Manhattan Associates Q4 2023 Earnings Call Transcript

Quartr
Provided by Quartr
January 30, 2024

There are 9 speakers on the call.

Operator

Good afternoon.

Operator

My name is Sherry, and I will be your conference facilitator today. At this time, I would like to welcome everybody to Manhattan Associates 4th Quarter 2023 Conference Call. As a reminder, ladies and gentlemen, this call is being recorded today, January 30, 2024. I would now like to introduce your host, Mr. Michael Bauer, Head of Investor Relations of Manhattan Associates.

Operator

Mr. Bauer, you may begin your conference.

Speaker 1

Okay. Thank you, Sherry, and good afternoon, everyone. Welcome to Manhattan Associates' 2023 4th Quarter Earnings Call. I will review our cautionary language and then turn the call over to Eddie Capel, our CEO. During this call, including the question and answer session, we may make forward looking statements regarding the future events or the future financial performance of Manhattan Associates.

Speaker 1

You're cautioned that these forward looking statements involve risks and uncertainties, are not guarantees of future performance and that actual results may differ materially from the projections contained in our forward looking statements. I refer you to the reports Manhattan Associates filed with the SEC for important factors that could cause actual results to differ materially from those in our projections, our Annual Report on Form 10 K for fiscal year 2022 and the risk factor discussion in that report as well as any risk factor updates we provide in our subsequent Form 10 We note the turbulent global macro environment could impact our performance and cause actual results to differ materially from our projections. We are under no obligation to update these statements. In addition, our comments include certain non GAAP financial measures to provide additional information to investors. We have reconciled all non GAAP measures to the related GAAP measures in accordance with SEC rules.

Speaker 1

You'll find reconciliations scheduled in the Form 8 ks we submitted to the SEC earlier today on our website at manh.com. Now, I'll turn the call over to Eddie.

Speaker 2

Thanks, Mike. Good afternoon, everybody, and a belated Happy New Year. Thanks for joining us as we review our results for the Q4 and full year 2023 as well as provide our outlook for 2024. So 2023 was a very successful year for Manhattan, setting new records in total revenue, RPO, operating profit, free cash flow and earnings per share. And to drive future growth and innovation, we also invested record amounts in our people and in research and development.

Speaker 2

In 2023, we increased our headcount by about 10% and our R and D investment was over $125,000,000 And for perspective, over the past 5 years, we've invested over $500,000,000 in R and D across mission critical, Commerce and Supply Chain Technology Solutions. And this level of consistent commitment is really unmatched in our industry and is one of the Manhattan's important differentiators. And given the size of the opportunity and growing demand, we're committed to increasing these investments in 2024 and beyond. These investments will also contribute to our industry leading levels of customer satisfaction, growing our addressable market and extending our position as the leading innovator in supply chain execution, omnichannel and point of sale solutions. Now while we remain appropriately cautious regarding the global economy, our business fundamentals are solid and we're optimistic about our long term market opportunity.

Speaker 2

Like prior years, we're entering 2024 with good visibility and benefiting from several growth drivers, which include the acquisition of new customers, conversions of on premise customers to cloud and cross selling our growing unified product portfolio. So pivoting to our quarterly results, Q4 was a record quarter that frankly exceeded our expectations. Revenue increased 20% as reported to $238,000,000 highlighted by 38% growth in cloud, 19% growth in services and double digit revenue growth across all of our geographies. These strong results drove top line outperformance and solid earnings leverage in the quarter with adjusted earnings per diluted share increasing 27% to 1.03 RPO, the leading indicator of our growth, increased 36 percent to $1,400,000,000 at the end of 2023. Customer satisfaction levels are high and win rates remain at about 75%, with demand for our cloud solutions continuing to be solid across our product portfolio.

