Manhattan Associates, Inc. (NASDAQ:MANH) Q1 2023 Earnings Call Transcript

Manhattan Associates, Inc. (NASDAQ:MANH) Q1 2023 Earnings Call Transcript April 25, 2023

Manhattan Associates, Inc. beats earnings expectations. Reported EPS is $0.8, expectations were $0.64.

Operator: Good afternoon. My name is Robert and I’ll be your conference facilitator today. At this time, I’d like to welcome everyone to the Manhattan Associates First Quarter Earnings Call. I would now like to introduce your host, Mr. Michael Bauer, Head of Investor Relations of Manhattan Associates. Mr. Bauer, you may begin your conference.

Michael Bauer: Great. Thank you, Robert, and good afternoon, everyone. Welcome to Manhattan Associates 2023 first quarter earnings call. I will review our cautionary language and then turn the call over to Eddie Capel, our CEO. During this call, including the question-and-answer session, we may make forward-looking statements regarding future events or the future financial performance of Manhattan Associates. You are cautioned that these forward-looking statements involve risks and uncertainties, are not guarantees of future performance and that actual results may differ materially from the projections contained in our forward-looking statements. I refer you to the reports Manhattan Associates filed with the SEC for important factors that could cause actual results to differ materially from those in our projections, particularly our annual report on Form 10-K for fiscal year 2022 and the risk factor discussion in that report as well as any risk factor updates we provide in our subsequent Form 10-Qs. We note in particular that turbulent global macro environment could impact our performance and cause actual results to differ materially from our projections.

We are under no obligation to update these statements. In addition, our comments include certain non-GAAP financial measures in an effort to provide additional information to investors. We have reconciled all non-GAAP measures to the related GAAP measures in accordance with SEC rules. You’ll find reconciliation schedules in the Form 8-K we submitted to the SEC earlier today and on our website at manh.com. Now, I’ll turn the call over to Eddie.

Eddie Capel: Thanks, Mike. Well, good afternoon, everybody, and thank you for joining us as we review our first quarter results and discuss our updated full year 2023 outlook. Well, Manhattan Associates is off to a strong start in 2023, reporting record results. Q1 total revenue was $221 million, up 24% as reported and 33% if normalized for our cloud transition. Earnings per share was $0.80, also up 33%. Both this top and bottom line results exceeded our expectations. Demand is strong, customer satisfaction is high and our growing investment in research and development has positioned Manhattan as the leading innovator in supply chain execution, omni-channel solutions and retail point-of-sale. And these favorable characteristics contributed to Q1 being our eighth consecutive record revenue quarter, highlighted by year-over-year 53% growth in cloud revenue, 29% growth in services revenue, and 20% revenue growth across all our geographies.

And these strong results drove our top line outperformance and solid earnings leverage in the quarter. RPO, the leading indicator of our growth, increased 42% to $1.2 billion over Q1 2022 as demand for our mission-critical cloud solutions continues to be strong and resilient across our product portfolio. From a vertical perspective, retail, manufacturing and wholesale continued to drive more than 80% of our bookings for the quarter. And across our solutions, the sub-verticals are nicely diversified. For example, in the quarter, cloud deals won include a discount retailer, a health solutions company, a grocery retailer, an industrial manufacturer, a specialty retailer of automotive parts and a fashion brand as well as a number of others. Win rates in the quarter were about 75%, with 25% of new cloud bookings being generated from net new logos.

And additionally, whilst the mix of bookings will vary on a quarterly basis, we had notable cross-sell strength in the quarter. And as discussed in prior calls, Manhattans’ cloud-native platform makes unifying mission-critical commerce and supply chain systems a real option versus simply an aspiration. For our customers, this can result in reduced IT complexity, increased revenue and improved profitability. And for Manhattan, it’s a natural catalyst to extend our best-of-breed product footprint within our existing customer base. And this differentiation provides Manhattan Active Solutions with another clear advantage over our competition. Our strong product activity continues to drive our services pipeline and growth. Importantly, our Professional Services team continues to perform very well for our customers and completed well over 100 go-lives in the quarter.

