Manhattan Associates, Inc. (NASDAQ:MANH) Q3 2024 Earnings Call Transcript

Manhattan Associates, Inc. (NASDAQ:MANH) Q3 2024 Earnings Call Transcript October 22, 2024

Manhattan Associates, Inc. beats earnings expectations. Reported EPS is $1.35, expectations were $1.06.

Operator: Good afternoon. My name is Alicia, and I will be your conference facilitator today. At this time, I would like to welcome everyone to Manhattan Associates Q3 2024 Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer period. [Operator Instructions] As a reminder, ladies and gentlemen, this call is being recorded today, October 22, 2024. Now, I would like to introduce you to your host, Michael Bauer, Head of Investor Relations of Manhattan Associates. Mr. Bauer, you may proceed.

Michael Bauer: Great. Thank you, Alicia, and good afternoon, everyone. Welcome to Manhattan Associates’ 2024 third 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 the future events or the future financial performance of Manhattan Associates. You are cautioned that these forward-looking statements involve risk 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 files 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 2023 and the risk factor discussion in that report, as well as any risk factor updates we provide on subsequent Form 10-Qs. We note the turbulent global macro environment could impact our performance and cause the actual results to differ materially from our projections.

We’re under no obligation to update these statements. In addition, our comments include certain non-GAAP financial measures 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: Great. Thanks, Mike. Good afternoon, everyone, and thank you for joining us as we review our third quarter results, discuss our Q4 outlook and provide some very preliminary color at least on 2025. Q3 and year-to-date results set all-time records on both bottom- and top-lines. For the quarter, total revenue increased 12% to $267 million, and adjusted earnings per share increased 29% to $1.35, both of these metrics were above our expectations. Driving the top-line outperformance and earnings leverage was solid cloud and services revenue growth across all geographies, with cloud subscription revenue posting 33% growth in the quarter. Manhattan’s business fundamentals are solid and we remain confident and very optimistic about our business opportunity.

While the global macro environment remains challenging, demand for our solutions is robust, customer satisfaction is high, and as evidenced by our recent release of the Manhattan Active Supply Chain Planning solution, the investments we’re making in R&D and our people are creating a clear differentiation. Delivering consistent market-leading innovation is creating more opportunities across supply chain, omnichannel retail and at the world’s best — as the world’s best brands look to unify and digitally transform. RPO, remaining performance obligation, increased 27% to roughly $1.7 billion. And as we’ve often cautioned, large, complex deals can be lumpy on a quarter-over-quarter basis. And whilst we haven’t seen much of that lumpiness over the past three or four years, this quarter and, to a lesser extent, last quarter, we have seen some.

And our third quarter RPO growth was impacted by some large digital transformational projects pushing it. That said, our fourth quarter is off to a great start and demand is solid. And attributes that give us confidence that we will actually achieve at the high end of our 2024 RPO bookings guidance of $1.8 billion. Across our industry-leading product portfolio and — global pipeline sits at record levels, our win rates remain strong at about 70%. And these factors, despite the uncertain macro environment, again, give us confidence that we’ll achieve the high end of our 2024 RPO bookings goals and equally important, are well-positioned for continued success in 2025, 2026, and of course, beyond that. Now, looking a little deeper into our Q3 bookings, from a vertical perspective, 80% of our deals came from retail, manufacturing and wholesale.

Across our solutions, the sub-verticals continue to be pretty diverse. And just some of the cloud deals we won this quarter include a North American supply chain solutions provider, a global plastics manufacturer, a multinational home improvement retailer, a global manufacturer of HVAC and refrigeration products, a global life sciences and clinical research company, a global apparel retailer and many others. In Q3, 14% of our new bookings were generated from net new logos, and we continue to have a very healthy mix of conversions, upsells and cross-sells. And we believe this demonstrates the many and varied opportunities we have for sustainable future growth. And as stated earlier, our solution pipeline is at record levels and new potential customers represent about 35% of that demand.