Speaker 2

From a vertical perspective, retail, manufacturing and wholesale continue to drive More than 80% of our bookings in the quarter and across our solutions, the sub verticals are pretty diverse. And the following is just a sample of some of the cloud deals we won this quarter. An industrial automation and energy management conglomerate an airline of fast food restaurant chain, a sporting goods retailer, a healthcare and supplies company and a specialty retailer as well as a number of others. And this quarter's wins contributed to a healthy mix of bookings across subverticals for the full year. Additionally, aided by secular tailwinds and the clear benefit of resilient modern supply chains, Roughly 1 third of our total bookings were generated from new logos for the full year 2023.

Speaker 2

Our pipeline continues to be strong with solid demand across our product suites. Net new potential customers represent about 35% of that demand and we have significant conversion opportunity. As we enter 2024 with over 85% of our on premise customers yet to begin their migration to our cloud solutions. For this quarter's brief product update, I'd like to start with 3 exciting announcements that we made at the National Retail Federation Conference in mid January, 2 of which have to do with a pretty large step forward with our Manhattan Active Omni Applications and the third is an important new partnership for us. So starting with the product enhancements.

Speaker 2

This quarter, we announced general availability of Iris, the next big step forward for our store associate app. Running on top of Manhattan Active Omni, our Manhattan Active Omni platform, Iris offers unmatched transactional performance, resiliency that's purpose built for the connectivity issues inherent in store networks and a great new associate experience design. And we believe that Iris is the 1st cloud native point of sale truly designed and built to offer the next best of both worlds, continuous innovation in the former quarter releases and onboard resiliency to handle centralized cloud deployments at scale. Many of our customers face ongoing battles to provide fast and reliable network connectivity to every register in every store. And Iris insulates the store associate from the whims of networks, offering unmatched Checkout performance, whether the device is connected, partially disconnected or completely offline.

Speaker 2

And Iris also offers a great new visual experience for the store associate seamlessly blending the 3 Cs of a best in class point of sale system, cart, catalog and customer. Iris empowers store associates to maximize Sales conversion rates in the store, the ability to sell both what's in the physical store and what's in the broader supply chain in a single transaction, ensuring every possible sale is converted. Furthermore, the highly visual customer profile within Iris empowers our store associates to truly deliver a personalized selling experience. Staying with retail stores just for a moment, Our point of sale system performed incredibly well during this recent holiday selling period with about 30,000 retail associates using our solution and customer transaction volumes exceeding any other cloud native point of sale solution in the market. Now at NRF, we also highlighted our fulfillment experience insight dashboard.

Speaker 2

This capability is unique to Manhattan Active Omni and allows our omnichannel customers to compare their fulfillment performance against their peers and competitors. Key omnichannel fulfillment experience metrics like click to deliver, order rejection rates, pick up in store Penetration percentage and abandonment rates among others are displayed dynamically for each of our customers. And we built this capability though so that our Manhattan Active Omni customers can understand exactly how they stack up against the field. Fulfillment Experience Insights lays out these metrics for them in a clear and comprehensive manner. And frankly, armed with this information, our professional services team members can provide corresponding process and technology recommendations to help move these metrics forward in the right direction over time.

Speaker 2

And we were finally, we're also excited to announce our new partnership with Over the last several years, we've witnessed Shopify surfacing more and more often in our Manhattan Active Omni prospect and customer base. Now we thought the time was right to team up with Shopify to offer the market end to end omnichannel commerce solutions. Shopify shares our vision of providing solution which lower purchase friction, increase conversion, and improve transparency and reliability during the fulfillment process. And for our customers, both Manhattan and Shopify focused on delivering functionality rich solutions, which can be implemented on time, on budget, and we start delivering value immediately for them. We believe that in the near to medium term, the market will Further emphasized total cost of ownership and lower project risk.

Speaker 2

And the Manhattan Active Omni and Shopify partnership is well suited to deliver on both of these. Now speaking of partners, I am proud to report that we finished 2023 by adding a record number of new partners to our Manhattan Value Partner or MVP program. Whether it's SaaS providers like Shopify or Adient, transportation visibility providers like Forkites or Project 44 or Shippeo On material handling and robotics vendors for use within the four walls of the DC, Manhattan Active Platform applications are easy to connect and offer our partners access to a world class customer base. And we continue to we'll continue to add and strengthen our relationships with premier, third party integration and advisory firms as well. Our network of technology and consulting partners help us connect with the broader market of target customers and improve the speed and success of our deployments.

