Manhattan Associates Inc (MANH)

Manhattan Associates develops, sells, deploys, services, and maintains software solutions designed to manage supply chains, inventory, and omnichannel operations for retailers, wholesalers, manufacturers, logistics providers, and other organizations. The company operates in the supply chain commerce solutions market, which is intensely competitive and characterized by rapid technological change, frequent new product introductions, changing customer demands, and evolving industry standards. Gartner Inc. estimates that over 80% of every supply chain software solutions dollar invested is spent in North America and Europe, making the health of the U.S. and European economies a meaningful impact on financial results. The company's solutions are mission critical, supporting complex global supply chains, and the company believes favorable secular tailwinds such as the digital transformation of businesses in manufacturing, wholesale, and retail are in synergistic alignment with current market demand.

Manhattan Associates competes with corporate information technology departments of current or potential customers capable of internally developing solutions; ERP vendors including Oracle, SAP, and Infor; supply chain execution and planning vendors including Blue Yonder/Panasonic, E2Open, Infios, SAS Institute, the Sterling Commerce division of IBM, and Relex; POS vendors including Aptos, Oracle, Jumpmind, and Salesforce; and smaller independent companies. The company believes it has established meaningful competitive differentiation through its supply chain and omnichannel commerce expertise, its platform-based solution approach, its track record of continuous supply chain commerce innovation and investment, its strong and endorsing customer relationships, its significant success in deploying and supporting solutions for market-leading companies, its success in helping clients address the enterprise impacts of digital commerce, and its ability to out-execute others in identifying sales opportunities and demonstrating expertise throughout the sales cycle. The company believes the domain expertise required to continuously innovate supply chain technology, effectively implement solutions, identify and attract sales opportunities, and compete successfully in the sales cycle provides a competitive advantage and is a significant barrier to market entry. The top five customers in aggregate accounted for 10% ¹, 12% ², and 11% ³ of total revenue for the years ended December 31, 2025, 2024, and 2023, respectively, and no single customer accounted for more than 10% of total revenue in any of those years.

Manhattan Associates generates revenue from five principal sources: cloud subscriptions including software as a service and hosting of software; licenses of its software; customer support services and software enhancements related to software licenses; professional services including solutions planning and implementation, related consulting, customer training, and reimbursements from customers for out-of-pocket expenses; and hardware sales. In 2025, the company generated $1,081.4 million ⁴ in total revenue with a revenue mix of cloud subscriptions 38% ⁵, software license 1% ⁶, maintenance 12% ⁷, services revenue 47% ⁸, and hardware 2% ⁹. Cloud subscriptions revenue is recognized over the term of the agreement, typically five years or more, and cloud revenue now represents about 96% ¹⁰ of total software revenue. The company sells its Manhattan Active solutions directly in multi-year cloud subscription arrangements, typically for a period of five years or more, providing clients with regular software updates during the contract period and benefiting Manhattan with a predictable and regular revenue stream. The company's business model is singularly focused on the development and implementation of complex commerce enablement software solutions designed to optimize supply chains and retail store operations including POS effectiveness and efficiency for customers.

Manhattan Associates' supply chain solutions are focused on distribution and transportation operations and comprise two main components. Distribution Management includes Manhattan Active Warehouse Management, a versionless, cloud-based application that runs on Google Cloud Platform, is offered exclusively via subscription, and includes state-of-the-art fulfillment optimization technology, a consumer grade mobile app experience, and embedded gamification capabilities. Manhattan Active WM embeds labor management and slotting optimization capabilities and also embeds a warehouse execution system that coordinates the interaction between automation, robotics, and labor for maximum efficiency. Transportation Management includes the Manhattan Active Transportation Management Solution designed to help shippers navigate demands while meeting customer service expectations at the lowest possible freight costs, with components including procurement and modeling tools, planning, execution and settlement tools, and the ability to connect shippers with a network of partners. Manhattan SCALE is a portfolio of logistics execution solutions built on Microsoft's .NET platform, targeted toward companies with execution-focused supply chain needs, delivered as a cloud-based solution on Microsoft's Azure platform, and also offered on premise via perpetual licenses. The company's omnichannel solutions include Manhattan Active Omni, which brings together Order Management, Store Inventory & Fulfillment, POS, and Customer Engagement tools into a single application built on a shared, cloud-native, microservices platform. Enterprise Omnichannel Commerce Solutions are designed to enable customers to take orders anywhere and fulfill them from anywhere, maximizing sales by leveraging a holistic inventory picture. Point of Sale solutions available on mobile and fixed stations include POS to process purchase transactions and Customer Engagement to provide the associate with a complete picture of the shopper's purchase history. Store Inventory and Fulfillment solutions provide store associates with capabilities that power fulfillment experiences like buy online, pickup in store, curbside pickup, same day delivery, and ship from store. Supply Chain Planning Solutions include Manhattan Active Supply Chain Planning, which unifies demand forecasting, replenishment, and allocation into a single, real-time planning solution built on the Manhattan Active cloud-native platform, connecting planning directly with Manhattan Active execution solutions including Warehouse Management, Transportation Management, Order Management, and Store Operations. The company's technology platform, the Manhattan Active Platform, is the foundation for its cloud-based products designed to provide always current versionless access, with the server side full stack running exclusively on Google Cloud Platform. The company continually invests in artificial intelligence technology to enhance its functional offerings, with a recent emphasis on Agentic AI advancements, and plans to further expand investments in generative AI, introducing the launch of Manhattan Active Agents, with the Active Agents add-on module also encompassing Agent Foundry for customers to create their own Agents running as part of the Manhattan Active Platform.