Our solution pipeline remains robust with encouraging demands across our product suites with new potential customers representing about 35% of our total pipeline. And while we remain appropriately cautious regarding the global economy, we continue to set aggressive growth and investment goals. This includes strategic investments in industry-leading innovation, further enablement of customer success, and expanding our addressable market. From a hiring standpoint, we continue to anticipate adding roughly 400 to 500 new employees this year and have already welcomed over 150 new employees to the Manhattan family just in Q1 alone. Now, turning to the product front. Each year around about this time, we participate in a definitive vendor landscape — set of definitive landscape studies for our WMS, TMS, and OMS applications.

For WMS and TMS, Gartner publishes an annual Magic Quadrant report. And for OMS, Forrester publishes the Omnichannel Wave report every other year. And while the results of the WMS Magic Quadrant won’t be released until early next month, we’re hopeful to make it 15 consecutive times as a definitive leader for WMS in this report. And for TMS though, I’m happy to share for the fifth consecutive year — or fifth consecutive time actually, we’ve been named a leader in the TMS Magic Quadrant. And our commitment to high levels of investment and innovation in TMS is born in both the strong showing in the MQ and strong levels of project activity across four continents. The Forrester Omnichannel OMS Wave was published this month. And for the second consecutive time, Manhattan Associates is the only leader in the Wave.

Having a single leader across consecutive Waves, given its — the report only comes out every two years, is highly unusual and it reflects our technical strength and unmatched functionality that has been generated from our 18 years of strong investment in this critical solution. And as the Forrester analysis shows, no vendor really comes close to matching our depth and breadth of capability across customer service, inventory availability, real-time order promising, fulfillment optimization and in-store execution. And of course, we deliver each of WMS and TMS and OMS on our industry-leading and unified Manhattan Active platform, which is our cloud-native application architecture and development platform. And Manhattan Active WM continues its strong performance measured in terms of new wins and successful customer adoption and go-lives.

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Now with over 100 Manhattan Active WM customers, we continue our strong track record of being selected to run the largest and most sophisticated supply chains. And we also continue to strengthen our diversity of industry and geographic coverage. Shifting gears just a little bit to our omni-channel solutions, we are happy to report that we took another very significant customer live with our point-of-sale solution this quarter. And in addition to delivering our cloud-native point-of-sale across their store fleet, we also executed a three-channel order management go-live simultaneously. Our OMS is really unique in its ability to simultaneously optimize retail, wholesale, and e-commerce orders. And this combined with our point-of-sale gives us the ability to help this particular customer deliver omni-channel operational excellence and to provide a technology template for a number of other significant specialty apparel brand within their group.

At the Momentum this year, we’re thrilled to have a number of point-of-sale customers presenting on the value that they’re deriving from the rollout of our omni-channel point-of-sale. Now, speaking of Momentum, our annual user conference which is coming up here in a month or so, I will be in Scottsdale, Arizona, one of our favorite venues. And this year’s theme is moving life and commerce forward. And we, our customers, and our partners will bring that theme to life in many creative and informative ways, and we’re excited. We’re excited to have our customer and our partner community come together with so many critical supply chain commerce topics to discuss at this time. We’ll also be demonstrating the unique advantages that we deliver when we assemble multiple Manhattan Active applications together.

The Manhattan Active architecture empowers our customers and our partners to leverage their creativity and technical prowess, to start with our market-leading application functionality and to extend it to do — to drive even more positive change for their businesses and their customers. And finally, we’re very excited about the advanced work that we’re doing determining how to best take advantage and leverage modern natural language models like ChatGPT and Bard, another topic that we’ll be presenting on and discussing in detail at Momentum. So that concludes my business update. Dennis is going to provide you with an update on our financial performance and outlook for the rest of the year, and then I’ll close our prepared remarks with a brief summary before we move to Q&A.

So, Dennis?

Dennis Story: Thanks, Eddie. So our Manhattan global teams continue to execute exceptionally well in a challenging macro environment. For the quarter, we delivered a strong, balanced financial performance across top line growth, operating margin, and cash flow. On an as reported basis, our Q1 results compare favorably to the Rule of 50. And if our revenue growth is normalized for our cloud transition, which excludes license and maintenance revenue, our results exceed the Rule of 60. FX in the quarter was a 1-point headwind to revenue growth, a nearly 2-point headwind to year-over-year RPO growth, and about 40 basis points of tailwind to sequential RPO growth. Now to our Q1 results. Growth rates are reported on a year-over-year basis, unless otherwise stated.