This strong demand is driven by a best-of-breed cloud native solutions that provide continuous access to innovation and are helping our customers digitally transform their businesses to drive success. Our mission-critical solutions help our clients improve customer satisfaction, drive more revenue and improve efficiency. And this strong demand for our solutions is also fueling opportunities and growth for our internal services organization and our systems integration partners. In Q3, our global services team completed over 100 go lives and continue to perform very well for our customers. Now, turning to a few product updates. I mentioned last quarter at our annual customer conference, Momentum, we unveiled the Manhattan Active Supply Chain Planning solution.

And I’m happy to report that as planned, we completed the development and shipped this latest addition to the Manhattan Active family right on schedule 17 days ago, just at the beginning of October. Manhattan Active Supply Chain Planning is now generally available, deployed in our evergreen cloud environments, and just like all of the Manhattan Active platform applications, it will receive functional and technical enhancements every single quarter. Since announcing this new offering in May, we’ve seen notable interest from around the globe. And as we’d hoped and kind of suspected, our WMS and TMS users are fascinated by our vision of combining these solutions with planning to improve their ability to execute in the field. And our Manhattan Active Omni users are digging in as well to see how a real-time view of inventory health can help them make better promising fulfillment decisions, which will yield even more margin advantages for their businesses.

Now, as a reminder, Manhattan Active Supply Chain Planning is the first planning solution prewired directly into the operations. When combined with Manhattan Active Warehouse Management, for example, our new planning solution will deliver detailed and accurate projections of your DC labor and operational needs for the next 52 weeks, all the way down to the department and job function, if necessary. Now, having been in the WMS business and helping our customers plan their labor for over 30 years now, we feel very confident in saying that today, very few operations are getting anywhere near that level of forward visibility. Being able to match your labor plans to your labor needs from the next 30 minutes down — up to the next 30 weeks improves just about every operational metric, from on-time shipping to total cost of labor.

But we didn’t stop there, because just like we put more planning into our WMS solution, we put more execution into our planning solutions as well. Unlike traditional solutions, Manhattan Active Supply Chain Planning runs continuously, constantly fine-tuning order quantities, even on orders that are already processing in a distribution center. And this is really transformative, because it allows real-time demand data from throughout the day to continuously shape the final order quantities right up until those orders are ready to be shipped. This level of supply chain agility is simply unachievable without the industry’s leading cloud native platform that we call the Manhattan Active Platform. The sub-second always-connected nature of the Manhattan Active applications allows them to collaborate with zero latency, a true industry first.

Now, I went into a little bit of detail on that scenario involving Manhattan Active WM, because I thought it would help illustrate the types of benefits that we’re going to be — we’re delivering. But rest assured, many other similar use cases exist for that solution, Manhattan Active TM and Manhattan Active Omni as well. And we’re in conversations with several customers beginning to activate Manhattan Active Supply Chain Planning in early to mid-2025. So, certainly stay tuned for more news, albeit in the early stages of our newest Manhattan Active offering. Now, we take a lot of pride in building software that enables our customers to gain a competitive advantage in their respective markets. Along those lines, we’ve recently released a few new capabilities with the Manhattan Active Omni that our customers are really applauding.

In an earlier quarter, I mentioned that our first-of-a-kind Fulfillment Experience Insights dashboard. This Fulfillment Experience Insights allows our customers to continuously benchmark their omnichannel fulfillment performance against their peers and against their competitors. But we didn’t stop there. We knew that this level of insight and visibility was really great, but operational recommendations are better. So, to that end, we recently introduced a capability that we call [Postgame Spotlight] (ph). And Postgame Spotlight provides detailed recommendations on how fulfillment performance can be improved from both a customer experience and a cost point — standpoint. And this is done by making detailed recommendations on elements like inventory deployment and fulfillment staffing in stores.