Speaker 2

So next quarter, I'll likely focus my product updates within our Manhattan Active Supply Chain Execution Suite. But for now, I'll simply mention that we continue to see strong demand and deal activity for our market leading unified supply chain execution offering consisting basically of WMS and TMS. This demand is coming from across the globe and across industries. And finally, throughout 2024, we'll also continue to update you on the progress that our R and D team is making as we incorporate the latest generative AI technologies into our supply chain and omni channel retail solutions. So in summary, 2023 was a terrific year for Manhattan, And we're very excited for the numerous opportunities that lie ahead to deliver simply world class innovation into our growing customer base.

Speaker 2

So that concludes my business update. Dennis is going to provide you with an update of the financial performance 2023 and outlook for 2024. And then I'll close our prepared remarks with a brief summary before we move on to Q and A. So Dennis?

Speaker 3

Thanks, Eddie. As Eddie highlighted, in 2023, we set all time records in RPO, total revenue, operating profit, free cash flow and earnings per share. So a big shout out to 4,600 team members across the globe, great execution through the year. For both the quarter and the year, we delivered a strong balanced financial performance on top line growth and operating margin. Both our Q4 and full year results exceeded expectations and compare favorably to the rule of 50.

Speaker 3

And if our revenue growth is normalized for our cloud transition, which excludes license and maintenance attrition, our performance is even stronger. Importantly, Manhattan continues to deliver strong consistent results across revenue growth, profitability and cash flow. I'll start with recapping our financial performance for the quarter year. Regarding FX, it was a one point tailwind to Q4 revenue growth and did not impact our full year revenue growth rate. For RPO, FX was a 1 point tailwind to both year over year and sequential growth.

Speaker 3

Now to our results. All growth rates are on an as reported year over year basis unless otherwise stated. For Q4 total revenue, Total revenue was up $238,000,000 or was $238,000,000 up 20 percent and full year revenue totaled $929,000,000 up 21%. Excluding license and maintenance revenue, which removes the revenue compression by our cloud transition, Q4 revenue growth was 24% and full year 28%, so nice double digit returns here. Q4 cloud revenue totaled $71,000,000 up 38%, with full year revenue totaling 2 $5,000,000 up 44%.

Speaker 3

We closed out 2023 with RPO of $1,400,000,000 growing 36% year over year and 8% sequentially as we experienced strength from across our Manhattan Active suite of products. Excluding FX impacts, RPO exceeded the high end of our $1,400,000,000 outlook by $13,000,000 which was stronger than expected. Services had another fantastic year and great performance with Q4 revenue increasing 19 percent to $119,000,000 with full year services revenue up 24% to $488,000,000 as cloud sales continue to fuel services growth globally. Q4 adjusted operating profit was $77,000,000 with an operating margin of 32.2 percent, representing a 200 basis point year over year improvement. Full year adjusted operating profit totaled $281,000,000 with a 30.3% operating margin and represents a 2 65 basis point improvement over 2022.

Speaker 3

Both Q4 And 2023 results were driven by strong cloud and services revenue growth combined with operating leverage as our cloud business scales. Q4 earnings per share increased 27% to $1.03 and GAAP earnings per share increased 30% to $0.78 Full year adjusted earnings per share increased 36% to $3.74 and GAAP earnings per share increased 39% to $2.82 Q4 operating cash flow increased 60% to $88,000,000 with a 36.3 percent free cash flow margin and a 32.9 percent adjusted EBITDA margin. Our full year operating cash flow was $246,000,000 while generating 26% free cash flow margin and 30.9% adjusted EBITDA margin. So turning to the balance sheet. Our deferred revenue increased 13% year over year to $239,000,000 We increased our cash position to $271,000,000 with 0 debt, up from $182,000,000 at the end of Q3.

