Summary
Manhattan Associates reported record second quarter 2023 results. Total revenue was $231.0 million, up 20.4% from $191.9 million in the prior-year quarter. Operating income rose 35.5% to $50.5 million. Net income increased 28.5% to $39.6 million. Diluted earnings per share was $0.63, up from $0.49. Operating margin expanded to 21.9% from 19.4%. For the first six months of 2023, revenue was $452.0 million, up 21.9% from $370.9 million. Operating income for the six months was $97.6 million, up 37.0%. Net income was $78.4 million, up 27.7%. Diluted EPS for the six months was $1.25, up from $0.97. Operating margin for the six months was 21.6%, up from 19.2%.
The quarter's operational momentum centered on cloud and services. Cloud subscription revenue growth was 44% in the second quarter, and services revenue growth was 23%. Remaining performance obligations, or RPO, reached $1.20 billion at June 30, 2023, up 33.7% from $897.7 million a year earlier. Deferred revenue was $227.1 million, up 27.6% from $178.0 million. Management said demand for cloud solutions remains the dominant customer preference. RPO is a key forward-looking indicator because about 98% of it represents cloud native subscriptions with non-cancelable terms greater than one year. The company also noted that cloud subscriptions revenue was 93% of total cloud and software license revenue in the first six months of 2023.
Cash generation was mixed. Operating cash flow for the second quarter was $40.6 million, down 23.0% from $52.7 million in the prior-year quarter. For the six months, operating cash flow was $99.3 million, up 17.5% from $84.5 million. Capital expenditures were $1.0 million in the second quarter, down 6.9% from $1.1 million. Days sales outstanding was 70 days at June 30, 2023, compared to 65 days at March 31, 2023. During the second quarter, Manhattan repurchased 381,357 shares for $66.8 million. In the first six months, it repurchased 896,195 shares for $140.9 million. In July 2023, the board replenished the remaining share repurchase authority to $75.0 million. The company carries no debt and has no credit facilities.
Management raised full-year 2023 guidance. The company expects adjusted operating margin of 27.4% to 27.6% and adjusted diluted earnings per share of $3.07 to $3.11 for the full fiscal year. Those are non-GAAP measures that exclude equity-based compensation and related income tax effects. The guidance also covers revenue, GAAP operating margin and GAAP diluted earnings per share, and it applies to the full fiscal year 2023 rather than the next quarter. Management said the strong first-half results drove the top-line outperformance and solid earnings leverage in the quarter.
Risks remain tied to the global economy and the cloud transition. Management said it stays cautious about global economic growth and geopolitical volatility, which could shape enterprise software buying decisions. The filing cites inflation, disruption in the retail sector, delays in product development, competitive and pricing pressures, software errors, information technology failures, security breaches, risks tied to product implementations, and global instability including the war in Ukraine. Extended sales cycles for large cloud subscriptions could affect the timing of bookings and revenue. Foreign currency fluctuations, especially the Indian Rupee, also move results. The 2017 U.S. tax law change that requires capitalization of research and development costs increased cash tax payments by approximately $26 million in 2022, and the company expects a similar negative impact for 2023. That law does not affect earnings per share or create an incremental expense obligation, but it does raise near-term cash taxes.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q2 FY2023 | Q1 FY2023 | QoQ | Q2 FY2022 | YoY |
|---|---|---|---|---|---|
| Revenue | $231.0M | $221.0M | +4.5% | $191.9M | +20.4% |
| Gross profit | $122.2M | $117.4M | +4.1% | $103.3M | +18.3% |
| Gross margin | 52.9% | 53.1% | -0.2 pp | 53.8% | -0.9 pp |
| Research & development | $31.6M | $30.8M | +2.6% | $27.9M | +13.2% |
| Sales & marketing | $18.6M | $18.1M | +2.8% | $17.7M | +4.6% |
| General & administrative | $20.2M | $20.0M | +1.4% | $18.6M | +8.8% |
| Total operating expenses | $180.5M | $173.9M | +3.8% | $154.7M | +16.7% |
| Operating income (loss) | $50.5M | $47.1M | +7.2% | $37.3M | +35.5% |
| Operating margin | 21.9% | 21.3% | +0.6 pp | 19.4% | +2.4 pp |
| Net income (loss) | $39.6M | $38.8M | +2.1% | $30.8M | +28.5% |
| Net margin | 17.1% | 17.6% | -0.4 pp | 16.1% | +1.1 pp |
| Diluted EPS | $0.63 | $0.62 | +$0.01 | $0.49 | +$0.14 |
Risks
MD&A states that, given the mission critical nature of its software and a challenging global macro environment, current sales cycles for large cloud subscriptions in its target markets could be extended, with total pricing including software and services in many cases exceeding $1.0 million.
Management remains cautious regarding the pace of global economic growth and believes global geopolitical and economic volatility likely will continue to shape customers' and prospects' enterprise software buying decisions. About 67% of total revenue in both the three and six months ended June 30, 2023 was generated in the United States and 18% in EMEA.
The cloud transition causes revenue to be recognized ratably over the subscription period, typically five years and more, rather than up front, and combined with extended lead times for developing new business this can cause uncertainty and impact the ability to accurately forecast bookings and revenues from quarter to quarter and over the longer term.
The company depends on a single line of business, and cloud solutions represented 93% of total software revenue in the first six months of 2023, while software license revenue decreased 33% in the six months ended June 30, 2023 compared to the prior-year period as customers shifted to cloud-native offerings.
The Unified Omnichannel Commerce and Digital Supply Chain markets are described as intensely competitive and characterized by rapid technological change, and the professional services business has competitive exposure to offshore providers and other consulting companies.
Other income, net decreased 60% in the six months ended June 30, 2023 compared to the prior-year period, primarily due to a $4.1 million decrease in foreign currency gains, with net foreign currency losses of $1.3 million in the first six months of 2023 versus $2.8 million of net foreign currency gains in the first six months of 2022, driven mainly by the Indian Rupee.
The company cites its ability to attract and retain highly skilled employees as a factor that could cause actual results to differ materially, and it employed approximately 4,500 employees worldwide at June 30, 2023 while continuing to grow headcount capacity.
SaaS KPIs
All quarters →Remaining Performance Obligations
RPO Growth (YoY)
Adjusted Operating Income
Summary, forecast, risks and KPIs are extracted from MANHATTAN ASSOCIATES INC's SEC filings for Q2 FY2023 (10-Q / 10-K and the 8-K earnings release); GAAP figures in the summary are checked against the reported XBRL data. They can contain errors; the filings are authoritative. Processed Oct 1, 2026.