ATLANTA, Feb. 05, 2019 (GLOBE NEWSWIRE) -- Leading Supply Chain and Omnichannel Commerce Solutions provider Manhattan Associates Inc. (NASDAQ: MANH) today reported GAAP diluted earnings per share for the fourth quarter ended December 31, 2018, of $0.40 compared to $0.36 in Q4 2017, on license revenue of $13.3 million, cloud subscriptions revenue of $6.8 million and record total revenue of $144.4 million, applying ASC 606 retrospectively. Non-GAAP adjusted diluted earnings per share for Q4 2018 was $0.46 compared to $0.45 in Q4 2017.

“We’re pleased with both our 2018 fourth quarter financial performance and full year results. We delivered record Q4 total revenue and strong earnings per share with a backdrop of solid software and global services revenue,” said Manhattan Associates president and CEO Eddie Capel. “In addition, we continue to receive very positive interest on our Manhattan Active™ suite of cloud-based solutions.”

“We remain bullish on our growth opportunity in 2019 and beyond.  While prudently cautious regarding current global geopolitical and economic volatility, we believe continued omnichannel and supply chain evolution in our target markets has created an acute need for Manhattan’s software that enables our clients to accelerate growth and Push Possible®,” added Mr. Capel.

FOURTH QUARTER 2018 FINANCIAL SUMMARY:

  • We have reclassified certain line items in prior period financial statements to conform to the current period presentation in the consolidated statements of income because of our business transition to cloud subscriptions.
  • GAAP diluted earnings per share was $0.40 in Q4 2018 compared to $0.36 in Q4 2017.
  • Adjusted diluted earnings per share, a non-GAAP measure, was $0.46 in Q4 2018, compared to $0.45 in Q4 2017.
  • Consolidated total revenue was $144.4 million in Q4 2018, compared to $144.1 million in Q4 2017. License revenue was $13.3 million in Q4 2018, compared to $14.7 million in Q4 2017. Cloud subscription revenue was $6.8 million in Q4 2018, compared to $3.2 million in Q4 2017.
  • GAAP operating income was $34.3 million in Q4 2018, compared to $43.6 million in Q4 2017.
  • Adjusted operating income, a non-GAAP measure, was $39.7 million in Q4 2018, compared to $48.8 million in Q4 2017.
  • Cash flow from operations was $34.0 million in Q4 2018, compared to $47.4 million in Q4 2017. Days Sales Outstanding was 64 days at December 31, 2018, compared to 60 days at September 30, 2018.
  • Cash and investments totaled $100.6 million at December 31, 2018, compared to $93.9 million at September 30, 2018.
  • During the three months ended December 31, 2018, the Company repurchased 518,548 shares of Manhattan Associates common stock under the share repurchase program authorized by our Board of Directors for a total investment of $24.8 million. In January 2019, our Board authorized the Company to repurchase up to an aggregate of $50 million of the Company’s common stock.

FULL YEAR 2018 FINANCIAL SUMMARY:

  • We have reclassified certain line items in prior period financial statements to conform to the current period presentation in the consolidated statements of income because of our business transition to cloud subscriptions.
  • GAAP diluted earnings per share for the twelve months ended December 31, 2018, was $1.58, compared to $1.68 for the twelve months ended December 31, 2017.  
  • Adjusted diluted earnings per share, a non-GAAP measure, was $1.79 for the twelve months ended December 31, 2018, compared to $1.87 for the twelve months ended December 31, 2017.
  • Consolidated revenue for the twelve months ended December 31, 2018, was $559.2 million, compared to $594.6 million for the twelve months ended December 31, 2017. License revenue was $45.4 million for the twelve months ended December 31, 2018, compared to $72.3 million for the twelve months ended December 31, 2017. Cloud subscription revenue was $23.1 million for the twelve months ended December 31, 2018, compared to $9.6 million for the twelve months ended December 31, 2017.
  • GAAP operating income was $133.9 million for the twelve months ended December 31, 2018, compared to $185.6 million for the twelve months ended December 31, 2017.
  • Adjusted operating income, a non-GAAP measure, was $154.2 million for the twelve months ended December 31, 2018, compared to $205.2 million for the twelve months ended December 31, 2017. 
  • Cash flow from operations was $137.3 million in the twelve months ended December 31, 2018, compared to $164.1 million in the twelve months ended December 31, 2017.
  • During the twelve months ended December 31, 2018, the Company repurchased 3,147,466 shares of Manhattan Associates common stock under the share repurchase program authorized by our Board of Directors, for a total investment of $143.3 million.

