Good afternoon. My name is Jesse, and I'll be your conference facilitator [Technical Difficulty]. [Operator Instructions]. As a reminder, ladies and gentlemen, this call is being recorded today, April 21, 2020. I'd now like to introduce Eddie Capel, CEO; Dennis Story, CFO; and Matt Humphries, Senior Director of Investor Relations. Mr. Humphries, you may begin your conference.

Thank you, Jessie, and good afternoon, everyone. Welcome to Manhattan Associates’ First Quarter 2020 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 future events or the future financial performance of Manhattan Associates. You are cautioned that these forward-looking statements involve risks and uncertainties and 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 files with the SEC for important factors that could cause actual results to differ materially from those in our projections, particularly our annual report on Form 10-K for fiscal year 2019 and the risk factor discussion in that report, as well as any risk factor updates we provide in our subsequent Form 10-Q. We note in particular that uncertainty regarding the impact of COVID-19 pandemic on our performance could 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 in an effort to provide additional information to investors. All non-GAAP measures have been reconciled to the related GAAP measures in accordance with SEC rules. You'll find reconciliation schedules in the Form 8-K we submitted to the SEC earlier today and on our Web site at manh.com. I’d like to turn the call now over to Eddie.

All right. Thank you, Matt. Well, good afternoon everyone. Before I begin my comments related to Manhattan Associates, I want to take this opportunity to recognize and thank some of the heroes of our COVID-19 world. The healthcare workers, first responders are appropriately receiving great commendations, respect and thanks from every corner of the world, and we at Manhattan Associates join in thanking them for their amazing dedication and the personal sacrifices that they're making to keep us healthy and also care for those that are unwell. So thank you. But I can tell you from firsthand experience, both personally and professionally, there are hundreds of thousands, maybe millions of supply chain heroes working every day all around the globe to maintain the flow of life sustaining products, food, beverages, pharmaceuticals and yes toilet paper, into the communities that they serve and we live in. These heroes are putting themselves at risk every single day to keep critical supply chains moving. So thank you. Thank you to the truck drivers, the warehouse operators, the retail associates and all of supply chain professionals around the world. We're humbled and proud to be working alongside you. So thanks again for everything that you do. So back to Manhattan Associates and thank you again for joining us as we review our first quarter 2020 results, and cover in some detail the actions that we've taken and the innovative approaches that we've employed to adapt to today's circumstances. Additionally, we're going to be providing updates to our financial guidance, bearing in mind the impact that COVID-19 is having on our business globally. Manhattan reported another record revenue quarter despite business activities slowing in the last few weeks of March. Specifically, we reported total revenue of $154 million that's up 4% year-over-year and adjusted earnings…

Thanks Eddie. First quarter total revenue was $153.9 million, up 4% organically over prior year, driven by our cloud and license revenue performance. Our total revenue estimate for the second quarter is a range of $122.5 million to $132.5 million. Adjusted earnings per share for Q1 was $0.40. GAAP earnings per share was $0.35 with stock-based compensation accounting for the difference between adjusted and GAAP EPS. Our adjusted earnings per share estimate for the second quarter is a range of $0.33 to $0.37. License revenue for Q1 was $9.7 million, above our expectations but down year-over-year as anticipated. We signed three $1 million plus deals in the quarter, with roughly one-third of all license deals coming from new customers. For the second quarter, we are expecting approximately $4 million in license revenue as license revenue mix continues to transition to cloud subscriptions. For the full year, we estimate licensed revenue will be between $23 million to $25 million. Cloud revenue was a record $17.3 million in the quarter, up 120% year-over-year and 10% sequentially, driven by continued customer demand for our cloud solutions across all of the verticals we serve. Of note, we closed our largest Manhattan Active Omni order volume deal in the quarter. Additionally, we continue to see strong demand for WMS in the cloud solutions with over 70% of our deals in the quarter coming from WMS, and nearly 30% of our bookings coming from either net new customers or net new product sales into our existing install base. For the second quarter, we are estimating our cloud revenue to be $18 million to $18.5 million and for the full year, we estimate our cloud revenue to be in the range of $74 million to $78 million. We estimate our cloud and license software mix to be…