And we put the spotlight on specific operational changes that we believe will move the needle for our customers. Both Fulfillment Experience Insights and Postgame Spotlight are really great examples of why our prospects choose and customers stay with Manhattan Active Omni. We’ve moved far beyond enablement and we’re now helping customers optimize and finetune their ever-evolving omnichannel fulfillment processes. And finally, on our products, I’d like to provide a brief update on, yes, generative AI. As we’ve said before, AI is far from a new phenomenon here at Manhattan. We’ve had our operations, research and data science team embedding AI into nearly every Manhattan application for several decades now. Generative AI is the latest of these powerful technologies, and we’re off to a really good start shipping production-ready generative AI capabilities.

At Momentum, again, we introduced Manhattan Assist, for example, a generative AI capability accessible from all Manhattan Active solutions. Our customers use Manhattan Assist every single day now, helping them quickly understand the many capabilities within our applications and it’s really been great, and kind of fun to be honest, to see the questions that they’re asking and some of the answers that we’re providing, and frankly, where we can still tune our large language model. Our partners at Google, of course, have continued to be a great help here as they continue to improve the underlying technology at a really rapid pace. So, we’re hard at work on our next-generation of GenAI-based capabilities right now and we’ll be rolling those out in the first half of 2025.

So, that concludes my business update. Dennis is going to provide you with an update on our financial performance and our outlook. And then, I’ll close our prepared remarks with a brief summary, and then we’ll move to Q&A. So, Dennis?

Dennis Story: Okay. Thanks, Eddie. Our Manhattan global teams continue to execute well in a challenging macro environment. For the quarter, we delivered a strong balanced financial performance across top-line growth, operating margin and cash flows. This includes posting record results across RPO, revenue, operating income and adjusted earnings per share. On an as-reported basis, our Q3 results came in slightly below the Rule of 50. And if our revenue growth is normalized for our cloud transition, which excludes license and maintenance revenue, our results exceeded the Rule of 50. Of course, FX has remained volatile. It did not have a meaningful impact to Q3 revenue growth, but was a $9 million tailwind to year-to-date RPO growth and an $18 million tailwind to sequential RPO growth.

Now, to our results. All growth rates are on an as-reported year-over-year basis unless otherwise stated. Total revenue was $267 million, up 12%. Excluding license and maintenance revenue, which removes the compression driven by our cloud transition, our total revenue was up 15%. Cloud revenue totaled $86 million, up 33%. We ended the quarter with RPO of roughly $1.7 billion, up 27% compared to the prior year and up 5% sequentially. And as Eddie discussed, several large strategic digital transformational deals pushed. Importantly, Manhattan continues to benefit from a record pipeline that includes solid demand from both new and existing customers, and strong win rates are giving us confidence in achieving the high end of our 2024 RPO bookings outlook and the ability to provide strong 2025 outlook parameters.

Our global services teams delivered record revenue, totaling $137 million, up 7%, as cloud sales continue to fuel services revenue growth for Manhattan. Adjusted operating profit was $99 million, with adjusted operating margin of 37.1%. This is 670 basis points year-over-year up. Our performance was driven by strong cloud and services revenue growth combined with operating leverage as our cloud business continues to scale. As Eddie discussed, we are very optimistic on our business opportunity and continue to invest in innovation to drive sustainable long-term growth. Turning to EPS, earnings per share, we delivered Q3 adjusted earnings per share of $1.35, up 29%, and GAAP earnings per share of $1.03, up 30%. Moving to cash, Q3 operating cash flow increased 6% to a solid $62 million.

This resulted in 23% free cash flow margin and 38% adjusted EBITDA margin. Regarding the balance sheet, total deferred revenue increased 18% to $253 million. We ended the quarter with $215 million in cash and zero debt. Accordingly, we leveraged our strong cash position and invested $50 million in share repurchases in the quarter, resulting in $198 million in buybacks year-to-date. Also, our Board has approved the replenishment of our $75 million share repurchase authority. On to our updated 2024 guidance. As consistently mentioned, our financial objective is to deliver sustainable double-digit top-line growth and top-quartile operating margins, benchmarked against any enterprise SaaS comps. These are important drivers to our best-in-class return on invested capital as we maintain a balanced investment approach to growth and profitability.