NEW PRESENTATION OF CONSOLIDATED STATEMENTS OF INCOME

We have reclassified certain line items in prior period financial statements to conform to the current period presentation in the consolidated statements of income because of our business transition to cloud subscriptions. These reclassifications include: all revenue line items; cost of license; cost of cloud subscriptions, maintenance and services; and cost of hardware. These reclassifications did not affect total revenue, operating income or net income. For further detail, please see note 7 in the supplemental financial information accompanying this press release.

2019 GUIDANCE

Manhattan Associates provides the following revenue, operating margin and diluted earnings per share guidance for the full year 2019:

   
  Guidance Range - 2019 Full Year  
 ($'s in millions, except operating margin and EPS)$ Range  % Growth Range  
                  
 Total revenue$564  $576  1%  3%  
                  
 Operating Margin:                
 GAAP operating margin 15.5%  15.8%         
 Equity-based compensation 5.5%  5.4%         
 Adjusted operating margin(1) 21.0%  21.2%         
                  
 Diluted earnings per share (EPS):                
 GAAP EPS$1.03  $1.07  -35%  -32%  
 Equity-based compensation 0.35   0.35          
 Adjusted EPS(1)$1.38  $1.42  -23%  -21%  
                  
 (1) Adjusted operating margin and adjusted EPS are non-GAAP measures that exclude the impact of equity-based compensation  
   and acquisition-related costs, and the related income tax effects of these items if applicable.  
                  

Manhattan Associates currently intends to publish in each quarterly earnings release certain expectations with respect to future financial performance. Those statements, including the guidance provided above, are forward looking. Actual results may differ materially. Those statements, including the guidance provided above, do not reflect the potential impact of mergers, acquisitions or other business combinations that may be completed after the date of the release.

Manhattan Associates will make its earnings release and published expectations available on its website (www.manh.com). Following publication of this earnings release, any expectations with respect to future financial performance contained in this release, including the guidance above, should be considered historical only, and Manhattan Associates disclaims any obligation to update them.

CONFERENCE CALL

The Company’s conference call regarding its fourth quarter and twelve months ended December 31, 2018, financial results will be held today, February 5, 2019, at 4:30 p.m. Eastern Time. We invite investors to a live webcast of the conference call through the Investor Relations section of Manhattan Associates' website at www.manh.com. To listen to the live webcast, please go to the website at least 15 minutes before the call to download and install any necessary audio software.

Those who cannot listen to the live broadcast may access a replay shortly after the call by dialing +1.855.859.2056 in the U.S. and Canada, or +1.404.537.3406 outside the U.S., and entering the conference identification number ­­­­­­­­9549358 or via the web at www.manh.com. The phone replay will be available for two weeks after the call, and the Internet webcast will be available until Manhattan Associates’ first quarter 2019 earnings release.

GAAP VERSUS NON-GAAP PRESENTATION

The Company provides adjusted operating income and margin, adjusted income tax provision, adjusted net income, adjusted diluted earnings per share, adjusted cost of services, and adjusted cost of cloud subscriptions, maintenance and services in this press release as additional information regarding the Company’s historical and projected operating results. These measures are not in accordance with – or alternatives to – GAAP, and may be different from similarly titled non-GAAP measures used by other companies. The Company believes the presentation of these non-GAAP financial measures facilitates investors’ ability to understand and compare the Company’s results and guidance, because the measures provide supplemental information in evaluating the operating results of its business, as distinct from results that include items not indicative of ongoing operating results, and because the Company believes its peers typically publish similar non-GAAP measures. This release should be read in conjunction with the Company’s Form 8-K earnings release filing for the three and twelve months ended December 31, 2018. 

Non-GAAP adjusted operating income and margin, adjusted income tax provision, adjusted net income and adjusted diluted earnings per share exclude the impact of equity-based compensation, acquisition-related costs and the amortization of these costs, and a restructuring charge – all net of income tax effects, and the impact of the Tax Cuts and Jobs Act. Adjusted cost of services and adjusted cost of cloud subscriptions, maintenance and services exclude the impact of equity-based compensation. We include reconciliations of the Company’s GAAP financial measures to non-GAAP adjustments in the supplemental information attached to this release.

ABOUT MANHATTAN ASSOCIATES

Manhattan Associates is a technology leader in supply chain and omnichannel commerce. We unite information across the enterprise, converging front-end sales with back-end supply chain execution. Our software, platform technology and unmatched experience help drive both top-line growth and bottom-line profitability for our customers. 