Speaker 3

In 2023, we invested $166,000,000 in share repurchases And we are entering 2024 with a Board approved $75,000,000 share repurchase authority. Moving to the outlook. As consistently mentioned, our financial objective is to deliver sustainable double digit top line growth and top quartile operating margins benchmarked against any enterprise SaaS comps. As noted on prior earnings calls, our goal is to update our RPO outlook on an annual basis. Additionally, as previously discussed, Our bookings performance is impacted by the number and relative value of large deals we close in any quarter, which can potentially cause lumpiness or nonlinear bookings throughout the year.

Speaker 3

With that, We are raising the midpoint of our preliminary 2024 RPO revenue, operating margin and EPS targets that we provided last quarter. For RPO, we are now targeting $1,750,000,000 to 1,800,000,000 The $1,780,000,000 midpoint compares favorably to our prior midpoint of $1,750,000,000 and represents 25% growth. For full year 2024 guidance, we now expect total revenue of $1,015,000,000 to $1,025,000,000 with a $1,020,000,000 midpoint comparing favorably to our prior midpoint of roughly $1,000,000,000 a bunch of billions in there, represents 16% growth excluding license and maintenance attrition and all in our target is 10%. For Q1, we are targeting total revenue of $241,000,000 to $245,000,000 which at the midpoint represents 16% growth excluding license and maintenance attrition and 10% growth all in. For the rest of the year, at the midpoint, we are targeting total revenue of about $255,000,000 in Q2, $264,000,000 in Q3 and accounting for retail peak seasonality, dollars 258,000,000 in Q4.

Speaker 3

Driven by our revenue growth and the inherent leverage in our business model, we continue to track ahead of our original margin expectations. As such, we are raising our 2024 adjusted operating margin guidance range to 28.75 percent to 29.25 percent with the 29% midpoint comparing favorably to our prior midpoint that we provided last quarter of 28.25 percent. Additionally, included in our outlook is 175 basis points of headwind from our license and maintenance revenue attrition to cloud. At the midpoint, adjusted operating margin on a quarterly basis is expected to be about 28% in Q1, 28.5% in Q2, 30% in Q3 and accounting for retail peak seasonality, 29.5% in Q4. The results in a full year adjusted EPS guidance range of $3.69 and $3.79 and a GAAP EPS range of $2.81 to $2.91 For comparison purposes, our 2024 adjusted tax rate is nearly 3.50 basis points higher then our 2023 adjusted tax rate.

Speaker 3

For Q1, we are targeting adjusted EPS of $0.85 to $0.87 And GAAP EPS of $0.71 to $0.73 for Q2 through Q4, we expect GAAP EPS to be about $0.25 lower than adjusted EPS per quarter, which accounts for our investment in equity based compensation. Here are some additional details on our 2024 outlook. For full year 2024, We continue to expect cloud revenue of $326,000,000 to $330,000,000 At the midpoint, this represents 29% growth and assumes roughly $75,000,000 in Q1, dollars 79,000,000 in Q2, $85,000,000 in Q3 $89,000,000 in Q4. For services revenue, we are increasing our forecast $532,000,000 to $542,000,000 representing 10% growth at the midpoint. On a quarterly basis, we expect Q1 services revenue of roughly $128,000,000 $137,000,000 in Q2, $141,000,000 in Q3 and accounting for retail peak seasonality, dollars 131,000,000 in Q4.

Speaker 3

On attrition to cloud, we expect maintenance and license to represent about a 6 point headwind to total revenue growth in 20 $21,000,000 to $123,000,000 or a 15% decline at the midpoint. On a quarterly basis, we expect Q1 to be $32,500,000 Q2, dollars 31,000 Q3, dollars 29,500,000 and Q4, dollars 29,000,000 We expect license revenue to be roughly $6,000,000 or less than 1% of 2024 total revenue and hardware to be between $5,000,000 to $7,000,000 per quarter. For consolidated Subscription, maintenance and services margin, we are targeting about 100 basis points of year over year improvement for 2024 and Q1. We expect our effective tax rate to be 21.5 percent and our diluted share count to be 62,800,000 shares, which assumes no buyback activity. And finally, in summary, 2023 was a great year We expect 2024 to be another year of balanced performance across revenue, growth, profitability and cash flow.

