MANHATTAN ASSOCIATES INC Q4 FY2024 earnings call

2024 was a highly successful year for Manhattan Associates, as it surpassed the $1 billion total revenue milestone and achieved new records in RPO, operating profit, free cash flow, and earnings per share. The fourth quarter was a record quarter with revenue rising 7% to $256 million, cloud revenue jumping 26%, and adjusted earnings per diluted share increasing 14% to $1.17. RPO grew 25% to $1.8 billion. Customer satisfaction levels remained high, with win rates around 70%. Vertical sectors such as retail, manufacturing, and wholesale drove over 80% of bookings. In 2024, the company invested $138 million in research and development. It launched Manhattan Active Supply Chain Planning, introduced Iris (the next iteration of Point of Sale), and made advancements across supply chain execution. The company signed its first Manhattan Active Supply Chain Planning customer in the fourth quarter.

In the fourth quarter of 2024, total revenue was $256 million, up 7% as reported. Cloud revenue experienced 26% growth, reaching $90 million. For the full year 2024, total revenue amounted to $1.04 billion, a 12% increase. Excluding license and maintenance revenue, which mitigates the revenue compression from the cloud transition, Q4 revenue growth was 11% and full-year growth was 16%. Full-year cloud revenue totaled $337 million, marking a 32% growth. In Q4, remaining performance obligation (RPO) surged 25% to $1.8 billion. Service revenue in Q4 was $119 million, slightly higher than the prior year but $2 million below previous expectations due to more pronounced budgetary constraints from several customers.

For 2025, the RPO target is set at $2.11 billion to $2.15 billion, with a midpoint of $2.13 billion, representing a 20% growth. Total revenue is expected to range from $1.06 billion to $1.07 billion. Cloud revenue is forecasted to be between $405 million and $410 million. Service revenue is anticipated to be in the range of $494 million to $500 million. The adjusted operating margin is expected to fall within 33% to 33.5%. For the first quarter of 2025, total revenue is projected to be $256 million to $258 million, with subsequent quarters having targeted revenues of approximately $266.5 million in Q2, $273 million in Q3, and $269 million in Q4.

The turbulent global macro environment poses a risk of impacting performance. There are near-term headwinds for the services business, as about 10% of customers reduced their planned services work. Foreign exchange volatility had an impact on RPO growth and the 2025 guidance.

Q: Terry Tillman inquired about seasonality, Q1 strength, and the distinction between cyclicality and structural dynamics in services.

A: Eddie Capel responded that there is no real seasonality other than a possible mid-year slowdown due to vacations, etc., Q4 was a record and Q1 has started strongly; services face budget pressure but customers still implement the software.

Q: Joe Vruwink asked about the RPO mix and progress on Point of Sale.

A: Eddie Capel stated that services attach rates are similar across the portfolio, there are over 150 live customers, over 600 facilities globally, and over 80% of customers are still on-premise.

Q: Brian Peterson asked about progress on the cloud transition and optimism regarding Point of Sale.

A: Eddie Capel mentioned there are over 150 live customers, over 600 facilities, and there was strong interest in Point of Sale at the NRF conference.

Q: Quinton Gabrielli asked about deal pushouts and the balance in services.

A: Eddie Capel replied that not all deals have closed, services remain important but software is growing faster.

Q: Mark Schappel asked about the sentiment from CIOs regarding WMS/TMS upgrades and reference customers for supply chain planning.

A: Eddie Capel said CIO sentiment is more enthusiastic than 12 months prior, and the first customer for supply chain planning was signed 65 days after its launch.

Q: William Jellison asked about services efficiency and hiring.

A: Eddie Capel said efficiency continues to improve, attrition is low, and hiring is being monitored due to a downtick in demand.

Q: Dylan Becker asked about services project pushouts and data readiness for supply chain planning.

A: Eddie Capel stated that customers are reducing rollouts due to budget constraints, data is available but change management is needed for real-time planning.

Q: George Kurosawa asked about tariffs and the margin guide.

A: Eddie Capel said no major tariffs are expected, and the company will invest more in R&D and sales/marketing in 2025.