Manhattan Associates designs, builds and delivers leading edge cloud and on-premise solutions so that across the store, through your network or from your fulfillment center, you are ready to reap the rewards of the omnichannel marketplace. For more information, please visit www.manh.com.

This press release contains “forward-looking statements” relating to Manhattan Associates, Inc.  Forward-looking statements in this press release include, without limitation, the information set forth under “2019 Guidance,” statements we make about market adoption of our cloud-based solution and other statements identified by words such as “may,” “expect,” “forecast,” “anticipate,” “intend,” “plan,” “believe,” “could,” “seek,” “project,” “estimate,” and similar expressions.  Prospective investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, and that actual results may differ materially from those contemplated by such forward-looking statements. Among the important factors that could cause actual results to differ materially from those indicated by such forward-looking statements are: uncertainty about the global economy, risks related from transitioning our business from a traditional perpetual license software company (generally hosted by our customers on their own premises and equipment) to a subscription-based software-as-a service/cloud-based model, disruption in the retail sector, the possible effect of new U.S. tariffs on imports from other countries (and possible responsive tariffs on U.S. exports by other countries) on international commerce, delays in product development, competitive pressures, software errors, information security breaches and the risk factors set forth in Item 1A of the Company’s Annual Report on Form 10-K for the year ended December 31, 2017 and in Item 1A of Part II in subsequent Quarterly Reports on Form 10-Q. Manhattan Associates undertakes no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes in future operating results.


MANHATTAN ASSOCIATES, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Income
(in thousands, except per share amounts)

 Three Months Ended December 31,  Year Ended December 31, 
 2018  2017  2018  2017 
 (unaudited)  (unaudited)         
Revenue:               
Cloud subscriptions$6,803  $3,188  $23,104  $9,596 
Software license 13,314   14,712   45,368   72,313 
Maintenance 36,466   37,325   147,033   142,998 
Services 84,525   77,183   329,685   326,502 
Hardware 3,258   11,678   13,967   43,190 
Total revenue 144,366   144,086   559,157   594,599 
Costs and expenses:               
Cost of software license 682   1,377   5,297   5,483 
Cost of cloud subscriptions, maintenance and services 62,138   48,934   235,584   208,045 
Cost of hardware -   8,416   -   32,205 
Research and development 18,208   14,630   71,896   57,704 
Sales and marketing 13,843   13,222   51,262   47,482 
General and administrative 13,222   11,764   52,618   46,054 
Depreciation and amortization 1,997   2,197   8,613   9,060 
Restructuring charge -   (24)  -   2,921 
Total costs and expenses 110,090   100,516   425,270   408,954 
Operating income 34,276   43,570   133,887   185,645 
Other (loss) income, net (901)  (580)  2,344   (812)
Income before income taxes 33,375   42,990   136,231   184,833 
Income tax provision 7,460   18,476   31,541   68,352 
Net income$25,915  $24,514  $104,690  $116,481 
                
Basic earnings per share$0.40  $0.36  $1.58  $1.68 
Diluted earnings per share$0.40  $0.36  $1.58  $1.68 
                
Weighted average number of shares:               
Basic 65,199   68,485   66,201   69,175 
Diluted 65,526   68,791   66,434   69,424 
                

MANHATTAN ASSOCIATES, INC. AND SUBSIDIARIES
Reconciliation of Selected GAAP to Non-GAAP Measures
(in thousands, except per share amounts)

  Three Months Ended December 31,  Year Ended December 31, 
  2018  2017  2018  2017 
                 
Operating income $34,276  $43,570  $133,887  $185,645 
Equity-based compensation (a)  5,291   5,188   19,864   16,229 
Purchase amortization (c)  108   107   430   430 
Restructuring charge (d)  -   (24)  -   2,921 
Adjusted operating income (Non-GAAP) $39,675  $48,841  $154,181  $205,225 
                 
                 
Income tax provision $7,460  $18,476  $31,541  $68,352 
Equity-based compensation (a)  1,092   1,934   4,662   5,964 
Tax benefit of stock awards vested (b)  6   14   777   1,911 
Purchase amortization (c)  22   40   101   158 
Restructuring charge (d)  -   (2)  -   1,073 
U.S. Tax Cuts and Jobs Act impact (e)  (146)  (2,825)  202   (2,825)
Adjusted income tax provision (Non-GAAP) $8,434  $17,637  $37,283  $74,633 
                 
