ATLANTA, Feb. 06, 2018 (GLOBE NEWSWIRE) -- Leading Supply Chain and Omnichannel Commerce Solutions provider Manhattan Associates, Inc. (NASDAQ:MANH) today reported GAAP diluted earnings per share for the fourth quarter ended December 31, 2017, of $0.36 compared to $0.42 in Q4 2016, on license revenue of $14.7 million, cloud subscriptions revenue of $3.2 million and total revenue of $144.1 million. Non-GAAP adjusted diluted earnings per share for Q4 2017 was $0.45 compared to $0.46 in Q4 2016. 

“Q4 and full-year 2017 marked a pivotal beginning to our cloud transformation.  Deal volume and competitive win rates were strong with better than anticipated market enthusiasm for our recently launched Manhattan Active Omni Solution.  Perpetual license sales and enterprise deal timelines, in contrast, saw delays as some pushed into 2018,” said Eddie Capel, president and chief executive officer of Manhattan Associates.  “It’s encouraging to see the market demanding the cloud delivery model and validating Manhattan’s differentiation.  We expect ongoing growth of our Manhattan Active cloud offerings as customers seek a cloud-first approach.” 

FOURTH QUARTER 2017 FINANCIAL SUMMARY: 

  • Certain line items in prior period financial statements have been reclassified to conform to the current period presentation in the consolidated statements of income due to the business transition to cloud subscriptions.
  • GAAP diluted earnings per share was $0.36 in Q4 2017 compared to $0.42 in Q4 2016.
  • Adjusted diluted earnings per share, a non-GAAP measure, was $0.45 in Q4 2017, compared to $0.46 in Q4 2016.
  • Consolidated total revenue was $144.1 million in Q4 2017, compared to $147.6 million in Q4 2016. License revenue was $14.7 million in Q4 2017, compared to $20.7 million in Q4 2016. Cloud subscriptions revenue was $3.2 million in Q4 2017 compared to $1.4 million in Q4 2016.
  • GAAP operating income was $43.6 million in Q4 2017, compared to $45.4 million in Q4 2016.
  • Adjusted operating income, a non-GAAP measure, was $48.8 million in Q4 2017, compared to $49.7 million in Q4 2016.
  • Cash flow from operations was $47.4 million in Q4 2017, compared to $37.8 million in Q4 2016. Days Sales Outstanding was 59 days at December 31, 2017, compared to 58 days at September 30, 2017.
  • Cash and investments totaled $125.5 million at December 31, 2017, compared to $129.7 million at September 30, 2017.
  • During the three months ended December 31, 2017, the Company repurchased 1,156,087 shares of Manhattan Associates common stock under the share repurchase program authorized by the Board of Directors for a total investment of $50.0 million. In February 2018, the Board of Directors authorized the Company to repurchase up to an aggregate of $50 million of the Company’s common stock. 

FULL YEAR 2017 FINANCIAL SUMMARY: 

  • Certain line items in prior period financial statements have been reclassified to conform to the current period presentation in the consolidated statements of income due to the business transition to cloud subscriptions.
  • GAAP diluted earnings per share for the twelve months ended December 31, 2017, was $1.68, compared to $1.72 for the twelve months ended December 31, 2016.  
  • Adjusted diluted earnings per share, a non-GAAP measure, was $1.87 for both the twelve months ended December 31, 2017, and 2016.
  • Consolidated revenue for the twelve months ended December 31, 2017, was $594.6 million, compared to $604.6 million for the twelve months ended December 31, 2016. License revenue was $72.3 million for the twelve months ended December 31, 2017, compared to $79.2 million for the twelve months ended December 31, 2016.  Cloud subscriptions revenue was $9.6 million for the twelve months ended December 31, 2017, compared to $5.8 million for the twelve months ended December 31, 2016.
  • GAAP operating income was $185.6 million for the twelve months ended December 31, 2017, compared to $194.3 million for the twelve months ended December 31, 2016.
  • Adjusted operating income, a non-GAAP measure, was $205.2 million for the twelve months ended December 31, 2017, compared to $210.7 million for the twelve months ended December 31, 2016. 
  • Cash flow from operations was a record $164.1 million in the twelve months ended December 31, 2017, compared to $139.3 million in the twelve months ended December 31, 2016.
  • During the twelve months ended December 31, 2017, the Company repurchased 2,695,295 shares of Manhattan Associates common stock under the share repurchase program authorized by the Board of Directors, for a total investment of $124.9 million. 

