UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
[Mark One]
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
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:
(Exact Name of Registrant as Specified in Its Charter)
|
|
||
(State or Other Jurisdiction of Incorporation or Organization) |
|
|
(I.R.S. Employer Identification No.) |
|
|
|
|
|
|
||
(Address of Principal Executive Offices) |
|
|
(Zip Code) |
Registrant’s Telephone Number, Including Area Code: (
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
Trading Symbol(s) |
Name of each exchange on which registered |
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.
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).
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.
☒ |
|
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 October 21, 2022, the latest practicable date, is as follows:
MANHATTAN ASSOCIATES, INC.
FORM 10-Q
Quarter Ended September 30, 2022
TABLE OF CONTENTS
PART I
|
|
|
|
|
|
Item 1. |
|
|
|
|
|
Condensed Consolidated Balance Sheets as of September 30, 2022 (unaudited) and December 31, 2021 |
3 |
|
|
|
|
4 |
||
|
|
|
5 |
||
|
||
6 |
||
|
|
|
7 |
||
|
|
|
Notes to Condensed Consolidated Financial Statements (unaudited) |
8 |
|
|
|
|
Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations. |
15 |
|
|
|
Item 3. |
27 |
|
|
|
|
Item 4. |
28 |
|
|
|
|
|
PART II |
|
|
|
|
|
|
|
|
|
|
Item 1. |
29 |
|
|
|
|
Item 1A. |
29 |
|
|
|
|
Item 2. |
Unregistered Sales of Equity Securities and Use of Proceeds. |
29 |
|
|
|
Item 3. |
29 |
|
|
|
|
Item 4. |
29 |
|
|
|
|
Item 5. |
29 |
|
|
|
|
Item 6. |
30 |
|
|
|
|
31 |
||
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)
|
|
September 30, 2022 |
|
|
December 31, 2021 |
|
||
|
|
(unaudited) |
|
|
|
|
||
ASSETS |
|
|
|
|
|
|
||
Current assets: |
|
|
|
|
|
|
||
Cash and cash equivalents |
|
$ |
|
|
$ |
|
||
Accounts receivable, net of allowance of $ |
|
|
|
|
|
|
||
Prepaid expenses and other current assets |
|
|
|
|
|
|
||
Total current assets |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
Property and equipment, net |
|
|
|
|
|
|
||
Operating lease right-of-use assets |
|
|
|
|
|
|
||
Goodwill, net |
|
|
|
|
|
|
||
Deferred income taxes |
|
|
|
|
|
|
||
Other assets |
|
|
|
|
|
|
||
Total assets |
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
|
||
LIABILITIES AND SHAREHOLDERS' EQUITY |
|
|
|
|
|
|
||
Current liabilities: |
|
|
|
|
|
|
||
Accounts payable |
|
$ |
|
|
$ |
|
||
Accrued compensation and benefits |
|
|
|
|
|
|
||
Accrued and other liabilities |
|
|
|
|
|
|
||
Deferred revenue |
|
|
|
|
|
|
||
Income taxes payable |
|
|
|
|
|
|
||
Total current liabilities |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
Operating lease liabilities, long-term |
|
|
|
|
|
|
||
Other non-current liabilities |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
Shareholders' equity: |
|
|
|
|
|
|
||
Preferred stock, par value; |
|
|
- |
|
|
|
- |
|
Common stock, $ |
|
|
|
|
|
|
||
Retained earnings |
|
|
|
|
|
|
||
Accumulated other comprehensive loss |
|
|
( |
) |
|
|
( |
) |
Total shareholders' equity |
|
|
|
|
|
|
||
Total liabilities and shareholders' equity |
|
$ |
|
|
$ |
|
||
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 September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
||||
|
|
(unaudited) |
|
|
(unaudited) |
|
|
(unaudited) |
|
|
(unaudited) |
|
||||
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cloud subscriptions |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Software license |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Maintenance |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Services |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Hardware |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total revenue |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Costs and expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cost of software license |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cost of cloud subscriptions, maintenance and services |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Research and development |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Sales and marketing |
|
|
|
|
|
|
|
|
|
|
|
|
||||
General and administrative |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Depreciation and amortization |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total costs and expenses |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Operating income |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Other income (loss), net |
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
||
Income before income taxes |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Income tax provision |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net income |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic earnings per share |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Diluted earnings per share |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Weighted average number of shares: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Diluted |
|
|
|
|
|
|
|
|
|
|
|
|
||||
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 September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
||||
|
|
(unaudited) |
|
|
(unaudited) |
|
|
(unaudited) |
|
|
(unaudited) |
|
||||
Net income |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Foreign currency translation adjustment |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Comprehensive income |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
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)
|
|
Nine Months Ended September 30, |
|
|||||
|
|
2022 |
|
|
2021 |
|
||
|
|
(unaudited) |
|
|
(unaudited) |
|
||
Operating activities: |
|
|
|
|
|
|
||
Net income |
|
$ |
|
|
$ |
|
||
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
|
||
Depreciation and amortization |
|
|
|
|
|
|
||
Equity-based compensation |
|
|
|
|
|
|
||
(Gain) loss on disposal of equipment |
|
|
( |
) |
|
|
|
|
Deferred income taxes |
|
|
( |
) |
|
|
( |
) |
Unrealized foreign currency gain |
|
|
( |
) |
|
|
( |
) |
Changes in operating assets and liabilities: |
|
|
|
|
|
|
||
Accounts receivable, net |
|
|
( |
) |
|
|
( |
) |
Other assets |
|
|
( |
) |
|
|
( |
) |
Accounts payable, accrued and other liabilities |
|
|
|
|
|
|
||
Income taxes |
|
|
( |
) |
|
|
( |
) |
Deferred revenue |
|
|
|
|
|
|
||
Net cash provided by operating activities |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
Investing activities: |
|
|
|
|
|
|
||
Purchase of property and equipment |
|
|
( |
) |
|
|
( |
) |
Net cash used in investing activities |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
|
||
Financing activities: |
|
|
|
|
|
|
||
Purchase of common stock |
|
|
( |
) |
|
|
( |
) |
Net cash used in financing activities |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
|
||
Foreign currency impact on cash |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
|
||
Net change in cash and cash equivalents |
|
|
( |
) |
|
|
|
|
Cash and cash equivalents at beginning of period |
|
|
|
|
|
|
||
Cash and cash equivalents at end of period |
|
$ |
|
|
$ |
|
||
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 September 30, 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Balance, June 30, 2022 (unaudited) |
|
|
|
|
$ |
|
|
$ |
- |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||||
Repurchase of common stock |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
- |
|
|
|
( |
) |
Restricted stock units issuance |
|
|
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
Equity-based compensation |
|
|
- |
|
|
|
- |
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
|
||
Foreign currency translation adjustment |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
( |
) |
|
|
( |
) |
Net income |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
- |
|
|
|
|
||
Balance, September 30, 2022 (unaudited) |
|
|
|
|
$ |
|
|
$ |
- |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
For the Nine Months Ended September 30, 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Balance, December 31, 2021 (audited) |
|
|
|
|
$ |
|
|
$ |
- |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||||
Repurchase of common stock |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
- |
|
|
|
( |
) |
Restricted stock units issuance |
|
|
|
|
|
|
|
|
( |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
||
Equity-based compensation |
|
|
- |
|
|
|
- |
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
|
||
Foreign currency translation adjustment |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
( |
) |
|
|
( |
) |
Net income |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
- |
|
|
|
|
||
Balance, September 30, 2022 (unaudited) |
|
|
|
|
$ |
|
|
$ |
- |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
For the Three Months Ended September 30, 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Balance, June 30, 2021 (unaudited) |
|
|
|
|
$ |
|
|
$ |
- |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||||
Repurchase of common stock |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
- |
|
|
|
( |
) |
Restricted stock units issuance |
|
|
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
Equity-based compensation |
|
|
- |
|
|
|
- |
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
|
||
Foreign currency translation adjustment |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
( |
) |
|
|
( |
) |
Net income |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
- |
|
|
|
|
|||
Balance, September 30, 2021 (unaudited) |
|
|
|
|
$ |
|
|
$ |
- |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
For the Nine Months Ended September 30, 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Balance, December 31, 2020 (audited) |
|
|
|
|
$ |
|
|
$ |
- |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||||
Repurchase of common stock |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
- |
|
|
|
( |
) |
Restricted stock units issuance |
|
|
|
|
|
|
|
|
( |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
||
Equity-based compensation |
|
|
- |
|
|
|
- |
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
|
||
Foreign currency translation adjustment |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
( |
) |
|
|
( |
) |
Net income |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
- |
|
|
|
|
||
Balance, September 30, 2021 (unaudited) |
|
|
|
|
$ |
|
|
$ |
- |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||||
See accompanying Notes to Condensed Consolidated Financial Statements.