                 
Net income $25,915  $24,514  $104,690  $116,481 
Equity-based compensation (a)  4,199   3,254   15,202   10,265 
Tax benefit of stock awards vested (b)  (6)  (14)  (777)  (1,911)
Purchase amortization (c)  86   67   329   272 
Restructuring charge (d)  -   (22)  -   1,848 
U.S. Tax Cuts and Jobs Act impact (e)  146   2,825   (202)  2,825 
Adjusted net income (Non-GAAP) $30,340  $30,624  $119,242  $129,780 
                 
                 
Diluted EPS $0.40  $0.36  $1.58  $1.68 
Equity-based compensation (a)  0.06   0.05   0.23   0.15 
Tax benefit of stock awards vested (b)  -   -   (0.01)  (0.03)
Purchase amortization (c)  -   -   -   - 
Restructuring charge (d)  -   -   -   0.03 
U.S. Tax Cuts and Jobs Act impact (e)  -   0.04   -   0.04 
Adjusted diluted EPS (Non-GAAP) $0.46  $0.45  $1.79  $1.87 
                 
Fully diluted shares  65,526   68,791   66,434   69,424 
                 

(a)     Adjusted results exclude all equity-based compensation to facilitate comparison with our peers and for the other reasons explained in our Current Report on Form 8-K filed today with the SEC. Equity-based compensation is included in the following GAAP operating expense lines for the three and twelve months ended December 31, 2018, and 2017:

  Three Months Ended December 31,  Year Ended December 31, 
  2018  2017  2018  2017 
                 
Cost of services $1,583  $1,398  $5,787  $3,994 
Research and development  1,095   1,280   4,230   3,208 
Sales and marketing  545   690   2,041   2,240 
General and administrative  2,068   1,820   7,806   6,787 
Total equity-based compensation $5,291  $5,188  $19,864  $16,229 
 

(b)     Adjustments represent the excess tax benefits and tax deficiencies of the stock awards vested during the period. Excess tax benefits (deficiencies) occur when the amount deductible for an award of equity instruments on our tax return is more (less) than the cumulative compensation cost recognized for financial reporting purposes. As discussed above, we excluded equity-based compensation from adjusted non-GAAP results to be consistent with other companies in the software industry and for the other reasons explained in our Current Report on Form 8-K filed with the SEC. Therefore, we also excluded the related tax benefit (expense) generated upon their vesting.

(c)     Adjustments represent purchased intangibles amortization from a prior acquisition. We exclude that amortization from adjusted results to facilitate comparison with our peers, to facilitate comparisons of the results of our core operations from period to period and for the other reasons explained in our Current Report on Form 8-K filed with the SEC.

(d)     In May 2017, we eliminated about 100 positions due to retail sector headwinds and to align our services capacity with demand. That action did not impair or alter our strategic investment plans in innovation and sales and marketing to increase market share and extend our competitive advantage. As a result of that initiative, we recorded a charge of approximately $2.9 million in 2017. The charge primarily consisted of employee severance, employee transition and outplacement costs. We excluded that charge from adjusted non-GAAP results because we do not believe the charge was a cost resulting from normal operating activities and for the other reasons explained in our Current Report on Form 8-K filed with the SEC.

(e)     In the fourth quarter of 2017, we recorded a provisional net one-time tax of $2.8 million because of the enactment of the Tax Cuts and Jobs Act in December 2017. We calculated that amount based on a reasonable estimate of the income tax effects, primarily from a tax on accumulated foreign earnings and the remeasurement of deferred tax assets. We finalized our calculations, resulting in a tax benefit of $0.2 million during the twelve months ended December 31, 2018.


MANHATTAN ASSOCIATES, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(in thousands, except share and per share data)

  December 31, 2018  December 31, 2017 
         
ASSETS        
Current Assets:        
Cash and cash equivalents $99,126  $125,522 
Short-term investments  1,440   - 
Accounts receivable, net of allowance of $2,589 and $2,692 at December 31, 2018 and December 31, 2017, respectively  100,108   92,231 
Prepaid expenses and other current assets  14,708   10,320 
Total current assets  215,382   228,073 
         
Property and equipment, net  14,318   15,493 
Goodwill, net  62,240   62,248 
Deferred income taxes  5,442   1,877 
Other assets  9,768   7,304 
Total assets $307,150  $314,995 
         
LIABILITIES AND SHAREHOLDERS' EQUITY        
Current liabilities:        
Accounts payable $18,181  $14,028 
Accrued compensation and benefits  29,485   15,826 
Accrued and other liabilities  12,161   12,105 
Deferred revenue  81,894   75,068 
Income taxes payable  3,543   7,228 
Total current liabilities  145,264   124,255 
         