Okay. Thanks, Dennis. Now to close out today's call, I want to step back just for a moment and let everybody know that despite the global uncertainty that we're all experiencing, we're acutely focused on the things that we can control. We're taking innovative and proactive approaches to customer engagements, while we're continuing to invest significantly in innovation so that we can expand our total addressable market and drive long term sustainable growth. Our sales and services team remain engaged in all kinds of stages of business and project development, and as we look forward to returning to the normal course of business in the future. These actions that we've taken will set us up for continued success as we move through this choppy period. And as we exit, we would expect to see solid demand for our mission critical supply chain and omnichannel commerce products all around the globe. And we're ensuring that we're positioned to capitalize on these opportunities. While the world moves rapidly around us, I can tell you we're not sitting still. We continue to push possible as we move our vision of unified commerce forward. So thank you. Thank you to all of our employees, our customers, our partners and our shareholders globally. We realize that this is an extraordinarily difficult time for many and we want to continue to emphasize that we're doing our part to rise to the occasion and meet these challenges head on. Jesse, we're now ready to take any questions.

Thank you [Operator Instructions]. The first question comes from Terry Tillman from SunTrust. Your line is open.

So I'll start off with my preamble, there’s a lot of insight and color. So, I appreciate all that. It's great to see how you guys are helping to drive through these critical supply chains, and I will miss seeing you all day at the conference, okay. So my first question just relates to conservativism. As we think about services projects kind of pushing out, what happened to in terms of timing of you need to get those projects going before we get into this critical window of holiday season, and we’ve already seen some holiday season activity from this transaction volume. But are you assuming that actually the window is still narrow that there's a fair amount of that retail oriented kind of holiday stuff you've got to get up and running? Actually just moves into next year, because we just won't have enough time to install, that’s the first question.

Yes, it's a mix of both Terry. So we're still moving a lot of projects forward. I talked about a hundred go lives in Q1, which is a random by that typical run rate. We've got about the same number of go lives planned for Q2. They’ve moved to lot of remote support and so forth. So, there's a lot of go life still moving forward, again, a lot of the strategic projects still moving forward. There are some, the non-essentials is the popular term, the non-essentials and non-critical that I think are likely to push post peak. But we're still planning and our customers are still telling us that there is criticality around getting our systems live before the retail peaks.

And it’s interesting, because it seem like back in like global financial crisis in '09, you'll have like $4 million license quarter you we had a couple of them on the road and I know you don’t want everyone remember that but you did. In the 2Q you’re all talking about over $20 million worth of total software revenue, including subscription. So I just wanted to point that out. But what's interesting is you're talking about 20% increase in pipeline. You also talked about the business feels a lot different than in past cycles. I'm just curious on that pipeline build. What is driving that other than like the digital kind of transformation stuff, the omnichannel or just the diverse customer activity than maybe in the last crisis, which was in '08, '09? Thank you.

Yes, I think it's a mixture of all of those things. Obviously, we feel like the innovation that we're driving into the field, there's a lot of interest in WMS and the cloud. Manhattan Active Omni is a large portion of that, our continued kind of expansion and vertical expansion. As I mentioned, the challenge here I think is one of timing when we see those things come to fruition. But from overall outlook and a strategic perspective, obviously we're encouraged by pipeline build such as that.

And maybe just last question for Dennis. I think from a cash flow perspective, I don't know if you said anything for the full year. But is there any kind of guidepost to think about cash flow maybe in relationship to net income or operating profit? Or just any kind of puts and takes to think about as we look at our cash flows? Thank you.

Nothing different than we've put out there before, Terry, probably a ratio of about 1.1 to 1.2 of net income.