And I’ll let the numbers speak for themselves. Total revenue was a record $221 million, up 24%. Excluding license and maintenance revenue which removes the compression driven by our cloud transition, our total revenue was up 33%. Cloud revenue totaled $57 million, up 53%. And as Eddie highlighted, we ended the quarter with RPO of $1.2 billion, up 42% compared to the prior year and up 10% sequentially. As of March 31, 98% of our RPO represents cloud-native subscriptions. And how about the global services team? Global services revenue was a record $116 million, up 29% as cloud sales continue to fuel services revenue growth globally. Operating profit totaled $64 million with adjusted operating margin of 28.8%, up 190 basis points year-over-year.

Our performance was driven by strong cloud and services revenue growth combined with operating leverage as our cloud business scales. Importantly as Eddie discussed, we continue to invest for future growth. This resulted in Q1 earnings per share of $0.80, up 33%, and GAAP EPS of $0.62, up 29%, a company that generates GAAP earnings. Turning to cash, operating cash flow was $59 million, up 85%. This resulted in a 30% adjusted EBITDA margin and a 26% free cash flow margin. Remember, like full year 2022, full year 2023 cash taxes will be negatively impacted by the US Tax Cuts and Jobs Act. Moving to the balance sheet, deferred revenue increased 34% to $218 million. We ended the quarter with $182 million in cash and, lo and behold, zero debt. Accordingly, we leveraged our strong cash position and invested $74 million in share repurchases in the quarter.

Also, our Board has approved the replenishing of our $75 million share repurchase authority. How about them apples? That covers the Q1 quarter, so on to our updated 2023 guidance. As consistently mentioned, our financial objective is to deliver sustainable double-digit top line growth and top quartile operating margins benchmarked against enterprise SaaS comps. This includes a balanced investment approach to growth and profitability. With our strong start to the year and increasing visibility, we are raising our 2023 revenue operating margin and earnings per share guidance. We are also reiterating our 2023 RPO guidepost range and midpoint of $1.35 billion. Consistent with our recent earnings releases, our guideposts and guidance ranges can be found in today’s earnings release, supplemental schedules.

All guidance references made on today’s call will be the midpoint of their respective ranges. As noted on prior earnings calls, we will be updating our RPO outlook on an annual basis. So as previously discussed, our bookings performance is impacted by the number and relative value of large deals we close in any quarter, which can potentially cause lumpiness or non-linear bookings throughout the year. So for full year 2023, we expect total revenue of $860 million, up $34 million or 4% from our prior midpoint of $826.5 million. Excluding license and maintenance attrition, this represents 20% growth. All in, our target is 12%. And for Q2, we expect total revenue of $216 million, or 21% growth, ex license and maintenance. All in, our target is 13% growth.

For operating margin, we are increasing the midpoint to 26.5%, up from our prior midpoint of 26%. Included in this outlook is roughly 200 basis points of headwind from the reduction in license and maintenance revenue. And as Eddie highlighted, given the combination of our demand and size of our opportunity, we continue to invest in our business. We believe this near-term margin trade-off well positions Manhattan Associates to expand our TAM, deliver long-term recurring revenue growth and cash flows. At the midpoint, we are targeting Q2 operating margin of 26.5%; Q3, 26%; and accounting for Q4 retail peak seasonality, 24.5%. Our full year adjusted EPS outlook is increasing by $0.20 to $2.88, up 7% from our prior midpoint of $2.68. On a quarterly basis, we are targeting Q2 and Q3 to be $0.72; and accounting for Q4 retail peak seasonality, $0.64.

For GAAP EPS, our midpoint increases by $0.15 to $2.03, up 8% from our prior $1.88 midpoint. For Q2, we are targeting GAAP EPS of $0.50. Here are some additional details on our 2023 outlook. Yes, we are increasing our cloud revenue midpoint to $240 million, representing 36% growth and is up 3% over our prior midpoint of $234 million. On a quarterly basis, we are targeting $59 million in Q2, $61 million in Q3, and $63 million in Q4. For services, we are increasing our forecast of $455 million to $463 million. The $459 million midpoint represents 17% growth and is up $27 million or 6% from our prior $432.5 million midpoint. On a quarterly basis, we are targeting Q2 services revenue of $118 million; Q3, $119 million; and accounting for Q4 retail peak seasonality, $106 million.

