Good afternoon. My name is Angie and I will be your conference facilitator today. At this time, I would like to welcome everyone to the Manhattan Associates Q4 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question and answer period. As a reminder, ladies and gentlemen, this call is being recorded today, Tuesday, February 1, 2022. I would now like to introduce Dennis Story, CFO of Manhattan Associates. Mr. Story, you may begin your conference.

Thank you, Angie. And good afternoon, everyone. Welcome to Manhattan Associates 2021 Fourth 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 future events or the future financial performance of Manhattan Associates. You are cautioned that these forward-looking statements involve risk 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 files with the SEC for important factors that could cause actual results to differ materially from those in our projections, particularly on our annual report on Form 10-K for fiscal year 2020 and the risk factor discussion in that report as well as any risk factor updates we've provide in our subsequent Form 10 - Qs. We note in particular that uncertainty regarding the impact of the 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. We have reconciled all non-GAAP measures 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 website at manh.com. Now I'll turn the call over to Eddie.

Thanks, Dennis. Good afternoon, everyone. And thank you for joining us as we review our fourth quarter and full year 2021 results, as well as our outlook for 2022. Well, 2021 was a very successful year for Manhattan Associates, setting all-time records in total revenue, RPO, cash flow, and earnings per share. In February 2018, we announced our goal to become a Cloud first company within five years. And four years into this transition, we've exceeded our own expectations and are well ahead of our initial timing and economic projections with Cloud solutions representing 90% of our pipeline opportunities. And despite the pandemic and in the midst of this Cloud transition, we delivered record revenue in two of the four years and are guiding towards third in 2022. Proudly, our associates continue to execute extremely well, serving both customers and our end markets. Demand for our unified commerce and supply chain Cloud solutions is very strong, creating great visibility for us as we enter 2022. And to help drive growth and serve our customers, we plan to add about 500 net new employees globally, and we remain committed to significantly investing in innovation to meet the future needs of our customers, grow our market share, and extend our adjustable market. And while global ebbs and flows certainly persist, we remain very encouraged by our near-term and long-term growth opportunities. So pivoting to results. Q4 was a record quarter that, again, exceeded our expectations. Total revenue increased 17% to $171 million, and adjusted earnings per diluted share of $0.48 was up 7% as we invested significantly in employee compensation. Regarding RPO, the leading indicator of our growth, in Q4 we added a record $126 million of RPO bookings, setting new highs in Americas, in EMEA, and in APAC. Our global sales…

Thanks, Eddie. Our Manhattan global teams continue to execute at a high level as Eddie highlighted. In 2021, we set all-time records in RPO, total revenue, cash flow, and earnings per share, hats off to our global associates for the outstanding performance. I'll start with recapping our financial performance for the quarter and year. All growth rates are year-over-year, unless otherwise stated. Q4 total revenue was a $171 million up 17%. Full-year revenue totaled $664 million up 13%. Excluding license and maintenance revenue, which removes the revenue compression by our Cloud transition, Q4 revenue growth was 24% and full year was 20%. Q4 Cloud revenue totaled $35 million, up 51%, with full-year revenue totaling $122 million, up 53%. We closed out 2021 with RPO of $699 million growing a 126% and up 22% sequentially, as demand continues to be robust. Our global services team delivered Q4 revenue of $82 million up 15%, and on the year, $335 million up 10%. Importantly, cloud sales continue to fuel services growth globally. Our Q4 operating profit totaled $39 million with adjusted operating margin of 22.8%. And our full year operating margin was 26.8% up a 160 basis points over 2020. Factoring in Q4 retail peak seasonality, we exceeded margin expectations. As discussed in our Q3 call, we also invested an additional $10 million in performance-based compensation, and employee retention investments. Our Q4 earnings per share of $0.48 exceeded our prior guidance with full-year totaling $2.23 on 27% growth. Q4 operating cash flow was $40 million and our full-year operating cash flow increased 31% to a $185 million, generating a 27% free cash flow margin, and a 28% EBITDA margin. Cash never lies. We ended the year with $264 million in cash and zero debt. For the year, we invested a 100 million in…

Terrific. Thanks, Dennis. Well, as you can tell, we're very pleased with that strong fourth-quarter and record-setting 2021 results. Well, there certainly is some turbulence in the global macro environment, but we're entering 2022 very well-positioned. Our business momentum is strong and we continue to deliver market-leading innovation that drives our customer's digital transformation. And as a result, we anticipate long-term, sustainable, and profitable growth for Manhattan Associates. To wrap up, I want to thank all of our employees globally for a fantastic year in 2021. Your relentless dedication and commitment to our customers is one of Manhattan's key differentiators. So thank you. Thank all of you. And Angie, we're now ready to take questions.