7
Notes to Condensed Consolidated Financial Statements
(Unaudited)
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 September 30, 2022, the results of operations for the three and nine months ended September 30, 2022 and 2021, and cash flows for the nine months ended September 30, 2022 and 2021. The results for the three and nine months ended September 30, 2022 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, 2021.
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.
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 cloud subscriptions, software licenses, 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
Cloud subscriptions includes software as a service (SaaS) and arrangements which provide customers with the right to use our software within a cloud 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. Managed services account for less than
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. 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. Perpetual software license revenue accounts for approximately
8
Our services revenue consists of fees generated from implementation, training, and application managed services, including reimbursements of out-of-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 Judgments
Our customer contracts include the sale of multiple SaaS services or licensed products. Judgement is required to determine whether each service or product sold is a distinct performance obligation that should be accounted for separately. We allocate the transaction price to the distinct performance obligations based on relative standalone selling price (“SSP”). We estimate SSP based on the prices we charge our customers or by using other 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. We typically bill our professional services 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 cloud subscriptions, maintenance, and professional services. In the three and nine months ended September 30, 2022, we recognized $
Remaining Performance Obligations
As of September 30, 2022, approximately $
Returns and Allowances
We have not experienced significant returns or warranty claims to date and, as a result, have
9
We record an allowance for credit losses 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 $
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 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:
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 September 30, 2022, our cash and cash equivalents were $
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
We present below the operating lease right-of-use assets and lease liabilities as of September 30, 2022 (in thousands):
|
|
|
|
|
|
|
September 30, 2022 |
|
|
ASSETS |
|
|
|
|
Operating lease right-of-use assets |
|
$ |
|
|
|
|
|
|
|
LIABILITIES |
|
|
|
|
|
$ |
|
||
Operating lease liabilities, long-term |
|
|
|
|
Total operating lease liabilities |
|
$ |
|
|
|
|
|
|
|
Aggregate future minimum lease payments under noncancelable operating leases as of September 30, 2022 are as follows (in thousands):
Year Ending December 31, |
|
|
|
|
2022 (excluding the nine months ended September 30, 2022) |
|
$ |
|
|
2023 |
|
|
|
|
2024 |
|
|
|
|
2025 |
|
|
|
|
2026 |
|
|
|
|
Thereafter |
|
|
|
|
Total minimum payments required |
|
|
|
|
Less short-term leases |
|
|
( |
) |
Less imputed interest |
|
|
( |
) |
Total operating lease liabilities |
|
$ |
|
|
The total lease cost for the three and nine months ended September 30, 2022 was $
Total lease cost for the three and nine months ended September 30, 2021 was $
Our variable lease costs for the three and nine months ended September 30, 2022 and 2021 were immaterial.
Other information related to operating leases are as follows:
Weighted average remaining lease term |
|
|
|
|
Weighted average discount rate |
|
|
% |
|
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 |
|
$ |
|
|
We granted
11
We present below a summary of changes during the nine months ended September 30, 2022 in our unvested units of restricted stock:
|
|
Number of shares/units |
|
|
Outstanding at December 31, 2021 |
|
|
|
|
Granted |
|
|
|
|
Vested |
|
|
( |
) |
Forfeited |
|
|
( |
) |
Outstanding at September 30, 2022 |
|
|
|
|
Our effective tax rate was
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 September 30, 2022, our uncertain tax positions increased by a net $
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 U.S. federal, substantially all state and local income tax examinations and substantially all non-U.S. income tax examinations for years before 2010.
Under the Inflation Reduction Act of 2022, we will be subject to a 1% excise tax on stock repurchases, net of stock issuances, beginning in 2023. We expect to include the tax in the cost of our stock repurchases as a reduction of shareholders' equity.
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 and nine months ended September 30, 2022 and 2021 (in thousands, except per share data):
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
||||
|
|
(in thousands, except per share data) |
|
|
(in thousands, except per share data) |
|
||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net income |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Earnings per share: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Effect of CESs |
|
|
- |
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Diluted |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Weighted average number of shares: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Effect of CESs |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Diluted |
|
|
|
|
|
|
|
|
|
|
|
|
||||
The number of anti-dilutive CESs during the three and nine months ended September 30, 2022 and 2021 was immaterial.
12
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 one of our products 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.
We manage our business by geographic region and have
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 $
13
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 and nine months ended September 30, 2022 and 2021 (in thousands):
|
|
Three Months Ended September 30, |
|
|||||||||||||||||||||||||||||
|
|
2022 |
|
|
2021 |
|
||||||||||||||||||||||||||
|
|
Americas |
|
|
EMEA |
|
|
APAC |
|
|
Consolidated |
|
|
Americas |
|
|
EMEA |
|
|
APAC |
|
|
Consolidated |
|
||||||||
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Cloud subscriptions |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||||
Software license |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Maintenance |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Hardware |
|
|
|
|
|
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
- |
|
|
|
|
||||||
Total revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Costs and Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Cost of revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Depreciation and amortization |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Total costs and expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Operating income |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
|
Nine Months Ended September 30, |
|
|||||||||||||||||||||||||||||
|
|
2022 |
|
|
2021 |
|
||||||||||||||||||||||||||
|
|
Americas |
|
|
EMEA |
|
|
APAC |
|
|
Consolidated |
|
|
Americas |
|
|
EMEA |
|
|
APAC |
|
|
Consolidated |
|
||||||||
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Cloud subscriptions |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||||
Software license |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Maintenance |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Hardware |
|
|
|
|
|
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
- |
|
|
|
|
||||||
Total revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Costs and Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Cost of revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Depreciation and amortization |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Total costs and expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Operating income |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Cloud subscriptions revenue primarily relates to our Manhattan Active omnichannel, warehouse management solutions, and transportation management solutions for the nine months ended September 30, 2022. The majority of our software license revenue relates to our warehouse management product group (over
At September 30, 2022, total assets for the Americas, EMEA and APAC segments were $
14
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion should be read in conjunction with the condensed consolidated financial statements for the three and nine months ended September 30, 2022 and 2021, including the notes to those statements, included elsewhere in this quarterly report. We also recommend the following discussion be read in conjunction with management’s discussion and analysis and consolidated financial statements included in our annual report on Form 10-K for the year ended December 31, 2021. Statements in the following discussion that are not statements of historical fact are “forward-looking statements.” Actual results may differ materially from the results predicted in such forward-looking statements, for a variety of factors. See “Forward-Looking Statements” below.
References in this filing to the “Company,” “Manhattan,” “Manhattan Associates,” “we,” “our,” and “us” refer to Manhattan Associates, Inc., our predecessors, and our wholly owned and consolidated subsidiaries.
Business Overview
We develop, sell, deploy, service and maintain software solutions designed to manage Unified Omnichannel Commerce and Digital Supply Chain, inventory and omnichannel operations for retailers, wholesalers, manufacturers, logistics providers and other organizations. Our customers include many of the world’s most premier and profitable brands.