Moving to maintenance, we are targeting a range of $126 million to $128 million, or an 11% decline at the midpoint. On a quarterly basis, we are targeting Q2 $32 million, Q3 $30.5 million and Q4 $29 million. We expect hardware revenue of $5 million per quarter and expect license of $2 million in Q2, and $1.5 million in Q3 and in Q4. For consolidated subscription, maintenance and services margin, we continue to target about 54% for the full year. On a quarterly basis, we are targeting approximately 54.5% in Q2 and Q3, and 54% in Q4. And finally, we expect our tax rate to be 21.5% and our diluted share count to be 62.8 million shares, which assumes no buyback activity. In summary, fantastic execution by the Manhattan team, thank you. And back to Eddie for some closing remarks.

Eddie Capel: Yes. Terrific. Thanks, Dennis. Well, we’re very pleased. We’re pleased with the strong start to the year and our record financial results. As always, we expect this year to be one of great accomplishments. And before opening up the call to questions, I’d like to share a couple of recent ones. Firstly, earlier this week, Manhattan Associates celebrated an important milestone, 25 years as a NASDAQ-listed public company. We’re very proud of that. And second, for the 11th consecutive year our team members voted Manhattan as a top workplace in Atlanta. And this award follows similar recognitions that Manhattan has earned around the globe over the past 12 months. So congratulations to all of our team members, and thank you for all the great work and your dedication to our customers. So that concludes our prepared remarks. And Rob, we’d be happy to take any questions now.

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Q&A Session

Operator: Thank you. Our first question comes from Terry Tillman with Truist Securities. Please proceed with your question.

Terry Tillman: Yes. Thanks. Good afternoon. And really strong results, congrats on that, and I guess happy birthday, MANH. The first question, I guess, Eddie, do you still have that office in Manhattan Beach, that little cute office? Is that still in the office portfolio?

Eddie Capel: We don’t, Terry, and we’ve been very happy with our financial performance over the last 25 years. If only we had owned that real estate, I think it might have outstripped us. But no, we don’t, unfortunately.

Terry Tillman: Okay. Fair enough. So yes, just a quick question for you, Eddie. I think in the prepared remarks you were talking about the increased cross-selling. What I’m curious about now is, you’ve got 100-plus customers on the cloud WMS, so that’s great to see. The idea here is, these become unified workflows and — when folks get on the microservices architecture. How are the conversations going in kind of the light bulb or the aha moments in terms of, wow, these are integrated workflows and really kind of starting to tip the scales and getting them to buy then the OMS or the TMS or other solutions? Just maybe an update on where you are in those kind of, hopefully, aha moments and then I had a question for Dennis.

Eddie Capel: Yes. Well, I think that certainly, those — your expression is the light bulbs are going on. Frankly, I think it’s a little different. Honestly, I think our customers in the marketplace have been looking for integrated workflows and hoping for integrated workflows for a long, long time. But it’s frankly been very difficult to realize them. We now have a solution to be able to actually realize that objective, and it becomes a real option versus, as I mentioned, just an aspiration. So in answer to your question, the conversations are going very well, particularly with our strategic customers. Usually, when we’re talking about, whether it be WMS or TMS or OMS and the specific need of that specific customer at that specific time, there are also conversations about all of our other solutions in terms of what that road map looks like to move from one to the other to the other.

And so we had mentioned cross-sell was a particularly strong this quarter. It’s going to bounce around a little bit for sure. But certainly, those conversations are very encouraging.

Terry Tillman: Got it. And I guess, Dennis, for you, congrats on DSOs and GAAP earnings. My question relates to the cloud subscription revenue has been accelerating strongly, and it accelerated again in 1Q and it was really actually notable upside. I’m curious, and maybe each quarter could be different variables that drive notable upside. But is there anything you can share about in the first quarter, whether it was just accelerated kind of go-lives or maybe more users or expansion deals? Just anything more on just the level of positive variance? Thank you.

Dennis Story: I mean, the primary drivers, the ramp, the compounding starting with these ramp deals, highly successful for us. That’s the big driver.

Eddie Capel: We’ve had a few. I wouldn’t say it’s a landslide. We’ve had — we certainly had a few projects that moved more quickly. So sort of a little different — subtly different to the ramp that was projected that the customers brought in production environments more quickly than they were expecting. So that was helpful, too.

Terry Tillman: Congrats again. Thanks.

