Manhattan Associates(MANH) - 2025 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Total revenue for Q3 2025 was $276 million, up 3% year-over-year, with a 7% increase when excluding license and maintenance revenue [18][19] - Cloud revenue increased by 21% to $105 million, slightly better than expected, while services revenue declined by 3% to $133 million [19] - Remaining Performance Obligations (RPO) increased by 23% year-over-year to $2.1 billion [20][21] - Adjusted operating profit was $103 million, with an adjusted operating margin of 37.5%, up about 40 basis points year-over-year [22] - Adjusted earnings per share (EPS) for Q3 was $1.36, up 1%, while GAAP EPS was $0.96, down 7% [22] Business Line Data and Key Metrics Changes - Cloud revenue growth was a significant driver of overall performance, with strong execution in services revenue despite a decline [5][19] - The company experienced a meaningful uptick in conversions and a growing pipeline of future conversion opportunities, particularly in cloud services [5][6] - New logos represented approximately 35% of the pipeline at the end of Q3, indicating a healthy mix of new and existing customer engagements [8] Market Data and Key Metrics Changes - The company reported strong win rates at 70%, with robust demand across diverse end markets including retail, grocery, and pharmaceuticals [5][8] - The macroeconomic environment remains volatile, impacting customer behavior and project timelines, but demand for the company's solutions remains strong [20][24] Company Strategy and Development Direction - The company is focused on strategic investments to drive growth initiatives, including converting on-premise customers to cloud solutions and cross-selling its unified product portfolio [5][29] - The launch of a dedicated renewal team and a conversion program aims to enhance customer engagement and accelerate cloud adoption [10][75] - The introduction of Agentic AI across all solutions is expected to enhance operational efficiency and customer value, with plans for broader deployment in early 2026 [11][96] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about achieving the high end of RPO goals for 2025 and expects cloud revenue to grow by 20% in 2026 [29] - The company anticipates a significant renewal cycle over the next 18 months, which is expected to positively impact RPO levels [32][33] - Management acknowledged the challenges posed by the macro environment but remains confident in the company's fundamentals and growth potential [20][24] Other Important Information - The company ended Q3 with $264 million in cash and zero debt, having invested $50 million in share repurchases during the quarter [23] - The board approved the replenishment of the $100 million share repurchase authority, reflecting confidence in the company's financial position [23] Q&A Session Summary Question: Can you share more on RPO levels and visibility for 2026? - Management highlighted a 23% year-over-year increase in RPO and expressed optimism due to a major renewal cycle coming up [32][33] Question: What are the conversion strategies for on-premise customers? - The company is taking a more proactive approach to conversions, offering fixed-fee, fixed-timeline options to a cohort of similar customers, resulting in a strong pipeline [36][37] Question: How is the fourth quarter shaping up compared to last year? - Management noted that Q4 is off to a strong start, with expectations for a performance similar to the previous year [42] Question: What role will the new COO play in growth initiatives? - The COO will focus on conversions, renewals, and strengthening the partner ecosystem to drive faster pipeline growth [45] Question: How is the company addressing the services momentum heading into 2026? - Management reported a strengthening services pipeline and backlog, indicating optimism for growth in 2026 [56][57] Question: What is the impact of Agentic AI on operations? - Internally, Agentic AI is providing leverage across departments, while externally, it is expected to enhance customer engagement and operational efficiency [92][96]