Speaker 3

Thank you and back to Eddie for some closing remarks.

Speaker 2

Thanks Dennis. Well indeed, 2023 was a very successful year for Manhattan. And while we remain appropriately cautious given the volatile macro conditions that are out there, our business fundamentals And momentum very solid, right? Manhattan enters 2024 as the industry leader With world class technology, with record levels of R and D investment that's contributing to our 75% plus win rates in the field, with industry leading levels of customer satisfaction and a strong pipeline with numerous drivers for sustainable long term growth. So in closing, I'd just like to echo Dennis' comments and thank all of the Manhattan team members Around the world for a fantastic 2023, your dedication and commitment to our growing customer base is just unparalleled and clearly one of our key differentiators.

Speaker 2

So Sherry, that concludes our prepared remarks, and we'd be happy to take any questions at this point.

Operator

Okay. Thank you. And our first question comes from Terry Tillman with Truist Securities. Please proceed.

Speaker 4

Hey, good afternoon, Eddie, Dennis and Mike. And it's great to hear all the talk about the 1,000,000,000. Maybe Eddie, a question for you and then I had a couple of follow ups for Dennis. As we just get further along in kind of the monetizing the cloud innovation cycles that you have, I'm curious, are you starting to see customers, Whether it's existing customers or prospects, kind of look at all the things you have from a platform perspective. So supply chain, unified commerce, And starting to think about, hey, we want to go get more aggressive initially with more like a platform deal, where it's a couple of major kind of sets of products as opposed to maybe WNS or OMS or PS.

Speaker 4

I'm just kind of curious about buying behavior. If they're starting to feel like, hey, yes, we want to go bigger, faster, Or does it still feel like no, there's the initial wedge and then over time they add the other products? Kind of curious about the buying behavior around just all the way you deliver with the platform.

Speaker 2

Yes, sure. It's a great question, Terry. And it's really the latter. Primarily, if you think about it because these are Pretty big initiatives, let's just say, WMS and order management or something, any 2 of the major products, They're pretty big initiatives in themselves and usually our customers can only digest one of them at a time. So they're unlikely, let's Take that example to by WMS and OMS knowing that they've got to pay OMS SaaS fees Whilst not beginning an implementation for 6, 9, maybe even 12 months.

Speaker 2

So I think they have a vision To be able to build on the platform and acquire additional products down the road, but just practically speaking, It doesn't make a ton of sense frankly to pay SaaS fees for products that you can't get to the implementation.

Speaker 4

Okay. Understood on that. And I guess maybe Dennis just to follow-up in terms of the cloud booking strength in the quarter. It was great to see in the upside. I'm curious If you could talk a little bit double click and then to that in terms of was there just some greater large deal exposure or benefits in the quarter?

Speaker 4

Or Was there a larger number of just actual kind of units or customers signed up? Just kind of curious if there was anything that was interesting or different versus the prior couple of quarters? And then I had a follow-up.

Speaker 3

I don't know about interesting or different. I thought it was pretty consistent kind of across the board, Terry.

Speaker 2

Yes. I would agree with that, Dennis. I mean, I'll tell you, we had no record size deals in the quarter. We always like those, but we had no record size deals in the quarter. I would say from a geographic perspective, we had very good and very nice sort of balanced contribution From both the Americas, EMEA and APAC, that was enjoyable.

Speaker 4

Yes, yes. No, it sounds enjoyable. I guess just a follow-up question for Dennis or Eddie for Mike is just related to you all did move up the RPO balance a little bit, so that was nice to see Given that we're still in the beginning of the year, one thing I'm curious about is, it does look like 1Q and 4Q were the biggest RPO or the bookings quarters in 2020 I'm not trying to pin you down the quarterly kind of guidance, but is there starting to be a common buying pattern with these cloud deals? Maybe it's the very beginning of the year or very end of the year with budget plus. I'm just trying to get a sense on if you could kind of foretell how like there's a pattern recognition now around booking?

Speaker 4

Thank you. Great job.

