Last decade by far. By far Yeah, it's pretty incredible. There was a stat showing the difference in China and India, and it was something, not just GDP per capita, but, like, the market cap of companies- Yeah. -in each country, and it's just totally diverged. And you know, the obvious property issues, the property valuation issues in China they've created. Right. You know, the one-child thing, and now they can't get anybody to have any babies, let alone one, and it's a mess. Ready to begin? Oh, yes, sir. Okay, I think we can begin. Hi, everyone. I'm Joe Vruwink. I cover vertical software at Baird. Our next presentation, Manhattan Associates. Manhattan is the leader in supply chain inventory management and omni-channel software. Very pleased to have with us today, Eddie Capel, CEO, Dennis Story, CFO, Mike Bauer, leads investor relations in the audience. This is gonna be a fireside chat format. If you have questions, you can raise your hand or email sessiontwo@rwbaird, and I can read it from the iPad. But maybe to begin, I'll turn it over to Eddie and Dennis just for an intro to Manhattan and overview of the investment case. Woo! Okay, let's see, Manhattan Associates, supply chain management software only, 35 years, public in 1998. No other major financial milestone since going public in 1998. 4,800 people around the world. Our product set is, again, supply chain management focused only. For the first 10 years of our company, we're a one product, one country company. Warehouse management systems for tier one, large distribution centers, and grew into transportation management, order management, inventory management, retail point of sale, and so on. We sit today, a little bit of rounding here, but we sit today as about a $1 billion revenue company. Started a cloud transition about 10 years ago, released our first cloud product in 2017, next one in 2020. 2021, just launched our final product, native cloud, about two weeks ago. When we talk about running in the cloud, we have reengineered everything, every piece of code from the ground floor up, to be a truly versionless, cloud-native solution, fully unified and fully integrated. We focus on Tier 1 and Tier 2 around the world. Bit of a loose definition, but, essentially companies that are, you know, $500 million in revenue and up. Not that we don't have smaller customers than that, but that's sort of the, the sweet spot for us. From a vertical penetration perspective, our biggest vertical is retail. That's where there's the most complexity in, you know, in supply chain. But retail, food service and grocery, third-party logistics, life sciences, automotive, high tech would be the verticals that we are most prevalent and, you know, and dominant in. From a revenue perspective, about 80% of our revenue comes from the Americas, 20% from international, about 1,200 customers, world, worldwide. Let's see, I think that's sort of the Manhattan in a, in about a minute or two, in terms of our overview. That's great. A few maybe rapid-fire questions about the business. So warehouse management, transportation, order management, or omni-channel- Yeah. -relative sizes or- Yeah - proportions of each of those? Yeah. Yep. Give you just general ballpark, you know, definitions of that. About half of our revenue comes from warehouse management systems, about 25%-30% order management, 15%-20% transportation, and then other. How would you characterize your competitive standing or market share in each of those? Yeah. So, let's see. It's a little hard to define market share for things other than warehouse management, 'cause there isn't a great market definition. We have about a 20% market share, 21% market share of warehouse management systems. Overall, in supply chain management, we have about a 2% market share, so plenty of runway, you know, plenty of runway in front of us. We track our win rates against our top six competitors, you know, thinking that if it's - if you're not a top six competitor, it's probably a smaller, you know, a smaller deal. We have about a 75% win rate against our top six competitors. In the 25% of the deals that we don't win, 90% of the reason we lose is on price. We are the premium, Tier 1 solution in the market. Okay, that's great. Maybe one last intro question, just level setting the financial profile of the company. So last year, an incredible year, 20% revenue growth, margins moved to, to 30%. This year, another double-digit revenue growth. How to just think about, moreover, an extended stretch of time- Yeah -kind of the growth in margins? Yeah. Well, growth in margins or revenue growth and, or- Revenue growth and- Right. Okay Okay -margins. Thank you. Okay. Okay. Well, from a... So, you know, our aspirations are to grow, you know, double-digit, double-digit revenue growth year-over-year. We've seen that for a pretty, you know, pretty long time, and then margins about 100 basis points a year is, you know, what we're guiding to. You know, the industry analysts will tell you that, you know, the supply chain management software market is growing at a, at about, you know, 16 or 17%. Okay. Focusing on warehouse management, so heritage of the company, the thing Manhattan's always been best known for- Yep. best-of-breed solution provider. Yeah. That was true before cloud. It's even more true with cloud, and- Yeah I think your lead has extended with cloud. Yep. Maybe just back up, what were the elements of the cloud strategy to enable that lead extension