MANHATTAN ASSOCIATES INC Q3 FY2026 earnings call

• Record Bookings and Momentum: The company achieved its fourth consecutive quarter of record bookings, with Year-to-Date deal volume already surpassing the total deal volume for all of fiscal year 2025.
• Cloud Revenue Milestone: Cloud revenue exceeded services revenue in Q3, driven by strong execution, upsells, and AI adoption. RPO increased 25% to $2.6 billion.
• Strategic Go-to-Market Investments: Growth is fueled by specialized sales teams (product-focused specialists, dedicated conversion/renewal teams) and a maturing partner ecosystem. Partner-sourced deals are up more than 4x year-over-year.
• AI Integration and Adoption: Manhattan’s 'Active AI' agents are embedded directly into the platform, eliminating the need for external data lakes. The company reports a 100% conversion success rate from AI pilots to subscriptions, with customers skipping pilot phases for direct subscription.
• Product Innovation ('Additions'): Launched 'Editions' (Essentials, Enterprise, Enterprise Premier) to broaden the addressable market. This allows smaller/medium customers to enter via lower-complexity paths and upgrade later, accelerating deal cycles.
• Operational Efficiency via AI: Customer use cases highlight significant labor savings: a 3PL reduced WAVE planning time by 50% and clerical booking time by 80%; a retailer cut invoice resolution time by over 70%; a manufacturer uses AI to prevent lost sales and freight overspend.
• Vertical Diversity: Strong deal flow across retail, grocery, life sciences, industrial, and logistics sectors, including conversions from on-premise solutions and expansions into new product lines like Active Transportation and Active AI.

Total revenue reached $306 million, representing an 11% year-over-year increase. Cloud revenue grew 28% to $134 million, marking a significant milestone where cloud revenue surpassed services revenue for the first time. Services revenue increased by 1% to $134 million. Excluding license and maintenance revenue (which compresses due to the cloud transition), total revenue growth was 12%. Cloud revenue now constitutes approximately 44% of total revenue ($134M / $306M), while services revenue also accounts for roughly 44%, with the remainder derived from maintenance and hardware.

• FY 2026 RPO Outlook: Raised full-year RPO growth expectation to 21% year-over-year, up from the previous range of 18%-20%.
• FY 2026 Total Revenue: Raised guidance to $1.176 billion - $1.178 billion (midpoint $1.177 billion), implying ~12% growth excluding license/maintenance attrition.
• FY 2026 Operating Margin: Increased midpoint to 35.3%, up from 35.1%.
• FY 2026 EPS: Raised adjusted EPS guidance to $5.54 - $5.56; GAAP EPS midpoint raised to $3.63.
• Q4 2026 Specifics: Targeted total revenue of ~$291 million, with cloud revenue at $136 million, services at $122 million, maintenance at $26 million, and hardware at $6 million. Adjusted operating margin targeted at 36.1%; adjusted EPS targeted at $1.38.
• FY 2027 Preliminary View: Management believes consensus estimates are appropriate, anticipating ~20% cloud revenue growth, low single-digit services growth, and continued operating margin expansion despite volatile macro conditions.

• Macroeconomic Volatility: Turbulent global macro environment could impact performance and cause actual results to differ materially from projections.
• Non-Linear Bookings: Large deal sizes can cause variability in quarterly bookings, making linear progression difficult to predict.
• FX Headwinds: Foreign exchange fluctuations created an $8 million headwind to year-over-year RPO growth and less than a $1 million headwind to sequential RPO growth.
• Implementation Friction: While improving, services implementation times and customer satisfaction remain areas of focus, though AI is helping accelerate deployments and reduce costs.

Q: Terry Tillman asked about the materiality of AI contribution to cloud revenue and whether Q4 bookings would reflect seasonal strength or budget flush.

A: CFO Linda noted that while AI contributed to results, they do not break out revenue by product quarterly yet. CEO Eric Clark stated they have a strong Q4 pipeline and updated RPO guidance because exceeding the prior range was evident, rather than relying on typical seasonal patterns.

Q: George Kurosawa inquired about the drivers behind better-than-expected renewals and details on the new 'Essentials Edition' customer.

A: Eric attributed renewal growth to cross-sells, upsells, pricing, and a dedicated renewals team structuring multi-product conversations. He explained the Essentials Edition targets customers previously priced out, allowing them to join the Active Platform early and upgrade as they grow, citing a quick close for a customer unaware they could afford Manhattan.

Q: Brian Peterson asked how the company offset traditional Q3 seasonality and what to expect for Next 24 Month RPO percentage.

A: Eric credited increased deal volume across all regions and a disciplined sales team finding new gears. Linda indicated Next 24 Month RPO should stay around 40%, driven by shorter contract durations (~5 years) and higher deal volume, while Eric added that winning more mid-sized deals ramps ARR faster than fewer large deals.

Q: Joe Vruwink asked if migration pipelines are changing seasonality and if AI helps in-period upsell speeds.

A: Eric clarified that fixed-fee conversions and new Editions unlock migration opportunities but didn't solely offset Q3 seasonality. He confirmed that AI accelerates deployment, leading to faster ROI realization and quicker ramping into higher subscription tiers, driving in-period upside.

Q: Beatrice (for Chris Quintero) asked about the sustainability of cloud outperformance and when 'Additions' momentum hits revenue vs. RPO.

A: Linda explained half the Q3 beat came from upsells, which are conservative in forecasts. Eric stated 'Additions' will have material impact in the second half of the year, noting that while it boosts RPO immediately, revenue recognition follows the deployment cycle.