Our business model is singularly focused on the development and implementation of complex commerce enablement software solutions that are designed to optimize supply chains, and retail store operations including point-of-sale effectiveness and efficiency for our customers.
We have five principal sources of revenue:
In the three and nine months ended September 30, 2022, we generated $198.1 million and $569.0 million in total revenue, respectively. The revenue mix for the three months ended September 30, 2022 was: cloud subscriptions 23%; software license 3%; maintenance 18%; services 52%; and hardware 4%. The revenue mix for the nine months ended September 30, 2022 was: cloud subscriptions 22%; software license 3%; maintenance 19%; services 52%; and hardware 4%.
During this quarter, the US dollar strengthened materially against certain foreign currencies in markets in which we operate, particularly the Pound Sterling and the Euro, which negatively impacted total revenue and our remaining performance obligations (“RPO”) balance. Foreign currency negatively impacted total revenue by approximately 4% in the three months ended September 30, 2022, compared to what we would have reported based on the exchange rates for the three months ended September 30, 2021. Currency volatility also negatively impacted our RPO growth by approximately 7% from September 30, 2021 to September 30, 2022, compared to what we would have reported had the exchange rates remained the same from 2021 to 2022. Despite the negative currency impact, we continued to deliver solid revenue growth.
While the majority of our contracts are in US dollars, as we continue to grow our Cloud subscription business in EMEA and APAC, fluctuations in foreign exchange rates may add variability to, and could have a material adverse impact on our financial results.
We have three geographic reportable segments: North and Latin America (the “Americas”), Europe, the Middle East and Africa (EMEA), and Asia-Pacific (APAC). Geographic revenue is based on the location of the sale. Our international revenue was approximately $60.7 million and $176.6 million for the three and nine months ended September 30, 2022, respectively, which represents approximately 31% of our total revenue for both three and nine months ended September 30, 2022. International revenue includes all revenue derived from sales to customers outside the United States. At September 30, 2022, we employed approximately 4,080 employees worldwide. We have offices in Australia, Chile, China, France, Germany, India, Italy, Japan, the Netherlands, Singapore, Spain, the United Kingdom, and the United States, as well as representatives in Mexico and reseller partnerships in Latin America, Eastern Europe, the Middle East, South Africa, and Asia.
Future Expectations
Our results for the first nine months of 2022 exceeded our expectations due to solid demand for our cloud solutions. Our solutions are mission critical, supporting complex global supply chains. We believe that favorable secular tailwinds, such as the digital transformation of businesses in manufacturing, wholesale and retail, coupled with our commitment to investing in organic innovation to deliver leading cloud supply chain, inventory and omnichannel commerce solutions is in synergistic alignment with current market
15
demand. We believe that this alignment is contributing to our strong financial results, higher demand and strong win rates for our solutions for the period.
We remain committed to investing in our business to drive customer success and expand our total addressable market, which we believe will position us well to achieve long-term sustainable growth and earnings. We have taken steps to best ensure the health and safety of our employees globally. Our daily execution has evolved into a hybrid (office and virtual) model, and we continue to find innovative ways to engage with employees, customers and prospects, ensuring that they are supported as they navigate their way through this period.
Going forward, we are investing in our cloud business, including enterprise investments in innovation, and strategic operating expenses to support growth objectives. The pace at which the market adopts our cloud subscriptions, resulting in revenue recognition spread out over the subscription period rather than up front, combined with extended lead times for developing new business, can cause uncertainty, impacting our ability to accurately forecast bookings and revenues from quarter to quarter and over the longer term.
For the remainder of 2022, our five strategic goals remain:
Cloud Subscription
In 2017, we released Manhattan Active™ Solutions, accelerating our business transition to cloud subscriptions. Under a cloud subscription, customers pay a periodic fee for the right to use our software within a cloud environment that we provide and manage over a specified period of time. As part of our subscription program, we allow our existing customers to convert their maintenance contracts to cloud subscription contracts. Some customers have converted their maintenance contracts to cloud subscriptions, and we expect there will be continued opportunities to convert existing maintenance contracts to cloud subscription contracts in the future.
In the fifth year of our cloud transition, demand for our cloud solutions is the dominant preference of customers. Cloud solutions are our fastest growing revenue line and represents 86% of total software revenue in the first nine months of 2022. We believe the reduction in license and maintenance revenue in favor of our cloud offerings is positive for our customers and Manhattan Associates.
Global Economic Trends and Industry Factors
Global macro-economic trends, technology spending, and supply chain management market growth are important barometers for our business. In the three and nine months ended September 30, 2022, both approximately 69% of our total revenue was generated in the United States, 16% and 17% in EMEA, respectively, and the remaining balance in APAC, Canada, and Latin America. In addition, Gartner Inc. (“Gartner”), an information technology research and advisory company, estimates that nearly 75% of every supply chain software solutions dollar invested is spent in North America and Western Europe; consequently, the health of the U.S. and the Western European economies have a meaningful impact on our financial results.
We sell technology-based solutions with total pricing, including software and services, in many cases exceeding $1.0 million. Our software is often a part of our customers’ and prospects’ much larger capital commitment associated with facilities expansion and business improvement. We believe that, given the mission critical nature of our software, combined with a challenging global macro environment, our current sales cycles for large cloud subscriptions in our target markets could be extended. While demand for our solutions is solid, the current business climate within the United States and geographic regions in which we operate may affect customers’ and prospects’ decisions regarding timing of strategic capital expenditures.
While we are encouraged by our results, we remain cautious regarding the pace of global economic growth. We believe global geopolitical and economic volatility likely will continue to shape customers’ and prospects’ enterprise software buying decisions.
16
Revenue
Cloud Subscriptions and Software License Revenue. Cloud subscriptions revenue and remaining performance obligation (“RPO”) growth are the leading indicators of our business performance, primarily derived from cloud native subscription fees that customers pay for our Unified Omnichannel Commerce and Digital Supply Chain solutions.
In the nine months ended September 30, 2022, cloud subscriptions revenue was 86% of total cloud and software license revenue. RPO increased 69% over prior year on strong demand. As of September 30, 2022, approximately $969.6 million of revenue, over 97% of which is cloud native subscriptions, is expected to be recognized from RPO 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).
In the three months ended September 30, 2022, cloud subscriptions revenue totaled $45.3 million or 23% of total revenues. In the nine months ended September 30, 2022, cloud subscriptions revenue totaled $124.8 million or 22% of total revenues.
Cloud subscriptions revenue is recognized ratably over the term of the agreement, typically five years and more. Cloud subscription revenue growth is influenced by the strength of general economic and business conditions and the competitive position of our software products. These revenues generally have long sales cycles. In the three and nine months ended September 30, 2022, the percentage mix of new to existing customers for the combination of software license and cloud subscriptions sales was approximately 35/65 and 47/53, respectively.
In the three months ended September 30, 2022, software license revenue totaled $6.4 million, or 3% of total revenue. In the nine months ended September 30, 2022, software license revenue totaled $19.9 million or 3% of total revenue.
Our Unified Omnichannel Commerce and Digital Supply Chain solutions are focused on core omnichannel operation (e-commerce, retail store operations and point-of-sale), supply chain commerce operations (Warehouse Management, Transportation Management and Labor Management), and Inventory Optimization, which are intensely competitive markets characterized by rapid technological change. We are a market leader in the supply chain management and omnichannel software solutions market as defined by industry analysts such as ARC Advisory Group and Gartner. Our goal is to extend our position as a leading global supply chain solutions provider by growing our cloud subscriptions and software license revenues faster than our competitors through investment in innovation.
Maintenance Revenue. Our maintenance revenue for the three months ended September 30, 2022 totaled $35.8 million, or 18% of total revenue. For the nine months ended September 30, 2022, maintenance revenue totaled $107.1 million or 19% of total revenue. For maintenance, we offer a comprehensive 24 hours per day, 365 days per year program that provides our perpetual software license customers with software upgrades, when and if available, which include additional or improved functionality and technological advances incorporating emerging supply chain and industry initiatives.