Other non-current liabilities  14,739   15,784 
         
Shareholders' equity:        
Preferred stock, no par value; 20,000,000 shares authorized, no shares issued or outstanding at December 31, 2018 and December 31, 2017  -   - 
Common stock, $.01 par value; 200,000,000 shares authorized; 64,860,419 and 67,776,138 shares issued and outstanding at December 31, 2018 and December 31, 2017, respectively  649   678 
Retained earnings  163,359   186,117 
Accumulated other comprehensive loss  (16,861)  (11,839)
Total shareholders' equity  147,147   174,956 
Total liabilities and shareholders' equity $307,150  $314,995 


MANHATTAN ASSOCIATES, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(in thousands)

  Year Ended December 31,
  2018  2017  
          
Operating activities:         
Net income $104,690  $116,481  
Adjustments to reconcile net income to net cash provided by operating activities:         
Depreciation and amortization  8,613   9,060  
Equity-based compensation  19,864   16,229  
Loss on disposal of equipment  59   152  
Deferred income taxes  (4,265)  1,574  
Unrealized foreign currency loss  298   196  
Changes in operating assets and liabilities:         
Accounts receivable, net  (9,341)  10,139  
Other assets  (4,357)  661  
Accounts payable, accrued and other liabilities  18,603   (5,354) 
Income taxes  (4,390)  1,876  
Deferred revenue  7,575   13,052  
Net cash provided by operating activities  137,349   164,066  
          
Investing activities:         
Purchases of property and equipment  (7,306)  (6,199) 
Net (purchases) maturities of short-term investments  (2,532)  429  
Net cash used in investing activities  (9,838)  (5,770) 
          
Financing activities:         
Purchase of common stock  (149,322)  (131,707) 
Net cash used in financing activities  (149,322)  (131,707) 
          
Foreign currency impact on cash  (4,585)  3,318  
          
Net change in cash and cash equivalents  (26,396)  29,907  
Cash and cash equivalents at beginning of period  125,522   95,615  
Cash and cash equivalents at end of period $99,126  $125,522  
          


MANHATTAN ASSOCIATES, INC.
SUPPLEMENTAL INFORMATION

1.    GAAP and Adjusted earnings per share by quarter are as follows:

 2017  2018 
 1st Qtr  2nd Qtr  3rd Qtr  4th Qtr  Full Year  1st Qtr  2nd Qtr  3rd Qtr  4th Qtr  Full Year 
GAAP Diluted EPS$0.40  $0.45  $0.47  $0.36  $1.68  $0.33  $0.42  $0.43  $0.40  $1.58 
Adjustments to GAAP:                                       
Equity-based compensation 0.04   0.03   0.03   0.05   0.15   0.05   0.06   0.06   0.06   0.23 
Tax benefit of stock awards vested (0.03)  -   -   -   (0.03)  (0.01)  -   -   -   (0.01)
Purchase amortization -   -   -   -   -   -   -   -   -   - 
Restructuring charge -   0.03   -   -   0.03   -   -   -   -   - 
U.S. Tax Cuts and Jobs Act impact -   -   -   0.04   0.04   (0.01)  -   -   -   - 
Adjusted Diluted EPS$0.42  $0.50  $0.51  $0.45  $1.87  $0.37  $0.47  $0.49  $0.46  $1.79 
Fully Diluted Shares 70,247   69,421   69,135   68,791   69,424   67,736   66,535   65,901   65,526   66,434 
                                        

2.    Revenues and operating income by reportable segment are as follows (in thousands):

 2017  2018 
 1st Qtr  2nd Qtr  3rd Qtr  4th Qtr  Full Year  1st Qtr  2nd Qtr  3rd Qtr  4th Qtr  Full Year 
Revenue: 
Americas$113,115  $123,658  $124,833  $115,543  $477,149  $104,615  $112,945  $113,886  $114,040  $445,486 
EMEA 23,360   22,028   18,453   21,508   85,349   19,164   21,356   21,181   23,043   84,744 
APAC 7,014   8,455   9,597   7,035   32,101   6,790   7,570   7,284   7,283   28,927 
 $143,489  $154,141  $152,883  $144,086  $594,599  $130,569  $141,871  $142,351  $144,366  $559,157 
                                        
GAAP Operating Income: 
Americas$28,713  $35,717  $39,295  $32,968  $136,693  $20,318  $26,589  $26,200  $24,422  $97,529 
EMEA 10,754   9,995   7,128   7,952   35,829   5,475   6,252   7,413   7,297   26,437 
APAC 2,253   3,547   4,673   2,650   13,123   2,037   2,844   2,483   2,557   9,921 
 $41,720  $49,259  $51,096  $43,570  $185,645  $27,830  $35,685  $36,096  $34,276  $133,887 
                                        
