December 12, 2023
VIA EDGAR
Ms. Chen Chen
Ms. Melissa Kindelan
Division of Corporation Finance
Office of Information Technologies and Services
Securities & Exchange Commission
100 F Street, N.E.
Washington, D.C. 20549
Re: Manhattan Associates, Inc.
Form 10-K for the Fiscal Year Ended December 31, 2022
File No. 000-23999
Dear Ms. Chen and Ms. Kindelan:
Manhattan Associates, Inc. (the “Company,” “our,” or “we”) has received the Staff’s comment letter dated November 30, 2023, with respect to the above-referenced filing. We set forth below our responses to the Staff’s comments, in each case following the full text of the Staff’s comment.
Form 10-K for the Fiscal Year Ended December 31, 2022
Management's Discussion and Analysis of Financial Condition and Results of Operations
Business Overview
Revenue, page 23
The Company would like to call the Staff’s attention to the Cloud Subscriptions and Software License revenue paragraph on page 23 where the Company notes that cloud subscription revenue and remaining performance obligation (RPO) growth are the leading indicators of its business performance. In future filings, the Company intends to add a separate section in the MD&A, currently expected to be substantially as set forth below, to highlight these metrics more clearly.
Additionally, due to the Company’s recent transition to a Cloud-based model, only a small number of the Company’s cloud subscriptions have come up for renewal to date. The Company expects renewals to increase in the coming years at which point the Company expects that it will begin to track and disclose retention rates as an additional key performance metric.
Key Performance Metrics
We regularly review metrics to evaluate our business, measure our performance, identify trends affecting our business, formulate financial projections and make strategic decisions. We believe
Ms. Chen Chen
Ms. Melissa Kindelan
December 12, 2023
Page 2
cloud subscriptions revenue growth and RPO growth are the leading indicators of our business performance, primarily derived from cloud subscription fees that customers pay for our Unified Omnichannel Commerce and Digital Supply Chain solutions.
Cloud Subscriptions Revenue Growth
Our cloud revenue growth provides insight into our ability to maintain and grow our cloud customer base. Total cloud revenue increased from $122.2 million in 2021 to $176.5 million in 2022, representing a 44% year-over-year increase. Total cloud revenue increased from $79.8 million in 2020 to $122.2 million in 2021, representing a 53% year-over-year increase. Cloud revenue growth is being driven by strong demand for our cloud offerings.
Remaining performance obligations
Transaction price allocated to RPO represents contracted revenue that has not yet been recognized, which includes deferred revenue and non-cancelable amounts that we expect to invoice and recognize as revenue in future periods. Substantially all of our RPO represents cloud native subscriptions with a non-cancelable term greater than one year. Maintenance contracts typically are for one year and not included in RPO. RPO provides insight into our contracted backlog of future business. As of December 31, 2022, our RPO was approximately $1.05 billion, an increase of 50% over December 31, 2021.
Results of Operations
Revenue, page 28
The Company would like to call the Staff’s attention to page 24 in the revenue discussion where it states that the percentage mix of new to existing customers for cloud subscriptions and software license sales taken together was approximately 40/60 in 2022. As mentioned above, only a small number of the Company’s cloud subscriptions have come up for renewal to date. The Company expects renewals to increase in the coming years at which point we expect we will begin to track and disclose retention rates.
As stated on page 24, our services revenue growth is contingent on cloud sales and customer upgrade cycles. The Company will disclose in future filings the percentage of professional services revenue that relates to cloud subscriptions. From 2020 to 2022, the percentage of professional services revenue that related to cloud subscriptions increased from approximately 25% in 2020 to over 50% in 2022 and continues to increase in 2023.
Notes to Consolidated Financial Statements
Note 1. Organization, Consolidation and Summary of Significant Accounting Policies
Remaining Performance Obligations, page 49
Ms. Chen Chen
Ms. Melissa Kindelan
December 12, 2023
Page 3
In future filings, the Company will revise its disclosure to clarify that most of the remaining balance will be recognized in the following 36 months.
Deferred Commissions, page 49
Commissions are earned on cloud subscription renewals, but they are not commensurate with the commission earned on the initial contract. As such, renewal commissions are amortized over the contractual renewal period. The Company will revise its future filings to provide additional clarification.
Please direct any further questions regarding these filings and this letter to the undersigned at (678) 597-7115. Thank you.
Very truly yours,
MANHATTAN ASSOCIATES, INC.
/s/ Dennis B. Story
Dennis B. Story
Executive Vice President and CFO