Maintenance revenue is influenced by: (1) new software license revenue growth; (2) annual renewal of support contracts; (3) increase in customers through acquisitions; (4) fluctuations in currency rates, and (5) conversion of maintenance contracts to cloud subscription contracts. Substantially all of our customers renew their annual support contracts. Maintenance revenue is generally paid in advance and recognized ratably over the term of the agreement, typically twelve months. Maintenance renewal revenue is recognized over the renewal period once we have a contract upon payment from the customer.
Services Revenue. In the three months ended September 30, 2022, our services revenue totaled $103.4 million, or 52% of total revenue. In the nine months ended September 30, 2022, our services revenue totaled $294.3 million, or 52% of total revenue.
Our professional services organization provides our customers with expertise and assistance in planning and implementing our solutions. To ensure a successful product implementation, consultants assist customers with the initial installation of a system, the conversion and transfer of the customer’s historical data onto our system, and ongoing training, education, and system upgrades. We believe our professional services enable customers to implement our software rapidly, ensure the customer’s success with our solutions, strengthen our customer relationships, and add to our industry-specific knowledge base for use in future implementations and product innovations.
Services revenue growth is contingent upon cloud sales and customer upgrade cycles, which are influenced by the strength of general economic and business conditions and the competitive position of our software products. In addition, our professional services business has competitive exposure to offshore providers and other consulting companies.
Hardware Revenue. Our hardware revenue, which we recognize net of related costs, totaled $7.2 million in the three months ended September 30, 2022 representing 4% of total revenue. For the nine months ended September 30, 2022, hardware revenue totaled $22.9 million, or 4% of total revenue. In conjunction with the licensing of our software, and as a convenience for our customers, we resell a variety of hardware products developed and manufactured by third parties. These products include computer hardware, radio frequency terminal networks, RFID chip readers, bar code printers and scanners, and other peripherals.
17
Product Development
We continue to invest significantly in research and development (R&D) to provide leading Unified Omnichannel Commerce and Digital Supply Chain solutions to enable global retailers, manufacturers, wholesalers, distributors, and logistics providers to successfully manage accelerating and fluctuating demands as well as the increasing complexity and volatility of their local and global supply chains, retail store operations and points of sale. Our R&D expenses were $29.4 million and $84.8 million for the three and nine months ended September 30, 2022.
We expect to continue to focus our R&D resources on the development and enhancement of our core supply chain, inventory optimization, omnichannel and point-of-sale software solutions. We offer what we believe to be the broadest solutions portfolio in the supply chain solutions marketplace, addressing all aspects of inventory optimization, transportation management, distribution management, planning, and omnichannel operations including order management, store inventory & fulfillment, call center and point-of-sale.
We also plan to continue to enhance our existing solutions and to introduce new solutions to address evolving industry standards and market needs. We identify opportunities to further enhance our solutions and to develop and provide new solutions through our customer support organization, as well as through ongoing customer consulting engagements and implementations, interactions with our user groups, association with leading industry analysts and market research firms, and participation in industry standards and research committees. Our solutions address the needs of customers in various vertical markets, including retail, consumer goods, food and grocery, logistics service providers, industrial and wholesale, high technology and electronics, life sciences, and government.
Cash Flow and Financial Condition
For the three and nine months ended September 30, 2022, we generated cash flow from operating activities of $39.9 million and $124.4 million, respectively. Our cash and cash equivalents at September 30, 2022 totaled $197.1 million, with no debt on our balance sheet. We currently have no credit facilities. Our primary uses of cash have been for funding investments in R&D in our Unified Omnichannel Commerce and Digital Supply Chain solutions to drive revenue and earnings growth. In addition, during the nine months ended September 30, 2022, we repurchased approximately $150.1 million of Manhattan Associates’ outstanding common stock under the share repurchase program approved by our Board of Directors. In October 2022, our Board of Directors approved replenishing the Company’s remaining share repurchase authority to an aggregate of $75.0 million of our common stock.
For the remainder of 2022, we expect our first priority for use of cash will continue to be investments in our Unified Omnichannel Commerce and Digital Supply Chain solutions. We also expect to prioritize capital allocation in our global teams to fund growth, and share repurchases. We do not anticipate any borrowing requirements in 2022 for general corporate purposes.
Results of Operations
In the following table, we present a summary of our consolidated results for the three and nine months ended September 30, 2022 and 2021.
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
||||
|
|
(in thousands, except per share data) |
|
|||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Revenue |
|
$ |
198,101 |
|
|
$ |
169,185 |
|
|
$ |
568,981 |
|
|
$ |
492,149 |
|
Costs and expenses |
|
|
161,331 |
|
|
|
126,777 |
|
|
|
460,986 |
|
|
|
384,959 |
|
Operating income |
|
|
36,770 |
|
|
|
42,408 |
|
|
|
107,995 |
|
|
|
107,190 |
|
Other income (loss), net |
|
|
1,612 |
|
|
|
(42 |
) |
|
|
4,593 |
|
|
|
(29 |
) |
Income before income taxes |
|
|
38,382 |
|
|
|
42,366 |
|
|
|
112,588 |
|
|
|
107,161 |
|
Net income |
|
$ |
29,674 |
|
|
$ |
36,654 |
|
|
$ |
91,091 |
|
|
$ |
89,890 |
|
Diluted earnings per share |
|
$ |
0.47 |
|
|
$ |
0.57 |
|
|
$ |
1.43 |
|
|
$ |
1.40 |
|
Diluted weighted average number of shares |
|
|
63,165 |
|
|
|
64,238 |
|
|
|
63,483 |
|
|
|
64,339 |
|
18
We have three geographic reportable segments: the Americas, EMEA, and APAC. Geographic revenue information is based on the location of sale. The revenues represented below are from external customers only. The geography-based expenses include costs of personnel, direct sales, marketing expenses, and general and administrative costs to support the business. There are certain corporate expenses included in the Americas segment that we do not charge to the other segments, including R&D, certain marketing and general and administrative costs that support the global organization, and the amortization of acquired developed technology. Included in the Americas costs are all R&D costs, including the costs associated with our operations in India. During the three and nine months ended September 30, 2022 and 2021, we derived the majority of our revenues from sales to customers within our Americas segment. In the following table, we present a summary of revenue and operating income by segment:
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||||||||||
|
|
2022 |
|
|
2021 |
|
|
% Change vs. |
|
|
2022 |
|
|
2021 |
|
|
% Change vs. |
|
||||||
Revenue: |
|
(in thousands) |
|
|
|
(in thousands) |
|
|
||||||||||||||||
Cloud subscriptions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Americas |
|
|
38,451 |
|
|
|
27,355 |
|
|
|
41 |
% |
|
|
106,064 |
|
|
|
74,498 |
|
|
|
42 |
% |
EMEA |
|
|
5,695 |
|
|
|
4,182 |
|
|
|
36 |
% |
|
|
15,544 |
|
|
|
10,947 |
|
|
|
42 |
% |
APAC |
|
|
1,121 |
|
|
|
659 |
|
|
|
70 |
% |
|
|
3,159 |
|
|
|
1,989 |
|
|
|
59 |
% |
Total cloud subscriptions |
|
|
45,267 |
|
|
|
32,196 |
|
|
|
41 |
% |
|
|
124,767 |
|
|
|
87,434 |
|
|
|
43 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Software license |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Americas |
|
|
4,686 |
|
|
|
7,065 |
|
|
|
-34 |
% |
|
|
12,147 |
|
|
|
18,646 |
|
|
|
-35 |
% |
EMEA |
|
|
708 |
|
|
|
1,024 |
|
|
|
-31 |
% |
|
|
5,969 |
|
|
|
5,018 |
|
|
|
19 |
% |
APAC |
|
|
992 |
|
|
|
372 |
|
|
|
167 |
% |
|
|
1,753 |
|
|
|
1,458 |
|
|
|
20 |
% |
Total software license |
|
|
6,386 |
|
|
|
8,461 |
|
|
|
-25 |
% |
|
|
19,869 |
|
|
|
25,122 |
|
|
|
-21 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Maintenance |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Americas |
|
|
27,901 |
|
|
|
26,551 |
|
|
|
5 |
% |
|
|
84,984 |
|
|
|
84,000 |
|
|
|
1 |
% |
EMEA |
|
|
5,657 |
|
|
|
5,639 |
|
|
|
0 |
% |
|
|
15,288 |
|
|
|
17,409 |
|
|
|
-12 |
% |
APAC |
|
|
2,262 |
|
|
|
2,289 |
|
|
|
-1 |
% |
|
|
6,843 |
|
|
|
6,961 |
|
|
|
-2 |
% |
Total maintenance |
|
|
35,820 |
|
|
|
34,479 |
|
|
|
4 |
% |
|
|
107,115 |
|
|
|
108,370 |
|
|
|
-1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Americas |
|
|
78,479 |
|
|
|
68,421 |
|
|
|
15 |
% |
|
|
222,206 |
|
|
|
195,391 |
|
|
|
14 |
% |
EMEA |
|
|
19,737 |
|
|
|
16,521 |
|
|
|
19 |
% |
|
|
58,670 |
|
|
|
49,482 |
|
|
|
19 |
% |
APAC |
|
|
5,209 |
|
|
|
3,230 |
|
|
|
61 |
% |
|
|
13,408 |
|
|
|
8,361 |
|
|
|
60 |
% |
Total services |
|
|
103,425 |
|
|
|
88,172 |
|
|
|
17 |
% |
|
|
294,284 |
|
|
|
253,234 |
|
|
|
16 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Hardware |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Americas |
|
|
7,157 |
|
|
|
5,841 |
|
|
|
23 |
% |
|
|
22,809 |
|
|
|
17,819 |
|
|
|
28 |
% |
EMEA |
|
|
46 |
|
|
|
36 |
|
|
|
28 |
% |
|
|
137 |
|
|
|
170 |
|
|
|
-19 |
% |
APAC |
|
|
- |
|
|
|
- |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
- |
|
||
Total hardware and other |
|
|
7,203 |
|
|
|
5,877 |
|
|
|
23 |
% |
|
|
22,946 |
|
|
|
17,989 |
|
|
|
28 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Total Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Americas |
|
|
156,674 |
|
|
|
135,233 |
|
|
|
16 |
% |
|
|
448,210 |
|
|
|
390,354 |
|
|
|
15 |
% |
EMEA |
|
|
31,843 |
|
|
|
27,402 |
|
|
|
16 |
% |
|
|
95,608 |
|
|
|
83,026 |
|
|
|
15 |
% |
APAC |
|
|
9,584 |
|
|
|
6,550 |
|
|
|
46 |
% |
|
|
25,163 |
|
|
|
18,769 |
|
|
|
34 |
% |
Total revenue |
|
$ |
198,101 |
|
|
$ |
169,185 |
|
|
|
17 |
% |
|
$ |
568,981 |
|
|
$ |
492,149 |
|
|
|
16 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Operating income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Americas |
|
|
22,914 |
|
|
|
29,727 |
|
|
|
-23 |
% |
|
|
68,814 |
|
|
|
74,433 |
|
|
|
-8 |
% |
EMEA |
|
|
9,851 |
|
|
|
10,485 |
|
|
|
-6 |
% |
|
|
29,791 |
|
|
|
27,502 |
|
|
|
8 |
% |
APAC |
|
|
4,005 |
|
|
|
2,196 |
|
|
|
82 |
% |
|
|
9,390 |
|
|
|
5,255 |
|
|
|
79 |
% |
Total operating income |
|
$ |
36,770 |
|
|
$ |
42,408 |
|
|
|
-13 |
% |
|
$ |
107,995 |
|
|
$ |
107,190 |
|
|
|
1 |
% |
19
Condensed Consolidated Financial Summary - Third Quarter 2022
Below we discuss our consolidated results of operations for the third quarters of 2022 and 2021.
Revenue
|
|
Three Months Ended September 30, |
|
|||||||||||||||||
|
|
|
|
% Change vs. |
|
|
% of Total Revenue |
|
||||||||||||
|
|
2022 |
|
|
2021 |
|
|
Prior Year |
|
|
2022 |
|
|
2021 |
|
|||||
|
|
(in thousands) |
|
|
|
|
|
|
|
|
|
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Cloud subscriptions |
|
$ |
45,267 |
|
|
$ |
32,196 |
|
|
|
41 |
% |
|
|
23 |
% |
|
|
19 |
% |
Software license |
|
|
6,386 |
|
|
|
8,461 |
|
|
|
-25 |
% |
|
|
3 |
% |
|
|
5 |
% |
Maintenance |
|
|
35,820 |
|
|
|
34,479 |
|
|
|
4 |
% |
|
|
18 |
% |
|
|
20 |
% |
Services |
|
|
103,425 |
|
|
|
88,172 |
|
|
|
17 |
% |
|
|
52 |
% |
|
|
52 |
% |
Hardware |
|
|
7,203 |
|
|
|
5,877 |
|
|
|
23 |
% |
|
|
4 |
% |
|
|
4 |
% |
Total revenue |
|
$ |
198,101 |
|
|
$ |
169,185 |
|
|
|
17 |
% |
|
|
100 |
% |
|
|
100 |
% |
Cloud Subscriptions Revenue. In the third quarter of 2022, cloud subscriptions revenue increased $13.1 million compared to the same quarter in the prior year. Our customers have demonstrated a clear preference for cloud-based solutions, including existing customers that are migrating from on-premise to cloud-based offerings. Cloud subscriptions revenue for the Americas, EMEA and APAC segments increased $11.1 million, $1.5 million and $0.5 million in the third quarter of 2022, respectively.
Software License Revenue. Software license revenue decreased $2.1 million in the third quarter of 2022 compared to the same quarter in the prior year on strong market preference for our cloud-native solutions. The perpetual license sales percentage mix across our product suite in the third quarter ended September 30, 2022 was over 90% warehouse management solutions.
Maintenance Revenue. Maintenance revenue increased $1.3 million in the third quarter of 2022 compared to the same quarter in the prior year. The majority of our maintenance revenue is derived from our Americas segment.
20
Services Revenue. Services revenue increased $15.3 million in the third quarter of 2022 compared to the same quarter in the prior year. Services revenue for the Americas, EMEA and APAC segments increased $10.1 million, $3.2 million, and $2.0 million, respectively, compared to the same quarter in the prior year, primarily driven by the increase in cloud subscriptions.
Hardware Revenue. Hardware sales increased $1.3 million in the third quarter of 2022 compared to the same quarter in the prior year. The majority of our hardware revenue is derived from our Americas segment. Sales of hardware is largely dependent upon customer-specific desires, which fluctuate.
21
Cost of Revenue
|
|
Three Months Ended September 30, |
|
|||||||||
|
|
2022 |
|
|
2021 |
|
|
% Change vs. |
|
|||
Cost of software license |
|
$ |
467 |
|
|
$ |
690 |
|
|
|
-32 |
% |
Cost of cloud subscriptions, maintenance and services |
|
|
95,691 |
|
|
|
70,813 |
|
|
|
35 |
% |
Total cost of revenue |
|
$ |
96,158 |
|
|
$ |
71,503 |
|
|
|
34 |
% |
Cost of Software License. Cost of software license consists of the costs associated with software reproduction; media, packaging and delivery; documentation, and other related costs; and royalties on third-party software sold with or as part of our products. Cost of software license decreased by $0.2 million in the third quarter of 2022 compared with the same quarter in the prior year.