The company's maintenance program provides on-premises software licensees with software upgrades for additional or improved functionality and technological advances incorporating emerging supply chain and industry advances, offering 24-hour customer support 365 days a year plus software upgrades for a pre-paid annual fee based on the specific solutions the customer has and the service level required. Professional Services are rendered under time and materials contracts with services billed by the hour, or under fixed-fee contracts with payments due on specific dates or milestones, and substantially all customers utilize some portion of these services to implement and support software solutions. Training and Change Management Services are provided on a fixed fee per-person, per-class basis, and computer-based training programs can be purchased for a fixed fee for use at client sites. Hardware sales, which are recognized net of related costs, totaled $25.4 million ¹¹ in 2025 representing 2% ¹² of total revenue, and the company resells a variety of hardware products developed and manufactured by third parties including computer hardware, radio frequency terminal networks, RFID chip readers, bar code printers and scanners, and other peripherals, purchasing hardware from vendors only after receiving an order from a customer with no hardware inventory maintained.

In January 2025, the company eliminated approximately 100 ¹³ positions to align services capacity with customer demand which has been impacted by short-term macro-economic uncertainty, recording restructuring expense of approximately $2.9 million ¹⁴ for the year ended December 31, 2025 to the Americas segment, primarily consisting of employee severance and outplacement services. During the year ended December 31, 2025, the company repurchased a total of 1,451,019 ¹⁵ shares at an average price per share of $189.20 ¹⁶ under its publicly-announced share repurchase program. In January 2026, the Board of Directors replenished the company's share repurchase authority to an aggregate of $100.0 million ¹⁷ of common stock. The company has no debt and currently has no credit facilities. In February and April 2025, two putative securities class action lawsuits were filed against the company, and on September 22, 2025, a shareholder derivative lawsuit was filed.

For the fiscal year ended December 31, 2025, consolidated revenue was $1,081.4 million ¹⁸ compared to $1,042.4 million ¹⁹ for 2024, representing 4% ²⁰ growth. Cloud subscription revenue was $408.1 million ²¹ for 2025 compared to $337.2 million ²² for 2024, an increase of 21% ²³. License revenue was $14.8 million ²⁴ for 2025 compared to $15.1 million ²⁵ for 2024. Services revenue was $503.0 million ²⁶ for 2025 compared to $525.5 million ²⁷ for 2024. Diluted earnings per share were $3.60 ²⁸ for 2025 compared to $3.51 ²⁹ for 2024. Operating income was $279.8 million ³⁰ for 2025 compared to $261.6 million ³¹ for 2024, with operating margins of 25.9% ³² for 2025 versus 25.1% ³³ for 2024. Cash flow from operations was $389.5 million ³⁴ for 2025 compared to $295.0 million ³⁵ for 2024. Cash and investments totaled $328.7 million ³⁶ at December 31, 2025 compared to $266.2 million ³⁷ at December 31, 2024.

For 2026, management's five strategic goals are to focus on customer success and drive sustainable long-term growth; invest in innovation to expand products and total addressable market; expand the Manhattan Active suite of cloud solutions; develop and grow the cloud business and cloud subscription revenue; and expand global sales and marketing teams. The company expects that its priorities for use of cash in 2026 will continue to be investments in its Unified Omnichannel Commerce and Digital Supply Chain solutions, capital allocation in global teams to fund growth, and accretive share repurchases. The company does not anticipate any borrowing requirements in 2026 for general corporate purposes.