Your first question comes from the line of Terry Tillman with Truist Securities. Please state your question.

Yeah. Thanks and congrats on the RPO and the fourth-quarter record. Hi, Eddie, Dennis and Mike. I guess -- and also by the way, Dennis, thanks for all that extremely fine grain guidance every quarter, makes it pretty simple to model. First question is for you Eddie in terms of being able to have this unified technology stock, how much is -- are the conversations in the pipeline activity involving customers wanting to buy both the WMS and the TMS in that conversation? And does it create a potential vendor consolidation play? Thank you.

Well, certainly vendor consolidation no question about that, Terry, and that's our objective. In terms of buying both together, certainly those conversations are happening. Certainly the conversations about the road-map of, frankly, which system to implement first and so forth are happening. Honestly, the answer to the question really comes down to the capacity of the customers’ organization to be able to implement both solutions simultaneously, because that is quite a plateful, so we work with them to figure out which one first, which one second, which piece is first, which piece is second, to deliver the best results for them, but it's a pretty exciting time for us and for the market for sure.

And it's a nice cross-sell, up-sell opportunity, Terry.

Sure. Thanks. So Eddie, you had a comment, I think it was great visibility. So to put you on the spot, Dennis, in terms of Eddie's comment about great visibility in the prepared remarks. As we think about RPO activity throughout the year, as part of the visibility just coming from -- you've got 60-plus customers, you got more go-lives, and you're starting to see this waterfall effect of just the installed base now, more comfortable. Hey, you've been in market for a while and that's kind of the key crops on the strengthening and visibility of the installed base saying, hey, we're ready, and then I had a follow-up on the seasonality of RPO.

Was there a question there, Terry? What I'd tell you is absolutely, visibility is fantastic, forward-looking, we're doing quite well there. And I think that's represented really in the guidepost that we've put out and reaffirmed.

Okay. This will definitely be a question. On seasonality, how do we think about RPO, because you have been at it for a while now. And so, are you seeing any market changes in seasonality and how we should be thinking and forecasting RPO across the quarters? Thank you.

I think demand blew through seasonality in Q4, so we'll update you next Q4 as well.

There tends to be -- I don't think there will be any real difference in buying patterns in the cloud world versus licensed world, Terry. There is not a ton of seasonality, but we do tend to see a little more buying at the end of Q4, and in Q1 getting ready because customers want systems implemented prior to the busy season in the following year. It's not huge, but if there is some seasonality, that tends to be what it looks like.

And it tends to impact services more than it does the cloud sales.

But -- so just to finalize here on the commentary. So Eddie, the reality is maybe there's a little bit of lumpiness in a positive way in 4Q. But also you could see some activity earlier in the year just as -- they've got budget and they're ready to commit, and then obviously they need to get it going before the season -- the holiday season.

That's right. Again, it's not a huge swing but we see a little bit of that. And then, of course you tend to see a little bit of a slowdown in the summer. That's more probably more in Europe than here. And a little bit of a slowdown going into peak while IT organizations and so forth are focused on getting ready and are a little distracted from the buying process. But I'll reiterate no major swings here, but those are the cycles.

Nice job, guys. Thanks.

Thank you, Terry.

Your next question comes from the line of Brian Peterson with Raymond James. Please state your question.

Hello?

Brian, your line is open. Please state your questions.

Hello, sorry guys the mute button got me. Well, congrats on the RPO numbers, those are fantastic. But just following up on Terry's question on the RPO. I'm curious, are your customers willing to commit to more products now that you have a broader cloud portfolio. We were talking about seasonality, but I'm curious, are people willing to buy more products at the same time now, just given that they're more integrated and I'd be curious to get your thoughts on that, Eddie.

Again, it's really the same answer, Brian. There is great opportunity for cross-sell and up-sell obviously because of the integrated and unified nature. About 15% of the 2021 bookings were kind of that cross-sell and up-sell. Now, the specific simultaneous purchase, again, comes down to, hey, how much can we knock down all at the same time verses that road-map conversation, and the follow-on sequential business that comes one behind the other.

Makes sense. And Eddie, just maybe a follow-up. We've gotten a question a lot from investors on what the supply chain disruption does for demand. Obviously, we're seeing Active M coming -- Active WM coming in really strong. I'm curious, from your perspective, what does that do for the demand environment? And are there other parts of the portfolio where we could see improving demand in 2022 and 2023? Thanks, Eddie. Thanks, again.

I don't know that there's going to be major shifts in 2022, Brian. I think that the general Geo supply chain disruptions are going to continue, I don't think you're going to see a ton of reassuring being able to be pulled off in 2022, but it just takes time to build that strategy out. But demand is certainly high for capacity, on the digital transformation side e-commerce continues to grow. There is obviously some slowness and some shortages of product coming into the country, so as a consequence of that, as soon as it hits shore here or hits land, there's a real immediacy and an urgency to get product distributed out to end consumers, and the optimization of the deployment of inventory around the country becomes particularly important. And I just really -- I know it's a little bit of a coy expression, but supply chain flexibility and agility is just super important across the globe.