NEW PRESENTATION OF CONSOLIDATED STATEMENTS OF INCOME 

Certain line items in prior period financial statements have been reclassified to conform to the current period presentation in the consolidated statements of income due to the business transition to cloud subscriptions. These reclassifications include: all revenue line items; cost of license; cost of cloud subscriptions, maintenance and services; and cost of hardware. Such reclassifications did not affect total revenues, operating income or net income. For further detail, please see note 8 in the supplemental financial information accompanying this press release. 

2018 GUIDANCE 

Manhattan Associates provides the following revenue and diluted earnings per share guidance for the full year 2018: 

   
  Guidance Range - 2018 Full Year  
 ($'s in millions, except EPS)$ Range  % Growth Range  
            
    
  
 Total revenue$546  $558  -8%  -6%  
            
    
  
 Operating Margin:
              
 GAAP operating margin 20.0%   20.4%  -11.2%  -10.8%  
 Equity-based compensation, net of tax 4.0%   3.9%        
 Adjusted operating margin(1) 24.0%   24.3%  -10.5%  -10.2%  
                
 Diluted earnings per share (EPS):             
  
 GAAP EPS$1.23  $1.27  -27%  -24%  
 Equity-based compensation, net of tax 0.25   0.25    
    
  
 Adjusted EPS(1)$1.48  $1.52  -21%  -19%  
                  
 (1) Adjusted operating margin and adjusted EPS are Non-GAAP measures that exclude the impact of equity-based compensation and acquisition-related costs, and the related income tax effects of both.  
                  

Manhattan Associates currently intends to publish, in each quarterly earnings release, certain expectations with respect to future financial performance. Those statements, including the guidance provided above, are forward looking. Actual results may differ materially. Those statements, including the guidance provided above, do not reflect the potential impact of mergers, acquisitions or other business combinations that may be completed after the date of the release.

Manhattan Associates will make its earnings release and published expectations available on its website (www.manh.com). Following publication of this earnings release, any expectations with respect to future financial performance contained in this release, including the guidance above, should be considered historical only, and Manhattan Associates disclaims any obligation to update them. 

CONFERENCE CALL 

The Company’s conference call regarding its fourth quarter and twelve months ended December 31, 2017, financial results will be held today, February 6, 2018, at 4:30 p.m. Eastern Time. Investors are invited to listen to a live webcast of the conference call through the investor relations section of Manhattan Associates' website at www.manh.com. To listen to the live webcast, please go to the website at least 15 minutes before the call to download and install any necessary audio software. 

For those who cannot listen to the live broadcast, a replay can be accessed shortly after the call by dialing +1.855.859.2056 in the U.S. and Canada, or +1.404.537.3406 outside the U.S., and entering the conference identification number ­­­­­­­­3099957 or via the web at www.manh.com. The phone replay will be available for two weeks after the call, and the Internet webcast will be available until Manhattan Associates’ first quarter 2018 earnings release. 

GAAP VERSUS NON-GAAP PRESENTATION 

The Company provides adjusted operating income, adjusted net income and adjusted diluted earnings per share in this press release as additional information regarding the Company’s historical and projected operating results. These measures are not in accordance with – or alternatives to – GAAP, and may be different from non-GAAP operating income, non-GAAP net income and non-GAAP earnings per share measures used by other companies. The Company believes that the presentation of these non-GAAP financial measures facilitates investors’ ability to understand and compare the Company’s results and guidance, because the measures provide supplemental information in evaluating the operating results of its business, as distinct from results that include items that are not indicative of ongoing operating results, and because the Company believes its peers typically publish similar non-GAAP measures. This release should be read in conjunction with the Company’s Form 8-K earnings release filing for the quarter and twelve months ended December 31, 2017.  

Non-GAAP adjusted operating income, adjusted income tax provision, adjusted net income and adjusted diluted earnings per share exclude the impact of equity-based compensation, acquisition-related costs and the amortization thereof, and a restructuring charge – all net of income tax effects, and the impact of the Tax Cuts and Jobs Acts. Reconciliations of the Company’s GAAP financial measures to non-GAAP adjustments are included in the supplemental information attached to this release.

ABOUT MANHATTAN ASSOCIATES 

Manhattan Associates is a technology leader in supply chain and omnichannel commerce. We unite information across the enterprise, converging front-end sales with back-end supply chain execution. Our software, platform technology and unmatched experience help drive both top-line growth and bottom-line profitability for our customers.  