Adjustments (pre-tax): 
Americas:                                       
Equity-based compensation$4,472  $2,796  $3,773  $5,188  $16,229  $4,343  $4,927   5,303  $5,291  $19,864 
Purchase amortization 107   108   108   107   430   107   108   107   108   430 
Restructuring charge -   2,908   (77)  (18)  2,813   -   -   -   -   - 
 $4,579  $5,812  $3,804  $5,277  $19,472  $4,450  $5,035  $5,410  $5,399  $20,294 
                                        
EMEA:                                       
Restructuring charge -   114   -   (6)  108   -   -   -   -   - 
                                        
Adjusted non-GAAP Operating Income: 
Americas$33,292  $41,529  $43,099  $38,245  $156,165  $24,768  $31,624  $31,610  $29,821  $117,823 
EMEA 10,754   10,109   7,128   7,946   35,937   5,475   6,252   7,413   7,297   26,437 
APAC 2,253   3,547   4,673   2,650   13,123   2,037   2,844   2,483   2,557   9,921 
 $46,299  $55,185  $54,900  $48,841  $205,225  $32,280  $40,720  $41,506  $39,675  $154,181 
                                        

 3.   Impact of Currency Fluctuation

The following table reflects the increases (decreases) in the results of operations for each period attributable to the change in foreign currency exchange rates from the prior period as well as foreign currency gains (losses) included in other income, net for each period (in thousands):

                                        
 2017  2018 
 1st Qtr  2nd Qtr  3rd Qtr  4th Qtr  Full Year  1st Qtr  2nd Qtr  3rd Qtr  4th Qtr  Full Year 
Revenue$(1,547) $(1,219) $536  $1,820  $(410) $2,781  $1,699  $(581) $(1,068) $2,831 
Costs and expenses (789)  (396)  723   1,485   1,023   2,328   831   (1,177)  (1,774)  208 
Operating income (758)  (823)  (187)  335   (1,433)  453   868   596   706   2,623 
Foreign currency gains (losses) in other income (646)  (348)  (81)  (771)  (1,846)  366   705   1,431   (1,185)  1,317 
 $(1,404) $(1,171) $(268) $(436) $(3,279) $819  $1,573  $2,027  $(479) $3,940 
                                        

Manhattan Associates has a large research and development center in Bangalore, India.  The following table reflects the increases (decreases) in the financial results for each period attributable to changes in the Indian Rupee exchange rate (in thousands):

 2017  2018 
 1st Qtr  2nd Qtr  3rd Qtr  4th Qtr  Full Year  1st Qtr  2nd Qtr  3rd Qtr  4th Qtr  Full Year 
Operating income$(70) $(326) $(338) $(345) $(1,079) $(360) $359  $828  $1,066  $1,893 
Foreign currency gains (losses) in other income (320)  (190)  71   (43)  (482)  210   1,120   1,572   (1,074)  1,828 
Total impact of changes in the Indian Rupee$(390) $(516) $(267) $(388) $(1,561) $(150) $1,479  $2,400  $(8) $3,721 
                                        

 4.            Other income includes the following components (in thousands):

 2017  2018 
 1st Qtr  2nd Qtr  3rd Qtr  4th Qtr  Full Year  1st Qtr  2nd Qtr  3rd Qtr  4th Qtr  Full Year 
Interest income$293  $264  $314  $303  $1,174  $347  $241  $201  $278  $1,067 
Foreign currency gains (losses) (646)  (348)  (81)  (771)  (1,846)  366   705   1,431   (1,185)  1,317 
Other non-operating income (expense) (18)  16   (26)  (112)  (140)  8   40   (94)  6   (40)
Total other income (loss)$(371) $(68) $207  $(580) $(812) $721  $986  $1,538  $(901) $2,344 
                                        

 5.            Capital expenditures are as follows (in thousands):

 2017  2018 
 1st Qtr  2nd Qtr  3rd Qtr  4th Qtr  Full Year  1st Qtr  2nd Qtr  3rd Qtr  4th Qtr  Full Year 
Capital expenditures$789  $1,914  $1,194  $2,302  $6,199  $2,174  $1,881  $1,481  $1,770  $7,306 
                                        