to get us where we are today, versus what your competitors have ended up doing? Yeah. You know, so we were number 1 in the market. We, you know, I know industry analysts, but from a Gartner perspective, Magic Quadrant in WMS, we've been, we've had the top spot for 16 years, or 16 Magic Quadrants in a row, a little bit longer than 16 years. We decided that we needed to move from on-premise into the cloud. We reengineered, as I mentioned, to a true version-less, cloud-native, cloud-native solution, and we've managed to extend our lead. You know, the biggest reason that our customers move to the cloud with us for any solutions, but particularly for warehouse management system, is the immediate access to innovation. So what it used to be in the old world, you know, implement our software, upgrade, do a big upgrade cycle every 5, 6 years. Today, in a version-less world, we deliver brand-new capabilities every 90 days. And in the distribution world, you know, things are changing, moving much faster than every 5 years, whether it be the speed that you have to operate because of the consumer SLAs, the labor market, and the need for robotics and automation, just a real changing profile in distribution operations. So we feel like, you know, in terms of our moat, if you want to call it that, for WMS, we had a pretty big one to start with. You know, we've done some very good things here, both from a technology and a capability perspective, over the last 3 or 4 years. Frankly, we've benefited from our competitors not making that move. It's a combination of good things from us and, you know, not such positive moves from our competitors, created a wider, deeper moat. Now that competitors have seen your success, are they just replicating the strategy, and so there's a wave of multi-tenancy on its way? Yeah, probably. I mean, one would think, right? They've got to compete. They haven't started yet, or they either haven't started or they're just starting now. And, you know, frankly, we know how big of a lift that is and how much effort it takes, both time, money, and resources, and consistency of strategy. So given that we started our journey 10 years ago, and they're just getting started, and we're not gonna stop innovating, I feel pretty good about keeping that market, you know, market leading position. Maybe to focus on the macro for a moment. Yeah. There's always concerns about retail exposure- Yeah -and how that spending may move around. Yep. More recently, there's concerns about just IT budgets- Yep -and software in those IT budgets. Yep. And then there's warehouses- Yeah -where you've heard, you know, CapEx is gonna go down. We actually built too many sites, et cetera, et cetera. Yeah. Then there's Manhattan, which RPO bookings or cloud bookings have- Yeah -been strong throughout all of those things. Q1 was another good quarter. Yeah. So what's the disconnect between the first three, which there's elements of truth across that all- No doubt. -but then your business? No doubt. Well, we're suffering from the, those first three things as well. Let's, let's not, make any bones about it. You know, sales cycles being delayed, a little stutter- stepping here and there, tapping the brakes, all those kinds of things, you know, we're seeing all of those things as well. But by the same token, you know, we are out-innovating our competitors, so, you know, we're taking, you know, taking market share for sure. If you looked at that company half a dozen years ago, we were 65% retail. We're 50% retail today in a market that's been growing because we've done a pretty nice job of, you know, of diversification there. And, you know, look, even though things are tough, I don't think anybody would argue that every company on the planet is going through some form of, you know, digitalization. And we've got a lot of customers, particularly now and growing, who would not be considered retailers. But to us, they kinda look like retailers. I mean, maybe the two quick examples. We started doing business with Nike about 15 years ago, 100% wholesale. So they would sorta still be probably considered a wholesaler. But the way they operate and way they distribute, of course, 26% of the business, direct to consumer, to us, they look like a retailer. ExxonMobil, who would have thought of them in any way, shape, or form as being a retailer? They're not a retailer, but they're being asked by their customers, the AutoZones, the O'Reillys, the Walmarts of the world, to create retail-ready shipments. So rather than sending me a truckload of oil, send me shipments that are store-ready, right? That are store-ready. So even though they're not a retailer, they're asked to be operate on the back end in a retail-ready way. So two customers there that clearly are not retail, but need the sophistication of a retail supply chain software solution, and you know has helped us again, sort of diversify. As this modernization process continues to kinda stretch out across every single industry, you know, the investments that we've made seem to be performing quite well for us. Second element of the spending question, you brought up a Gartner framework, double digits. Yeah. I think that's 2x faster than the category was growing by before- That's right. - 2020. That's right. Do you think WMS ultimately went through an extended period of just underinvestment, and you're still in a mode where customers are making good for things they weren't doing before? No, not really. I