Thanks for joining. We're gonna go ahead here and get started. My name is Brian Peterson. I'm one of the Application Software Analysts here at Raymond James. Very happy to have Eddie Capel with us from Manhattan Associates. Good afternoon. Eddie, maybe to get started, I think some people in the room may be newer to the story. Can you start with me with a higher level overview of what you guys are doing at Manhattan? Yeah, sure. Manhattan Associates, supply chain management software. We're a software product company. Manhattan in a minute is 33-ish years old, founded in Manhattan Beach, California, hence the name. Relocated to Atlanta in 1995. Public in 1998. Public ever since. We're about 4,200 people worldwide. 1,200 customers, something like that. We're focused on what we call tier one and tier two enterprises. 80% of our revenue in the Americas, 20% international, kind of following that supply chain management software spend profile. Products at a very high level, warehouse management system software running big distribution centers as our first product 33 years ago. We've grown that footprint to be transportation management software, inventory management software, order management software, and most recently, store systems and point of sale software. Our customers, again, sort of tier one enterprises. You know, the name names the like of Boeing, General Motors, Schneider Electric, Grainger, Target, Best Buy, The Home Depot, Tiffany & Co., Starbucks. Everybody from, you know, kind of bigger industrials to specialty retail and everything in between. From a revenue profile perspective, we have a pretty big professional services organization. Not unique, but a little unusual in terms of we have a pretty big implementation services business to go along with software product development. About 50% of our revenue comes from our professional services organization. About 1,800 professionals around the world focused on implementing our solutions in the field for our customers. Maybe just to kind of start on the macro, right? Mm-hmm. I know everybody seems to be talking about that these days. Yeah. you guys have actually executed really, really well, despite maybe a choppy macro. Yeah. Can you talk about what you're hearing from customers and I guess your assessment of what's going on with the business? You know, from our window, look, I've told a lot of people this. Honestly, if we woke up in the morning and only looked at the world through the lens of Manhattan Associates, never turned on a newsfeed, a TV, or opened a newspaper, you know, we'd think things were pretty good, frankly. You know, can't be naive about what's going on in the world, of course. We have seen a little bit of choppiness and as the expression goes, elongation of, you know, sales cycles just a little bit. The, you know, sort of theory from our window is that our solutions are, A, mission-critical, and B, focused on supply chain, which continue to be critical for our customers and the, you know, the industry at large. Backing off in a wholesale way from making investments in supply chain, seems to be, you know, not a that smart of a thing to do, right? Even though things might be a little bit tougher, from a consumer demand perspective, still satisfying that customer demand, making sure that supply chains are resilient and building some contingency into supply chains, still a pretty popular pastime. I wanted to hit maybe on the customers too, just to kind of double click on it. Yeah, sure. I know we've talked about that in terms of what is the status or the health of the customer base today, maybe versus. Yeah ... you know, 10, 15 years ago. How's that changed? Yeah. Well, look, there's winners and losers, obviously, and one tends to see the headlines around those that might be having a few challenges here and there. Some of those are our customers. You know, Bed Bath & Beyond is a customer of ours. Party City is a customer of ours. You know, just to give some context there. When customers go through challenges of those types in our world, frankly, they still continue to have to operate. Our systems remain, you know, mission-critical. Maybe more importantly, though, there is no customer in our portfolio that represents more than 2% of revenue in any given year, and that's kind of rotational as well. We're pretty, you know, pretty reasonably insulated. All right, wanna hit on a lot of the product stuff. Mm-hmm. You know, maybe if I take a step back, you know, if I look at Gartner Magic Quadrants, like you guys have been the leader in those kind of things for a very long time. Yeah. You started on this journey with Active. Yeah. I'd love to understand, you know, with that multi-tenant cloud product portfolio now, what is that value you can provide to customers? What has that done to win rates? Yeah. Cause you were already leading, so, you know. Yeah ... how far ahead are you now? Yeah. Yeah, I mean, look, we, as you say, Brian, we, you know, we've been a market leader for most of our solutions, you know, top right-hand corner and so forth, for a number of years, even when we were an on-premise perpetual license software company. You know, it's kind of 25 year or so history of doing