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Manhattan Associates Reports First Quarter 2018 Performance
[April 24, 2018]

Manhattan Associates Reports First Quarter 2018 Performance


ATLANTA, April 24, 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 first quarter ended March 31, 2018 of $0.33 compared to $0.40 in Q1 2017 on license revenue of $7.6 million, cloud subscriptions revenue of $4.5 million and total revenue of $130.6 million. Non-GAAP adjusted diluted earnings per share for Q1 2018 was $0.37 compared to $0.42 in Q1 2017.

“Overall, we are off to a good start to the year, with Q1 total revenue and earnings per share performance slightly ahead of our expectations. Our transition to cloud continues as planned and while license revenue was soft due to some sales cycles extending, we performed well across all other revenue categories and our sales pipelines for both cloud and perpetual license are solid. Based on our outlook for the remainder of the year, we are maintaining our 2018 full-year guidance,” said Manhattan Associates president and CEO Eddie Capel. “Despite the global geopolitical and economic volatility, we continue to be very bullish on the market opportunity ahead and are investing significant capital into transformative industry leading innovation. We look forward to our upcoming Momentum customer conference in May, where we will unveil exciting product advancements enabling our clients to Push Possible™ with their commerce supply chains,” concluded Mr. Capel.

FIRST QUARTER 2018 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 $0.33 in Q1 2018 compared to $0.40 in Q1 2017.

  • Adjusted diluted earnings per share, a non-GAAP measure, was $0.37 in Q1 2018, compared to $0.42 in Q1 2017.

  • Consolidated total revenue was $130.6 million in Q1 2018, compared to $143.5 million in Q1 2017. License revenue was $7.6 million in Q1 2018, compared to $21.3 million in Q1 2017. Cloud subscriptions revenue was $4.5 million in Q1 2018 compared to $1.5 million in Q1 2017.

  • GAAP operating income was $27.8 million in Q1 2018, compared to $41.7 million in Q1 2017.

  • Adjusted operating income, a non-GAAP measure, was $32.3 million in Q1 2018, compared to $46.3 million in Q1 2017.

  • Cash flow from operations was $51.3 million in Q1 2018, compared to $61.3 million in Q1 2017. Days Sales Outstanding was 59 days at both March 31, 2018, and December 31, 2017.

  • Cash and investments totaled $119.0 million at March 31, 2018, compared to $125.5 million at December 31, 2017.

  • During the three months ended March 31, 2018, the Company repurchased 1,157,696 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 April 2018, the Board of Directors authorized the Company to repurchase up to an aggregate of $50 million of the Company’s common stock.

NEW PRESENTATION OF CONSOLIDATED STATEMENTS OF INCOME

We have reclassified certain line items in prior period financial statements 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. These reclassifications did not affect total revenue, operating income or net income. For further detail, please see note 7 in the supplemental financial information accompanying this press release.

2018 GUIDANCE

Manhattan Associates reaffirms the following revenue, operating margin and diluted earnings per share guidance for the full year 2018:

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

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 first quarter financial results will be held today, April 24, 2018, at 4:30 p.m. Eastern Time. We invite investors 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.

Those who cannot listen to the live broadcast may access a replay 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 1295756, 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’ second quarter 2018 earnings release.

GAAP VERSUS NON-GAAP PRESENTATION

The Company provides adjusted operating income, adjusted income tax provision, adjusted net income, adjusted diluted earnings per share, adjusted cost of services, and adjusted cost of cloud subscriptions, maintenance and services 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 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 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 three months ended March 31, 2018.

