Summary
Manhattan Associates reported record quarterly revenue and earnings for the third quarter ended September 30, 2021. Total revenue was $169.2 million, up 13.0%. Operating income was $42.4 million, up 21.2%. Net income was $36.7 million, up 46.8%. Diluted earnings per share was $0.57, up 46.2%. Operating margin was 25.1%, up 1.7 percentage points. Non-GAAP adjusted diluted earnings per share was $0.71, compared with $0.51. Adjusted operating income, a non-GAAP measure, was $53.0 million, compared with $44.1 million. Management pointed to robust demand across all solutions and strong cloud and services revenue momentum.
The cloud transition continues to reshape the revenue mix. Remaining performance obligations, or RPO, reached $573.7 million at September 30, 2021, up 123.0%. Deferred revenue was $136.5 million, up 20.5%. Those figures reflect strong bookings for cloud subscriptions. The revenue mix for the third quarter was cloud subscriptions 19%, software license 5%, maintenance 20%, services 52%, and hardware 4%. Cloud solutions represented 78% of total software revenue in the first nine months of 2021. Management said demand for cloud solutions is the dominant preference of customers, with 90% of the pipeline representing cloud solutions. Perpetual license solutions are rapidly attriting due to market demand. Operating cash flow was $59.7 million in the quarter, up 40.5%. Capital expenditures were $1.0 million, up 460.8%. For the first nine months of 2021, revenue was $492.1 million, up 12.0%. Operating income was $107.2 million, up 24.8%. Net income was $89.9 million, up 34.8%. Diluted earnings per share was $1.40, up 34.6%. Operating margin was 21.8%, up 2.2 percentage points. Operating cash flow for the nine months was $145.1 million, up 41.0%. Capital expenditures for the nine months were $2.2 million, up 11.9%.
Guidance for the full year 2021 was raised. The company now expects total revenue growth of 11% to 12% for the full year, up from its previous guidance. Full-year GAAP operating margin guidance was also raised. Full-year GAAP earnings per share guidance implies growth of 18% to 20%, up from previous guidance. Adjusted earnings per share guidance for the full year was raised as well. Cloud revenue guideposts were raised for 2021 through 2024, and RPO guideposts were raised for the same years. Management expects to reach an RPO milestone in 2022, about a year earlier than its original expectations.
Risks remain. The company stays cautious about global geopolitical and economic volatility and the COVID-19 pandemic. The global recovery is expected to be slow and protracted. The shift from perpetual licenses to cloud subscriptions spreads revenue recognition over the subscription period, which can make quarterly bookings and revenue harder to forecast. Sales cycles for large cloud subscriptions and license deals of $1.0 million or greater could be extended. Competition is intense from ERP and supply chain management vendors, and pricing pressure could reduce gross margins and market share. Foreign currency fluctuations, especially in the Indian Rupee, affect results. New or increased tariffs and a possible trade war add uncertainty. Other risks include undetected software errors, security breaches, and reliance on third-party software. The company repurchased 123,131 shares for $20.0 million in the quarter. In October 2021, the board authorized up to $50 million of additional repurchases. Days sales outstanding was 63 days at September 30, 2021, compared with 62 days at June 30, 2021. The company has no debt on its balance sheet and no credit facilities. It employed approximately 3,500 employees worldwide. Cloud infrastructure obligations are approximately $67 million over the next five years. The company has a large research and development center in Bangalore, India.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q3 FY2021 | Q2 FY2021 | QoQ | Q3 FY2020 | YoY |
|---|---|---|---|---|---|
| Revenue | $169.2M | $166.1M | +1.8% | $149.8M | +13.0% |
| Gross profit | $97.7M | $95.5M | +2.3% | $84.6M | +15.5% |
| Gross margin | 57.7% | 57.5% | +0.3 pp | 56.5% | +1.3 pp |
| Research & development | $23.4M | $23.2M | +0.7% | $20.5M | +14.3% |
| Sales & marketing | $14.1M | $13.8M | +2.2% | $11.4M | +23.3% |
| General & administrative | $15.9M | $17.1M | -6.8% | $15.5M | +2.5% |
| Total operating expenses | $126.8M | $126.8M | +0.0% | $114.8M | +10.5% |
| Operating income (loss) | $42.4M | $39.4M | +7.8% | $35.0M | +21.2% |
| Operating margin | 25.1% | 23.7% | +1.4 pp | 23.4% | +1.7 pp |
| Net income (loss) | $36.7M | $30.6M | +19.8% | $25.0M | +46.8% |
| Net margin | 21.7% | 18.4% | +3.3 pp | 16.7% | +5.0 pp |
| Diluted EPS | $0.57 | $0.48 | +$0.09 | $0.39 | +$0.18 |
Risks
MD&A states the business transition to cloud subscriptions spreads revenue recognition over the subscription period rather than up front, and that perpetual license solutions are rapidly attritting with 90% of pipeline representing cloud solutions. This shift, combined with extended lead times for new business, creates uncertainty in forecasting bookings and revenues quarter to quarter and over the longer term.
MD&A says current sales cycles for large cloud subscriptions and, to a lesser degree, license sales of $1.0 million or greater could be extended by the challenging global macro environment, COVID-19 pandemic, and geopolitical uncertainty. Delays in customer capital expenditure decisions can materially adversely impact the business and intensify competition.
MD&A notes that timing of closing a few large software license transactions can materially impact software license revenues, operating profit, operating margins, and earnings per share. It states that $0.7 million of either pre-tax profit or expense in the third quarter of 2021 equates to approximately one cent of diluted earnings per share impact.
MD&A expects continued competition from ERP and supply chain management application vendors and business application software vendors that may broaden offerings by developing, acquiring, or partnering. Increased competition could result in price reductions, fewer customer orders, reduced gross margins, and loss of market share.
MD&A remains cautious about the global recovery from COVID-19, which it expects to be slow and protracted, and says global geopolitical and economic volatility associated with the pandemic likely will continue to shape customers' and prospects' enterprise software buying decisions.
MD&A states that services revenue was 52% of total revenue in the third quarter of 2021, and that this large services mix may cause consolidated operating margin profile to be lower than competitors' and may impact operating margin profile.
SaaS KPIs
All quarters →Remaining Performance Obligations
Adjusted Operating Income
Cloud Subscription Revenue
Summary, forecast, risks and KPIs are extracted from MANHATTAN ASSOCIATES INC's SEC filings for Q3 FY2021 (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.