Manhattan Associates designs, builds and delivers leading edge cloud and on-premise solutions so that across the store, through your network or from your fulfillment center, you are ready to reap the rewards of the omnichannel marketplace. For more information, please visit www.manh.com

This press release contains “forward-looking statements” relating to Manhattan Associates, Inc.  Forward-looking statements in this press release include, without limitation, the information set forth under “2018 Guidance,” statements we make about market adoption of our cloud-based solution and other statements identified by words such as “may,” “expect,” “forecast,” “anticipate,” “intend,” “plan,” “believe,” “could,” “seek,” “project,” “estimate,” and similar expressions.  Prospective investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, and that actual results may differ materially from those contemplated by such forward-looking statements. Among the important factors that could cause actual results to differ materially from those indicated by such forward-looking statements are: uncertainty about the global economy, risks related from transitioning our business from a traditional perpetual license software company (generally hosted by our customers on their own premises and equipment) to a subscription-based software-as-service/cloud-based model, delays in product development, competitive pressures, software errors, information security breaches and the risk factors set forth in Item 1A of the Company’s Annual Report on Form 10-K for the year ended December 31, 2016. Manhattan Associates undertakes no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes in future operating results. 

  
MANHATTAN ASSOCIATES, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Income
(in thousands, except per share amounts)
 
  
 Three Months Ended December 31,  Year Ended December 31, 
 2017  2016  2017  2016 
 (unaudited)  (unaudited)         
Revenue:               
Software license$14,712  $20,702  $72,313  $79,213 
Cloud subscriptions 3,188   1,423   9,596   5,783 
Maintenance 37,325   34,826   142,998   133,848 
Services 77,183   81,571   326,502   351,785 
Hardware 11,678   9,070   43,190   33,928 
Total revenue 144,086   147,592   594,599   604,557 
Costs and expenses:               
Cost of license 1,377   1,429   5,483   6,818 
Cost of cloud subscriptions, maintenance and services 48,934   53,374   208,045   219,635 
Cost of hardware 8,416   6,068   32,205   23,426 
Research and development 14,630   13,183   57,704   54,736 
Sales and marketing 13,222   13,617   47,482   48,223 
General and administrative 11,764   12,281   46,054   48,322 
Depreciation and amortization 2,197   2,284   9,060   9,090 
Restructuring charge (24)  -   2,921   - 
Total costs and expenses 100,516   102,236   408,954   410,250 
Operating income 43,570   45,356   185,645   194,307 
Other (loss) income, net (580)  416   (812)  1,800 
Income before income taxes 42,990   45,772   184,833   196,107 
Income tax provision 18,476   15,855   68,352   71,873 
Net income$24,514  $29,917  $116,481  $124,234 
                
Basic earnings per share$0.36  $0.42  $1.68  $1.73 
Diluted earnings per share$0.36  $0.42  $1.68  $1.72 
                
Weighted average number of shares:               
Basic 68,485   70,742   69,175   71,674 
Diluted 68,791   71,148   69,424   72,060 

  

MANHATTAN ASSOCIATES, INC. AND SUBSIDIARIES
Reconciliation of Selected GAAP to Non-GAAP Measures
(in thousands, except per share amounts)
 
  Three Months Ended December 31,  Year Ended December 31, 
  2017  2016  2017  2016 
                 
Operating income $43,570  $45,356  $185,645  $194,307 
Equity-based compensation (a)  5,188   4,210   16,229   15,934 
Purchase amortization (c)  107   108   430   430 
Restructuring charge (d)  (24)  -   2,921   - 
Adjusted operating income (Non-GAAP) $48,841  $49,674  $205,225  $210,671 
                 
                 
Income tax provision $18,476  $15,855  $68,352  $71,873 
Equity-based compensation (a)  1,934   1,451   5,964   5,789 
Tax benefit of stock awards vested (b)  14   -   1,911   - 
Purchase amortization (c)  40   37   158   156 
Restructuring charge (d)  (2)  -   1,073   - 
U.S. Tax Cuts and Jobs Act impact (e)  (2,825)  -   (2,825)  - 
Adjusted income tax provision (Non-GAAP) $17,637  $17,343  $74,633  $77,818 
                 
                 
Net income $24,514  $29,917  $116,481  $124,234 
Equity-based compensation (a)  3,254   2,759   10,265   10,145 
Tax benefit of stock awards vested (b)  (14)  -   (1,911)  - 
Purchase amortization (c)  67   71   272   274 
Restructuring charge (d)  (22)  -   1,848   - 
U.S. Tax Cuts and Jobs Act impact (e)  2,825   -   2,825   - 
Adjusted net income (Non-GAAP) $30,624  $32,747  $129,780  $134,653 
                 
