Manhattan Associates, Inc. Q3 FY2025 earnings call

Key Points

• Q3 results were better than expected with 21% cloud revenue growth driving top line outperformance and earnings leverage. Services revenue also outperformed expectations despite a 3% year-over-year decline.
• RPO increased 23% year-over-year to $2.1 billion. Win rates remained strong at 70%, with strength in selling to existing customers.
• Launched a dedicated renewal team and a conversion program to proactively convert on-prem customers to Manhattan Active.
• Announced the addition of Greg Betz as Chief Operating Officer, bringing experience in operational excellence and strategic execution.
• Agentic AI is being invested in across Manhattan Active solutions, with early access programs for agents in warehouse, transportation, store, and contact center applications.
• Enterprise Promise & Fulfill (EPF) has customers live and signed new deals, serving as a bridge between supply chain planning and execution.
• Supply chain planning is progressing with a U.S.-based retailer as the first customer live on the platform, and hiring of planning talent is ongoing.

Total revenue for the quarter was $276 million, up 3% excluding license and maintenance revenue; total revenue was up 7% when including license and maintenance. Cloud revenue increased 21% to $105 million, contributing approximately 38% of total revenue. Services revenue declined 3% to $133 million, contributing approximately 48% of total revenue. RPO ended Q3 at $2.1 billion, up 23% year-over-year and 3% sequentially.

2025 Guidance

• Expect to achieve towards the high end of the full year 2025 RPO outlook.
• Total revenue expected $1.03 billion to $1.077 billion, with a midpoint of $1.075 billion.
• Adjusted operating margin midpoint increased to 35.6% from prior 35%.
• Adjusted earnings per share midpoint increased to $4.96, GAAP EPS midpoint to $3.44.

2026 Guidance

• Expect 20% cloud revenue growth in 2026.
• Services expected to grow in 2026, with maintenance attrition anticipated to accelerate next year.
• Adjusted operating margin expected to expand 50 to 75 basis points while continuing to invest in the business.

Risks

• Turbulent global macro environment could impact performance and cause actual results to differ materially from projections.
• Lumpiness of large deals and Q3 seasonality pressured net new logos.
• Potential impact of U.S. tax law changes on cash taxes paid, though it benefited Q3 and Q4 operating cash flow.

Q: Terrell Tillman asked about RPO levels and optimism for 2026, and conversion strategies for on-prem customers to cloud.

A: Eric Clark responded that Q3 RPO had double-digit growth when normalizing for FX, and optimism comes from visibility into renewal cycles and pipeline. On conversions, there's early success with a consultative approach, targeting cohorts of similar customers for fixed fee, fixed timeline conversions.

Q: Brian Peterson asked about Q4 start and Greg Betz's role.

A: Eric Clark said Q4 is off to a solid start similar to last year, and Greg Betz will help with conversions, renewals, and maturing the partner ecosystem.

Q: Joseph Vruwink asked about risk factors in fixed fee conversion strategy and 2026 guidance.

A: Eric Clark stated the strategy is based on repeatability and similarity of cohorts, with confidence in on-time and on-budget implementations, and 2026 guidance is in the right ballpark with clear guidance to come.

Q: Christopher Quintero asked about services momentum in 2026 and customer examples of conversion and cross-sell.

A: Eric Clark said services pipeline and backlog are strengthening, and the food and beverage customer example shows the unification story is resonating.

Q: Dylan Becker asked about scaling SI ecosystem and AI receptivity.

A: Eric Clark mentioned having conversations with SI partners, building clarity and trust in the partner program, and AI is resonating well with customers, with early access feedback positive.

Q: Jeffrey Parker Lane asked about investments in sales and marketing.

A: Eric Clark said there's an incremental step-up in investment, leveraging Manhattan veterans and external expertise for renewals and conversions.

Q: George Kurosawa asked about services upside and hiring productivity.

A: Eric Clark said services team is executing well with $2M shifted from Q4 to Q3, and hiring of sales talent is snowballing with strong candidate pipeline.

Q: Guy Hardwick asked about Agentic AI's impact on R&D and revenues.

A: Eric Clark said internal leverage from Agentic AI is seen across departments, with no dilution expected to margins, and external revenue impact will be discussed in future calls.

Q: Mark Schappel asked about supply chain planning and point-of-sale.

A: Eric Clark said supply chain planning is ahead of schedule with good pipeline, and point-of-sale transactions were up over 80% year-over-year.

Q: Lachlan Brown asked about Agentic AI feedback and margin impact.

A: Eric Clark said early access feedback is positive about quick deployment, and intention is to preserve margins with pricing to be finalized in future calls.