Manhattan Associates Q2 Sales Advance; Consulting Carries The Groceries

July 28, 2014 Dan Burger

The supply chain software company Manhattan Associates, a key independent software vendor (ISV) in a key vertical market for the IBM i platform, completed its second quarter of 2014 ahead of projections. Consulting services drives the revenue bus at this company, but the firm highlighted five software licensing contracts with new customers and expanded contracts with 27 existing customers. Three contracts were in excess of $1 million. Compared to a year ago, license revenue for the quarter was up 11 percent to $18 million.

Services revenue in Q2 totaled $93.5 million, an increase of 20 percent compared to Q2 2013. Two revenue streams–consulting and maintenance–contribute to service revenue. Consulting is the greater of the two by nearly a two-to-one margin. Consulting revenue for the quarter totaled $65.7 million, a 25 percent lift from this time last year. The company hired 130 services representatives in the second quarter, with approximately half being recent college graduates.

Maintenance revenue for the quarter climbed 8 percent to $27.8 million. The company claims its customer-retention rate exceeds 90 percent.

Total Q2 revenue was a company record $122.5 million, an increase of 20 percent. The bulk of the revenue–$98.6 million–comes from the Americas, and rose 18 percent. A growth spurt of 33 percent in Europe, the Middle East and Africa (EMEA) pumped up sales in that region to $15.9 million. A revenue increase of 15 percent in Asia/Pacific (APAC) region was also recorded, hitting just under $8 million.

In the earnings conference call, chief executive officer Eddie Capel noted that the company’s warehouse management license fee revenue contributed half the license revenue and the combination of other software combined for the other half.

“A meaningful portion of our WMS and non-WMS license and services revenue activity continues to be driven by existing and new customer omni-channel initiatives and the reinvention of their supply chains,” Capel said. “The retail, consumer goods, and grocery verticals were our strongest license fees contributors making up more than half of the license revenue for Q2 2014.”

Dennis Story, chief financial officer at Manhattan Associates, noted the company now has had three consecutive quarters of license revenue in the $17 million to $18 million range and expectations are for the full year growth to be in the high single- to low double-digit percentages.

During the first six months of 2014, the company repurchased 1,477,036 shares of Manhattan Associates common stock for a total investment of $50.5 million.

In addition to having a solid customer base of IBM midrange users, Manhattan Associates also develops software for the Unix and Windows .NET platforms.