 6.            Stock Repurchase Activity (in thousands):

 2017  2018 
 1st Qtr  2nd Qtr  3rd Qtr  4th Qtr  Full Year  1st Qtr  2nd Qtr  3rd Qtr  4th Qtr  Full Year 
Shares purchased under publicly-announced buy-back program 1,004   535   -   1,156   2,695   1,158   1,082   389   519   3,148 
Shares withheld for taxes due upon vesting of restricted stock 131   1   2   1   135   111   1   3   -   115 
Total shares purchased 1,135   536   2   1,157   2,830   1,269   1,083   392   519   3,263 
                                        
Total cash paid for shares purchased under publicly-announced buy-back program$49,978  $24,974  $-  $49,953  $124,905  $49,972  $47,876  $20,669  $24,757  $143,274 
Total cash paid for shares withheld for taxes due upon vesting of restricted stock 6,641   27   80   54   6,802   5,843   23   175   7   6,048 
Total cash paid for shares repurchased$56,619  $25,001  $80  $50,007  $131,707  $55,815  $47,899  $20,844  $24,764  $149,322 
                                        

7.           Impact of Cloud Transition

Because of our business transition to Cloud Subscriptions, we have revised our presentations of revenue and related cost line items in our consolidated statements of income. We have reclassified certain line items in prior period financial statements to conform to the current period presentation in the consolidated statements of income. These reclassifications include: all revenue line items; cost of license; cost of cloud subscriptions, maintenance and services; and cost of hardware. These reclassifications did not affect total revenue, operating income or net income. The following table reflects the comparison between the former and new presentation (in thousands):

 2017  2018 
 1st Qtr  2nd Qtr  3rd Qtr  4th Qtr  Full Year  1st Qtr  2nd Qtr  3rd Qtr  4th Qtr  Full Year 
                                        
Former Presentation: 
Software license$22,773  $22,442  $18,794  $17,900  $81,909  $12,024  $18,350  $17,981  $20,117  $68,472 
Services 108,833   116,828   115,555   110,394   451,610   111,701   115,051   116,911   116,256   459,919 
Hardware and other 11,883   14,871   18,534   15,792   61,080   6,844   8,470   7,459   7,993   30,766 
 $143,489  $154,141  $152,883  $144,086  $594,599  $130,569  $141,871  $142,351  $144,366  $559,157 
                                        
Cost of license$2,240  $2,355  $2,830  $3,169  $10,594  $3,982  $5,534  $5,789  $6,023  $21,328 
Cost of services 49,743   47,751   44,750   43,053   185,297   50,348   49,475   50,984   52,093   202,900 
Cost of hardware and other 9,638   12,207   15,492   12,505   49,842   3,464   4,072   4,413   4,704   16,653 
 $61,621  $62,313  $63,072  $58,727  $245,733  $57,794  $59,081  $61,186  $62,820  $240,881 
                                        
                                        
New Presentation: 
Cloud subscriptions (a)$1,496  $2,378  $2,534  $3,188  $9,596  $4,469  $5,377  $6,455  $6,803  $23,104 
Software license 21,277   20,064   16,260   14,712   72,313   7,555   12,973   11,526   13,314   45,368 
Maintenance 33,376   35,959   36,338   37,325   142,998   36,397   36,993   37,177   36,466   147,033 
Services 79,781   85,327   84,211   77,183   326,502   78,757   82,267   84,136   84,525   329,685 
Hardware 7,559   10,413   13,540   11,678   43,190   3,391   4,261   3,057   3,258   13,967 
 $143,489  $154,141  $152,883  $144,086  $594,599  $130,569  $141,871  $142,351  $144,366  $559,157 
                                        
Cost of license$1,352  $1,438  $1,316  $1,377  $5,483  $1,308  $2,096  $1,211  $682  $5,297 
Cost of cloud subscriptions, maintenance and services (b) 54,899   53,109   51,103   48,934   208,045   56,486   56,985   59,975   62,138   235,584 
Cost of hardware 5,370   7,766   10,653   8,416   32,205   -   -   -   -   - 
 $61,621  $62,313  $63,072  $58,727  $245,733  $57,794  $59,081  $61,186  $62,820  $240,881 
                                        


                                        
Reconciliation of Selected GAAP to Non-GAAP Measure: 
                                        
 2017  2018 
 1st Qtr  2nd Qtr  3rd Qtr  4th Qtr  Full Year  1st Qtr  2nd Qtr  3rd Qtr  4th Qtr  Full Year 
                                        