Speaker 2

Thank you, Terry. No, not really. So I would say definitely no budget flush at the end of the year, Given that obviously their annual subscription fees, so there's no License buys right at the end of the year or anything like that in terms of budget flush. Q1, I can see maybe. You for saying you're not going to pin us down on this.

Speaker 2

But I think in Q1, we sometimes see a little bit of a stronger buying pattern because there's still time to get systems in before peak if you kind of buy early in Q1. That is definitely an opportunity there for us, but no budget flush at the end of Q4. Thanks. Thank you. Thank you, Terry.

Operator

Our next question is from Brian Peterson with Raymond James. Please proceed.

Speaker 5

Thanks, gentlemen. Congrats on the strong quarter. So Eddie, I'd love to give me an update. I know in the past you've shared some details on the number of booked customers or implemented customers for ActiveWM. Any updated perspective that you can share there?

Speaker 2

Yes, I think I can. We're at somewhere I don't have the exact number frankly off the top of my head, but we're 120 plus of contracted customers. Live customers, again, don't quote me to the exact, we're about 75 live customers And right at 200 just over 200 facilities live around the globe. So and some of those of course of very large facilities, highly automated and so forth. So with, Call it 125, 75, 200.

Speaker 2

I mean this is a rock solid proven solution now. We went through, of course, the peak season of 2022 with live Manhattan Active WM customers. But as you can tell, we had hundreds of facilities that went through peak of 2023. So I think it's sort of a Take it to the bank, bulletproof solution that's proven at the top end of the market now.

Speaker 5

It's great to see that progress. And maybe just a follow-up on services hiring and anything on productivity. Obviously, we got the guide for the margins, but to understand how you guys are thinking about services capacity in 2024? Thanks, guys.

Speaker 2

Yes. We plan on increasing capacity, obviously, to help With customer satisfaction and so forth, as we've talked about before, Hiring came in a little lower in 2023 than we had originally projected at the beginning of the year only because we saw attrition very low, frankly. So we modulated our hiring accordingly. The onboarding and the productivity of the team members that we brought on has been Outstanding frankly, and that's a combination to our kind of services operations team, all of the training programs, center of excellence we have and so forth is very focused on making those individuals productive as soon as we possibly can. But certainly expect several 100 hires this year as well.

Speaker 5

Thank you.

Speaker 2

Pleasure, Brian. Thank you.

Operator

Our next question is from Joe Vruwink with Baird. Please proceed.

Speaker 6

Great. Thanks for taking my questions. I wanted to start with Shopify Alliance, which Sounds pretty interesting. You mentioned there's some existing customer overlap. Can you maybe quantify that or where you see The most synergies in the customer base today.

Speaker 6

And then obviously, when you think about the global Shopify merchant count, that's A massive number. I would imagine that's not all addressable by kind of your enterprise grade technology, but What sort of expansion in audience do you think this could ultimately mean for Manhattan?

Speaker 2

Yes. So let's see, great question. Look, this is driven probably a little more to be perfectly honest. Joe, with Shopify obviously has a fabulous history, a really great technology platform and have been doing exceptionally well I hope they won't be offended by this, but in the SMB space and have gradually been coming up the stack toward the enterprise where we play. So that's why we started to see a lot more cross fertilization of prospects and customers as they come up into kind of real enterprise class versus us going down so much into SMB.

Speaker 2

We've had that Conversation many, many times about our focus on both Tier 1 and Tier 2. But we really do think the combination of our advanced technology and platform and Shopify's advanced Technology and platform can really deliver some substantial and very effective and efficient results for our customer base and so forth. And one of the beauties and I mentioned this in my prepared remarks, Both they and we are very focused on essentially speed to value. They've become they are experts at this for The smaller merchants and so forth and we think together we can bring that fast, efficient, effective enablement up into the enterprise.

Speaker 6

Okay. That's great. And then maybe one for you and Dennis. Just the maintenance revenues, they have been exceeding plan, still growing here in 4Q. Obviously appreciate the 2024 outlook and maybe the pace of attrition picking up.