                 
Diluted EPS $0.36  $0.42  $1.68  $1.72 
Equity-based compensation (a)  0.05   0.04   0.15   0.14 
Tax benefit of stock awards vested (b)  -   -   (0.03)  - 
Purchase amortization (c)  -   -   -   - 
Restructuring charge (d)  -   -   0.03   - 
U.S. Tax Cuts and Jobs Act impact (e)  0.04   -   0.04   - 
Adjusted diluted EPS (Non-GAAP) $0.45  $0.46  $1.87  $1.87 
                 
Fully diluted shares  68,791   71,148   69,424   72,060 

(a)  Adjusted results exclude all equity-based compensation, to facilitate comparison with our peers and for the other reasons explained in our Current Report on Form 8-K filed with the SEC on the date hereof. Equity-based compensation is included in the following GAAP operating expense lines for the three and twelve months ended December 31, 2017 and 2016: 

  Three Months Ended December 31,  Year Ended December 31, 
  2017  2016  2017  2016 
                 
Cost of services $1,398  $819  $3,994  $3,794 
Research and development  1,280   567   3,208   2,489 
Sales and marketing  690   593   2,240   2,431 
General and administrative  1,820   2,231   6,787   7,220 
Total equity-based compensation $5,188  $4,210  $16,229  $15,934 

(b)  During the first quarter of 2017, we adopted Accounting Standards Update (ASU) 2016-09, Compensation – Stock Compensation: Improvements to Employee Share-Based Payment Accounting, to improve the accounting for employee share-based payments. Under the new guidance, all excess tax benefits and certain tax deficiencies are recognized as income tax expense or benefit in the income statements on a prospective basis, rather than recorded in additional paid-in capital. The adjustment represents the excess tax benefits and tax deficiencies of the stock awards vested during the period. Excess tax benefits (deficiencies) occur when the amount deductible for an award of equity instruments on our tax return is more (less) than the cumulative compensation cost recognized for financial reporting purposes, respectively. As discussed above, we excluded equity-based compensation from adjusted non-GAAP results to be consistent with other companies in the software industry and for the other reasons explained in our Current Report on Form 8-K filed the SEC.  Therefore, we also excluded the related tax benefit (expense) generated upon their vesting. 

(c)  Adjustments represent purchased intangibles amortization from a prior acquisition. Such amortization is excluded from adjusted results to facilitate comparison with our peers, to facilitate comparisons of the results of our core operations from period to period and for the other reasons explained in our Current Report on Form 8-K filed with the SEC. 

(d)  In May 2017, we eliminated about 100 positions due to the headwinds in the retail sector and to align our services capacity with demand. This action does not impair or alter our strategic investment plans in innovation and sales and marketing to increase market share and extend our competitive advantage. As a result of this initiative, we recorded a charge of approximately $2.9 million in 2017. The charge primarily consists of employee severance and employee transition and outplacement costs. We do not believe that the charge is a cost resulting from normal operating activities. Consequently, we have excluded this charge from adjusted non-GAAP results. 

(e)  The enactment of the Tax Cuts and Jobs Act in December 2017 resulted in a provisional net one-time tax of $2.8 million in the fourth quarter of 2017 based on a reasonable estimate of the income tax effects, primarily from a tax on accumulated foreign earnings and the remeasurement of deferred tax assets. As this was a one-time charge, we have excluded this charge from adjusted non-GAAP results. We continue to finalize the analysis of the tax reform provisions in 2018. 

  
MANHATTAN ASSOCIATES, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(in thousands, except share and per share data)
 
  
  December 31,
2017
  December 31,
2016
 
         
ASSETS        
Current Assets:        
Cash and cash equivalents $125,522  $95,615 
Short-term investments  -   - 
Accounts receivable, net of allowance of $2,692 and $3,595 in 2017 and 2016, respectively  92,231   100,285 
Prepaid expenses and other current assets  10,320   11,118 
Total current assets  228,073   207,018 
         
Property and equipment, net  15,493   17,424 
Goodwill, net  62,248   62,228 
Deferred income taxes  1,877   2,867 
Other assets  7,304   7,603 
Total assets $314,995  $297,140 
         
LIABILITIES AND SHAREHOLDERS' EQUITY        
Current liabilities:        
Accounts payable $14,028  $12,052 
Accrued compensation and benefits  15,826   20,700 
Accrued and other liabilities  12,105   12,510 
Deferred revenue  75,068   63,457 
Income taxes payable  7,228   8,924 
Total current liabilities  124,255   117,643 
         
