MANH Manhattan Associates Inc

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 SUBSIDIARIESCondensed 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 SUBSIDIARIESReconciliation 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 SUBSIDIARIESCondensed 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 SUBSIDIARIESCondensed 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