Double-Digit License Revenue Growth Continues for Manhattan Associates
October 27, 2014 Dan Burger
Retail supply chain powerhouse Manhattan Associates continues to perform well as demonstrated by its Q3 financial report showing a revenue gain of $17.8 million (14 percent) and a license revenue increase of $2.1 million (12 percent) based on comparisons with Q2. License revenue, however, fell below $17 million, after three consecutive quarters above that mark. For the nine months of 2014, license revenue was $52 million, which compares to $45.1 million for the same nine-month period in 2013. Total revenue for the first three quarters of 2014 increased from $306.9 million to $361.7 million. License revenue from net new customers was estimated to represent 30 percent of the total.
The mix of license fee revenue in the third quarter is in line with past reports with a 50-50 split between warehouse management and our other solutions. Warehouse management software (WMS) and non-WMS license and services revenue activity continues to be driven by omni-channel initiatives and legacy supply chain modernization. The retail, consumer goods, and life sciences markets were the strongest license fee contributors, with more than half of license fee revenues attributed to those sources.
To bolster its successful omni-channel initiative, the company in August acquired Global Bay Technologies from VeriFone. The technology Global Bay brings is in the retail store point-of-sale, customer management, and inventory management areas.
Manhattan’s CEO Eddie Capel described the value of the Global Bay acquisition during his company’s webcast last week.
“The combination of Manhattan’s enterprise inventory visibility, order management, and store solutions with Global Bay’s point-of-sale and clienteling applications will deliver the industry’s only true omni-channel sales and fulfillment platform,” Capel said. “We believe that this new offering represents a notable competitive differentiating capability both for Manhattan Associates and their customers while at the same time expanding our adjusted market.”
In terms of total revenue, Manhattan’s CFO Dennis Story provided a geographical representation of how the major markets performed.
The largest percentage of increase year-over-year came from the Americas, which grew 18 percent. Europe, the Middle East and Africa was next, showing a 12 percent gain, and Asia Pacific increased revenue 11 percent compared to Q3 last year. That translates into license revenue of $15.6 million in the Americas, $589,000 in EMEA, and $705,000 for APAC.
Services revenue in the third quarter totaled $98.5 million, an increase of 16 percent year-over-year. Manhattan divides its service revenue into two revenue streams: consulting and maintenance. The consulting side of the business chipped in $69.4 million growing, which is a 20 percent bump compared to Q3 2013. Maintenance revenue was pegged at $29.1 million. That’s a 7 percent increasing compared to 2013.
“We’re very pleased with our third quarter performance in a generally tepid macro environment,” Capel said.
Based on the third quarter financial news, Manhattan raised its total revenue guidance estimate. It was previously estimated as coming in between $472 million to $477 million. The new estimate is between $479 million and $481 million. These end of the year estimates represent a 16 percent rate of growth.
In addition to having a solid customer base of IBM midrange users (primarily running the warehouse management software), Manhattan Associates also develops software for the Unix and Windows .NET platforms.
Gartner has recognized Manhattan Associates WMS as an industry leader for the past seven years.