Other non-current liabilities  15,784   10,131 
         
Shareholders' equity:        
Preferred stock, no par value; 20,000,000 shares authorized, no shares issued or outstanding in 2017 and 2016  -   - 
Common stock, $.01 par value; 200,000,000 shares authorized; 67,776,138 and 70,233,955 shares issued and outstanding at December 31, 2017 and December 31, 2016, respectively  678   702 
Retained earnings  186,117   184,558 
Accumulated other comprehensive loss  (11,839)  (15,894)
Total shareholders' equity  174,956   169,366 
Total liabilities and shareholders' equity $314,995  $297,140 

  

MANHATTAN ASSOCIATES, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(in thousands)
 
   Year Ended December 31,
  2017  2016  
          
Operating activities:         
Net income $116,481  $124,234  
Adjustments to reconcile net income to net cash provided by operating activities:         
Depreciation and amortization  9,060   9,090  
Equity-based compensation  16,229   15,934  
Loss on disposal of equipment  152   30  
Tax benefit of stock awards exercised/vested  -   5,209  
Excess tax benefits from equity-based compensation  -   (5,214) 
Deferred income taxes  1,574   1,797  
Unrealized foreign currency loss (gain)  196   (393) 
Changes in operating assets and liabilities:         
Accounts receivable, net  10,139   (4,358) 
Other assets  661   299  
Accounts payable, accrued and other liabilities  (5,354)  (9,261) 
Income taxes  1,876   6,129  
Deferred revenue  13,052   (4,150) 
Net cash provided by operating activities  164,066   139,346  
          
Investing activities:         
Purchases of property and equipment  (6,199)  (6,843) 
Maturities of short-term investments  429   10,201  
Net cash (used in) provided by investing activities  (5,770)  3,358  
          
Financing activities:         
Purchase of common stock  (131,707)  (167,933) 
Proceeds from issuance of common stock from options exercised  -   18  
Excess tax benefits from equity-based compensation  -   5,214  
Net cash used in financing activities  (131,707)  (162,701) 
          
Foreign currency impact on cash  3,318   (2,804) 
          
Net change in cash and cash equivalents  29,907   (22,801) 
Cash and cash equivalents at beginning of period  95,615   118,416  
Cash and cash equivalents at end of period $125,522  $95,615  
          

MANHATTAN ASSOCIATES, INC.  
SUPPLEMENTAL INFORMATION

1.  GAAP and Adjusted earnings per share by quarter are as follows: 

  2016  2017 
 1st Qtr  2nd Qtr  3rd Qtr  4th Qtr  Full Year  1st Qtr  2nd Qtr  3rd Qtr  4th Qtr  Full Year 
GAAP Diluted EPS$0.38  $0.46  $0.47  $0.42  $1.72  $0.40  $0.45  $0.47  $0.36  $1.68 
Adjustments to GAAP:                                       
Equity-based compensation 0.04   0.03   0.03   0.04   0.14   0.04   0.03   0.03   0.05   0.15 
Tax benefit of stock awards vested -   -   -   -   -   (0.03)  -   -   -   (0.03)
Purchase amortization -   -   -   -   -   -   -   -   -   - 
Restructuring charge -   -   -   -   -   -   0.03   -   -   0.03 
U.S. Tax Cuts and Jobs Act impact -   -   -   -   -   -   -   -   0.04   0.04 
Adjusted Diluted EPS$0.42  $0.49  $0.50  $0.46  $1.87  $0.42  $0.50  $0.51  $0.45  $1.87 
Fully Diluted Shares 73,020   72,228   71,743   71,148   72,060   70,247   69,421   69,135   68,791   69,424 
                                        

2.  Revenues and operating income by reportable segment are as follows (in thousands): 

  2016  2017 
 1st Qtr  2nd Qtr  3rd Qtr  4th Qtr  Full Year  1st Qtr  2nd Qtr  3rd Qtr  4th Qtr  Full Year 
Revenue: 
Americas$128,807  $131,018  $130,099  $123,660  $513,584  $113,115  $123,658  $124,833  $115,543  $477,149 
EMEA 15,686   18,185   15,078   17,333   66,282   23,360   22,028   18,453   21,508   85,349 
APAC 5,367   5,689   7,036   6,599   24,691   7,014   8,455   9,597   7,035   32,101 
 $149,860  $154,892  $152,213  $147,592  $604,557  $143,489  $154,141  $152,883  $144,086  $594,599 
                                        
