Manhattan Associates ((MANH)) has held its Q3 earnings call. Read on for the main highlights of the call.
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Manhattan Associates’ recent earnings call painted a generally positive picture, driven by robust growth in cloud revenue and record-high remaining performance obligations (RPO). Despite facing a challenging macroeconomic environment and some seasonal pressures, the company’s strategic initiatives, such as significant investments in sales and marketing and leadership expansion, are poised to sustain growth. While there are concerns about a decline in services revenue and macroeconomic volatility, the positive aspects of the company’s performance significantly outweigh the negatives.
Strong Cloud Revenue Growth
Manhattan Associates reported a 21% increase in cloud revenue for Q3, which significantly contributed to the company’s overall top-line performance and earnings leverage. This growth underscores the company’s successful transition to cloud-based solutions, which continues to be a key driver of their financial success.
Record RPO Growth
The company achieved a 23% year-over-year increase in remaining performance obligations, reaching $2.1 billion. This record growth in RPO highlights the strong demand for Manhattan Associates’ solutions and provides a solid foundation for future revenue streams.
High Win Rates
Manhattan Associates maintained a strong win rate of 70%, with notable success in selling to existing customers. This high win rate reflects the company’s effective sales strategies and the value that customers find in their solutions.
Successful Product Innovations
The introduction of Agentic AI across Manhattan Active solutions and new product launches like Enterprise Promise & Fulfill have been well-received in the market. These innovations are expected to enhance the company’s competitive edge and drive further growth.
Expanded Leadership Team
The appointment of Greg Betz as Chief Operating Officer is aimed at enhancing operational frameworks and driving next-generation partner models. This leadership expansion is part of the company’s strategy to strengthen its operational capabilities.
Strategic Investments in Sales and Marketing
Manhattan Associates has made significant investments in sales and marketing, including the establishment of a new dedicated renewal team and conversion program. These investments are expected to bolster the company’s market presence and drive future sales growth.
Services Revenue Decline
The company experienced a 3% year-over-year decline in services revenue, attributed to budgetary constraints that have shifted work to future periods. This decline is a point of concern, but the company remains optimistic about returning to services growth in the near future.
Challenging Macro Environment
The global macroeconomic environment remains volatile, impacting customer timelines and leading to cautious spending behaviors. Despite these challenges, Manhattan Associates continues to perform well, driven by its strategic initiatives.
Seasonal Pressures on Net New Logos
Q3 seasonality and the lumpiness of large deals have pressured net new logos, which represented only 17% of new cloud bookings in the quarter. However, the company remains focused on expanding its customer base and increasing new logo contributions.
Forward-Looking Guidance
During the earnings call, Manhattan Associates provided optimistic guidance for the future. The company expects to achieve the high end of its full-year 2025 RPO outlook, with continued 20% subscription growth projected. For 2026, the company anticipates 20% cloud revenue growth and a return to services growth, along with adjusted operating margin expansion between 50 to 75 basis points.
In conclusion, Manhattan Associates’ earnings call reflects a generally positive sentiment, with strong cloud revenue growth and record RPO figures standing out as key highlights. Despite some challenges, the company’s strategic initiatives and forward-looking guidance suggest a promising outlook for sustained growth.