterial.

 

Other information related to operating leases are as follows:

 

Weighted average remaining lease term

 

5.9 years

 

Weighted average discount rate

 

 

3

%

Supplemental cash flow information - operating cash flows (in thousands):

 

 

 

 

Cash paid for amounts included in the measurement of lease liabilities

 

 

 

 

Operating cash flows for operating leases

 

$

1,926

 

 

5.

Equity-Based Compensation

We granted 324,591 and 511,633 restricted stock units (RSUs) during the three months ended March 31, 2021 and 2020, respectively. Equity-based compensation expense related to RSUs was $10.1 million and $7.6 million during the three months ended March 31, 2021 and 2020, respectively.

We present below a summary of changes during the three months ended March 31, 2021 in our unvested units of restricted stock:

 

 

 

Number of shares/units

 

Outstanding at December 31, 2020

 

 

1,462,864

 

Granted

 

 

324,591

 

Vested

 

 

(475,841

)

Forfeited

 

 

(11,121

)

Outstanding at March 31, 2021

 

 

1,300,493

 

 

 

11


 

 

6.

Income Taxes

Our effective tax rate was 9.9% and 12.0% for the three months ended March 31, 2021 and 2020, respectively. The decrease in the effective tax rate for the three months ended March 31, 2021 is due to foreign jurisdiction business incentives and change in deductible stock compensation.

We apply the provisions for income taxes related to, among other things, accounting for uncertain tax positions and disclosure requirements in accordance with Accounting Standards Classification (ASC) 740, Income Taxes. For the three months ended March 31, 2021, there were no material changes to our uncertain tax positions. There has been no change to our policy that recognizes potential interest and penalties related to uncertain tax positions within our global operations in income tax expense.

We conduct business globally and, as a result, file income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. In the normal course of business, Manhattan is subject to examination by taxing authorities throughout the world.  We are no longer subject to the U.S. federal, substantially all state and local income tax examinations and substantially all non-U.S. income tax examinations for years before 2012.

 

7.

Basic and Diluted Net Income Per Share

Basic net income per share is computed using net income divided by the weighted average number of shares of common stock outstanding (“Weighted Shares”) for the period presented.

Diluted net income per share is computed using net income divided by Weighted Shares and the treasury stock method effect of common equivalent shares (CESs) outstanding for each period presented.

In the following table, we present a reconciliation of earnings per share and the shares used in the computation of earnings per share for the three months ended March 31, 2021 and 2020 (in thousands, except per share data):

 

 

 

Three Months Ended March 31,

 

 

 

2021

 

 

2020

 

 

 

(in thousands, except per share data)

 

 

 

 

 

 

 

 

 

 

Net income

 

$

22,643

 

 

$

22,530

 

Earnings per share:

 

 

 

 

 

 

 

 

Basic

 

$

0.36

 

 

$

0.35

 

Effect of CESs

 

 

(0.01

)

 

 

-

 

Diluted

 

$

0.35

 

 

$

0.35

 

 

 

 

 

 

 

 

 

 

Weighted average number of shares:

 

 

 

 

 

 

 

 

Basic

 

 

63,645

 

 

 

63,592

 

Effect of CESs

 

 

821

 

 

 

750

 

Diluted

 

 

64,466

 

 

 

64,342

 

 

The number of anti-dilutive CESs during the three months ended March 31, 2021 and 2020 was immaterial.

 

8.

Contingencies

From time to time, we may be involved in litigation relating to claims arising out of the ordinary course of business, and occasionally legal proceedings not in the ordinary course. Many of our installations involve products that are critical to the operations of our clients’ businesses. Any failure in a company’s product could result in a claim for substantial damages against us, regardless of our responsibility for such failure. Although we attempt to limit contractually our liability for damages arising from product failures or negligent acts or omissions, there can be no assurance that the limitations of liability set forth in our contracts will be enforceable in all instances. We are not currently a party to any legal proceedings in the ordinary course of business or other legal proceedings the result of which we believe is likely to have a material adverse impact on our business, financial position, results of operations, or cash flows. We expense legal costs associated with loss contingencies as such legal costs are incurred.

9.

Operating Segments

We manage our business by geographic region and have three geographic reportable segments: North and Latin America (the “Americas”); Europe, the Middle East and Africa (EMEA); and Asia Pacific (APAC). All segments derive revenue from the sale and implementation of our supply chain commerce solutions.  The individual products sold by the segments are similar in nature and are all designed to help companies manage the effectiveness and efficiency of their supply chain commerce. We use the same accounting policies for each reportable segment. The chief executive officer and chief financial officer evaluate performance based on revenue and operating results for each reportable segment.

 

12


 

The Americas segment charges royalty fees to the other segments based on software licenses and cloud subscriptions sold by those reportable segments. The royalties, which totaled approximately $1.6 million and $0.7 million for the three months ended March 31, 2021 and 2020, respectively, are included in costs of revenue for each segment with a corresponding reduction in the Americas segment’s cost of revenue. The revenues represented below are from external customers only. The geography-based costs consist of costs for professional services personnel, direct sales and marketing expenses, infrastructure costs to support the employee and customer base, billing and financial systems, management and general and administrative support.  Certain corporate expenses included in the Americas segment are not charged to the other segments.  Such expenses include research and development, certain marketing and general and administrative costs that support the global organization, and the amortization of acquired developed technology. Costs in the Americas segment include all research and development costs, including the costs associated with our operations in India.

In accordance with the segment reporting topic of the FASB Accounting Standards Codification, we present below certain financial information by reportable segment for the three months ended March 31, 2021 and 2020 (in thousands):

 

 

 

 

 

Three Months Ended March 31,

 

 

 

2021

 

 

2020

 

 

 

Americas

 

 

EMEA

 

 

APAC

 

 

Consolidated

 

 

Americas

 

 

EMEA

 

 

APAC

 

 

Consolidated

 

Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cloud subscriptions

 

$

22,489

 

 

$

3,578

 

 

$

576

 

 

$

26,643

 

 

$

15,243

 

 

$

1,488

 

 

$

529

 

 

$

17,260

 

Software license

 

 

4,160

 

 

 

3,152

 

 

 

526

 

 

 

7,838

 

 

 

8,450

 

 

 

1,024

 

 

 

261

 

 

 

9,735

 

Maintenance

 

 

28,236

 

 

 

5,562

 

 

 

2,361

 

 

 

36,159

 

 

 

28,460

 

 

 

5,171

 

 

 

2,113

 

 

 

35,744

 

Services

 

 

62,180

 

 

 

16,039

 

 

 

2,140

 

 

 

80,359

 

 

 

67,249

 

 

 

16,619

 

 

 

3,538

 

 

 

87,406

 

Hardware

 

 

5,748

 

 

 

103

 

 

 

-

 

 

 

5,851

 

 

 

3,744

 

 

 

11

 

 

 

3

 

 

 

3,758

 

    Total revenue

 

 

122,813

 

 

 

28,434

 

 

 

5,603

 

 

 

156,850