Manhattan Associates(MANH) - 2023 Q1 - Quarterly Report

PART I FINANCIAL INFORMATION Item 1. Financial Statements Q1 2023 financial statements reflect a decrease in total assets and equity, with revenue growing to $221.0 million and net income reaching $38.8 million, despite substantial share repurchases Condensed Consolidated Balance Sheets As of March 31, 2023, total assets decreased to $530.8 million and shareholders' equity declined to $181.1 million, primarily due to reduced cash and share repurchases Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2023 (unaudited) | December 31, 2022 | | :--- | :--- | :--- | | Cash and cash equivalents | $181,595 | $225,463 | | Total current assets | $371,504 | $415,375 | | Total assets | $530,843 | $570,178 | | Deferred revenue | $216,312 | $208,807 | | Total current liabilities | $322,753 | $315,595 | | Total shareholders' equity | $181,072 | $226,800 | | Total liabilities and shareholders' equity | $530,843 | $570,178 | Condensed Consolidated Statements of Income Q1 2023 saw total revenue increase 23.5% to $221.0 million, driven by cloud subscriptions, with net income rising 26.8% to $38.8 million Q1 2023 vs. Q1 2022 Income Statement (in thousands, except per share data) | Metric | Q1 2023 (unaudited) | Q1 2022 (unaudited) | YoY Change | | :--- | :--- | :--- | :--- | | Cloud subscriptions Revenue | $57,220 | $37,297 | +53.4% | | Total revenue | $221,013 | $178,956 | +23.5% | | Operating income | $47,085 | $33,972 | +38.6% | | Net income | $38,791 | $30,592 | +26.8% | | Diluted earnings per share | $0.62 | $0.48 | +29.2% | Condensed Consolidated Statements of Cash Flows Q1 2023 operating cash flow significantly increased to $58.7 million, but substantial share repurchases led to a net decrease in cash and cash equivalents of $43.9 million Cash Flow Summary for Three Months Ended March 31 (in thousands) | Cash Flow Activity | 2023 (unaudited) | 2022 (unaudited) | | :--- | :--- | :--- | | Net cash provided by operating activities | $58,716 | $31,792 | | Net cash used in investing activities | ($666) | ($1,159) | | Net cash used in financing activities | ($101,688) | ($77,108) | | Net change in cash and cash equivalents | ($43,868) | ($47,389) | Notes to Condensed Consolidated Financial Statements Notes detail accounting policies, showing $1.2 billion in RPO primarily from cloud subscriptions, an increased effective tax rate, and the Americas as the largest revenue segment - As of March 31, 2023, the company has approximately $1.2 billion in Remaining Performance Obligations (RPO), with 98% related to cloud-native subscriptions. About 40% of this is expected to be recognized as revenue over the next 24 months[36] - The effective tax rate for Q1 2023 was 17.9%, a significant increase from 11.9% in Q1 2022. The rise is attributed to a net decrease in excess tax benefits from restricted stock vesting[50] Revenue by Segment (in thousands) | Segment | Q1 2023 Revenue | Q1 2022 Revenue | | :--- | :--- | :--- | | Americas | $170,759 | $139,540 | | EMEA | $39,658 | $32,151 | | APAC | $10,596 | $7,265 | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management reports strong Q1 2023 results driven by cloud solutions, with total revenue up 24% to $221.0 million and improved operating margin, as the company transitions to a cloud-first model with strategic growth goals - The company's business is transitioning to a cloud-first model, with cloud solutions accounting for 91% of total software revenue in Q1 2023[72] - Remaining Performance Obligation (RPO) grew 42% over the prior year, reaching approximately $1.2 billion as of March 31, 2023, with 98% being cloud-native subscriptions[78] - Strategic goals for 2023 include focusing on employees and customer success, investing in innovation, expanding the Manhattan Active cloud suite, growing cloud subscription revenue, and expanding global sales and marketing teams[70][76] Results of Operations Q1 2023 total revenue increased 24% to $221.0 million, driven by a 53% surge in cloud subscriptions, while operating income rose 39% to $47.1 million across all geographic segments Revenue by Type - Q1 2023 vs Q1 2022 (in thousands) | Revenue Type | Q1 2023 | Q1 2022 | % Change | | :--- | :--- | :--- | :--- | | Cloud subscriptions | $57,220 | $37,297 | 53% | | Software license | $5,352 | $8,358 | -36% | | Maintenance | $35,650 | $35,302 | 1% | | Services | $116,170 | $89,918 | 29% | | Hardware | $6,621 | $8,081 | -18% | | Total revenue | $221,013 | $178,956 | 24% | Operating Income by Segment - Q1 2023 vs Q1 2022 (in thousands) | Segment | Q1 2023 | Q1 2022 | % Change | | :--- | :--- | :--- | :--- | | Americas | $29,647 | $21,393 | 39% | | EMEA | $12,793 | $10,517 | 22% | | APAC | $4,645 | $2,062 | 125% | | Total operating income | $47,085 | $33,972 | 39% | Liquidity and Capital Resources Q1 2023 operating cash flow increased to $58.7 million, funding operations and share repurchases, with the company maintaining $181.6 million in cash and no debt - Cash flow from operating activities increased to $58.7 million in Q1 2023, compared to $31.8 million in Q1 2022, driven by earnings growth and timing of customer collections[115] - The company repurchased $101.7 million of its common stock in Q1 2023[117] - As of March 31, 2023, the company had $181.6 million in cash and cash equivalents and no debt[90][114] Item 3. Quantitative and Qualitative Disclosures About Market Risk No material changes occurred in the company's quantitative and qualitative disclosures about market risk from the prior annual report - There were no material changes to market risk disclosures from the most recent Form 10-K[125] Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective, with no material changes to internal control over financial reporting during the quarter - The CEO and CFO concluded that as of March 31, 2023, the company's disclosure controls and procedures were effective in providing reasonable assurance[128] - No changes occurred in the company's internal control over financial reporting during Q1 2023 that would have a material effect[129] PART II OTHER INFORMATION Item 1. Legal Proceedings The company is not currently involved in any legal proceedings expected to have a material adverse impact on its business or financial position - The company is not currently involved in any legal proceedings expected to have a material adverse impact[131] Item 1A. Risk Factors No new risk factors are presented in this report, with investors directed to the comprehensive disclosures in the prior annual Form 10-K - The report refers to the risk factors disclosed in the Annual Report on Form 10-K for the year ended December 31, 2022, for a comprehensive understanding of potential risks[133] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds During Q1 2023, the company repurchased 514,838 shares of common stock, with the Board replenishing the share repurchase authority to $75.0 million in April 2023 Share Repurchases for Q1 2023 | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | Jan 1 - Jan 31, 2023 | - | - | | Feb 1 - Feb 28, 2023 | 274,254 | $144.89 | | Mar 1 - Mar 31, 2023 | 240,584 | $143.15 | | Total | 514,838 | N/A | - In April 2023, the Board of Directors replenished the company's share repurchase authority to an aggregate of $75.0 million[135] Item 6. Exhibits This section lists exhibits filed with the Form 10-Q, including CEO and CFO certifications and Inline XBRL documents - Exhibits filed include CEO and CFO certifications pursuant to Sarbanes-Oxley Act Sections 302 and 906[140]