that. We felt that it was important to start to build the next generation of solutions, that meant for us re-engineering everything every product that we have from the ground floor up. Not taking our perpetual software and hosting it, re-engineering it from the ground floor up to be able to benefit from cloud technology. The number one, in my opinion, the number one reason that our customers transition from on-premise to cloud is access to innovation. Gone are the days where we would release, you know, a product or do a product release once a year, and our customers would upgrade every four, five, six, maybe even seven years. Today, completely versionless software. Never do an upgrade again, and we're delivering new innovation to them with zero downtime every 90 days. As you think about the world, particularly the world of supply chain today, with consumer demand changing and preferences changing dramatically, supply chain configurations having to change dramatically, and quickly, the ability to have access to brand-new innovation, never having to do an upgrade again is the, is the number one differentiator, I would say. Maybe give us a highlight then on the Active WMS space. Yep. I know WMS is a big product. Yep ...for you guys. What have you seen in terms of win rates- Yeah How has the adoption of that product gone so far? Yeah, terrific. WMS was the first product we developed 33 years ago, so we got a lot of, you know, a lot of history there. We released a truly cloud-native solution of WMS almost three years ago. Almost three years ago. We've acquired about 95, call it, I might be off by one or two, 95 customers in that three years. The biggest and fastest product adoption release in the history of Manhattan for sure. 95 customers, almost exactly split. 50% of those 95 contracts were existing customers that are moving from on-premise to the cloud, and 50% of them brand-new logos that we've never done business with before. Where that puts us in terms of, you know, the sort of the existing customer base, we're about 5% converted in terms of our on-premise customers that will, in my opinion, all inevitably move to the cloud. Look, this is a forecast from my perspective, I think that 95% of our customers, there'll always be some stragglers, will move in the next six to seven years. All right, so you got a lot of that base already ready to transition. What I'd love to understand on the net new side. Yeah. Like, what are, like, what are you displacing? Yeah. How do you think about win rates as you kind of look at it sometime? Yeah. Win rates, you asked me about that. I'm sorry. We publicly talk about across the entire portfolio, 75% win rates against our top 6 competitors. Top 6, because if you're not in the top 6, it's probably not a big deal, right? Those are the big deals. That's across our entire portfolio. Some of our products we don't win at a 75% win rate. You know, you can imagine and rationalize from that our win rates for our flagship products, Manhattan Active WMS, for example, are well above 75%. In terms of, you know, kind of the, A, the market drivers and who are we taking, you know, business, you know, business away from. Market drivers, when it comes down to it, are sort of two things in the WMS space. One is the need for just about every company on the planet to drive greater levels of efficiency, which means robotics and automation into their distribution centers, right? Labor capacity shortages, need for increased velocity, productivity, and throughput for distribution centers. As a consequence of that, yesterday's WMS, as it were, doesn't fit the need for a modern, highly automated, robotized distribution center. Second, typically, we operate the most sophisticated distribution centers around the world. Most of those historically have been driven by retail requirements, because that's where the most sophisticated distribution is, not so much in, you know, manufacturing, wholesale, CPG particularly. What we've seen happen, and we all have seen this, right, as consumers over the last few years, so many more manufacturers and wholesalers are moving to a direct consumer model, which really, frankly, blows up the distribution and fulfillment needs. Hence the need for modern software. Can you talk about the flexibility that like Active WMS gives them, right? Yeah. As you're thinking about maybe retailers a little bit further ahead... Yeah ...what about these other end markets like CPG and grocery? Like- Yeah ...is that, is this the time for them to invest? Yeah. That's what you're seeing in the pipe. Yeah, for sure, because they're starting to go direct to consumer or shipping retail ready. Look, this is an incredibly old and incredibly simplistic example, but I'll use it nonetheless. 