Cost of Cloud Subscriptions, Maintenance and Services. Costs of cloud subscriptions, maintenance and services consist primarily of salaries and other personnel-related expenses of employees dedicated to cloud subscriptions; maintenance services; and professional and technical services as well as hosting fees. The $24.9 million increase in the quarter ended September 30, 2022 compared to the same quarter in the prior year was principally due to a $12.3 million increase in compensation and other personnel-related expenses, a $8.9 million increase in performance-based compensation, a $1.6 million increase in travel expenses, and a $1.3 million increase in computer infrastructure costs.
Operating Expenses
|
|
Three Months Ended September 30, |
|
|||||||||
|
|
2022 |
|
|
2021 |
|
|
% Change vs. |
|
|||
|
|
(in thousands) |
|
|
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|||
Research and development |
|
$ |
29,375 |
|
|
$ |
23,372 |
|
|
|
26 |
% |
Sales and marketing |
|
|
15,742 |
|
|
|
14,057 |
|
|
|
12 |
% |
General and administrative |
|
|
18,392 |
|
|
|
15,928 |
|
|
|
15 |
% |
Depreciation and amortization |
|
|
1,664 |
|
|
|
1,917 |
|
|
|
-13 |
% |
Operating expenses |
|
$ |
65,173 |
|
|
$ |
55,274 |
|
|
|
18 |
% |
Research and Development. Our principal R&D activities have focused on the expansion and integration of new products and releases, including cloud-based solutions, while expanding the product footprint of our software solution suites in Supply Chain, Inventory Optimization, Omnichannel and point-of-sale.
For each of the quarters ended September 30, 2022 and 2021, we did not capitalize any R&D costs because the costs incurred following the attainment of technological feasibility for the related software product through the date of general release were insignificant.
R&D expenses primarily consist of salaries and other personnel-related costs for personnel involved in our R&D activities. R&D expenses for the quarter ended September 30, 2022 increased by $6.0 million, compared to the same quarter of 2021 principally due to a $2.8 million increase in compensation and other personnel-related expenses, and a $2.7 million increase in performance-based compensation.
Sales and Marketing. Sales and marketing expenses include salaries, commissions, travel and other personnel-related costs and the costs of our marketing and alliance programs and related activities. Sales and marketing expenses increased $1.7 million in the quarter ended September 30, 2022 compared to the same quarter in the prior year primarily due to a $1.3 million increase in performance-based compensation expense.
General and Administrative (G&A). G&A expenses consist primarily of salaries and other personnel-related costs of executive, financial, human resources, information technology, and administrative personnel, as well as facilities, legal, insurance, accounting, and other administrative expenses. G&A expenses increased $2.5 million, in the current year quarter compared to the same quarter in the prior year, primarily due to a $1.4 million increase in compensation and other personnel-related expenses, and a $0.9 million increase in performance-based compensation.
22
Depreciation and Amortization. Depreciation and amortization of intangibles and software expense for the third quarter of 2022 and 2021 was $1.7 million and $1.9 million, respectively.
Operating Income
Operating income in the third quarter of 2022 was $36.8 million compared to $42.4 million in the same quarter in the prior year. Operating margin was 18.6% for the third quarter of 2022 versus 25.1% for the same quarter in the prior year. Operating income and margin decreased primarily due to our commitment to strategically invest in a business as a cloud first company focused on delivering long-term sustainable growth and earnings leverage. As a result, we are investing significantly in R&D to deliver new innovation, cloud operations headcount, infrastructure and technology to support our ability to scale our cloud business to achieve our growth objectives. In addition, our innovation releases have fueled strong demand for our global consulting services, and we are actively hiring to fulfill customer demand, which impacts operating income and margins until new resources ramp to full utilization.
Other Income and Income Taxes
|
|
Three Months Ended September 30, |
|
|||||||||
|
|
2022 |
|
|
2021 |
|
|
% Change vs. |
|
|||
|
|
|
|
|
|
|
|
|
|
|||
Other income (loss), net |
|
$ |
1,612 |
|
|
$ |
(42 |
) |
|
|
-3938 |
% |
Income tax provision |
|
|
8,708 |
|
|
|
5,712 |
|
|
|
52 |
% |
Other income (loss), net. Other income (loss), net primarily includes interest income, foreign currency gains and losses, and other non-operating expenses. Other income (loss), net increased $1.7 million in the third quarter of 2022 compared to the same quarter in the prior year primarily due to gains or losses on intercompany transactions denominated in foreign currencies with subsidiaries due to the fluctuation of the U.S. dollar relative to other foreign currencies, primarily the Indian Rupee. We recorded net foreign currency gains of $1.6 million in the third quarter of 2022, and an immaterial amount of net foreign currency gains in the same quarter in the prior year.
Income tax provision. Our effective income tax rate was 22.7% and 13.5% for the quarters ended September 30, 2022 and 2021, respectively. The increase in the effective tax rate for the three months ended September 30, 2022 due to decreases of statute of limitations expiry on tax reserves and favorable prior year provisional tax estimate true-ups.
Condensed Consolidated Financial Summary – First Nine Months of 2022
23
Below we discuss our consolidated results of operations for the nine months ended September 30, 2022 and 2021.
|
|
Nine Months Ended September 30, |
|
|||||||||||||||||
|
|
|
|
% Change vs. |
|
|
% of Total Revenue |
|
||||||||||||
|
|
2022 |
|
|
2021 |
|
|
Prior Year |
|
|
2022 |
|
|
2021 |
|
|||||
|
|
(in thousands) |
|
|
|
|
|
|
|
|
|
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Cloud subscriptions |
|
$ |
124,767 |
|
|
$ |
87,434 |
|
|
|
43 |
% |
|
|
22 |
% |
|
|
18 |
% |
Software license |
|
|
19,869 |
|
|
|
25,122 |
|
|
|
-21 |
% |
|
|
3 |
% |
|
|
5 |
% |
Maintenance |
|
|
107,115 |
|
|
|
108,370 |
|
|
|
-1 |
% |
|
|
19 |
% |
|
|
22 |
% |
Services |
|
|
294,284 |
|
|
|
253,234 |
|
|
|
16 |
% |
|
|
52 |
% |
|
|
51 |
% |
Hardware |
|
|
22,946 |
|
|
|
17,989 |
|
|
|
28 |
% |
|
|
4 |
% |
|
|
4 |
% |
Total revenue |
|
$ |
568,981 |
|
|
$ |
492,149 |
|
|
|
16 |
% |
|
|
100 |
% |
|
|
100 |
% |
Cloud Subscription Revenue. Cloud subscriptions revenue increased $37.3 million in the nine months ended September 30, 2022 compared to the same period in the prior year, as customers continued to purchase our SaaS offerings rather than a traditional perpetual license. Our customers have demonstrated a clear preference for cloud-based solutions, including existing customers that are migrating from on-premise to cloud-based offerings. Cloud subscriptions revenue for the Americas, EMEA and APAC segments increased $31.5 million, $4.6 million and $1.2 million, respectively, in the nine months ended September 30, 2022.
Software License Revenue. Software license revenue decreased $5.2 million in the nine months ended September 30, 2022 compared to the same period in the prior year. We believe the decrease reflects a strong market preference for our cloud-native solutions.
The license sales percentage mix across our product suite in the nine months ended September 30, 2022 was over 85% warehouse management solutions.
Maintenance Revenue. Maintenance revenue decreased $1.3 million in the nine months ended September 30, 2022 compared to the same period in the prior year. Maintenance revenue for the EMEA and APAC segments decreased $2.2 million and $0.1 million, respectively, in the nine months ended September 30, 2022 , while the Americas segment increased $1.0 million.
Services Revenue. Services revenue increased $41.1 million in the nine months ended September 30, 2022 compared to the same period in the prior year. Services revenue for the Americas, EMEA and APAC segments increased $26.8 million, $9.2 million and $5.1 million in the nine months ended September 30, 2022, respectively, compared with the same period in the prior year, primarily driven by the increase in cloud subscriptions.