GAAP Operating Income: 
Americas$37,454  $44,126  $46,213  $37,154  $164,947  $28,713  $35,717  $39,295  $32,968  $136,693 
EMEA 4,439   6,854   4,822   5,945   22,060   10,754   9,995   7,128   7,952   35,829 
APAC 1,206   1,288   2,549   2,257   7,300   2,253   3,547   4,673   2,650   13,123 
 $43,099  $52,268  $53,584  $45,356  $194,307  $41,720  $49,259  $51,096  $43,570  $185,645 
                                        
Adjustments (pre-tax): 
Americas:                                       
Equity-based compensation$4,688  $3,495  $3,541  $4,210  $15,934  $4,472  $2,796   3,773  $5,188  $16,229 
Purchase amortization 107   108   107   108   430   107   108   108   107   430 
Restructuring charge -   -   -   -   -   -   2,908   (77)  (18)  2,813 
 $4,795  $3,603  $3,648  $4,318  $16,364  $4,579  $5,812  $3,804  $5,277  $19,472 
                                        
EMEA:                                       
Restructuring charge -   -   -   -   -   -   114   -   (6)  108 
                                        
Adjusted non-GAAP Operating Income: 
Americas$42,249  $47,729  $49,861  $41,472  $181,311  $33,292  $41,529  $43,099  $38,245  $156,165 
EMEA 4,439   6,854   4,822   5,945   22,060   10,754   10,109   7,128   7,946   35,937 
APAC 1,206   1,288   2,549   2,257   7,300   2,253   3,547   4,673   2,650   13,123 
 $47,894  $55,871  $57,232  $49,674  $210,671  $46,299  $55,185  $54,900  $48,841  $205,225 
                                        

3.  Impact of Currency Fluctuation 

The following table reflects the increases (decreases) in the results of operations for each period attributable to the change in foreign currency exchange rates from the prior period as well as foreign currency gains (losses) included in other income, net for each period (in thousands): 

 2016  2017 
 1st Qtr  2nd Qtr  3rd Qtr  4th Qtr  Full Year  1st Qtr  2nd Qtr  3rd Qtr  4th Qtr  Full Year 
Revenue$(810) $(474) $(784) $(1,425) $(3,493) $(1,547) $(1,219) $536  $1,820  $(410)
Costs and expenses (1,292)  (702)  (782)  (1,028)  (3,804)  (789)  (396)  723   1,485   1,023 
Operating income 482   228   (2)  (397)  311   (758)  (823)  (187)  335   (1,433)
Foreign currency gains (losses) in other income 165   331   (72)  211   635   (646)  (348)  (81)  (771)  (1,846)
 $647  $559  $(74) $(186) $946  $(1,404) $(1,171) $(268) $(436) $(3,279)

Manhattan Associates has a large research and development center in Bangalore, India.  The following table reflects the increases (decreases) in the financial results for each period attributable to changes in the Indian Rupee exchange rate (in thousands): 

  2016  2017 
 1st Qtr  2nd Qtr  3rd Qtr  4th Qtr  Full Year  1st Qtr  2nd Qtr  3rd Qtr  4th Qtr  Full Year 
Operating income$682  $459  $259  $159  $1,559  $(70) $(326) $(338) $(345) $(1,079)
Foreign currency gains (losses) in other income (109)  212   (44)  159   218   (320)  (190)  71   (43)  (482)
Total impact of changes in the Indian Rupee$573  $671  $215  $318  $1,777  $(390) $(516) $(267) $(388) $(1,561)
 

4.  Other income includes the following components (in thousands): 

  2016  2017 
 1st Qtr  2nd Qtr  3rd Qtr  4th Qtr  Full Year  1st Qtr  2nd Qtr  3rd Qtr  4th Qtr  Full Year 
Interest income$335  $329  $281  $216  $1,161  $293  $264  $314  $303  $1,174 
Foreign currency gains (losses) 165   331   (72)  211   635   (646)  (348)  (81)  (771)  (1,846)
Other non-operating income (expense) 20   (6)  1   (11)  4   (18)  16   (26)  (112)  (140)
Total other income (loss)$520  $654  $210  $416  $1,800  $(371) $(68) $207  $(580) $(812)
  

5.  Capital expenditures are as follows (in thousands): 

  2016  2017 
 1st Qtr  2nd Qtr  3rd Qtr  4th Qtr  Full Year  1st Qtr  2nd Qtr  3rd Qtr  4th Qtr  Full Year 
Capital expenditures$1,906  $2,201  $1,358  $1,378  $6,843  $789  $1,914  $1,194  $2,302  $6,199 
  