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 of these costs, and a restructuring charge – all net of income tax effects, and the impact of the Tax Cuts and Jobs Act. Adjusted cost of services and adjusted cost of cloud subscriptions, maintenance and services exclude the impact of equity-based compensation. We include reconciliations of the Company’s GAAP financial measures to non-GAAP adjustments 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, 2017. 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 March 31, 
  2018  2017 
  (unaudited)  (unaudited) 
Revenue:        
Software license $7,555  $21,277 
Cloud subscriptions  4,469   1,496 
Maintenance  36,397   33,376 
Services  78,757   79,781 
Hardware (1)  3,391   7,559 
Total revenue  130,569   143,489 
Costs and expenses:        
Cost of license  1,308   1,352 
Cost of cloud subscriptions, maintenance and services  56,486   54,899 
Cost of hardware (1)  -   5,370 
Research and development  17,059   14,225 
Sales and marketing  12,884   11,789 
General and administrative  12,800   11,872 
Depreciation and amortization  2,202   2,262 
Total costs and expenses  102,739   101,769 
Operating income  27,830   41,720 
Other income (loss), net  721   (371)
Income before income taxes  28,551   41,349 
Income tax provision  5,899   13,125 
Net income $22,652  $28,224 
         
Basic earnings per share $0.34  $0.40 
Diluted earnings per share $0.33  $0.40 
         
Weighted average number of shares:        
Basic  67,553   69,973 
Diluted  67,736   70,247 
         

(1)  Adoption of the new revenue recognition standard, FASB ASC Topic 606, Revenue from Contracts with Customers, in the first quarter of 2018 resulted in changes in the presentation of hardware revenue and cost of hardware. For further detail, please see note 8 in the supplemental financial information accompanying this press release.

MANHATTAN ASSOCIATES, INC. AND SUBSIDIARIES
Reconciliation of Selected GAAP to Non-GAAP Measures
(in thousands, except per share amounts)

 
   Three Months Ended March 31, 
   2018  2017 
          
Operating income  $27,830  $41,720 
Equity-based compensation (a)   4,343   4,472 
Purchase amortization (c)   107   107 
Adjusted operating income (Non-GAAP)  $32,280  $46,299 
          
          
Income tax provision  $5,899  $13,125 
Equity-based compensation (a)   1,064   1,632 
Tax benefit of stock awards vested (b)   749   1,968 
Purchase amortization (c)   26   39 
U.S. Tax Cuts and Jobs Act impact (d)   348   - 
Adjusted income tax provision (Non-GAAP)  $8,086  $16,764 
          
          
Net income  $22,652  $28,224 
Equity-based compensation (a)   3,280   2,840 
Tax benefit of stock awards vested (b)   (749)  (1,968)
Purchase amortization (c)   81   68 
U.S. Tax Cuts and Jobs Act impact (d)   (348)  - 
Adjusted net income (Non-GAAP)  $24,916  $29,164 
          
          
Diluted EPS  $0.33  $0.40 
Equity-based compensation (a)   0.05   0.04 
Tax benefit of stock awards vested (b)   (0.01)  (0.03)
Purchase amortization (c)   -   - 
U.S. Tax Cuts and Jobs Act impact (d)   (0.01)  - 
Adjusted diluted EPS (Non-GAAP)  $0.37  $0.42 
          
Fully diluted shares   67,736   70,247 
          

(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 months ended March 31, 2018 and 2017:

   Three Months Ended March 31, 
   2018  2017 
          
Cost of services  $1,117  $1,141 
Research and development   921   720 
Sales and marketing   558   667 
General and administrative   1,747   1,944 
Total equity-based compensation  $4,343  $4,472 
 

(b)  Adjustments represent 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. 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. We exclude that amortization from adjusted results to facilitate comparison with our peers, to facilitate comparison 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 the fourth quarter of 2017, we recorded a provisional net one-time tax of $2.8 million due to the enactment of the Tax Cuts and Jobs Act (the Act) in December 2017. We calculated that amount 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. We adjusted our provisional estimate by $0.3 million during the first quarter of 2018.