With our strong year-to-date performance in an uneven macro environment, we are tightening our 2024 revenue guidance and increasing our operating margin and EPS guidance. Details can be found in today’s earnings release. Also, as discussed earlier, we expect to achieve the high end of our 2024 RPO outlook of $1.75 billion to $1.8 billion. As noticed on the — as noted on the prior earnings calls, our objective is to update our RPO outlook on an annual basis. And lastly, on RPO, as previously noted, 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 as evidenced by our Q3 deal pushes. All guidance references made on today’s call will be at the midpoint of their respective ranges.

With that, for the full year 2024, we expect total revenue of $1.039 billion to $1.041 billion, with a $1.04 billion midpoint, which represents 12% growth. For operating margin, we are increasing our midpoint to 34%. This compares favorably from our prior midpoint of 32.1% and 30.4% in the prior-year period. As Eddie highlighted, given the demand and size of our opportunity, we continue to invest in our business to fully leverage the new large TAM expansion revenue streams through investments in R&D and sales and marketing. Our full year earnings per share midpoint is increasing $0.35 to $4.61 and represents 23% growth compared to the prior year. For GAAP earnings per share, our midpoint increases by $0.36 to $3.48 and also represents 23% growth compared to the prior year.

This implies Q4 total revenue of $253.5 million, which is $3.5 million lower than our prior Q4 midpoint as we now anticipate services revenue of $121.5 million, as the choppy macro environment has resulted in several transformational deal pushes, some customers shifting services projects to 2025 and a more pronounced pausing impact from this year’s retail peak season. We are increasing our cloud target to $89.5 million and maintenance revenue upticks to $33.5 million. Our operating margin target is increasing to 32.5% and is up from our prior 30.5% estimate. The Q4 sequential change in operating margin accounts for retail peak seasonality, which as a reminder is when customers idle implementations to focus on their peak busy season. Now moving to 2025, we’re going to provide some preliminary parameters here.

We are currently in the very early stages of our 2025 budget cycle and will firm up this outlook on our Q4 call as we get through the U.S. election process and our final market analysis. With that, we are targeting total revenue of $1.13 billion to $1.14 billion, representing 9% to 10% growth, with license and maintenance attrition masking total growth by 5 percentage points. This includes our cloud revenue target of $415 million, representing 23% year-over-year growth. For RPO, we are targeting $2.15 billion, which represents 21% growth. In 2025, we are targeting services revenue of $565 million to $575 million. The $570 million midpoint represents 8% growth. On license and maintenance attrition to cloud, we are targeting maintenance revenue to be about $118 million, which represents a 15% decline, and for license revenue to be about $5 million, which is well below 1% of total revenue.

We anticipate operating margin to be about 33.5%. Normalizing for our license and maintenance revenue attrition to cloud, our 2025 operating margin increases roughly 100 bps year-over-year, while we simultaneously increase our investment in our business and hire leading supply chain talent. We expect our 2025 tax rate to be 21% and diluted share count to be approximately 63 million shares, which assumes no buyback activity. In summary, our preliminary 2025 parameters include: total revenue, excluding license and maintenance attrition, to increase 14%; cloud revenue to increase 23%; services revenue to increase 8%; and RPO to increase 21%; and for an operating margin of 33.5% while increasing our investment in Manhattan leading innovation. All-in, solid execution by our global Manhattan team and looking forward to the ending the year strong.

Thank you very much, and back to Eddie.