6.  Stock Repurchase Activity (in thousands): 

  2016  2017 
 1st Qtr  2nd Qtr  3rd Qtr  4th Qtr  Full Year  1st Qtr  2nd Qtr  3rd Qtr  4th Qtr  Full Year 
Shares purchased under publicly-announced buy-back program 892   552   420   957   2,821   1,004   535   -   1,156   2,695 
Shares withheld for taxes due upon vesting of restricted stock 163   -   3   1   167   131   1   2   1   135 
Total shares purchased 1,055   552   423   958   2,988   1,135   536   2   1,157   2,830 
                                        
Total cash paid for shares purchased under publicly-announced buy-back program$48,499  $34,995  $24,998  $49,901  $158,393  $49,978  $24,974  $-  $49,953  $124,905 
Total cash paid for shares withheld for taxes due upon vesting of restricted stock 9,292   26   158   64   9,540   6,641   27   80   54   6,802 
Total cash paid for shares repurchased$57,791  $35,021  $25,156  $49,965  $167,933  $56,619  $25,001  $80  $50,007  $131,707 
  

7.  As mentioned in footnote b to the reconciliation of selected GAAP to Non-GAAP Measures, during the first quarter of 2017, we adopted ASU 2016-09 Compensation - Stock Compensation: Improvements to Employee Share-Based Payment Accounting. Had we adopted the guidance during the first quarter of 2016, the cash provided by operating activities and cash used in financing activities for the twelve months ended December 31, 2016, as compared to December 31, 2017, would have been as follows: 

          Twelve Months Ended December 31, 
         2016  2017 
                
Net cash provided by operating activities, as stated $139,346  $164,066 
Add: excess tax benefit from equity-based compensation  5,214   - 
Revised net cash provided by operating activities $144,560  $164,066 
                
Net cash used in financing activities, as stated $(162,701) $(131,707)
Less: excess tax benefit from equity-based compensation  (5,214)  - 
Revised net cash used in financing activities $(167,915) $(131,707)
  

8.  Certain line items in prior period financial statements have been reclassified to conform to the current period presentation in the consolidated statements of income. These reclassifications include all revenue line items, cost of license, cost of cloud, subscriptions, maintenance and services, and cost of hardware. Such reclassifications did not affect total revenues, operating income or net income. The following table reflects the comparison between the former and new presentation (in thousands):

                    
 2016 2017
 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr Full Year 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr Full Year
                    
Former Presentation:
Software license$20,607  $20,631  $21,633  $22,125  $84,996  $22,773  $22,442  $18,794  $17,900  $81,909 
Services 116,263   119,833   119,267   111,923   467,286   108,833   116,828   115,555   110,394   451,610 
Hardware and other 12,990   14,428   11,313   13,544   52,275   11,883   14,871   18,534   15,792   61,080 
 $149,860   $154,892   $152,213   $147,592   $604,557   $143,489   $154,141   $152,883   $144,086   $594,599  
                    
Cost of license$3,152  $2,283  $2,966  $2,419  $10,820  $2,240  $2,355  $2,830  $3,169  $10,594 
Cost of services 51,904   48,393   49,436   47,742   197,475   49,743   47,751   44,750   43,053   185,297 
Cost of hardware and other 9,757   11,841   9,276   10,710   41,584   9,638   12,207   15,492   12,505   49,842 
 $   64,813   $   62,517   $   61,678   $   60,871   $249,879   $   61,621   $   62,313   $   63,072   $   58,727   $245,733  
                    
                    
New Presentation:
Software license$19,617  $18,882  $20,012  $20,702  $79,213  $21,277  $20,064  $16,260  $14,712  $72,313 
Cloud subscriptions (a) 990   1,749   1,621   1,423   5,783   1,496   2,378   2,534   3,188   9,596 
Maintenance 31,757   32,841   34,424   34,826   133,848   33,376   35,959   36,338   37,325   142,998 
Services 88,735   91,866   89,613   81,571   351,785   79,781   85,327   84,211   77,183   326,502 
Hardware 8,761   9,554   6,543   9,070   33,928   7,559   10,413   13,540   11,678   43,190 
 $149,860   $154,892   $152,213   $147,592   $604,557   $143,489   $154,141   $152,883   $144,086   $594,599  
                    
