Manhattan Associates, Inc. — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024; comparisons are with Q1 2023 unless otherwise noted. Manhattan develops and implements supply-chain commerce and omnichannel software. The unaudited statements are prepared under U.S. GAAP.
Key financial results
| Metric | Q1 2024 | Q1 2023 | Change |
|---|---|---|---|
| Revenue | $254.6 million | $221.0 million | +15% |
| Operating income | $57.6 million | $47.1 million | +22% |
| Operating margin | 22.6% | 21.3% | +1.3 percentage points |
| Net income | $53.8 million | $38.8 million | +39% |
| Diluted EPS | $0.86 | $0.62 | +39% |
| Cash from operations | $54.7 million | $58.7 million | Down $4.0 million |
Revenue mix: cloud subscriptions $78.0 million (+36%); software licenses $2.8 million (-47%); maintenance $35.0 million (-2%); services $132.2 million (+14%); and hardware $6.5 million (-1%). Cloud subscriptions represented 30% of total revenue and 97% of cloud plus software-license revenue. Services were 52% of revenue.
Operating expenses increased 10% to $77.6 million, including R&D of $35.0 million (+14%). Management attributed higher operating income and margin primarily to growth in cloud subscriptions and services. The effective tax rate fell to 8.2% from 17.9%, reflecting increased excess tax benefits on restricted-stock vesting and a favorable foreign-tax-law change.
Financial position and cash use
At March 31, 2024, cash and cash equivalents were $207.5 million, down from $270.7 million at year-end. Current assets were $445.2 million and current liabilities $372.0 million. The company reported no debt and no credit facilities. It said existing cash should cover working capital and capital needs for at least the next 12 months and that it does not anticipate borrowing for general corporate purposes in 2024.
Operating activities provided $54.7 million; investing activities used $2.3 million, principally for property and equipment; financing activities used $113.8 million, principally for common-stock repurchases, including shares withheld for taxes. The cash-flow statement reports $113.8 million of repurchases, while management separately identifies approximately $73.4 million bought under the share-repurchase program. The company repurchased approximately 293,592 program shares during the quarter. Days sales outstanding were 74, versus 70 at December 31, 2023.
Deferred revenue was $263.9 million, versus $237.8 million at year-end. Remaining performance obligations (RPO) were approximately $1.5 billion, up 31% year over year; over 98% related to cloud-native subscriptions with non-cancelable terms exceeding one year. Management expects to recognize about 40% within 24 months, with most of the balance over the following 36 months. Contractual commitments included approximately $102.3 million for cloud infrastructure and $26.2 million for internal software subscriptions over the next four years.
Changes, outlook and risks
- Growth was led by cloud subscriptions and services; management said cloud demand was solid and Q1 results exceeded expectations. Approximately 31% of the value of new non-cancelable cloud subscriptions signed in the quarter was with new customers and 69% with existing customers.
- Management did not provide numeric full-year revenue or earnings guidance in the supplied filing text. For the rest of 2024, it plans to prioritize product development, cloud growth, staffing and customer success, while weighing share repurchases against acquisitions and business investment. In April, the board replenished share-repurchase authority to an aggregate $75 million.
- Management remained cautious about global economic growth, geopolitical and economic volatility, and potentially extended sales cycles for large cloud deals. Other cited risks include competition, attracting and retaining skilled employees, software defects or service interruptions, cybersecurity and data protection, implementation-related claims, international operations and foreign exchange, and returns on R&D investment.
- The company reported no legal proceeding it believed likely to have a material adverse effect and no material changes in market-risk disclosures. Management concluded disclosure controls were effective; no material change in internal control over financial reporting was reported.
Important facts for investors to verify
- Whether cloud growth and the $1.5 billion RPO convert to recognized revenue on the expected schedule.
- Whether services capacity and costs remain aligned with cloud implementation demand, and how operating margins trend as investment increases.
- The composition of cash-funded repurchases: the filing reports $113.8 million in total financing cash outflow and approximately $73.4 million of program purchases.
- Collections and working-capital trends, including DSO rising to 74 days and the effect of timing on operating cash flow.
- Exposure to macroeconomic conditions, extended sales cycles, cybersecurity or service disruptions, and international risks.