Matt Pfau with William Blair, your line is open.

First, Eddie wanted to extrapolate a little bit more on those comments about the current situation that you're seeing being different than what you've seen during past slowdowns when demand dissipated. And maybe just expand on what factors you believe are driving this situation to be different than past slowdowns? And then, is it possible we're just in a situation where it's too early to tell if demand will drop off?

Well, I think there is uncertainty. There's no question about that and the depth and the size of the crystal ball is certainly in everybody's hands, yours as well as mine. I think the commentary just from the conversations we're having and the feel that we have is that we've got a shorter runway to recovery or attempt to become back to normal course of business. So, investments that are being made or plans are being made, we can we can still see the finish line for those, both us and our customers. We can see the finish line of when those things get finished, when they get -- and when they get executed versus in prior situations whether it be 2001 or '08, '09, I don't think the finish line could be seen there. The other thing that I think is a little different for us as we've done a lot of groundwork building demand for our cloud solutions and that is continuing to pay off. The other factor I've kind of mentioned is about 50% of our pipeline is coming from net new logos. So, that is, I think representative of the type of innovation that we're bringing to the marketplace and the type of innovation the new operating models are going to need. And then finally compared with certainly 2001, but even 2008 and 2009, we have both a broader product footprint and a greater global reach. So that -- those are the things -- like major things that I think are different this time around.

And then just longer term coming out of this, I mean, it seems like your product portfolio is pretty well aligned to the direction that the market needs to go or adapt to at least. So, any changes in terms of how you guys are thinking about future investment priorities within your product portfolio or what areas you expect to be robust coming out of this?

Yes, that's a great question Matt. Look, I think I mentioned in my comments, I do think that a little bit selfishly, we've wondered for a couple of decades maybe why supply chain wasn't as a popular of the conversation in the C-suite in the boardroom, as we always thought it should have been. But I think it is front and center of all conversations today. So, the strategic nature of supply chain when we come out of this, I think will be front and center for sure. I think it is recognized that supply chain and supply chain systems are absolutely mission critical. We're right at the middle of that, I think, aside from sort of getting back to businesses, as usual, number one; driving innovation into the marketplace. I think we're going to see a good deal more focus on supply chain resilience that is needed to be put in and additional supply chain contingencies that people add customers and the market is going to want to build, whether that be geographically or locally. Now, as we think about sort of the the shift, clearly, we're seeing during this time a shift, even greater shift toward kind of direct to consumer. So we think our products are on point whether it be WMS, TMS, Manhattan Active Omni, and a demand forecasting and inventory optimization solutions. In terms of product strategy, not much change. There are some sort of adjustments that we will be making absolutely in the near term, even super near term adjustments that we're making. So the things like particularly curbside, right, curbside pickup has become very, very helpful, very popular. You lose some of the -- or a lot of the opportunity to cross sell and upsell, if you're a retailer when you're doing curbside. So we're going to introduce in a matter of days some interesting and innovative solutions that will at least give our retail customers the opportunity to execute on some cross sell, upsell even in a curbside environment. So we will bring some new creativity to bear. Obviously, we can do that because we've got a, sort of version-less cloud native solutions. But the overall product strategy remains intact.

Next question comes from Brian Peterson with Raymond James.Your line is open.

So, Dennis, I think recurring gross margins, you had that up a bit for the full year. Given what we're seeing on the services side, I am a little surprised that margins wouldn't come down a bit as well. I know there's some other moving parts here. But any color that you can add on was helping the margins? And I'm also curious the shift towards virtual services deployments, how does that impact the overall margin structure?

Yes, so I'll let Eddie answer the shift to virtual. But on the overall margin profile, the reason it's going up, Brian is, one; denominator, significant haircut on revenue and the aggressive expense management actions that we took. So we've taken about $45 million over the last three quarters of expense across the organization out of the business and obviously services is a large component of that.