The company is investing in its cloud business, including enterprise investments in innovation, and strategic operating expenses to support growth objectives. Cloud revenue growth is being driven by strong demand for cloud offerings, with cloud revenue up 21% ³⁸ over 2024, and cloud revenue now represents about 96% ³⁹ of total software revenue. As of December 31, 2025, remaining performance obligations were approximately $2.2 billion ⁴⁰, an increase of 25% ⁴¹ over December 31, 2024 on strong demand, with over 98% ⁴² of RPO representing cloud native subscriptions with a non-cancelable term greater than one year. Approximately 56% ⁴³ of the total value of new non-cancelable cloud subscriptions signed during 2025 was with new customers and 44% ⁴⁴ was with existing customers. The company plans to further expand investments in generative AI, introducing the launch of Manhattan Active Agents, with the Active Agents add-on module also encompassing Agent Foundry for customers to create their own Agents running as part of the Manhattan Active Platform.

The company expects to continue to focus research and development resources on the development and enhancement of core supply chain, inventory optimization, omnichannel and POS software solutions. R&D expenses for the years ended December 2025 and 2024 were $145.1 million ⁴⁵ and $137.7 million ⁴⁶, respectively. The company expects to continue to enhance existing solutions and introduce new solutions to address evolving industry standards and market needs. The company believes that favorable secular tailwinds, such as the digital transformation of businesses in manufacturing, wholesale and retail, coupled with its commitment to investing in organic innovation to deliver leading cloud supply chain, inventory and omnichannel commerce solutions, is in synergistic alignment with current market demand, contributing to strong financial results, higher demand and strong win rates for solutions.

Operating margins were 25.9% ⁴⁷ for 2025 versus 25.1% ⁴⁸ for 2024, with operating income and margin increasing primarily due to increased cloud subscriptions. The company recorded restructuring expense of approximately $2.9 million ⁴⁹ for the year ended December 31, 2025 to the Americas segment, primarily consisting of employee severance and outplacement services, to align services capacity with customer demand impacted by short-term macro-economic uncertainty. The company expects maintenance revenues to decline as it continues to develop cloud offerings, to be offset by additional cloud revenue including from customers converting their maintenance contracts to cloud subscriptions.

The company's principal administrative, sales, marketing, support, and research and development facility is located in approximately 209,000 ⁵⁰ square feet of modern office space in Atlanta, Georgia. The company also occupies facilities outside the United States under multi-year lease agreements in the United Kingdom, the Netherlands, France, China, Japan, Spain, Singapore, India, Australia, and Germany, and offices under short-term lease agreements in Chile and Italy. As of December 31, 2025, the company employed approximately 4,370 ⁵¹ employees worldwide, with approximately 2,600 ⁵² employees in international operations. The company's daily execution is a hybrid model combining office and virtual work.

In January 2026, the Board of Directors replenished the company's share repurchase authority to an aggregate of $100.0 million ⁵³ of common stock. During the year ended December 31, 2025, the company repurchased a total of 1,451,019 ⁵⁴ shares at an average price per share of $189.20 ⁵⁵ under its publicly-announced share repurchase program. The company does not intend to declare or pay cash dividends in the foreseeable future, with management anticipating that all earnings and other cash resources will be retained for investment in the business, including share repurchases. R&D expenses for the years ended December 2025 and 2024 were $145.1 million ⁵⁶ and $137.7 million ⁵⁷, respectively, and the company expects to continue to focus R&D resources on development and enhancement of core solutions.

The company remains cautious about the global economy and the pace of global economic growth, believing global geopolitical and economic volatility likely will continue to shape customers' and prospects' enterprise software buying decisions. The company believes that given the mission critical nature of its software, combined with a challenging global macro environment, current sales cycles for large cloud subscriptions in target markets could be extended. The company's largest market, retail, is experiencing significant business disruption and transformation primarily driven by digital commerce, causing many traditional retailers to assess challenges of the transformation and evaluate their store networks and costs, potentially delaying purchase decisions on products. The company's international operations are subject to risks including differing economic conditions, changes in political climate, differing tax structures, other regulations and restrictions, and foreign exchange rate volatility, with a large development center in Bangalore, India that does not have a natural in-market revenue hedge to mitigate currency risk to operating expenses in India.

The company faces risks related to its dependence on a single line of business, as it continues to derive revenues from sales of supply chain cloud solutions and related professional services, and any factor adversely affecting the markets for supply chain cloud solutions could have an adverse effect. The company's use of generative and agentic AI tools exposes it to operational, compliance, and other risks including protection of proprietary rights, AI adoption-related risk as some customers may be reluctant to use generative and agentic AI products, operational risks from incomplete or inaccurate outputs, cybersecurity and third-party rights risks, and regulatory risks from jurisdictions that have proposed or enacted legislative frameworks governing AI tools including the European Union's AI Act and the Colorado AI Act.