15 years ago, Nike, a customer of ours, you know, their distribution model was send big trucks of product to Finish Line, Foot Locker, Macy's, and Dick's Sporting Goods, right? You go sell that. We don't know. First of all, we don't know who you're going to sell it to. But second of all, go sell it. If you don't, just flip it over to TJ Maxx and they'll sell what's left. Right? Today, they send 26% of their business is sending a single pair of shoes to you, Mike, and me. Okay? That changes the context of how you manage orders and fulfill orders, and the SLAs you have to meet for that individual consumer. You know, by the way, on top of that, in the old world, they had never heard of a return, right? Product coming back to me? What are you talking about? I just push it this way. It sells one way or another, and I just push some more, push some more. Now they're shipping tens of thousands of individual pairs of shoes to individuals' doorsteps. By the way, you have to send them back from time to time. All of the implications of that on a fulfillment and distribution network requires, A, a great deal more sophistication than a single truckload of product going to a, you know, going to a single customer, and all of the, you know, tentacles that has to financial reconciliation, inventory management, and fulfillment. Maybe just kind of rounding out the discussion on Active. Yeah because I know it's not just WMS. Sure. You know, maybe starting with Omni. Yeah, sure. You know, what is the uptake been like there? Maybe how do you think about the synergies between Omni and maybe the rest of the Active suite? Yes. Right. So Omni in our world is sort of an order management acronym, you know, frankly. To enable our customers, again, whether they be manufacturers, wholesalers, or retailers, to be able to manage the orders that they're receiving, frankly, figure out exactly how to fulfill them across a distributed network, where to fulfill them from, greatest profitability, greatest inventory leverage, greatest margin leverage, and fulfill the SLA of the consumer. It could be fulfilling from a store, could be fulfilling from a distribution center, could be fulfilling from a partner. It also includes a very sophisticated multi-channel call center, you know, call center application, and all of the retail store systems that go along with that so that retailers can ship directly from store, provide you with buy online picking, pickup in store capabilities, buy online, curbside pickups and capabilities, all of those kinds of things that manage that capability. It's obviously direct consumer continues to accelerate. COVID has accelerated the need for those capabilities. Order Management, if you look across the portfolio and the approximate breakdown of our revenue, about 50% of our revenue comes from Warehouse Management Systems, bounces around quarter- by- quarter, but 25%-30% of our revenue comes from Omni or Order Management side of the business. You know, as you bring those things together, and particularly Warehouse Management, Transportation Management, Inventory Management, and an Omni suite of solutions, creating that unified suite of capabilities so that our customers can deliver a great experience to you, the consumer, but also manage those fulfillment and Inventory Management strategies, with a level of precision, accuracy, and the appropriate margin. What about on the TMS side? Brad, I know that's maybe your latest Active product launch. Yeah. How has that been received? Yeah. I know we've talked about... Yeah. kinda cross-selling Yeah. with Active WMS. Yeah. Where are we in that today? Yeah. Transportation Management on our cloud native Active platform came only a year and a half, you know, was released only a year and a half ago, so it's a little earlier in the, you know, in the cycle. About 25 or 30 customers so far. About 50% of those customers are WMS customers as well. That's great for us. There's a great deal of adjacency and, you know, and benefit there. Feel pretty good about the cross-sell and upsell opportunity. Last year, in 2022, calendar is fiscal for us, about 26% of our software sales were from cross-sell upsell. Oh, good. Yeah, yeah. You know, as we're migrating on the product side, Point of Sale, obviously excited to talk to you about this. Yeah, right. Yeah, me too. What is that longer term opportunity? Maybe can you talk about what you've done on the supply chain execution side. Right. that allows you to kinda come in and provide more value with the rest of the Active suite? I'd love to unpack that a bit. Yeah, yeah, sure. Point of Sale is essentially one of the newer developments for us. As I mentioned, we provide execution capabilities, and have done for a little while, inside the store. You buy online, pickup in store, getting that order ready for you to pick up or shipping a order from the store and so forth. Been in the store. Our belief is that the industry is ripe to reinvent the Point of Sale market, primarily because retail stores are no longer single function locations. They used to be walk in the store, pick up a product, pay for it, walk out. That's what a retail store did, right? Today, they're a multifunction facility. They're a miniature distribution center, they're a customer service center for return, online returns at the store, they're a boutique, they're a gallery, they're a digital business or a digital billboard. All of those kinds of things in that little glorified calculator that used to sit in the corner of the store to consummate the transaction no longer gets the job done in a true omnichannel selling world, number 1. Number 2, Point of Sale used to be a hardware