Eddie Capel: Thank you, Terry.

Dennis Story: Thanks, Terry.

Operator: Our next question is from Brian Peterson with Raymond James. Please proceed with your question.

Brian Peterson: Hi, gentlemen, thanks for taking the question and congrats on the results. So Eddie, I wanted to start on point-of-sale. So you guys have had some success there. I’d love to hear about maybe the ramp of that product and how we should think about that contributing to RPO or growth over the long term? And how excited are you in that portfolio and how they can ultimately fit in?

Eddie Capel: Yes. I mean, look, it’s a reiteration of me saying I’m very excited about where we are there. The objective is to get a 10 or a dozen live and referenceable customers by the end of the year because I think that’s when sort of the flywheel begins to start. And we’re certainly on track for that. In terms of the financial impact of point-of-sale on our financial results, frankly, it’s pretty minimal at the moment, which is frankly is great. Now, that’s a function of a solid performance across the rest of the product portfolio as well, but the opportunity for strong CAGR in that space is certainly there for us. And look, back to a little bit of same — about the same response to the previous question, the conversations about the road map for modern technology in the retail store are definitely ramping up, and I think continue to be more excited than ever about the opportunity that lies in front of us.

Brian Peterson: Understood. Maybe a follow-up to Terry’s question on cross-sell. How do you think about what was really strong this quarter? And as you guys build out the portfolio, the cross-sell motion changed a little bit, right? So I guess I’m just curious how that could evolve potentially over the next three to five years? Thanks guys.

Eddie Capel: Yes. It was good balance, Brian. There was nothing that really stood out. It was a nice balance across WMS, TMS and OMS, sort of typical ratios for us and across the geographies. So that was good to see. But I would — in terms of what the typical motion, if you think about which products might come first in the portfolio of implementations and so forth, it really depends. It depends on the customers’ needs. The vertical focus changes that dependency of need a little bit across the product suite. But again, for us, it’s not really that important which goes, first, because we’ve got a unified suite of solutions that could meet any road map needs. And we’ve — our cross-sell this quarter was — a little — a tick over 35% of our new bookings this quarter came from cross-sell. So again, pretty encouraging.

Brian Peterson: Big brands.

Eddie Capel: Yes, big brands.

Operator: Our next question is from Joe Vruwink with Baird. Please proceed with your question.

Joe Vruwink: Great. Hi, everyone. I guess I’ll start with the macro question. The general indications we’ve heard this year have been that larger enterprise customer is still very much forging ahead and thinking about what modernization needs to happen. And if there’s maybe any signs of stresses, it’s probably at the lower end of the market, which I imagine isn’t served by Manhattan to begin with. I guess, I’ll ask, any changes you’re seeing from a macro sense or even changes within any particular segment of the business?

Eddie Capel: No, not really, Joe. We’ve got — we’ve diversified more — obviously, more and more over the last few years. So less retail focus for us, although still a lot of work going on in retail, but a lot of manufacturers and wholesalers going direct-to-consumer. So that obviously is very important to us. In terms of where the slowness, where the softness might be, we haven’t seen it in any particular segment or, frankly, in any particular tier. There are winners and losers in every tier. Obviously, we’ve seen some of the larger and maybe not the largest, but some of the larger retailers pretty negatively impacted as well as some of the specialty guys. But if I have 35 – the other thing is, about 35% of our pipeline is coming from new logos, companies that we’ve never done business with before.

And a lot of those tend to be outside of our typical vertical focus. So look, we all see the macro challenges. We hear the headlines from the companies that are struggling. And — but we’ve seen no particular concentration across either our customer base, our geographies, or our verticals.

Joe Vruwink: Okay. Great. And then I guess I’ll ask a cross-sell question too, but maybe a bit open ended. How do you think this begins to change your model in a financial sense? So, do you think this maybe becomes a driver of higher services utilization, does new cloud revenue end up activating more quickly than in the past being tied to more of a long WMS rollout? And what might be a reasonable time frame when you think about this increasing share of bookings coming from cross-sell? When do some of these things maybe start to impact the revenue model as it’s reported?

Eddie Capel: You mean product cross-selling, Joe?

Joe Vruwink: Yes.