Management's message emphasizes that while cautious about the global economy, results for the full year ended December 31, 2025 exceeded expectations due to solid demand for cloud solutions. Management believes that favorable secular tailwinds such as the digital transformation of businesses in manufacturing, wholesale and retail, coupled with the company's commitment to investing in organic innovation to deliver leading cloud supply chain, inventory and omnichannel commerce solutions, is in synergistic alignment with current market demand, contributing to strong financial results, higher demand and strong win rates. Management remains committed to investing in the business to drive customer success and expand total addressable market, which is believed will position the company well to achieve long-term sustainable growth and earnings. For 2026, management's five strategic goals are to focus on customer success and drive sustainable long-term growth; invest in innovation to expand products and total addressable market; expand the Manhattan Active suite of cloud solutions; develop and grow the cloud business and cloud subscription revenue; and expand global sales and marketing teams. Management expects that priorities for use of cash in 2026 will continue to be investments in Unified Omnichannel Commerce and Digital Supply Chain solutions, capital allocation in global teams to fund growth, and accretive share repurchases, with no anticipated borrowing requirements in 2026 for general corporate purposes.

Total revenue for the fiscal year ended December 31, 2025 was $1,081.4 million ⁵⁸ compared to $1,042.4 million ⁵⁹ for 2024. Net income was $219.9 million ⁶⁰ for 2025 compared to $218.4 million ⁶¹ for 2024. Diluted earnings per share were $3.60 ⁶² for 2025 compared to $3.51 ⁶³ for 2024. Operating income was $279.8 million ⁶⁴ for 2025 compared to $261.6 million ⁶⁵ for 2024, with operating margins of 25.9% ⁶⁶ for 2025 versus 25.1% ⁶⁷ for 2024. Cash flow from operations was $389.5 million ⁶⁸ for 2025 compared to $295.0 million ⁶⁹ for 2024. Cash and cash equivalents totaled $328.7 million ⁷⁰ at December 31, 2025 compared to $266.2 million ⁷¹ at December 31, 2024, with no debt. The effective income tax rate was 23.1% ⁷² in 2025 compared to 18.2% ⁷³ in 2024, with the increase mainly due to a decrease of excess tax benefits on restricted stock vesting in 2025, an increase in executive compensation limitations, and an increase in tax contingency reserves. The income tax provision for 2025 and 2024 included excess tax benefits of $6.1 million ⁷⁴ and $13.1 million ⁷⁵ on vesting of restricted stock. Restructuring expense of $2.9 million ⁷⁶ was recorded in 2025 related to the elimination of approximately 100 ⁷⁷ positions. By segment, the Americas generated $810.4 million ⁷⁸ in revenue and $167.6 million ⁷⁹ in operating income, EMEA generated $215.8 million ⁸⁰ in revenue and $88.1 million ⁸¹ in operating income, and APAC generated $55.2 million ⁸² in revenue and $24.2 million ⁸³ in operating income for 2025.

The company's future revenue is dependent on continuing sales from cloud subscriptions, which in turn drive sales of professional services, and if customers discontinue cloud subscriptions or reduce the scope of professional services agreements, revenue could decrease significantly. The company depends on third-party data centers to provide cloud-based solutions, and if these providers encounter defects, delays, or interruptions in service, business and operating results could be harmed, and if the company is unable to manage the costs of these services, results may be negatively affected. The company's use of generative and agentic AI tools exposes it to risks including protection of proprietary rights as U.S. copyright may be limited to works created by human authors, AI adoption-related risk as some customers may be reluctant to use generative and agentic AI products, operational risks from incomplete or inaccurate outputs, cybersecurity and third-party rights risks, and regulatory risks from jurisdictions that have proposed or enacted legislative frameworks governing AI tools including the European Union's AI Act and the Colorado AI Act. The company's operating results are substantially dependent on one line of business, as it continues to derive revenues from sales of supply chain cloud solutions and related professional services, and any factor adversely affecting the markets for supply chain cloud solutions could have an adverse effect. The company's largest market, retail, is experiencing significant business disruption and transformation primarily driven by digital commerce, and since solutions often require customers to make significant capital investments, traditional retailers could delay purchase decisions, and extended sales cycles for large cloud subscriptions could have a material adverse effect on revenues and results of operations.