game, right? There were companies that had factories that built cash registers. It's a software game now and not a, you know, not a hardware game, and well suited, of course, because of the distributed nature of it to a cloud application. We think there's a huge opportunity there. We're just, all of us, just getting started on that, you know, on that journey. We've got a very small number of customers at the moment. We've got essentially zero revenue coming from that, from that line of business to all intents and purposes. We've got about 10 or 12 customers under contract. We've got about a handful live and in, you know, and in production. My feeling is that in order to kind of get over that, where have you done a lot of the implementation, you need to have that 10 or 12 live customers, you know, to bring some real kind of credibility and get past that early adopter stage. You know, by the end of this year, we'll be at 10 or 12 live customers. What do you think, and I know it's early, right? Yeah. You're not promising anything. Yeah. What about the size of that opportunity versus? Yeah. You know, the way I think about it. Point of Sale is a pretty bifurcated market, right? When you check into the hotel, to a hotel here, that's a point of sale system, right? There's the barber shop, the coffee shop, the grocery store with bad scan, but that's not our game. We're in sort of the, think about anywhere that there's a higher touch with the consumer is where our point of sale, really plays 'cause we can sell end of aisle, we can provide personalization, access to inventories across the network and so forth. The market overall, there's not great market numbers. If you look at the market today or the industry pundits today, they'll tell you it's a $10 billion market. The problem is that includes the old, you know, hardware and some of these sort of edge case point of sale. I think for us, certainly my eyes at the moment are set on there is no reason that this business can't be as big as WMS. Right. I mean, I think that's conservative, frankly. That's sort of the size of the opportunity that I think is available to us. Well, that's definitely something we'll be following. Right. Right. Sure. Yeah. I also wanna talk about hiring plans, right? Yeah. It's interesting from our perspective, you know, following software, you see a lot of other companies that are maybe trimming a little bit. Mm-hmm. You guys are hiring. Yeah. I think that speaks to maybe to your bullishness about the business. Yeah. Talk about your hiring plans. Yeah. What are you adding, any thoughts there? In calendar 2022, we hired, we're about 4,000... maybe 4,300 now, but something like that. 2022, we hired about 550 people. It was about on target, a little behind where we wanted to be, but about on target. This year, our plan is a little less than that, maybe 450. We're about 175 that we brought on so far this year in that range, 175, you know, 180. Feel pretty good about, you know, about where we are. We didn't overhire. Sure ...you know, any point and so forth. You know, we keep a very close eye on, you know, on demand. You know, we love to have just a little bit more demand than supply. It's not much, but just a little bit. Don't wanna hurt customer satisfaction there, but that's where we'd like to be, and seem to be on a pretty good track there. Maybe just 'cause I think the perspective matters here. You know, talking about your margin profile and maybe what you've done with your excess cash over the years, I think is something people would wanna know. Yeah. Yeah, yeah. you know, we're a debt-free company, never had a penny of debt. We sit today with about $200 on the balance sheet. You know, number one use of cash, you know, for us is invest in R&D. We have about 1,000 people, round numbers, in our research and development organization. So continue to invest heavily in R&D. Number two is M&A. For those of you who know us, we've barely done any M&A lifetime and haven't done any in the last 5 years. But if we could find something that, you know, got us over the hurdle in terms of, you know, strategic to our portfolio and modern technology and at a reasonable price and so forth, we'd certainly consider it. In the absence of investing more in research and development, acquiring companies, then we think the best way to put, you know, our money to work is in a share buyback program. For the last, call it 15 years, we've been, you know, pragmatic. We don't try to time the market. You know, a consistent pragmatic share buyback program over the last 15 years, reduced shares outstanding. You know, we bought back about almost 40% of the company. It's a go private one, you know, 1 quarter at a time. Not really. We bought back about 40% of the company over the last 15 years or so. Yeah. That's- Yeah. That's good perspective. Yeah. I'll open up to the audience if there's any questions. Yeah. A few familiar faces in here. Good to see you. We got a quiet group. All right. Oh, you're good. Just on hiring and wages. Yeah. You're on the right track, but in terms of inflation that we've been seeing for new hires. Yeah. Sure. Yeah. Yeah. No, it's more expensive today, for sure. No question about that. Tech