Cost of license$2,322  $1,361  $1,706  $1,429  $6,818  $1,352  $1,438  $1,316  $1,377  $5,483 
Cost of cloud subscriptions, maintenance and services (b) 56,862   54,053   55,346   53,374   219,635   54,899   53,109   51,103   48,934   208,045 
Cost of hardware 5,629   7,103   4,626   6,068   23,426   5,370   7,766   10,653   8,416   32,205 
 $64,813   $62,517   $61,678   $60,871   $249,879   $61,621   $62,313   $63,072   $58,727   $245,733  
                    
                    
Reconciliation of Selected GAAP to Non-GAAP Measure:
                    
  2016   2017 
 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr Full Year 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr Full Year
                    
Former Presentation:
Cost of services$51,904  $48,393  $49,436  $47,742  $197,475  $49,743  $47,751  $44,750  $43,053  $185,297 
Equity-based compensation (c) (1,279)  (868)  (828)  (819)  (3,794)  (1,141)  (580)  (875)  (1,398)  (3,994)
Adjusted Cost of services$50,625  $47,525  $48,608  $46,923  $193,681  $48,602  $47,171  $43,875  $41,655  $181,303 
                    
New Presentation:
Cost of cloud subscriptions, maintenance and services (b)$56,862  $54,053  $55,346  $53,374  $219,635  $54,899  $53,109  $51,103  $48,934  $208,045 
Equity-based compensation (c) (1,279)  (868)  (828)  (819)  (3,794)  (1,141)  (580)  (875)  (1,398)  (3,994)
Adjusted Cost of cloud subscriptions, maintenance and services$55,583  $53,185  $54,518  $52,555  $215,841  $53,758  $52,529  $50,228  $47,536  $204,051 
                    
                    
(a) Cloud subscriptions includes software as a service (“SaaS”) and arrangements which provide customers with the right to use our software within a cloud-based environment provided by and managed by us where the customer does not have the right to take possession of the software without significant penalties.
                    
(b) Cost of cloud subscriptions, maintenance and services consists primarily of salaries and other personnel-related expenses of employees dedicated to cloud subscriptions; maintenance services; and professional and technical services as well as hosting fees.
                    
(c) Adjusted result exclude all equity-based compensation, to facilitate comparison with our competitors and peers and for the other reasons explained in our Current Report on Form 8-K filed with the SEC on the date hereof.
                    

9.  We adopted the new revenue recognition standard, FASB ASC Topic 606, Revenue from Contracts with Customers, in the first quarter of 2018.  The new standard provides accounting guidance for all revenue arising from contracts with customers and affects substantially all entities. We adopted the standard using the modified retrospective method with the cumulative effect of initially adopting the standard recorded as an adjustment to retained earnings as of January 1, 2018. Historical hardware sales prior to the adoption of ASC606 were recorded on a gross basis, as we were the principal in the transaction in accordance with ASC 605-45.  Under the new standard, we are an agent in the transaction as we do not physically control the hardware which we sell, accordingly, we recognize our hardware revenue net of related cost which reduces both hardware revenue and cost of sales as compared to our accounting prior to 2018. We recognize and present our hardware revenue net of related cost under the new standard prospectively. For comparison purposes only, had we implemented ASC 606 using the full retrospective method, we would have presented hardware revenue net of expense in our 2016 and 2017 quarterly financial results below: 

 2016  2017 
 1st Qtr  2nd Qtr  3rd Qtr  4th Qtr  Full Year  1st Qtr  2nd Qtr  3rd Qtr  4th Qtr  Full Year 
                                        
Presentation of Hardware Revenue - Pre ASC 606 adoption: 
                                        
Revenue                                       
Hardware Revenue$8,761  $9,554  $6,543  $9,070  $33,928  $7,559  $10,413  $13,540  $11,678  $43,190 
                                        
Cost of Revenue                                       
Cost of Hardware (5,629)  (7,103)  (4,626)  (6,068)  (23,426)  (5,370)  (7,766)  (10,653)  (8,416)  (32,205)
                                        
Hardware Revenue, net$3,132  $2,451  $1,917  $3,002  $10,502  $2,189  $2,647  $2,887  $3,262  $10,985 
                                        
Proforma Presentation of Hardware Revenue - Post ASC 606 Using Full Retrospective Method: 
                                        
Hardware Revenue$3,132  $2,451  $1,917  $3,002  $10,502  $2,189  $2,647  $2,887  $3,262  $10,985 
                                        

 

Contact: Dennis Story Rick Fernandez
  Chief Financial Officer Senior Manager, Corporate Communications
  Manhattan Associates, Inc.      Manhattan Associates, Inc.
  770-955-7070 678-597-6988
  dstory@manh.com rfernandez@manh.com