Speaker 6

I'm wondering if you just have any Updated thoughts on kind of the migration timeline and those existing on prem customers you mentioned at the beginning. What sort of duration might you expect for the majority to ultimately choose one of your cloud offerings?

Speaker 2

Yes. I mean, look, I've been saying it for a pretty long time. I think it's a 6 to 7 year run. Now it would be fair of you to say, but Eddie, you said 6 to 7 years at the beginning of the year and now you're saying 6 to 7 years at the beginning of this year as well. Yes, it's still in that range.

Speaker 2

In that range Joe would be my estimate to get through the bulk of transitions. My guess is they'll still be 5%, 10%. At the end of that period of time, there'll be sort of laggards and so forth, but It's a 6 or 7 year journey in my view.

Speaker 6

Okay. Very good. I'll leave it there. Thank you.

Speaker 2

I'm sorry, the one thing I'll mention, just a reminder there, Joe. We essentially offer no incentives for either our customers or for our sales guys and the sales team to promote. Our strategy is when the time is right, we're there for you. So there's no incentive and frankly there's no Gun to the head. Thank you.

Speaker 2

I was going to try and look for a better nicer expression than that. But there's no threats of lack of support or anything else.

Speaker 6

Yes. Okay. Understood. Thank you.

Speaker 2

Thank you, Joe.

Operator

Our next question is from Mark Schappel with Loop Capital Markets. Please proceed.

Speaker 4

Thank you for taking my question and nice job on the quarter guys. Eddie, With respect to your point of sale business, I was wondering if you could just highlight or point out some of the biggest opportunities you face and also some of the challenges you're facing right now. So for instance, are you facing challenge wise, are you facing more so on the marketing side or maybe on the product side?

Speaker 2

Yes. Great, great, great question, Mark. So let's start with the challenges, get those out of the way. I just think we still got a little bit of an awareness Challenge at this. We are beating the drums and telling neighbors, friends and aunts and uncles As best as we possibly can about this world class solution that we have, number 1.

Speaker 2

Now At the National Retail Federation show conference, I should say, a couple of weeks ago and I mentioned in my prepared comments, we launched the next generation. So we still have got the most revolutionary, 5 native point of sale in the industry, But we updated it yet again next generation and launched it at NRF and very, very well Very well received. So I think awareness is still kind of a challenge. Now You and others have heard me talk about the goal by the end of the year was to have about 10 Live customers, well, we've got that. We've got about 10 because I think that sort of gets you over the hump in terms of, okay, this is not a little early cycle product anymore.

Speaker 2

And the fact of the matter is we went through the holiday peak season here with 10 live customers, 30,000 store associates using our system, every penny of revenue. If you think about The customers that run both Manhattan Active Omni and point of sale, right, all of their wholesale business, if they have it, The direct to consumer business is all running through Manhattan Active Omni. All of their foot traffic revenue is running through point of sale. So every single penny of their revenue is running through the Manhattan solutions. 30,000 associates and Right around 1500 more now, but right around 1500 stores live on point of sale through the peak season and transaction volumes that are substantial, let's just call it that and certainly exceed any other cloud native point of sale system added.

Speaker 2

So feel really good about kind of where we are with the product. We've noted so long answer here, but we noted some of the wins we've had against best of breed point of sale companies Head to head with no other solutions from Manhattan and no previous experience with Manhattan. So clearly, we can go head to head. And now, I mean, if there was ever any question about scalability and so forth, we Sailed through Q4 with again 30,000, 1500 stores, very high transaction volume. So feel like we're there.

Speaker 2

We just got to beat the drum,

Speaker 4

That's helpful. Thanks. And then shifting gears a little bit here. With respect to your sales motion, could you just Give us a sense of what percentage of bookings were cross sell, up sell during the quarter or actually during the year? I

Speaker 2

think, let's see, we're right around give me a percentage here and there, but we were just under 30% for the quarter and I think for the year we were right in the 26%, 27%.

Speaker 4

Perfect. Great. Thank you. That's all for me.

Speaker 2

Okay. Thank you, Mark.

Operator

Our next question is from Matt Pfau with William Blair. Please proceed.