MANHATTAN ASSOCIATES, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(in thousands, except share and per share data)

  
  March 31, 2018  December 31, 2017 
  (unaudited)     
ASSETS        
Current Assets:        
Cash and cash equivalents $106,668  $125,522 
Short-term investments  12,341   - 
Accounts receivable, net of allowance of $2,265 and $2,692, respectively  85,285   92,231 
Prepaid expenses and other current assets  14,557   10,320 
Total current assets  218,851   228,073 
         
Property and equipment, net  15,758   15,493 
Goodwill, net  62,252   62,248 
Deferred income taxes  634   1,877 
Other assets  9,687   7,304 
Total assets $307,182  $314,995 
         
LIABILITIES AND SHAREHOLDERS' EQUITY        
Current liabilities:        
Accounts payable $14,869  $14,028 
Accrued compensation and benefits  20,894   15,826 
Accrued and other liabilities  12,010   12,105 
Deferred revenue  85,505   75,068 
Income taxes payable  9,527   7,228 
Total current liabilities  142,805   124,255 
         
Other non-current liabilities  16,429   15,784 
         
Shareholders' equity:        
Preferred stock, no par value; 20,000,000 shares authorized, no shares issued or
outstanding in 2018 and 2017
  -   - 
Common stock, $0.01 par value; 200,000,000 shares authorized; 66,819,431 and
67,776,138 shares issued and outstanding at March 31, 2018 and December 31, 2017,
respectively
  668   678 
Retained earnings  159,288   186,117 
Accumulated other comprehensive loss  (12,008)  (11,839)
Total shareholders' equity  147,948   174,956 
Total liabilities and shareholders' equity $307,182  $314,995 
  


MANHATTAN ASSOCIATES, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(in thousands)

 
  Three Months Ended March 31,
  2018 2017
  (unaudited) (unaudited)
Operating activities:    
Net income $22,652  $28,224 
Adjustments to reconcile net income to net cash provided by operating activities:    
Depreciation and amortization  2,202   2,262 
Equity-based compensation  4,343   4,472 
(Gain) loss on disposal of equipment  (3)  20 
Deferred income taxes  1,587   2,531 
Unrealized foreign currency (gain) loss  (333)  104 
Changes in operating assets and liabilities:    
   Accounts receivable, net  7,502   16,553 
   Other assets  (4,223)  (3,939)
   Accounts payable, accrued and other liabilities  5,435   (4,063)
   Income taxes  2,286   8,172 
   Deferred revenue  9,853   6,940 
Net cash provided by operating activities  51,301   61,276 
     
Investing activities:    
Purchase of property and equipment  (2,174)  (789)
Net purchases of investments  (12,598)  (11,630)
Net cash used in investing activities  (14,772)  (12,419)
     
Financing activities:    
Purchase of common stock  (55,815)  (56,619)
Net cash used in financing activities  (55,815)  (56,619)
     
Foreign currency impact on cash  432   1,355 
     
Net change in cash and cash equivalents  (18,854)  (6,407)
Cash and cash equivalents at beginning of period  125,522   95,615 
Cash and cash equivalents at end of period $106,668  $89,208 
 


MANHATTAN ASSOCIATES, INC.

SUPPLEMENTAL INFORMATION

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

 
 2017  2018 
 1st Qtr  2nd Qtr  3rd Qtr  4th Qtr  Full Year  1st Qtr 
GAAP Diluted EPS$0.40  $0.45  $0.47  $0.36  $1.68  $0.33 
Adjustments to GAAP:                       
Equity-based compensation 0.04   0.03   0.03   0.05   0.15   0.05 
Tax benefit of stock awards vested (0.03)  -   -   -   (0.03)  (0.01)
Purchase amortization -   -   -   -   -   - 
Restructuring charge -   0.03   -   -   0.03   - 
U.S. Tax Cuts and Jobs Act impact -   -   -   0.04   0.04   (0.01)
Adjusted Diluted EPS$0.42  $0.50  $0.51  $0.45  $1.87  $0.37 
Fully Diluted Shares 70,247   69,421   69,135   68,791   69,424   67,736 

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

  
 2017  2018 
 1st Qtr  2nd Qtr  3rd Qtr  4th Qtr  Full Year  1st Qtr 
Revenue: 
Americas$113,115  $123,658  $124,833  $115,543  $477,149  $104,615 
EMEA 23,360   22,028   18,453   21,508   85,349   19,164 
APAC 7,014   8,455   9,597   7,035   32,101   6,790 
 $143,489  $154,141  $152,883  $144,086  $594,599  $130,569 
                        