talent. You know, look, you know, I'll often get the question, oh, is it easier to hire talent now with layoffs around the tech industry and so forth? No, not at all. I mean, it's still a voracious war out there, certainly for the best talent, you know, anyway. There's no question. You know, wage inflation is there. You know, I think we've done a pretty balanced and reasonable job of keeping our team intact, keeping our talent, our experience, and our tenure, in, you know, in place. You know, being responsible while we do that. You know, attrition last year was... We have, you know, almost a couple thousand people in Bangalore, so usually you see a little more, you know, higher attrition rates there. Globally, our attrition rate was just a tick below 13%, including the Bangalore operations. Feel pretty good about, you know, keeping hold of the talent. Yeah. Maybe just one for me. Yeah. I think there's a lot of legacy solutions in the WMS space. Yeah. You know, I'm curious what the kinda large conglomerate-oriented companies, like Are they doing anything different competitively to try to attack the WMS opportunity? I don't think so. I mean, I don't think so. I mean, look, I'm biased, and it's easy for me to say. We started our cloud, you know, re-engineering our solutions to build cloud-native products in 2013. Now, in 2013, it was three PowerPoint slides, right? We were just kinda getting, you know, it was a twinkle in our eye and just getting started. We started in 2014. We didn't release our first product till 2017. In terms of bringing our tier one sophisticated WMS to a truly cloud-native solution, it's been a 10-year journey. Mm-hmm. Right? It's cost us $1 billion essentially to re-engineer our solutions to. I think it's pretty hard to catch. Yeah. I think the moat's pretty deep and pretty wide, frankly. Even on maybe some of the pure play competitors, I know there's been some news out there from... Yeah. No, I mean, look, you know, they keep us on our toes, mostly from a pricing perspective. You know, there's always competition out there. You know, as I said, our win rates are well above 75%, so we're doing well against our competitors. We just gotta make sure we can demonstrate value to, you know, to our prospects to, you know, maintain that premium position. And I've asked you this question in the past. Yeah. You know, in terms of the innovation going forward, right? Like, what you've been able to do is really impressive. Yeah. I'm curious, as we think about where you're investing now, is that more into the kind of existing markets you've talked about? Yeah. or there new kinda opportunities Yeah that you're probably gonna identify for us. Yeah. Yeah Yeah or is there more out there? Yeah. We will continue to stay focused on supply chain management software, right? That's what we do. That's what we know. We feel like we're pretty good at it. Now, you know, the markets continue to grow, both from a geographic perspective, from a vertical opportunity perspective, and still within the bounds of supply chain. Our future development is really mostly about getting closer to the consumer, whether it be, you know, the Order Management Solutions, Point of Sale, of course, getting closer to the consumer. We don't call it this, but the way to think about it is consumer-based CRM. Right. So knowing exactly what we've sold or what from a retail perspective, what's been sold to you, when it was sold to you, what price it was sold for. Did you buy 10 things on sale and return 9 of them? Did you buy 10 full price and never return any of them? Being able to profile you know, as a customer from a lifetime value perspective, understanding how we did for you. What was my SLAs? What were my fill rates and so forth. Thereby, being able to market to you in a very accurate and precise way, because we are the owner of all those, all that data. I think we might have time for one more. All right. Well, I'll ask then maybe on Manhattan Active WMS. Yeah. No, yeah. Go, go for it. How have the implementations gone, right? That it gets complex... Yeah, it is. Right? Some of them are very large customers, Yeah. some of them. Like, Yeah. you know, how has that gone so far? You mentioned, I think mid-90s in terms of customers. Mid-90 customers under contract. All right. We've got. You'll have to give me, again, a little bit of license, one or two either way. We've got, almost half of those guys are live- Good ...in one shape or form or another. The client that has the most distribution centers, you know, 'cause a lot of them have, you know, big networks and so forth. I think 12 or 13 is the most distribution centers that one customer has, you know, has rolled out. We've got some very nice global contracts with, you know, big tier one customers. L'Oréal, for example, has, I don't know, 54 distribution centers around the world, something like that. We're about four or five into, you know, into that so far. Yeah, but going well. You know, our world is a big reference ability world. You know, we gotta have good customer satisfaction to get all the ongoing sales. Yeah. Great. Thanks, Eddie. That's all the time we have. My pleasure. My pleasure. Thanks, everybody. Appreciate it.