Hardware Revenue. Hardware sales increased $5.0 million in the nine months ended September 30, 2022 compared to the same period in the prior year.
Cost of Revenue
|
|
Nine Months Ended September 30, |
|
|||||||||
|
|
2022 |
|
|
2021 |
|
|
% Change vs. |
|
|||
|
|
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|||
Cost of software license |
|
$ |
1,749 |
|
|
$ |
1,802 |
|
|
|
-3 |
% |
Cost of cloud subscriptions, maintenance and services |
|
|
266,482 |
|
|
|
214,394 |
|
|
|
24 |
% |
Total cost of revenue |
|
$ |
268,231 |
|
|
$ |
216,196 |
|
|
|
24 |
% |
Cost of Software License. Cost of software license slightly decreased by $0.1 million in the nine months ended September 30, 2022 compared with the same period in the prior year.
Cost of Cloud Subscriptions, Maintenance and Services. Costs of cloud subscriptions, maintenance and services consist primarily of salaries and other personnel-related expenses of employees dedicated to cloud operations; maintenance services; and professional and technical services as well as hosting fees. The $52.1 million increase in the nine months ended September 30, 2022 compared to the same period in the prior year was principally due to a $33.9 million increase in compensation and other
24
personnel-related expenses, a $9.5 million increase in performance-based compensation expense, a $4.5 million increase in travel expense, and a $2.7 million increase in computer infrastructure cost.
Operating Expenses
|
|
Nine Months Ended September 30, |
|
|||||||||
|
|
2022 |
|
|
2021 |
|
|
% Change vs. |
|
|||
|
|
(in thousands) |
|
|
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|||
Research and development |
|
$ |
84,754 |
|
|
$ |
70,845 |
|
|
|
20 |
% |
Sales and marketing |
|
|
47,881 |
|
|
|
41,203 |
|
|
|
16 |
% |
General and administrative |
|
|
54,963 |
|
|
|
50,579 |
|
|
|
9 |
% |
Depreciation and amortization |
|
|
5,157 |
|
|
|
6,136 |
|
|
|
-16 |
% |
Operating expenses |
|
$ |
192,755 |
|
|
$ |
168,763 |
|
|
|
14 |
% |
Research and Development. R&D expenses for the nine months ended September 30, 2022 increased $13.9 million compared to the same period in the prior year principally due to a $10.4 million increase in compensation and other personnel-related expenses, and a $2.8 million increase in performance-based compensation expense. For the same reasons included in the quarterly R&D discussion above, no R&D costs were capitalized during the nine months ended September 30, 2022 and 2021.
Sales and Marketing. Sales and marketing expenses increased $6.7 million in the nine months ended September 30, 2022 compared to the same period in the prior year primarily due to a $2.9 million increase in performance-based compensation expense, a $1.6 million increase in compensation and other personnel related expenses, a $1.4 million increase in marketing and campaign programs, and a $0.8 million increase in travel expense.
General and Administrative. General and administrative expenses increased $4.4 million in the nine months ended September 30, 2022 compared to the same period in the prior year, primarily due to a $3.3 million increase in compensation and other personnel related expenses, and a $0.6 million increase in performance-based compensation expense.
Depreciation and Amortization. Depreciation and amortization of intangibles and software expense for the nine months ended September 30, 2022 and 2021 was $5.2 million and $6.1 million, respectively.
Operating Income
Operating income for the nine months ended September 30, 2022 was $108.0 million compared to $107.2 million for the same period in the prior year. Operating margin was 19.0% the first nine months of 2022 versus 21.8% for the same period in the prior year. Operating income was relatively flat and operating margin decreased primarily due to our commitment to strategically invest in a business as a cloud first company focused on delivering long-term sustainable growth and earnings leverage. As a result, we are investing significantly in R&D to deliver new innovation, cloud operations headcount, infrastructure and technology to support our ability to scale our cloud business to achieve our growth objectives. In addition, our innovation releases have fueled strong demand for our global consulting services, and we are actively hiring to fulfill customer demand, which impacts operating income and margins until new resources ramp to full utilization.
Other Income and Income Taxes
|
|
Nine Months Ended September 30, |
|
|||||||||
|
|
2022 |
|
|
2021 |
|
|
% Change vs. |
|
|||
|
|
|
|
|
|
|
|
|
|
|||
Other income (loss), net |
|
$ |
4,593 |
|
|
$ |
(29 |
) |
|
|
-15938 |
% |
Income tax provision |
|
|
21,497 |
|
|
|
17,271 |
|
|
|
24 |
% |
Other income (loss), net. Other income (loss), net increased $4.6 million in the nine months ended September 30, 2022 compared to the same period in the prior year primarily due to gains or losses on intercompany transactions denominated in foreign currencies with subsidiaries due to the fluctuation of the U.S. dollar relative to other foreign currencies, primarily the Indian Rupee. We recorded net foreign currency gains of $4.3 million in the first nine months of 2022, and an immaterial amount of net foreign currency gains in the first nine months of 2021.
Income tax provision. Our effective income tax rate was 19.1% and 16.1% for the nine months ended September 30, 2022 and 2021, respectively. The increase in the effective tax rate for the nine months ended September 30, 2022 is due to the decrease of
25
statute of limitation expiry on tax reserves, decrease of favorable prior year provisional tax estimate true-ups, and income earned in higher tax jurisdictions.
Liquidity and Capital Resources
During the first nine months of 2022, we funded our business exclusively through cash generated from operations. Our cash and cash equivalents as of September 30, 2022 included $157.6 million held in the U.S. and $39.5 million held by our foreign subsidiaries. We believe that our cash balances in the U.S. are sufficient to fund our U.S. operations. In the future, if we elect to repatriate the unremitted earnings of our foreign subsidiaries, we would not be subject to additional U.S. income taxes on such earnings, but we could be subject to additional local withholding taxes.
Cash flow from operating activities totaled $124.4 million and $145.1 million in the nine months ended September 30, 2022 and 2021, respectively. Typical factors affecting our cash provided by operating activities include our level of revenue and earnings for the period, the timing and amount of employee bonus and income tax payments, and the timing of cash collections from our customers which is our primary source of operating cash flow. Cash flow from operating activities for the nine months ended September 30, 2022 decreased $20.7 million compared to the same period in the prior year, which is mainly due to increase in tax payments associated with the U.S. Tax Cuts and Jobs Act that requires capitalization of R&D costs for tax purposes beginning in 2022.
Cash flow used in investing activities totaled $4.2 million and $2.2 million in the nine months ended September 30, 2022 and 2021, respectively. Our investing activities for both the nine months ended September 30, 2022 and 2021 consisted of capital spending to support company growth.
Financing activities used cash of $179.0 million and $100.2 million for the nine months ended September 30, 2022 and 2021, respectively. The principal use of cash for financing activities in both periods was to purchase our common stock, including shares withheld for taxes due upon vesting of restricted stock. Repurchases of our common stock for the nine months ended September 30, 2022 and 2021 totaled $179.0 million and $100.2 million, respectively, including shares withheld for taxes of $28.9 million and $20.4 million, respectively.
Periodically, opportunities may arise to grow our business through the acquisition of complementary products, and technologies. Any material acquisition could result in a decrease to our working capital depending on the amount, timing, and nature of the consideration to be paid. We believe that our existing cash will be sufficient to meet our working capital and capital expenditure needs at least for the next twelve months, although there can be no assurance that this will be the case. We continue to focus on managing liquidity, while investing in and growing our headcount capacity to support our customers and grow our business. For the remainder of 2022, we anticipate that our priorities for use of cash will be similar to prior years, with our first priority being continued investment in product development and profitably investing in our business to extend our market leadership. We will continue to weigh our share repurchase options against cash for acquisitions and investing in the business. We will also continue to evaluate acquisition opportunities that are complementary to our product footprint and technology direction. At this time, we do not anticipate any borrowing requirements for the remainder of 2022 for general corporate purposes.