Former Presentation: 
Cost of services$49,743  $47,751  $44,750  $43,053  $185,297  $50,348  $49,475  $50,984  $52,093  $202,900 
Equity-based compensation (c) (1,141)  (580)  (875)  (1,398)  (3,994)  (1,117)  (1,556)  (1,531)  (1,583)  (5,787)
Adjusted Cost of services$48,602  $47,171  $43,875  $41,655  $181,303  $49,231  $47,919  $49,453  $50,510  $197,113 
                                        
New Presentation: 
Cost of cloud subscriptions, maintenance and services (b)$54,899  $53,109  $51,103  $48,934  $208,045  $56,486  $56,985  $59,975  $62,138  $235,584 
Equity-based compensation (c) (1,141)  (580)  (875)  (1,398)  (3,994)  (1,117)  (1,556)  (1,531)  (1,583)  (5,787)
Adjusted Cost of cloud subscriptions, maintenance and services$53,758  $52,529  $50,228  $47,536  $204,051  $55,369  $55,429  $58,444  $60,555  $229,797 
                                        
  1. Cloud subscriptions includes software as a service (“SaaS”) and arrangements that provide customers with the right to use our software within a cloud-based environment provided by and managed by us where the customer does not have the right to take possession of the software without significant penalties.
     
  2. Cost of cloud subscriptions, maintenance and services consists primarily of salaries and other personnel-related expenses of employees dedicated to cloud subscriptions; maintenance services; professional and technical services; and hosting fees.
     
  3. Adjusted results exclude all equity-based compensation to facilitate comparison with our competitors and peers and for the other reasons explained in our Current Report on Form 8-K filed today with the SEC.

8.        ASC 606 Adoption

We adopted the new revenue recognition standard, FASB ASC Topic 606, Revenue from Contracts with Customers, in the first quarter of 2018. The new standard provides accounting guidance for all revenue arising from contracts with customers and affects substantially all entities. We adopted the standard using the modified retrospective method with the cumulative effect of initially adopting the standard recorded as an adjustment to retained earnings as of January 1, 2018. We recorded historical hardware sales prior to the adoption of ASC 606 on a gross basis, as we were the principal in the transaction in accordance with ASC 605-45. Under the new standard, we are an agent in the transaction as we do not physically control the hardware we sell. Accordingly, we recognize our hardware revenue net of related cost, which reduces both hardware revenue and cost of sales compared to our accounting prior to 2018. We recognize and present our hardware revenue net of related cost under the new standard prospectively. For comparison purposes only, had we implemented ASC 606 using the full retrospective method, we would have presented hardware revenue net of expense in our 2017 quarterly financial results below (in thousands):

 2017  2018 
 1st Qtr  2nd Qtr  3rd Qtr  4th Qtr  Full Year  1st Qtr  2nd Qtr  3rd Qtr  4th Qtr  Full Year 
                                        
Presentation of Hardware Revenue - Pre ASC 606 adoption: 
                                        
Revenue                                       
Hardware Revenue$7,559  $10,413  $13,540  $11,678  $43,190  $11,224  $16,252  $10,575  $11,863  $49,914 
                                        
Cost of Revenue                                       
Cost of Hardware (5,370)  (7,766)  (10,653)  (8,416)  (32,205)  (7,833)  (11,991)  (7,518)  (8,605)  (35,947)
                                        
Hardware Revenue, net$2,189  $2,647  $2,887  $3,262  $10,985  $3,391  $4,261  $3,057  $3,258  $13,967 
                                        
Proforma Presentation of Hardware Revenue - Post ASC 606 Using Full Retrospective Method: 
                                        
Hardware Revenue$2,189  $2,647  $2,887  $3,262  $10,985  $3,391  $4,261  $3,057  $3,258  $13,967 
                                        

9.        Remaining Performance Obligations

Under the new revenue recognition standard, we now disclose revenue we expect to recognize from our remaining performance obligations.  Our reported performance obligations primarily represent cloud subscriptions with a non-cancelable term greater than one year (including cloud deferred revenue as well as cloud amounts that will be invoiced and recognized as revenue in future periods).  Our deferred revenue on the balance sheet primarily relates to our maintenance contracts, which are typically one year in duration and are not included in the remaining performance obligations.  Below are our remaining performance obligations as of the end of each period (in thousands):

 December 31, 2017  March 31, 2018  June 30, 2018  September 30, 2018  December 31, 2018 
Remaining Performance Obligations$27,535  $33,999  $58,434  $64,175  $76,990 


Contact: Dennis Story Rick Fernandez
  Chief Financial Officer Senior Manager, Corporate Communications
  Manhattan Associates, Inc. Manhattan Associates, Inc.
  770-955-7070 678-597-6988
  dstory@manh.com rfernandez@manh.com