Eddie Capel: Well, we feel like we’re doing pretty good. As I mentioned, a little more than 35% of our new bookings this quarter came from cross-sell, okay? 25% of our new bookings came from brand new logos, okay? So obviously, the balance is from existing customers and buying more of what they’ve already got. So we look at that and feel like it’s pretty balanced, frankly. As you know, we’ve been in recent quarters, the past six, eight quarters, we’ve been as high as 50% of our new bookings coming from new logos. We’ve been as low as 25% from cross-sell. So it bounces around a little bit quarter-to-quarter, but that balance of cross-sell, increased sales of the same product to existing customers and new logos is pretty strong. And we don’t see that changing other than the variability quarter-by-quarter for the foreseeable future.

Joe Vruwink: Okay. Thank you very much.

Eddie Capel: Pleasure, Joe. Thank you.

Operator: Our next question is from Matt Pfau with William Blair. Please proceed with your question.

Matt Pfau: Nice results and thanks for taking my questions, guys. I just wanted to ask — yes, can you hear me?

Eddie Capel: Yes.

Matt Pfau: Okay. Hi, just wanted to ask, when you look at your business, what sort of tie is there to perhaps your new build out of warehouse or fulfillment space? And as the cost of capital has increased and some of these developers have pulled back a bit on their development of new space, does that have any impact on you? Is it more of conversion of existing warehouse space for you?

Eddie Capel: It’s mostly the conversion and modernization of existing space. You asked an interesting question. I don’t have the percentage off the top of my head to be perfectly honest with you. But it’s in the range of 10%, maybe even less of our implementations going into new buildings. So certainly, the preponderance of what we’re doing is sort of brandfield work, whether it be only the modernization of the software or the retrofit of a building with additional automation and software.

Matt Pfau: Got it. That’s helpful. And then when we look at the number of net new customers or bookings coming from net new customers this quarter, it’s lower than that 35% in the pipeline this quarter. I think it was higher in the past several quarters before that. How do you sort of think about the ideal mix there where you’re bringing enough new customers on to have enough cross-sell opportunities down the road?

Eddie Capel: Yes. I think, look, clearly, it’s important to look at it at least annually, not as a quarterly number, if not even a longer duration. Our target is about a third. We feel like if we can get about a third of our new bookings from new logos, that will fuel the future cross-sell opportunity like crazy, frankly.

Dennis Story: Yes. And for the past 10-plus years, we’ve carried about a 30% to 35% new logo balance in our pipeline.

Matt Pfau: Great. Thanks guys. Appreciate it.

Eddie Capel: Our pleasure, Matt. Thank you.

Operator: Our next question is from Mark Schappel with Loop Capital Markets. Please proceed with your question.

Mark Schappel: Hi, thank you for taking my question and nice job on the quarter, exceptionally good job. Eddie, in an earlier question you noted that many of your new customers are coming from verticals outside of the core markets or the core verticals. I wonder if you could just go a little deeper into what verticals these customers are coming from? And also, how are — many of these new customers and new logos, how are they finding a way to Manhattan?

Eddie Capel: I think — well, first of all, industrial manufacturers, life sciences, high tech would be three that sort of jump out to me that are new or bigger verticals for us now than they were historically. And really, most of that work is driven by those companies doing something that’s more direct-to-consumer. It may not be direct-to-consumer in the purest sense of to the doorstep and so forth. But a lot of the life sciences and health care solutions companies, for example, are shipping smaller quantities, a very high value goods to individual pharmacies, doctors’ offices and so forth. So it looks just a lot more like retail. And that capability, as you know, requires a good deal of sophistication, a great deal of control and a great deal of precision. And so I think, look, we could talk a lot about this space. But those would be the highlights, I think.

Mark Schappel: Okay. Great. Thank you. And then one follow-up. On the marketing front, I mean, the company is very well known in the warehouse. It’s less known in, say, order management. I was wondering if you could just give us a little insight into what some of your marketing efforts are to drive awareness of your order management and point-of-sale solutions. I think you gave a little bit of that in your prepared remarks, you’re talking about some of the industry analysts, but I wonder if you could just expand on that?

Eddie Capel: Yes. Well, we feel pretty good about our position in the order management space. Now, Mark, to be perfectly honest with you, sort of the preeminent analyst in that space — analyst firm in that space tends to be Forrester. And for the last four to six years, they put us as the only leader — they have a Wave process versus a Quadrant, but we’re positioned as the only leader in that space. So we feel pretty good about our awareness there. Clearly, point-of-sale is where we’ve got to continue to cross the bridge and to bang the drum. We’re doing that. At every possible turn, we’re talking about the next generation of point-of-sale solution that we believe retailers need. And we’re not going to continue to stop banging that drum.