Aggregate Contractual Obligations
Our principal commitments consist of multiple non-cancellable contracts for cloud infrastructure services and obligations under operating leases. As of September 30, 2022, our cloud infrastructure obligations are approximately $122.9 million over the next 5 years. We also enter into non-cancellable subscriptions in the ordinary course of business for internal software to support our operations. Our obligations, as of September 30, 2022, are approximately $19.8 million over the next 5 years. We expect to fulfill all these commitments from our working capital.
Critical Accounting Policies and Estimates
In the first nine months of 2022, there were no significant changes to our critical accounting policies and estimates from those disclosed in the section “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our annual report on Form 10-K for the year ended December 31, 2021.
Forward-Looking Statements
Certain statements contained in this filing are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, including but not limited to statements related to expectations about global macroeconomic trends and industry developments, plans for future business development activities, anticipated costs of revenues, product mix and service revenues, research and development, selling, general and administrative activities, and liquidity and capital needs and resources. When used in this quarterly report, the words “may,” “expect,” “forecast,” “anticipate,” “intend,” “plan,” “believe,” “could,” “seek,” “project,” “estimate,” and similar expressions are generally intended to identify forward-looking statements. Undue reliance should not be placed on these forward-looking statements, which reflect opinions only as of the date of this quarterly report. Such forward-looking statements are subject to risks, uncertainties, and other factors that could cause actual results to differ materially from future results expressed or implied by such forward-looking statements. Investors are cautioned that forward-looking statements are not
26
guarantees of future performance and involve risks and uncertainties, and that actual results may differ materially from those contemplated by such forward-looking statements.
Some of the factors that could cause actual results to differ materially from the results discussed in forward-looking statements include:
We undertake no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes in future operating results.
Item 3. Quantitative and Qualitative Disclosures about Market Risk.
There were no material changes to the Quantitative and Qualitative Disclosures about Market Risk previously disclosed in our annual report on Form 10-K for the year ended December 31, 2021.
27
Item 4. Controls and Procedures.
Disclosure Controls and Procedures
We maintain disclosure controls and procedures designed to provide reasonable assurance that information required to be disclosed in reports filed under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and our Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
No system of controls, no matter how well designed and operated, can provide absolute assurance that the objectives of the system of controls are met, and no evaluation of controls can provide absolute assurance that the system of controls has operated effectively in all cases. Our disclosure controls and procedures however are designed to provide reasonable assurance that the objectives of disclosure controls and procedures are met.
As of the end of the period covered by this report, our management evaluated, with the participation of our Chief Executive Officer and Chief Financial Officer, the effectiveness of our disclosure controls and procedures. Based on the evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of the end of the period covered by this report, our disclosure controls and procedures were effective to provide reasonable assurance that the objectives of disclosure controls and procedures are met.
Changes in Internal Control over Financial Reporting
During the three months ended September 30, 2022, there were no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting, including any corrective actions with regard to material weaknesses.
28
PART II
OTHER INFORMATION
Item 1. Legal Proceedings.
From time to time, we may be a party to legal proceedings arising in the ordinary course of business, and we could be a party to legal proceedings not in the ordinary course of business. We are not currently a party to any legal proceeding the result of which we believe could have a material adverse impact upon our business, financial position, results of operations, or cash flows.
Many of our product installations involve software products that are critical to the operations of our customers’ businesses. Any failure in our products could result in a claim for substantial damages against us, regardless of our responsibility for such failure. Although we attempt to contractually limit 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.
Item 1A. Risk Factors.
In addition to the other information set forth in this report, you should carefully consider the risk factors disclosed in Item 1A, “Risk Factors,” of our annual report on Form 10-K for the year ended December 31, 2021.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
The following table provides information regarding common stock purchases under our publicly announced repurchase program for the quarter ended September 30, 2022.
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Period |
|
Total Number of Shares Purchased |
|
|
Average Price Paid per Share |
|
|
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs |
|
|
Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs |
|
||||
July 1 - July 31, 2022 |
|
|
- |
|
|
$ |
- |
|
|
|
- |
|
|
|
75,000,000 |
|
August 1 - August 31, 2022 |
|
|
207,030 |
|
|
|
146.58 |
|
|
|
207,030 |
|
|
|
44,653,177 |
|
September 1 - September 30, 2022 |
|
|
139,590 |
|
|
|
140.79 |
|
|
|
139,590 |
|
|
|
25,000,009 |
|
Total |
|
|
346,620 |
|
|
|
|
|
|
346,620 |
|
|
|
|
||
Item 3. Defaults Upon Senior Securities.
No events occurred during the quarter covered by this report that would require a response to this item.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
None.
29
Item 6. Exhibits.
|
|
|
|
|
|
|
|
Exhibit 101.INS |
Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. |
|
|
Exhibit 101.SCH |
Inline XBRL Taxonomy Extension Schema Document |
|
|
Exhibit 101.CAL |
Inline XBRL Taxonomy Extension Calculation Linkbase Document |
|
|
Exhibit 101.DEF |
Inline XBRL Taxonomy Extension Definition Linkbase Document |
|
|
Exhibit 101.LAB |
Inline XBRL Taxonomy Extension Label Linkbase Document |
|
|
Exhibit 101.PRE |
Inline XBRL Taxonomy Extension Presentation Linkbase Document |
|
|
Exhibit 104 |
The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2022, has been formatted in Inline XBRL. |
* In accordance with Item 601(b)(32)(ii) of the SEC’s Regulation S-K, this Exhibit is hereby furnished to the SEC as an accompanying document and is not deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that Section, nor shall it be deemed incorporated by reference into any filing under the Securities Act of 1933.
30
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
MANHATTAN ASSOCIATES, INC.
Date: |
October 28, 2022 |
/s/ Eddie Capel |
|
|
Eddie Capel |
|
|
President and Chief Executive Officer |
|
|
(Principal Executive Officer)
|
|
|
|
Date: |
October 28, 2022 |
/s/ Dennis B. Story |
|
|
Dennis B. Story |
|
|
Executive Vice President, Chief Financial Officer and Treasurer |
|
|
(Principal Financial Officer) |
31
Exhibit 31.1
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
PURSUANT TO RULE 13a-14(a)/15d-14(a), AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Eddie Capel, certify that:
Dated this 28th day of October, 2022
/s/ Eddie Capel |
Eddie Capel President and Chief Executive Officer |
Exhibit 31.2
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER
PURSUANT TO RULE 13a-14(a)/15d-14(a), AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Dennis B. Story, certify that:
Dated this 28th day of October, 2022
/s/ Dennis B. Story |
Dennis B. Story Executive Vice President, Chief Financial Officer and Treasurer
|
Exhibit 32
CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
This Certificate is being delivered pursuant to the requirements of Section 1350 of Chapter 63 (Mail Fraud) of Title 18 (Crimes and Criminal Procedures) of the United States Code and shall not be relied on by any person for any other purpose.
The undersigned, who are the Chief Executive Officer and Chief Financial Officer, respectively, of Manhattan Associates, Inc. (the “Company”), hereby each certify that, to the undersigned’s knowledge:
The Quarterly Report on Form 10-Q of the Company for the quarterly period ended September 30, 2022 (the “Report”), which accompanies this Certification, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and all information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Dated this 28th day of October, 2022
/s/ Eddie Capel |
Eddie Capel President and Chief Executive Officer |
/s/ Dennis B. Story |
Dennis B. Story Executive Vice President, Chief Financial Officer and Treasurer |
In accordance with SEC Release No. 34-47986, this Exhibit is furnished to the SEC as an accompanying document and is not deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that Section, nor shall it be deemed incorporated by reference into any filing under the Securities Act of 1933. A signed original of this written statement required by Section 906 of the Sarbanes-Oxley Act of 2002 has been provided to the registrant and will be retained by the registrant and furnished to the Securities and Exchange Commission or its staff upon request.