Yes. From a virtual perspective, I mean, I think, I got to say the teams are executing very well. The customer organizations are adapting incredibly well. It was all kinds of creative solutions that are being employed. And honestly, there is a very little fall off. There is some, but there's very little fall off in productivity and efficiency.

And maybe if I think I heard this right that you were able to kind of pivot with one customer in terms of their e-commerce functionality in six days. As we think about customers really adjusting in real time to the supply chain needs, are you able to really move that services capacity around and kind of help them within days and months as they kind of struggle with this dynamic?

Yes, we are. We are, yes. There's actually a couple. That six day week situation, there are two of them. One of them was with a distribution center that was moved from being a retail replenishment. So, ship to store DC to direct to consumer facility on a space of weeks. And we had one other customer that was sort of interesting names -- I'll leave the name off the charter here, but the distribution center was closed by the local government. They only have one distribution center and it was closed. They said, "My goodness, what we do?" We said, "Why don't you start shipping from store? You got inventory there, the stores are closed, you can put -- they were able to put staff in the store. So, they pivoted from using WMS to distribute products through actually using app Manhattan Active Omni solution to ship product out of the store all in a space of six days. Pretty amazing.

Your next question comes from Yun Kim from Rosenblatt. Your line is open.

Hi, Eddie and Dennis. Eddie I have a quick question in reference to your comment about 20% improvement in your sales pipeline. Just curious how much of that pipeline improvement did you see, let's say after the first week of March?

It was pretty consistent across the quarter Yun actually. I know it might be surprising, but I think that -- I can't fully explain why, but it was pretty balanced across the quarter. I suppose one hypothesis could be some businesses are sort of idling. They're taking the opportunity to focus on strategic projects that could be one reason. But it was spread pretty equally across the quarter.

And then also, can you just talk about some of the trends that you are seeing out there in the midst of COVID-19? I know you mentioned it in your prepared remarks. But isn't there a greater motivation for customers to move to the cloud sooner than later? And I know you said that the cloud deployments tend to be more gradual. But are you seeing customers or hope maybe seeing customers perhaps thinking about heading up faster deployment cycle once the environment -- the spending environment returns to normal?

I would say that, that is true independent of anything else that's going on with COVID. In the last shall we call it 75 days or so, I wouldn't say that we've seen any types of shifts or trends of that type. There hasn't been time, frankly, and businesses have been focused on either dealing with the incredibly high volumes and velocities they've got coming at them or creative solutions to be able to keep their businesses moving forward, such as the ones that we've talked about a little bit or adapting their strategies. And we haven't really got to any particular trends around infrastructure deployment. But I would tell you, that has been the trend, again, regardless particularly for us over the last 12 to 24 months.

And then for Dennis, how should we think about the margin for the services business? And then also is that -- is the services business -- could that potentially see an immediate uplift once the current travel restrictions get lifted?

I don't -- one, we're not splitting out the services margin profile, Yun. So could we get an uplift if demand just stamps back? Sure, probably from a revenue perspective for sure. I would say though Yun from I mean that we're all seeing this, this is not unique to us. It appears that businesses going to open and the economy is going to open gradually. It's going to be regional, if not state specific. So, I'm not sure that we're going to see a real fast snapback and any size sort of immediacy. I think we'll see it be gradual. Now, as I said though we're being pretty effective operating in a virtual environment, which also in a way would sort of dull that snapback a lot -- a bit because we're already operating reasonably effectively.

The next question comes from Mark Schappel with Benchmark. Your line is open.

Eddie starting with you. In your prepared remarks, you mentioned that you're seeing, I think you call a tail shift becoming more important to some of your customers. And I was wondering if you just go deeper with respect to your comments maybe as an example or two?