Eddie Capel: Yeah, thanks, Dennis. Well, we’re pleased with our Q3 and our year-to-date results. While we continue to be appropriately cautious, I think, on the volatile macro conditions, and we did experience a more pronounced impact this quarter, as we said earlier though, we’re still very confident in achieving the high end of our RPO goals for 2024. Longer term, our business fundamentals, win rates and innovation strategies are really solid. And accordingly, we’re optimistic about expanding our opportunity and we’ve provided what we consider to be albeit preliminary, but responsible targets for 2025. So, we thank everybody for joining the call, and we thank our global team for all the great work that they do for our customers. So, that concludes our prepared remarks, and Alicia, we’ll be happy to take any questions.

Q&A Session

Operator: Great. Thank you. We will now be conducting a question-and-answer session. [Operator Instructions] Our first question comes from the line of Terry Tillman with Truist Securities. Please proceed with your question.

Terry Tillman: Yeah, thanks. Hi, Eddie, Dennis and Mike. Just two questions for me. The first question is, Eddie, I don’t recall usually in press releases giving commentary on the current quarter. So, you said off to a good start and you talked about it on in your prepared remarks. Could we just dig into that or double-click into that a little bit more? Have you actually seen some of those deals slip have actually closed? And the second part of that first question is, what kind of signals are you getting particularly on these bigger transformational deals that there’s some budget flush in store here in 4Q and are you assuming that? And then, I had a follow-up for Dennis.

Eddie Capel: Good luck about — packing there, Terry. Thanks. Yeah, so let’s see, in the start to Q4 — the good start to Q4 has been a combination of some of the deals that slipped from Q3 into Q4 closing, but also some of the deals that we expected to close early in Q4 to indeed close. So, just feel good about where we are in that regard, hence the reiteration of the full year RPO guidance. In terms of budget flush, don’t expect to see that frankly. I think for the most part, the days of end-of-year budget flush seem to have disappeared because we’re talking about OpEx here and a longer-term revenue stream for us and cost commitment for our customers. So, the days where customers and products mix may well flush a little budget on a one-time license payment seems to largely have gone away.

Terry Tillman: Okay, got it. Thanks, Eddie. And I guess, Dennis, just a follow-up. Thanks for all the commentary for ’25. The one thing on services, what I’m curious about is because you’re talking about hitting at least the high end of your RPO guidance for this year and it looks pretty constructive in terms of the initial RPO targets for next year. On the services side, I’m curious is there something to be said about some of these customers just maybe being more frugal when they sign a contract maybe they’re just using less resources and you’re assuming that, or they’re just kind of using maybe a longer duration of rolling it out, so it could impact services, and/or is there just maybe some incremental conservatism you’re baking in because of some of these risk factors like the global macro, elections, et cetera?

Eddie Capel: Terry, I’ll take the first half of that. Dennis can talk about any conservatism and so forth contingent that he may have built into the model, but I would tell you that there is kind of two components. One is, frankly, we are getting more efficient. There’s no question as we’ve been — gone down this journey, the cost of implementing our Manhattan Active Solutions is getting better and better and better. We’ve seen on a number of fronts, straight efficiency is getting better on the services side. We’re seeing far less customization because of the richness of solutions. So, that’s on our side of the fence. And secondly, as I think you know, we’ve advanced and enhanced our system integrator network. And the good news is they’re doing a healthy amount of the work as well.

So, we’re getting a global reach across those systems integrators. So, that’s a little bit of what’s going on in there, strong software, but not quite as strong on the services side, but we see that as a largely as a positive.

Terry Tillman: That’s helpful. And then, I guess, maybe just like on the idea though, just kind of finishing up here, Dennis in terms of — there’s always an “under promise and over deliver” kind of philosophy here. Is there some incremental conservatism because of some of these things that you can’t really control? And then, the thing that I didn’t even plan on asking, I’m going to ask, you all benefited from some of these customers committing for long durations. Are you still seeing that kind of multiyear, five-year-plus contracting? Thank you.

Dennis Story: Yeah, on the multiyear, five-year contracting, and you hit the nail on the head, we like to under promise and over deliver, Terry. Yeah.