Speaker 7

Yes. Hey, great. Thanks. Nice quarter guys. I wanted to ask on the Shopify partnership.

Speaker 7

Is that just a Product integration partnership or is there a go to market motion there as well with them?

Speaker 2

Yes, both. I mean, as is so we obviously we've announced the partnership as is customary with us and I think Shopify too. We're going to make sure that we've got all of the technical aspects of the product integration, end to end End to end integration and process flows completely ironed out before we do anything more, but Now it's at the moment it is we're working on the certified integration. We've got joint clients that are in active implementation. We expect to be live in Q2.

Speaker 7

Got it. Great. And then one as you ask on the margins, Understand that. I think the margin slight margin decline, operating margin decline you're guiding for in 2024 is Effectively all driven by revenue mix with the runoff of maintenance and license. As we think like longer term about the cloud gross margin, which You don't break out specifically, but is that still ramping?

Speaker 7

Is there still upside to that as you scale? How do we think about that?

Speaker 2

Yes, there is. I mean, we're effectively continuing to increase operating margins. If you take out the drag, and we still think there's scale opportunity in cloud operations and up and down the P and L, frankly.

Speaker 7

Okay, great. Thanks, guys.

Speaker 2

Thank you, Matt.

Operator

And our final question comes from Blair Abernathy with Rosemont Securities. Please proceed.

Speaker 8

Thanks very much. Nice quarter, guys.

Speaker 4

Hi, Brian.

Speaker 8

Dennis, just wondering on the professional services side of the business, If you look at your overall hiring, your total employee headcount was up around 10% in the year, But your professional services revenues were up around 24%. Can you just help reconcile sort of capacity in that professional services business and pricing in the market, how that performed in 'twenty three and sort of what you're looking at for 'twenty four?

Speaker 2

Well, Eddie here. Just a couple of points. I mean, obviously, we have seen a little bit, not a ton, but we have passed on a little bit of the wage inflation and so forth to our customers. So you've seen hourly rates tick up a little bit, but most of the leverage comes from the efficiency of the organization, but for sure, particularly as we continue to focus on The center of excellence is that I talked about, the training and the onboarding of the new resources. Now the other thing that I mentioned, We had forecasted a little bit higher headcount acquisition in 2023 than we needed Because attrition was lower than we expected, that helps efficiency for sure.

Speaker 8

Okay, great. And is there with the Shopify relationship, will that also drive services, I guess it would if larger customers adopt

Speaker 4

your solution?

Speaker 2

Yes, sure, Sure. Yes. No doubt it will. Now part of our objective there, just to be clear, is to take out any of the Base integration work that's needed to be done will between us will carry that cost. So the idea is to Speed up implementations, reduce the total cost of ownership and so forth.

Speaker 2

But nonetheless, there's still professional services fees associated with implementing that joint solution.

Speaker 8

Okay, great. Great. And then my next question was just really around Just maybe a little more color on the guidance, the revenue guidance for fiscal 'twenty four of sort of 10% on the top line, You did 21% in 'twenty three, you did 15% in 'twenty two. And is there a I just want to get your sense of sort of how you came to your 2024 revenue view?

Speaker 2

Well, we're our Revenue growth guidance coming into 2024 is roughly the same as it was coming into 2023, slightly higher actually.

Speaker 8

Okay. Is the environment Feeling about the same as 23 at the end of last year?

Speaker 2

Yes. In the same ballpark, obviously, there is a few things going on around the world That happening now that weren't happening at the beginning of 2023, 2024 is an election year etcetera, etcetera. So the things that you know about, But aside from those things, everything feels about the same.

Speaker 8

Okay, great. Thanks very much.

Speaker 2

Our pleasure, Blair. Thank you.

Operator

We have reached the end of our question and answer session. I would like to

Speaker 2

today, again, we're pleased with 2023, looking forward to a fabulous 2024, and we'll look forward to updating you on the

Operator

at this time and thank you for your participation.

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Earnings Conference Call
Manhattan Associates Q4 2023
00:00 / 00:00
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