Good color. Thanks, Eddie.

Pleasure, Brian.

Your next question comes from the line of Joe Vruwink with Baird. Please state your question

Great. Hi, everyone. Maybe I'll start, Eddie in your prepared remarks, you mentioned how you saw growing addressable market opportunity. Can you maybe just expand on where some of the biggest new opportunities lie and maybe related to that, it definitely seems to be coming out more often Manhattan Active WM moving outside of that, most automated Level 4, Level 5 warehouse environment, how much is the persona of your customer starting to change? And so there's consequentially just more potential users of a cloud product and that contributes to the TAM expansion.

It's a modernization really of the supply chain versus going down market a ton, Joe, to be perfectly honest with you, that's driving a lot of the demand. As we've talked about, a number of times, distribution centers today look quite different to the way they looked even five years ago, but certainly 10 and 15 years ago with the levels of automation, robotics, and so forth. So the need to have sophisticated software to be able to drive that inside the full walls transformation is important. Obviously, the digital transformation of the way consumers are ordering and consuming goods requires a whole different strategy for distribution, whether it be the number of distribution centers, the size of the distribution centers, the hours of operation of those distribution centers, all of those things contribute to the modernization of sophisticated distribution network. In terms of growing at adjustable market certainly with continuing to expand our product portfolio, particularly out on the front end into the retail store portfolio and we feel like we're doing pretty well from a market share perspective. Again, we've talked about this before with manufacturers and wholesalers becoming much more direct-to-consumer, that drives greater demand for sophisticated fulfillment and distribution. I was talking to one of our customers the other day and just sort of mentioned it, hey, we really consider ourselves a cloud-first company now, and this was a company that had been a traditional wholesaler for 30 years. And they said funny you should say that, we now consider ourselves a direct-to-consumer company. And they have been traditionally a wholesale for 30 years, and so a great marriage there and just a lot of great market expansion opportunities for us.

Okay. That's great. And then, just in regards to being focused on cross-sales and dedicating more resources that way, talk a lot about what that might mean for WMS paired with TMS. Does that also include I guess within WMS functionality, thinking of things like execution, control, yard management, labor management. When you wrap all those capabilities in the -- what Manhattan can provide, are you ultimately seeing your ACVs get bigger just within the WMS category?

It really -- certainly we've seeing a lot of synergy across those products. By the way, as you look at Manhattan Active Omni point-of-sale, Manhattan Active Omni integrated with WMS being much more sophisticated with late-stage cancellation, order consolidation, order aggregation, and those kinds of things. In terms of ACV growth or NACV growth, it still comes down to whether this is a road map purchase or a multi-product buy upfront, which again comes down to how much can our customers bite off in terms of project initiatives all at once. So it hasn't -- we haven't seen it manifest itself in a significant ACV growth at an initial contract. But we're okay with that. We're in this for the long term, we want to make sure our customers are successful over the long term, and make sure that they implemented a pace that is aggressive, but yet comfortable for them.

Okay. Great. Thank you very much.

Pleasure, Joe. Thank you.

Your next question comes from the line of Mark Zgutowicz with Rosenblatt Securities. Please state your question.

Hey, guys, I'll play my broken record hear and again congratulate you on some great results. Eddie, I wanted to see if you might pull the curtain back a little bit on the new CMO that you brought in, and a few months ago I think it's been. And I'm just curious if there are any tangible you might be able to share in terms of what your marketing or branding looks like this year relative to last and specifically across other product or geo, or perhaps using different types of ad mediums that would be helpful. Thanks.

So Addie is doing a fantastic job. We're thrilled to have her on the team, and not only did she do fantastic where she's integrating into the team wonderfully and really spreading her wings across product and across their geographies. I'm not going to put her on the spot with very specific marketing initiatives in her first 90 days here or so, or even in an interim. But I will tell you that she's got us and our company very focused on digital marketing. Number 1, number 2, we've said for a long time that we think we have some of the best kept secrets on the planet. Well, here comes Ann with 90 days or so into the business, and she certainly concurs, now she's got under the hood a little bit and is focused on making sure that we don't have a lot of secrets, that we are loud and proud with our marketing strategies going into 2022. So you certainly should expect to see us again be a little more, for both frankly, in communicating some of the very innovative solutions that we have in our portfolio.

Got it. I suppose we're not expecting a Super Bowl ad this year though.