Terry Tillman: Got it. Thanks.

Eddie Capel: Thank you, Terry.

Operator: Thank you. Our next question comes from the line of Joe Vruwink with Baird. Please proceed with your question.

Joe Vruwink: Great. Thanks. Hi, everyone. I want to begin by following up on the share of bookings coming from net new 14% was the lowest it’s been in some time. I guess, is that just emblematic of the type of environment we’re in where naturally you’d expect more of the book of business to come from existing customers? And I’m wondering if that’s true, within the interest existing customers are expressing, is that leaning more into maybe migrations and that’s part of the strong 4Q activity you’re seeing, or is the cross-sell vision and truly getting [buy-in] (ph) the Active Supply Chain, is that actually factoring in more prominently?

Eddie Capel: No. I think, Joe, you bring up a good point that it is, I think, the lowest we’ve seen certainly for quite some time. So, now our spread is 14% to — I think 52% or 53%, but as you look across the deals, you look across the pipeline and so forth, there was nothing particularly trend worthy in that number. When you look at the pipeline, about 35% of the pipeline is new logos. I’m not calling this, but I would expect this to get back to historical norms in Q4 and going forward.

Joe Vruwink: Okay, that’s great. On the large digital transformation projects that sound like they’re converting already in 4Q, is that still largely around WMS? Is there a multi-product scope and that’s why it’s truly digital transformation? And how — yeah, I think over recent quarters, there’s been some cautious optimism that things like Point of Sale might factor more prominently in 2025. Certainly, it seems like Supply Chain Planning is going to start to be more common in the deal flow. Any way to kind of maybe size or quantify or frame kind of those newer products that’s kind of playing into the cloud activity?

Eddie Capel: Yeah. Let’s see. So, in terms of product mix, you asked specifically about the strong start to Q4, nice product mix in this strong start to Q4. We don’t have those percentages and all those kinds of things laid out yet of course, but I know off the top of my head, we’ve got some WMS deals, we’ve got some nice OMS deals, we’ve got a Point of Sale deal in the mix already closed for Q4. So, pretty nice mix. In terms of — I suppose you’re sort of asking for closer to the top of the pipeline funnel on Supply Chain Planning and Point of Sale and those kinds of things. Point of Sale, we’re enthused about the pipeline specifically for Q4 and on into 2025. As far as Supply Chain Planning is concerned, obviously, we’re 17 days post GA.

So, it’s a little early to be calling that, but I would tell you the interest and the enthusiasm, as I said in my prepared comments, has been maybe a little — just a little on the positive side of surprising, both here in the U.S. and in Europe and in APAC, so as we’ve traveled around the world doing this launch. So, these things don’t move the needle overnight, but we are certainly encouraged by the early conversations we’re having, and I would also say, both with existing customers and net new conversations around Supply Chain Planning.

Joe Vruwink: Great. I’ll leave it there. Thank you.

Eddie Capel: Okay. Thank you, Joe.

Operator: Thank you. Our next question comes from the line of Brian Peterson with Raymond James. Please proceed with your question.

Brian Peterson: Hey, guys. Thanks for taking the question. So, Eddie, I appreciate all the color. We would love to understand if there’s any commonality in what’s driving the delayed deals for some of these larger customers. Is that a certain end market or getting implementation plans over the finish line? We just love to understand if there’s any commonality there.

Eddie Capel: No, nothing that I would call out, Brian. Nobody — when we talk to folks, there may be just a little — something a little bit ahead of all others, maybe a little — a few folks wanted to wait to see how the election shakes down, I don’t know how that really impacts their decision, but sometimes that is cited, but all of the other things that are going around the planet are not discussed. So, I think it’s just a — for us, just a little bit of a confidence matter that we’ve got to get through with our customers. The great news is that our win rates and our selection being selected continues to be very strong. So, some of the deals that have pushed both into Q4 and even further than that, we’ve been selected. It’s just a question of the customer and the prospect getting comfortable that the time is right. So, hence, the reason for, frankly, some of our confidence and enthusiasm.