mean, there's a changing world, right? The fact that you can place an order at 8:30 P.M. and have it delivered to you on your doorstep at 5:00 A.M. I mean, that—what goes on behind the scenes to make that single product arrive on your doorstep at 5:00 A.M. when you ordered at 8:30 P.M., is quite extensive. That change is quite extensive. And involves, amongst other things, modern software to, you know, to accomplish the goal. So it's not—I don't think it was necessarily a question of underinvestment, but the acceleration of the consumer SLAs has driven, you know, the need for more speed in the execution systems. So you talked earlier, you're a cloud transition story at the moment- Yeah -which means there's two paths to grow. You can win new logos, and you can migrate your installed base. Yeah. Maybe on the latter, how many are in the installed base at this point that can still move cloud? Yeah, from a WMS perspective, which is our largest, you know, customer base segment, we've got about 900 customers, and we're about 15% of the way through the migration from on-premise to the cloud. Okay. Yeah. There's a big event coming up for those that were in SPS Commerce at the start of the day. It came up as well. SAP is sunsetting- ECC -not just their legacy WM product, but also their ECC. Is that relative to change events that normally your customers are considering? Is this a big one? Yes, it is. Okay. It's, you know, it's definitely creating some tailwinds for us. I think that, you know, look, I don't think there's any secret. The ECC to S/4HANA move that SAP is encouraging people to take is not a reinvention of technology from an SAP perspective. They haven't rebuilt their systems from the ground floor up to be cloud native. They're essentially taking their on-premise software and moving it into the cloud. What that signals to their customers is, really there's no innovation, right? There's really no innovation. And I think that that's fine for the core SAP solutions, financials, order to cash, procurement. There's not a lot of innovation required there. So it's not going away, not going away any time soon. But in the areas around those core SAP capabilities, supply chain being, you know, being one of them, customers, I think, are looking and saying: "Look, I can't just move that over and not have innovation for another 10 years." So they're starting to, you know, kind of splinter those things off, and we're the beneficiary. We actually had one of our more recent customers, Schneider Electric, wall-to-wall SAP customer. They're moving to S/4HANA, but they've broken away WMS, warehouse management and transportation management, and awarded us the global contract to roll out WMS across all their DCs and TMS across the across. They were an SAP, an SAP customer. And, you know, they're not the only one. There are, you know, the L'Oréals and the Nikes and the Asda in the U.K. and so forth, all going through that same ECC to S/4HANA migration, at the same time, sort of breaking away those supply chain pieces, and we've been the beneficiary. So, you know, I expect that to, you know, to continue, frankly. And, you know, there aren't hundreds and hundreds and hundreds just yet, but for us, they're the tier one global accounts, and, you know, candidly, you don't need that many of them to make the difference for us. Yeah. The number that has been estimated is they maybe have 5,000 legacy WM customers out there. Yeah. Not all are gonna be applicable to you. No. But do you have a rough sense proportion? No. Honestly, I don't know what the number is of the 5,000. You're absolutely right in terms of many of them have, you know, I don't mean this in a rude way, but pretty rudimentary needs, and they're satisfied by the SAP capability. They don't need innovation and so on and so forth. But, you know, one, I think it would be fair to even if there were 10% that were, you know, it would be highly advantageous for us. Okay, great. Wanted to go back to the comment you made earlier. With cloud, it's easier for customers to access innovation- Yeah -'cause it's always happening. Yeah. That's within a product, but it's also across the products- Yeah -which gets to cross-selling. So, cross-selling as a contributor to cloud bookings has been a pretty steady element. Yeah. Is that actually something that over time, you know, as customers do move, this is gonna become a more cross-sell-centric growth story because of how the platform is architected? I think so. So, so historically, you know, it bounces around quarter by quarter and so forth, but cross-sell upsells are about 25% of our new software revenue every quarter, right? About 20. I think it's been as low as 20 and as high as 30. But anyway, so about 25%. In the old world of selling licensed software, let's, you know, just maybe candid about it. In the world of selling licensed software, it would not be unusual to go to a client, I'm speaking hypothetically here, of course, and they say: "Hey, we'd like to buy, you know, WMS." And we'd say: "Well, how about buying TMS as well?" They would say, "Hmm, only if it's a great deal." Right? And in the licensed world, you could make it a great deal, okay? So they buy WMS and TMS together. In the cloud world, obviously paying subscription, nobody in their right mind is gonna say: "Yeah, sure. Why don't I start paying for something that I'm not gonna be using for a while?" It just doesn't work that way. And our systems are such that