Well, you never know, don't get up and go the restroom, Mark. You might

Alright. That's good. I like that anticipation. Last question, and I might have missed it just a housekeeping on POS go-live. I know you've chatted about them in the past, but just curious how that has trended.

Yeah, it's gone pretty well, and what I said was that we've got a number that are underway and we expect by the end of the year to light up a bunch more stores both here in the U.S. and some internationally as well. So the pipeline continues to grow, there clearly is demand out there for a really integrated, strategic suite of selling product across bricks-and-mortar and in digital. And as we get more established in this world and in this market, you're going to see us start talk about some really nice brands that are starting to adopt a solution.

Got it. Thanks, guys.

Our pleasure, Mark. Thank you.

Your next question comes from the line of Mark Schappel with Loop Capital.

Hi, nice job on the quarter and thanks for taking my question.

Sure thing Mark, thank you.

Hey, Eddie, just starting with you. A question on your point-of-sale business, just building off the former question here. In over the past year or so the focus was basically just building up reference accounts with respect to that product. Now that you have many of those reference accounts in place, I'm wondering if you would expect point-of-sale to become a greater percentage of your business going forward.

Look, it's a slow burn, Mark. We don't wake up one morning and say, hey, I'm going to -- it's the heart and soul of the retail operation. They don't -- certainly retailers do not replace their point-of-sale systems on a whim, and they're very, very strategic decisions. But I got to tell you, we can feel the momentum building throughout our organization, everything from initial pipeline, acceleration, to deployments and go-live. I guess you'll be the judge of whether it's a significant part of the business as we march through the next eight or 10 quarters, but certainly momentum is building nicely.

Nice. Thanks. And then regarding just supply chain in general, given the increasing attention that companies are placing on supply chain these days, how much are you seeing higher level executives involved in your sales processes and say, six, three or four years ago?

Yeah, much more so. I think we've always been mission critical solutions to our customers since day one of the company's existence, but never more than in the last year or two have we been participating in forward-level and C-suite level conversations. I don't think there's barely a company on the planet that isn't very focused on supply chain issues, whether manufacture, wholesale, or retailer, and we really are becoming one of the most important IT systems in our customers’ landscape for sure.

Okay, that's helpful. And then just finally here, I was wondering if you just comment a little bit on what you're seeing or whether you're seeing any changes with respect to your customers budgeting cycles for the upcoming year?

No. It's a pretty simple answer to that, Mark. No real change in budget cycles that we've seen.

We like simple answers, appreciate it. Thanks, that's all I have.

Sure thing, Mark. Thank you.

Your next question comes from the line of Matt Pfau with William Blair. Please state your question.

Hey, guys. I wanted to ask on the labor side of things and obviously you ramped up some compensation to retain and presumably attract employees. On the services side, have you been able to hire a plan, and has labor been a bottleneck there at all? And then within your customers, has their ability to engage with you been any limiter to getting deals implemented?

Yeah. We've had to plan, so that's been good. We -- I think so far this year we've got a new -- we've got about somewhere in the 75 - 100 new associates with the company, so that's exciting to see for sure. In terms of the reticence of our customers to move forward because of lack of resource on their side, I haven't seen a ton of that. Now, we have seen them ask us to take on maybe a little more work and, of course, we're seeing a very, very vibrant system integrator participation. And certainly, we're being asked to introduce our system integration partners into the mix to augment our customer teams, but I wouldn't say we've seen any buying trepidation or buying slowness due to lack of resource on the customer side.

Great. And then in terms of existing WM customers moving from an on-prem deployment to the Cloud, maybe just some update there and what the interest level is. And I think if I recall when you released Active WM back in 2020, the original plan was to support the on-prem version for five years so presumably we're a bit over three years out now from when that would end, how are customer -- discussions with customers progressing around moving over to the Cloud from existing deployments?

If you have a lot of enthusiasm, we just said we got about 60 different customers under contract now. I may not be exactly correct percentage-wise, but it's about 50-50. 50% of those 60 brand new customers that we've never done business with before, and 50% are existing customers that are transitioning from on-prem into the cloud. So it's a pretty exciting time, we're very pleased about where we are. Obviously we were very pleased with the financial results, but at the end of the day, we've only transitioned 30 of our existing customers that we built up over the last 30 years so far. We're encouraged by the enthusiasm there and their desire to move to scalable, extensible, visionless software in the cloud.

Okay, great. I appreciate it guys.

Sure thing, Matt.

At this time there are no further questions, I will now turn the floor back to management for any additional or closing remarks.

Yeah, good. Thank you, Angie. No real closing remarks. Just would like to thank everybody for all of their support during 2021. We're thrilled to be started with 2022 and look forward to giving you our first 2022 update in about 90 days or so. In the meantime, have a great evening. Thank you. Bye.

Thank you for participating in today's conference call. You may now disconnect your lines at this time.