Yes, sure. I mean, simply put Mark it's a move away from any brick-and-mortar selling to direct-to-consumer. Now that's with the exception of course of the central businesses, the home improvement and the grocery and the pharmacy folks that are open and seeing surging volumes. But just as about everybody else, you have to through a necessity shift to direct-to-consumer. The other factor there is that some of our customers with seasonal products are moving to some pretty aggressive sales strategies, online sales strategies, because they don't want to get stuck with seasonal inventory that they can't move. And that's I think deriving some pretty high volumes of direct-to-consumer business. So, that really is type of a shift that I'm referring to.

And then one additional question here. As you're aware, supply chain solutions require very significant commitments in terms of higher amount of customers. It often takes face-to-face meeting to push a deal over the goal line. I was just wondering if you could just give us an idea, a little bit more details on how the company is managing through the current disruptions, without conducting say on-site pilots or holding face-to-face meetings?

Yes, well, I mean, look, sufficed to say there are no face-to-face sales meetings, product demonstrations and so forth. They're all being conducted virtually. I mean, one of the things that we've been very pleased with is, frankly, our tech infrastructure for our 3,500 people all around the world is not just held up, has performed flawlessly, and that's for all of our 900 people or so in research and development as well as professional services and customer support organization. We've actually put in -- not a lot of track here, but we've put in a special customer support program for those that are shipping important and essential commodities into our communities to make sure that we're giving them 24x7 support for all these very high volumes they're seeing of essential products. But then as we shift to sales and marketing, all those meetings are happening virtually. I think the world is getting more comfortable, frankly, with virtual meetings, with video meetings and Webex Teams, Zoom and everything else. And so far the market has been pretty receptive to those types of meetings. Now, there's no question that we would in more ways than one be prefer to be back and front of our customers and prospects. But in the meantime, we've got some great technology that really gets us pretty close.

[Operator Instructions]. Your next question ...

Hi, Joe.

Great. Hello, everyone. I wanted to go back to this idea of Manhattan as a net beneficiary coming out of this. And the thing that came to mind, the 20% sequential increase in the pipeline, is that a result that's actually better than seasonally it might be the case for this point in the year? Are you already starting to see kind of a lead gen uplift, if you will, given the current environment?

No, not really Joe, to be perfectly honest with you. Because the first couple of months of the year, we were honestly seeing really no impact from the COVID situation, let's call it the last months, even less -- a little bit less than that of the quarter we started to see some impact. So I don't think it's seeing a surge because of that. We are seeing, as I mentioned before, a positively disproportionate level of interest in our cloud solutions and supply chain solutions move into the cloud. So that I think is part of it. again, a broader product footprint I think is driving some of thepipeline growth, and our geo expansion to a lesser extent, but our geographic expansion as well.

Joe, WMS -- as demand for WMS in the cloud pipeline has been a bit of an accelerant as well. So we continue to see the pipeline strengthen on the WMS side.

And then I just wanted to clarify, I guess make sure I heard something correctly. Eddie, in your prepared remarks, I think you said that 20% of near-term to mid-term service revenue is impacted by, if I heard this right, the retail vertical. And I just wanted to check that because you are bringing the service full year guide down by about 20%. I don't know if it's a coincidence. Those are the same numbers. But it would actually imply that maybe outside of the retail vertical, a lot of project activity is still humming. And I would imagine be it grocery, food and beverage, life science, maybe you've actually gotten a little bit of uplift. So, just any thoughts there.

Yes. That's right analysis that you've put into that Joe. There's no question that kind of specialty retail, department stores and so forth are being -- or seem to have been impacted disproportionately. That's why we're seeing that, that shift. But we are seeing certainly the life sciences space, grocery, 3PL move up a little bit.

And there are no further questions at this time.

Okay. Very good. Thank you, Jesse, and thank you everybody for joining the call. Thank you as always for your support of Manhattan Associates. We'll look forward to speaking with you again in about 90 days, and we certainly hope that everybody out there is safe, remains safe and is -- we are all in a better spot 90 days from now. Good afternoon.

This concludes today's conference…