The Economy Squeezes Manhattan Associates in Q4
February 23, 2009 Timothy Prickett Morgan
Supply chain software maker Manhattan Associates, which has a sizable business related to the i platform, saw its sales decline in the fourth quarter of 2008, as most IT vendors did.
In the quarter ended in December, Manhattan Associates said that software license sales fell 25.5 percent to $13.8 million; services sales dropped 5.7 percent to $53.8 million while hardware and other sales fell by 14.6 percent to just a hair under $8 million. Revenues across all categories in Q4 came to $75.6 million, a decline of 11 percent compared to the year ago quarter. After a restructuring charge of $4.7 million relating to the laying off of 170 employees that happened in the quarter as Manhattan Associates tried to cut costs, net income dropped dramatically to just under $2 million, down 76.6 percent from the fourth quarter of 2007. The company had 2,100 employees as the year ended, down 100 from headcount at the end of 2007. (It is not clear from Manhattan Associates’ statements if the 2,100 is the number after the 170 layoffs, but it seems likely.)
Before the economic meltdown slammed the IT business starting around September, Manhattan Associates was ambling along, and for the full year, its numbers were on par with sales and profits in 2007. Increased services sales offset declines in software, hardware, and other sales in 2008, yielding $337.2 million in total sales, nearly identical to 2007’s levels. However, higher costs in many areas, the restructuring charges, and other asset impairments all impacted the bottom line, so the company only posted a net income of $22.8 million for the 2008 year, down 25.9 percent from the profits it pocketed in 2007.
“Fourth quarter results were about as expected,” explained Pete Sinisgalli, president and chief executive officer at Manhattan Associates in a statement put out with the Q4 numbers. “The selling environment continued to be quite difficult, with several opportunities pushing into 2009. Nonetheless, with the actions we took during the fourth quarter to lower headcount and reduce expenses, we were able to post a decent financial result.” That is more than a lot of companies have been able to say. “We do not expect the market to improve until the latter half of 2009 at the earliest,” Sinisgalli added, saying that Manhattan Associates would continue investing in its software to pursue business when it picks up again.
While not providing a lot of guidance, the company said that it expected to post earnings per share in the first quarter of 2009 between 15 cents and 25 cents a share, which is a decline of between 50 and 17 percent off Q1 2008’s earnings, and for the full year, it expects EPS in the range of $1.03 to $1.28, which is an increase of between 10 and 36 percent over 2008’s earnings per share. The company did not provide revenue guidance, and admittedly, those are some pretty big ranges. This is the reality of the global economy right now. Manhattan Associates has liquidated its short-term investments and is sitting on $85.7 million in cash. The company seems well positioned to ride out the economic storm.