GAAP Operating Income: 
Americas$28,713  $35,717  $39,295  $32,968  $136,693  $20,318 
EMEA 10,754   9,995   7,128   7,952   35,829   5,475 
APAC 2,253   3,547   4,673   2,650   13,123   2,037 
 $41,720  $49,259  $51,096  $43,570  $185,645  $27,830 
                        
Adjustments (pre-tax): 
Americas:                       
Equity-based
  compensation
$4,472  $2,796  $3,773  $5,188  $16,229  $4,343 
Purchase amortization 107   108   108   107   430   107 
Restructuring charge -   2,908   (77)  (18)  2,813   - 
 $4,579  $5,812  $3,804  $5,277  $19,472  $4,450 
                        
EMEA:                       
Restructuring charge -   114   -   (6)  108   - 
                        
Adjusted non-GAAP Operating Income: 
Americas$33,292  $41,529  $43,099  $38,245  $156,165  $24,768 
EMEA 10,754   10,109   7,128   7,946   35,937   5,475 
APAC 2,253   3,547   4,673   2,650   13,123   2,037 
 $46,299  $55,185  $54,900  $48,841  $205,225  $32,280 
                        

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):

                        
 2017  2018 
 1st Qtr  2nd Qtr  3rd Qtr  4th Qtr  Full Year  1st Qtr 
Revenue$(1,547) $(1,219) $536  $1,820  $(410) $2,781 
Costs and expenses (789)  (396)  723   1,485   1,023   2,328 
Operating income (758)  (823)  (187)  335   (1,433)  453 
Foreign currency (losses)
  gains in other income
 (646)  (348)  (81)  (771)  (1,846)  366 
 $(1,404) $(1,171) $(268) $(436) $(3,279) $819 
 

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):

 
 2017  2018 
 1st Qtr  2nd Qtr  3rd Qtr  4th Qtr  Full Year  1st Qtr 
Operating income$(70) $(326) $(338) $(345) $(1,079) $(360)
Foreign currency
  (losses) gains in
  other income
 (320)  (190)  71   (43)  (482)  210 
Total impact of
  changes in the
  Indian Rupee
$(390) $(516) $(267) $(388) $(1,561) $(150)
 

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

 
 2017  2018 
 1st Qtr  2nd Qtr  3rd Qtr  4th Qtr  Full Year  1st Qtr 
Interest income$293  $264  $314  $303  $1,174  $347 
Foreign currency (losses) gains (646)  (348)  (81)  (771)  (1,846)  366 
Other non-operating
  (expense) income
 (18)  16   (26)  (112)  (140)  8 
Total other (loss) income$(371) $(68) $207  $(580) $(812) $721 
 

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

 
 2017  2018 
 1st Qtr  2nd Qtr  3rd Qtr  4th Qtr  Full Year  1st Qtr 
Capital expenditures$789  $1,914  $1,194  $2,302  $6,199  $2,174 
 

6.    Stock Repurchase Activity (in thousands):

 
 2017  2018 
 1st Qtr  2nd Qtr  3rd Qtr  4th Qtr  Full Year  1st Qtr 
Shares purchased under publicly-announced buy-back program 1,004   535   -   1,156   2,695   1,158 
Shares withheld for taxes due upon vesting of restricted stock 131   1   2   1   135   111 
Total shares purchased 1,135   536   2   1,157   2,830   1,269 
                        
Total cash paid for shares purchased under publicly-announced buy-back program$49,978  $24,974  $-  $49,953  $124,905  $49,972 
Total cash paid for shares withheld for taxes due upon vesting of restricted stock 6,641   27   80   54   6,802   5,843 
Total cash paid for shares repurchased$56,619  $25,001  $80  $50,007  $131,707  $55,815 
 