it's not impossible. Schneider Electric is very big. They are taking on WMS and TMS at the same time. But most companies find it hard to execute on more than one of these initiatives at a time. They're big. Big WMS rollout, big OMS implementation, big TMS implementation, they're big. So as a consequence of that, of course, they buy when they're ready. We have a unified set of solutions, obviously, common technology, and so forth. So I do think as we see more customers move over to the cloud with one product, the likelihood and opportunity for cross-sell, upsell, is higher going forward. Do you have dedicated sales and services teams just supporting cross-sales at this point? Yes, we... Not services, not services. Okay. You know, they - frankly, the services team- They move around. -execute on a project when it's sort of put in front of them, as it were. Yeah. But we have a team, you know, account-specific team that are focused on existing customers and, you know, understanding their roadmap and working with them to build that roadmap out for a multi-product solution. There's been two- That's code for selling them more software. Yeah. There’s been two new product introductions in recent history, Point of Sale, most recently, Supply Chain Planning- Yeah -where when they happen, it's really kind of eyebrow-raising- Yeah -'cause these are massive TAMs. Yeah. Each equals what you've been doing- That's right -in execution. That's right. Is there a commonality in why Manhattan arrived at those two things to go after? Market need. So if we think really quickly about point of sale, in fact, I've, you know, I've been asked at conferences like this, you know, 10, 12 years ago, will you essentially, will you ever get into point of sale? The answer is no. There were behemoth companies in that space that dominated. But now, but things changed for us, right? In as much as the short version is, retail stores have changed. They were the same for hundreds of years, right? They hadn't changed. They might look different, different shapes, different products, different lighting, but you walked into the store, you picked up a product, you paid for it, and you walked out. That's what a retail store did. It's a single- function facility. That little cash register, that little glorified calculator that sat in the corner, ran the store, consummated the transaction. That's all it did. You wake up today. I'm making this a little simple, of course, but you wake up today, the store is a multi-function facility. Billboard for the digital business, it's a gallery, it's a boutique, maybe even they don't sell products. It's a customer service center. You buy online, return in store. It's a mini distribution center. You buy online, retailer use it to distribute store product right to you. You can buy online, pickup in store. You can buy online, pickup curbside. There are all these many, many functions now that go on inside of the store that cannot be supported by a glorified calculator, that cash register. And the time was right, we felt and we feel, for the next generation of really not point of sale, it's really the next generation of, selling platform. There's more to it than I've described, but you get my point that something changed, in the market, and there is a market need. That's why we built, that's why we launched. The same is true, of course, entirely different, of supply chain planning. Supply chain planning has been around, excuse me, supply chain planning as a category, has been around for decades. We believe something has changed, something has tipped here. So for decades, planning systems were batch-based, right? And just one example, but you think about retail, retail would send one shipment to their stores once a week, okay? And then the CEO would get the sales report overnight. You know, what happened yesterday, what happened yesterday? But because of that infrequent delivery process, it meant that batch-based planning systems made sense. You took all these big chunks of data, you ran a big batch overnight or even once a month, to decide what you were gonna buy and where were you gonna disposition that inventory. You fast-forward to today, and again, you can buy at 8:30 in the evening, order 8:30 in the evening online, and that product's on your doorstep at 5:00 A.M. And of course, that's an extreme situation, but over the last 15 years, that's been the trajectory, right? From, you know, going into a store and only getting one delivery a week. All of that agility, flexibility, and speed over the last 15 years has been absorbed by the execution systems. Order management systems have got better, distribution system centers have got faster. They've been putting robots in there, automation has been put in there, transportation systems have become much faster. Uber, Deliveroo, and all those things, deliver over, you know, deliver overnight. All of that speed has been absorbed by the execution systems. By the way, we've benefited from that over the last, you know, over the last 15 years, and so on and so forth, from a software perspective. But I think we're at a tipping point, we're at a tipping point, because as fast as those execution systems get, you've still got to have inventory to feed them, right? You've got to have inventory in the right place at the right time. There's only two answers to having inventory at the, in the right place at the right time. One is, you constantly shuffle it around based upon where the