Brian Peterson: Understood. Thanks, Eddie. Dennis, maybe one for you. Just — you, obviously, gave a lot in a preliminary outlook for ’25, but at a high level, how should we think about the underlying demand environment that’s going to underpinning your assumptions for ’25? Thanks, guys.

Dennis Story: No change, Brian.

Eddie Capel: Yeah, no — I would agree with that. No real change in the demand environment. Obviously, we continue as we have done for a number of years, our vertical diversification. Our global diversification, frankly, remains about the same. So, we’re pleased with that. There’s no real change there. It moves a little bit again from quarter to quarter. Our product mix remains about the same. And our new logo to existing customer kind of cross-sell and upsell opportunity remains about the same as well. So, no change there and continue to feel optimistic about the near term, but especially our competitive advantage and differentiation going forward.

Brian Peterson: Got it. Thanks, guys.

Eddie Capel: Sure thing, Brian.

Operator: Thank you. Our next question comes from the line of [Tim Kurosawa] (ph) with Citi. Please proceed with your question.

George Kurosawa: Hi, this is George here. Thanks for taking the questions here. Maybe the first one on the pace of cloud migrations that you guys have seen, I think in the past you’ve given 15% of the base has migrated over to cloud at this point. Maybe an update either on that number or directionally and how that’s trended relative to expectations?

Eddie Capel: Yeah. Up a couple of points as sort of you would expect and continuing to track in about the same direction. So, we’re a little less than 20%. It’s hard to put an exact number on it, but right in there the midpoint of 15% to 20% or so is sort of where we are. The trajectory seems about the same. I think we’re still on about a six year — my opinion, six-year trajectory to get the bulk of our customers across the bridge.

George Kurosawa: Okay, great. And then, I did want to follow-up on a line of discussion earlier on the duration of contracts and seeing some longer duration contracts. Was that — I guess, to put a finer point on it, has duration of contracts on average been increasing and has that had a meaningful impact on RPO?

Eddie Capel: No. Well, so when we first started the transitional process five, six years ago, we originally thought this goes way back. We originally thought three years was sort of going to be the number, but a long time ago, I want to say 2019 or so, maybe even ’18, we started to see these five-year contracts being requested primarily because of the stickiness of our systems. And our customers I think thought it made sense for them to be five years, and it’s held pretty solid there from — so that what is that, five or six years now it’s been pretty stable maybe 5.5 years.

Dennis Story: No major change.

Eddie Capel: Yeah.

George Kurosawa: Okay, great. And then, one last if I may, on the margin upside, I think it was pretty impressive. Last quarter, I think you called out mix being a tailwind here. Is that also a story in this quarter? It sounds like scaling was also a benefit, but just how would you frame kind of the upside that you saw in the quarter and in the guidance?

Dennis Story: Absolutely. From a mix standpoint, so fantastic execution by the business, record cloud and services. Yeah, just a great performance there.

George Kurosawa: Great. Thanks for taking the questions.

Eddie Capel: Pleasure, George.

Operator: Thank you. Our next question comes from the line of Mark Schappel with Loop Capital Markets. Please proceed with your question.

Mark Schappel: Hi, guys. Thanks for taking my question here. Eddie, with respect to the tone around your Point of Sale business, maybe just talk about whether there are any Point of Sale deals during the quarter? You may have mentioned this in the call, but I didn’t catch it.

Eddie Capel: Yeah. I actually did not. But no Point of Sale deals in Q3, but we have — I did mention that we have closed one in early Q4. And the near-term pipeline for Point of Sale is encouraging. We’re excited about the opportunities even inside the quarter here that we might be able to close.

Mark Schappel: Okay, great. And then, with respect to your sales motion in the quarter, you mentioned new logos, I think were 14%. What about the remaining sales balance in terms of cross-sells and conversions?