7.  Due to the business transition to Cloud Subscriptions, we have revised our presentations of revenue and related cost line items in our consolidated statements of income. We have reclassified certain line items in prior period financial statements 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  2018 
 1st Qtr  2nd Qtr  3rd Qtr  4th Qtr  Full Year  1st Qtr  2nd Qtr  3rd Qtr  4th Qtr  Full Year  1st Qtr 
                                            
Former Presentation:     
Software license$20,607  $20,631  $21,633  $22,125  $84,996  $22,773  $22,442  $18,794  $17,900  $81,909  $12,024 
Services 116,263   119,833   119,267   111,923   467,286   108,833   116,828   115,555   110,394   451,610   111,701 
Hardware and other 12,990   14,428   11,313   13,544   52,275   11,883   14,871   18,534   15,792   61,080   6,844 
 $149,860  $154,892  $152,213  $147,592  $604,557  $143,489  $154,141  $152,883  $144,086  $594,599  $130,569 
                                            
Cost of license$3,152  $2,283  $2,966  $2,419  $10,820  $2,240  $2,355  $2,830  $3,169  $10,594  $3,982 
Cost of services 51,904   48,393   49,436   47,742   197,475   49,743   47,751   44,750   43,053   185,297   50,348 
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   3,464 
 $64,813  $62,517  $61,678  $60,871  $249,879  $61,621  $62,313  $63,072  $58,727  $245,733  $57,794 
                                            
                                            
New Presentation:     
Software license$19,617  $18,882  $20,012  $20,702  $79,213  $21,277  $20,064  $16,260  $14,712  $72,313  $7,555 
Cloud subscriptions (a) 990   1,749   1,621   1,423   5,783   1,496   2,378   2,534   3,188   9,596   4,469 
Maintenance 31,757   32,841   34,424   34,826   133,848   33,376   35,959   36,338   37,325   142,998   36,397 
Services 88,735   91,866   89,613   81,571   351,785   79,781   85,327   84,211   77,183   326,502   78,757 
Hardware 8,761   9,554   6,543   9,070   33,928   7,559   10,413   13,540   11,678   43,190   3,391 
 $149,860  $154,892  $152,213  $147,592  $604,557  $143,489  $154,141  $152,883  $144,086  $594,599  $130,569 
                                            
Cost of license$2,322  $1,361  $1,706  $1,429  $6,818  $1,352  $1,438  $1,316  $1,377  $5,483  $1,308 
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   56,486 
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  $57,794 
                                            
                                            


Reconciliation of GAAP to Non-GAAP Measures:     
                                            
 2016  2017  2018 
 1st Qtr  2nd Qtr  3rd Qtr  4th Qtr  Full Year  1st Qtr  2nd Qtr  3rd Qtr  4th Qtr  Full Year  1st Qtr 
                                            
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  $50,348 
Equity-based compensation (c) (1,279)  (868)  (828)  (819)  (3,794)  (1,141)  (580)  (875)  (1,398)  (3,994)  (1,117)
Adjusted Cost of services$50,625  $47,525  $48,608  $46,923  $193,681  $48,602  $47,171  $43,875  $41,655  $181,303  $49,231 
                                            
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  $56,486 
Equity-based compensation (c) (1,279)  (868)  (828)  (819)  (3,794)  (1,141)  (580)  (875)  (1,398)  (3,994)  (1,117)
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  $55,369 
                                            
                                            
(a) Cloud subscriptions includes software as a service (“SaaS”) and arrangements that provide customers the right to use our software within a cloud-based environment that we manage 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 results 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 of this release. 
  

8.     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. We recorded historical hardware sales prior to the adoption of ASC 606 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 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 2017 quarterly financial results below:

 
 2016  2017  2018 
 1st Qtr  2nd Qtr  3rd Qtr  4th Qtr  Full Year  1st Qtr  2nd Qtr  3rd Qtr  4th Qtr  Full Year  1st Qtr 
                                            
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  $11,224 
                                            
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)  (7,833)
                                            
Hardware Revenue, net$3,132  $2,451  $1,917  $3,002  $10,502  $2,189  $2,647  $2,887  $3,262  $10,985  $3,391 
                                            
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  $3,391 
                                            


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
     

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