But there is that but of we’ve got to have a material number of live referenceable customers in that space to really get that flywheel going and be representative of what our solutions can do. And of course, the beauty of point-of-sale solutions is, you can test them as a consumer pretty quickly anytime you want. And so we feel good about getting the reach of our solutions out there. And the target has been to have, again, about a dozen referenceable customers for point-of-sale by the end of the year because it’s just my personal opinion, about that number starts to get sort of — to bring gravity and materiality to what we’re doing. We already operate from a store execution perspective. We’re a little — in a little over 20,000 stores today installed and live, not with point-of-sale, but with the execution system, buy online pick up in store, curbside pickup, store inventory management, ship from store, fulfill from store, all of those kinds of things live in over 20,000 stores.

And of course, our objective is to bring our point-of-sale solution to all of those stores and more as well and feel like we’re making pretty good progress.

Mark Schappel: Thanks. That was helpful. Thanks.

Eddie Capel: But let me just say, Mark, if you got any neighbors that are retailers, feel free to share the news, we will — we’d love everybody to be talking about it.

Mark Schappel: I’ll send them your way.

Eddie Capel: Thank you.

Dennis Story: Thanks.

Operator: Our final question is from Blair Abernethy with Rosenblatt Securities. Please proceed with your question.

Blair Abernethy: Thanks. Nice quarter guys. Just — Eddie, just following on your point-of-sale comments there. If you look 25 — customers, a total of 20,000 stores today, are you 10% penetrated that with POS or 5%? Is there some sense of how big that opportunity could be for Manhattan?

Eddie Capel: And the penetration, well, first of all, 20,000 as we’re proud of it is only scratching the surface and our penetration into that 20,000 is — don’t quote me, but somewhere in the 2% to 3% range. So that’s why we’re on one hand incredibly enthusiastic and excited about the space because we’re making good progress, it really isn’t impacting our financial results just yet, but of course, you can capture the vision forward in your mind forward and think about the potential positive impact that it can have on the future.

Blair Abernethy: Okay. Great. Thank you. And then just shifting over to the international business, both EMEA and APAC, growing at or above the company overall rate, which is encouraging. Can you just give us a little more color on what’s happening in EMEA and APAC for Manhattan? Is it — these net new customers, are they coming? Do you offer cloud in APAC? just kind of wondering what sort of — what’s the dynamic look like there from a new customer stand point?

Eddie Capel: Yes. Good question. So the answer is yes, we offer cloud across the globe, in fact, many of our customers are international and global organizations that are rolling out internationally, but so, yes is the answer to that question. In terms of both APAC and EMEA, the — if you look at the sub-regions or the countries inside of those theaters, some are more vibrant than others. Look, this is not the time to go down every single country and so forth, but if you go through Europe, you’d say, well, certainly, things in the UK are a little more suppressed than elsewhere. We used to have a not huge, but reasonably healthy business in Russia of course, which we’ve shut down, we can move to APAC and Australia is certainly quite vibrant, Southeast Asia is quite vibrant, China for a variety of reasons has been a bit slower, but look, that’s why we have an international business to help — supporting our customers where they need us to be, but also to smooth out some of those lumps here and there by specific region.

But at the end of the day, we’re managing through all that lumpiness region by region, I think, exceptionally well and that’s why you see the performance from the international markets.

Dennis Story: Nice growth rates and generating earnings.

Blair Abernethy: Yes. Yes, that’s great. Okay, thanks, guys.

Eddie Capel: Pleasure, Blair. Thank you.

Operator: We have reached the end-of-the question-and-answer session. I’d now like to turn the call back over to Eddie Capel for closing comments.

Eddie Capel: Yes. Thank you, Rob, and thanks everybody for joining us to review the Q1 results. As I said, we feel really good about the start that we’ve made to 2023 here, but we are just getting started. We’ve got big aspirations as you know and expecting an exciting year ahead. So we’ll look forward to speaking with you in about 90 days to review our next chapter of the year. Thanks. Bye, bye.

Operator: This concludes today’s conference. You may disconnect your lines at this time and we thank you for your participation.