Eddie Capel: Yeah. So, 14% was the low. Cross-sells were just a little over 20% and conversions pretty high this quarter at about, call it, 60%, maybe even a little tick above 60% in terms of migrations.

Mark Schappel: Great. Thank you. That’s all for me.

Eddie Capel: My pleasure, Mark. Thank you.

Operator: Thank you. Our last question will be from the line of Dylan Becker with William Blair. Please proceed with your question.

Dylan Becker: Hey, gentlemen. Appreciate the questions here. Maybe, Eddie, starting for you, you called out kind of the Insight offering and Spotlights. Seems like there’s a lot more value that you guys can add through these solutions and the data set that you’ve scaled, but wonder how you’re thinking about the opportunity to kind of narrow those benchmarking capabilities over time now that you can reconcile planning and execution, and maybe how this further incentivizes the broader adoption across kind of your platform over time.

Eddie Capel: Well, Dylan, our strategy, no question, is a land-and-expand strategy. We think that as we continue to innovate and increase our TAM in kind of adjacent products and so forth, that ability to cross-sell into our existing customer base is very, very important. Not always, but most of the time customers and prospects buy one SaaS solution at a time, because obviously it takes some time to implement and so forth, no point in paying SaaS fees for something that is going to be implemented nine or 12 months from now, but it’s all part and parcel of our strategy to expand our breadth and be able to address greater total addressable market and across an expanded set of verticals.

Dylan Becker: Got it. Okay. That makes sense. And then maybe for you, Eddie or Dennis here too, you guys called out kind of the internal efficiencies on the services side. You also talked about kind of the evolution of the partner ecosystem. Would love to just kind of get an update on how you’re thinking about offloading maybe more of that kind of services work to partners’ kind of receptivity appetite and growing that ecosystem? Thanks.

Eddie Capel: Yeah, sure. Well, first of all, certainly, our services team have done a fabulous job, always have, but continue to get more and more and more efficient. There’s no doubt that over the last — if you kind of look back over the last couple of years, 24 to 30 months or so, frankly, we did a lot of campus recruiting and those guys are really becoming experienced and efficient at what they do now. Our attrition has been low. So again, we’re just sort of in fusing experience into our services organization that’s creating a great deal of efficiency. On top of that, we’re seeing the need for customers to customize our solution go down, and that is because of the thoughtfulness and the richness of the new solutions that we’re introducing into the market.

We’ve always said every time we reengineer one of our solutions from the ground floor up, it’s based upon all the product experience that we’ve gained. WMS, for example, 30 years of experience that we put into Manhattan Active WM, everything you could possibly imagine. And we were able and fortunate enough to be able to start from a clean sheet of paper. So, less customization is required, that drives services down. And we’ve been able to attract a larger systems integrator community for sure and frankly a number of the bigger global systems integrators that are in the program. They’re all important, don’t get me wrong, all of our partners, but when you look at the guys with global reach like the Accentures and the Caps and Deloitte’s and IBMs and so forth, it’s not that we’re pushing services to them, but if our customers choose to use them either on a regional or a global basis, that’s fine by us and we’re just seeing a little bit more of that, that’s all.

Dylan Becker: Okay, great. Thanks, Eddie.

Eddie Capel: My pleasure, Dylan. Thank you.

Operator: Thank you. There are no further questions at this time. I would like to pass the call back over to Eddie for closing remarks.

Eddie Capel: Very good. Thank you, Alicia. Well, thank you very much everybody for joining us today. Thank you for support as always. We’ll look forward to getting back together in 90 days or so and reporting on Q4, and also, of course, tightening up then our 2025 guidance for you. But until then, I guess it’s very early, but it would be appropriate for me to say happy holidays to everybody, even though it’s a little premature, I guess the next time we speak to you it will be after. Thank you. Bye-bye.

Operator: This concludes today’s teleconference. You may disconnect your lines at this time. Thank you for your participation.