demand moves around the nation. If you do that, you're handling it two, three, four times. Transportation costs go through the roof. Suboptimal. The other answer is stockpile inventory where you might need it, and, and obviously increase your balance sheet. That's not a very good answer either. We believe the time is now right to take planning systems from being batch-based to continuously optimize planning cycles, so that you can take that one product that was sold at 8:30 A.M. and delivered at 5:00 A.M., deliver it immediately and consistently into the planning system, and have the planning system continuously optimize what to buy and where to disposition inventory to make sure the right inventory is in the right place at the right time. So, you know, we're our charter or our objective is to be, you know, a half a step ahead of the market. You never want to be too early, and so forth. But we think now, after 15 years of focusing on execution systems becoming faster and faster and faster and smoothing out all of that volatility, there is no choice, frankly, to now begin to focus on the inventory side as planning side of the house. Hence, the reason that we sequenced the planning solutions moving into cloud native, and breaking that batch model, to the end of sort of our product portfolio versus the beginning. There is one other, you know, it's a bit tactical, but important. The compute you need to run these batches is big and powerful. And obviously, the advent of cloud and being able to scale that up and down today versus, you know, prior years is helpful, too, but it's not the strategic reason for doing it. Whew! That was a long answer, wasn't it? If you give the directive, "Look, I don't want our win rates to change at all going after supply chain planning, even though it's a new product- Yeah. -“I expect the same success,” do you think you'll end up narrowing in on a type of customer? Will it be a Manhattan WMS customer? Yeah That sees the logic integrating with this? I mean, look, that's going to be our first target. It was for point of sale. Our point of sale strategy was, hey, it's a new, brand-new product for us. We're not known for this, so let's go to sell to our existing customer base, where, you know, our reputation - where we've got a reputation and folks trust us. By the way, why don't we go and sell to existing Manhattan customers who already have order management? Because it's a natural, you know, extension. And we've had some success there. But we've also had success selling point of sale to customers that we've never done business with before, and of course, by definition, have no other products from us. We were very encouraged by that because what it told us was we didn't need either a, an existing relationship and reputation or other products to enable us to win a point-of-sale deal. We could go head-to-head against, you know, point-of-sale system companies that have been around for 20 or 30 years and win just exclusively on the merits of the product. Now, that said, as we launch, you know, supply chain planning, GA is going to be in early October. No question, you know, the first doors we're gonna be knocking on are, you know, the folks that are friends of ours and already have, already have our products. That'll be the place we start. Manhattan is unique in the sense that you take on a lot of the services needs where other vendors maybe have delegated that over time. Right. And so you're controlling a lot of the- Right -the value. Right. That's influenced the idea of a partner community, though the partners have been getting larger, so there's more- Yeah SIs than you have worked with in the past. Yeah. Other spin on partnership is go-to-market relationships, and I want to ask about Shopify, which was announced earlier this year. Yeah. It kind of speaks to what you're doing in the omni-channel arena, but the virtue of your two companies coming together and why that's a good thing. Yep, the short version there is, there's a history of, e-commerce platforms. There used to be three big ones: IBM, SAP, and Oracle, ATG, Hybris, and WebSphere Commerce. They sort of got a bit tired around the edges. This is an oversimplification, but got a bit tired around the edges, and Demandware came along and became, you know, the dominant player. Demandware, acquired by Salesforce, became the dominant player. Popular theory, hypothesis is that that's getting a bit tired around the edges. Technology is a bit old, and there are two new players emerging. One is commercetools, and one is Shopify. Very different approaches, but nonetheless, they are emerging. Their objectives is to sweep through that, commerce platform market and do a bunch of replacements. And frankly, we want... And the natural place for Shopify is they come up from SAP, SMB, into the enterprise space, is to look at our order management system company, customers as, you know, great, a great, universe of opportunity. So why not pre-build integration with our order management, make it easier for them? So that's the Shopify benefit. For us, we'd like to be a part of that e-commerce platform replacement wave as it continues and, you know, move forward with, with Shopify, so hence the partnership. That's great. We're out of time. A lot of ground covered, but please join me in thanking Eddie and Dennis. Sure thing. Thank you for your time. Appreciate it. For more questions, next up, we have FIS, Kohl's, ASGN, Blackbaud, ePlus, and Navitas.