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Supply chain software provider Manhattan Associates beats Q3 estimate; 2021 guide light

Warehouse management systems changeover and subscription model to weigh on 2021

Forklift in warehouse (Photo: Flickr/Beximco Pharma)

Management from supply chain solutions technology provider Manhattan Associates (NASDAQ: MANH) said they are starting to see “modest improvement” in the global macro environment.

On their Thursday third-quarter conference call, they said forward demand for their supply chain management solutions is strong as nine out of 10 consumers are seeking an omnichannel experience and those that use more than one delivery channel spend 10% more than single channel users. They said distribution center construction remains “vibrant” throughout the industry and those centers will need to be “highly automated” with tech-advanced warehouse management systems.

The company reported adjusted earnings per share (EPS) of 51 cents, 12 cents higher than the consensus estimate. Total revenue declined 8% year-over-year to $150 million. Management attributed the entire revenue decline to the pandemic. The company is also transitioning from a licensed software to a subscription-based software-as-a service cloud model.

Manhattan Associates’ key performance indicators

“This was a strong quarter for Manhattan Associates, despite the continued impact that the COVID-19 pandemic is having globally. Our cloud business continues to trend positively as more and more customers look for modern, agile and scalable supply chain and omnichannel commerce solutions to help them operate in a rapidly evolving world,” said President and CEO Eddie Capel.

Full-year 2020 revenue guidance was raised by 3% at the midpoint of the range to $574 million to $579 million. The company now expects adjusted EPS of $1.62 to $1.66, 5% higher when comparing the midpoints of the old and new ranges. The raised outlook is ahead of the consensus estimate of $1.57.

The move to a subscription revenue model as well as navigating an environment where many supply chains are upgrading warehouse management systems is expected to create lumpiness in earnings for the company. Management provided 2021 earnings guidance of $1.37 to $1.54 per share, likely lower than the 2020 result and well below the current consensus estimate of $1.68. Declines in license revenue, a reversal of prior pandemic-related cost actions and investments in the network and technology were cited as headwinds.

First-quarter 2021 guidance was issued at 31 cents per share compared to current expectations of 37 cents. Management said the first quarter will be the weakest of the year, contributing just 21% of total earnings. Activity is expected to ramp throughout the year with the back half of 2021 accounting for 55% of the year’s EPS.

The conversion of hardware to service has a revenue phase-in period with the out years of the contract carrying a greater percentage of the total contract value. Revenue from remaining performance obligations — unearned revenue or future bookings for its cloud services with a noncancelable contract term of greater than one year — was $257 million, a 69% year-over-year increase and 14% higher than the second quarter. This metric is expected to increase to the $400 million range in 2021.

Manhattan Associates generated $103 million in cash flow from operations during the first nine months of the year, down 8% year-over-year. The company closed the quarter with $166 million in cash and investments and no debt.

“We remain confident in the long-term outlook for our business and expect to continue to invest into our business to drive further market penetration while expanding our addressable market globally,” concluded Capel.

Manhattan Associates is a supply chain and omnichannel commerce technology provider. The company’s technology offering enables retailers, wholesalers, manufacturers and logistics providers to manage their supply chains, inventory and omnichannel operations. Manhattan Carrier helps motor carriers optimize loads and manage fuel costs and drivers’ hours of service.

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Todd Maiden

Based in Richmond, VA, Todd is the finance editor at FreightWaves. Prior to joining FreightWaves, he covered the TLs, LTLs, railroads and brokers for RBC Capital Markets and BB&T Capital Markets. Todd began his career in banking and finance before moving over to transportation equity research where he provided stock recommendations for publicly traded transportation companies.