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, 2018, of $0.40 compared to $0.36 in Q4 2017, on license revenue of $13.3 million, cloud subscriptions revenue of $6.8 million and record total revenue of $144.4 million, applying ASC 606 retrospectively. Non-GAAP adjusted diluted earnings per share for Q4 2018 was $0.46 compared to $0.45 in Q4 2017.

“We’re pleased with both our 2018 fourth quarter financial performance and full year results. We delivered record Q4 total revenue and strong earnings per share with a backdrop of solid software and global services revenue,” said Manhattan Associates president and CEO Eddie Capel. “In addition, we continue to receive very positive interest on our Manhattan Active™ suite of cloud-based solutions.”

“We remain bullish on our growth opportunity in 2019 and beyond.  While prudently cautious regarding current global geopolitical and economic volatility, we believe continued omnichannel and supply chain evolution in our target markets has created an acute need for Manhattan’s software that enables our clients to accelerate growth and Push Possible®,” added Mr. Capel.

FOURTH QUARTER 2018 FINANCIAL SUMMARY:

• We have reclassified certain line items in prior period financial statements to conform to the current period presentation in the consolidated statements of income because of our business transition to cloud subscriptions.
• GAAP diluted earnings per share was $0.40 in Q4 2018 compared to $0.36 in Q4 2017.
• Adjusted diluted earnings per share, a non-GAAP measure, was $0.46 in Q4 2018, compared to $0.45 in Q4 2017.
• Consolidated total revenue was $144.4 million in Q4 2018, compared to $144.1 million in Q4 2017. License revenue was $13.3 million in Q4 2018, compared to $14.7 million in Q4 2017. Cloud subscription revenue was $6.8 million in Q4 2018, compared to $3.2 million in Q4 2017.
• GAAP operating income was $34.3 million in Q4 2018, compared to $43.6 million in Q4 2017.
• Adjusted operating income, a non-GAAP measure, was $39.7 million in Q4 2018, compared to $48.8 million in Q4 2017.
• Cash flow from operations was $34.0 million in Q4 2018, compared to $47.4 million in Q4 2017. Days Sales Outstanding was 64 days at December 31, 2018, compared to 60 days at September 30, 2018.
• Cash and investments totaled $100.6 million at December 31, 2018, compared to $93.9 million at September 30, 2018.
• During the three months ended December 31, 2018, the Company repurchased 518,548 shares of Manhattan Associates common stock under the share repurchase program authorized by our Board of Directors for a total investment of $24.8 million. In January 2019, our Board authorized the Company to repurchase up to an aggregate of $50 million of the Company’s common stock.

FULL YEAR 2018 FINANCIAL SUMMARY:

• We have reclassified certain line items in prior period financial statements to conform to the current period presentation in the consolidated statements of income because of our business transition to cloud subscriptions.
• GAAP diluted earnings per share for the twelve months ended December 31, 2018, was $1.58, compared to $1.68 for the twelve months ended December 31, 2017.  
• Adjusted diluted earnings per share, a non-GAAP measure, was $1.79 for the twelve months ended December 31, 2018, compared to $1.87 for the twelve months ended December 31, 2017.
• Consolidated revenue for the twelve months ended December 31, 2018, was $559.2 million, compared to $594.6 million for the twelve months ended December 31, 2017. License revenue was $45.4 million for the twelve months ended December 31, 2018, compared to $72.3 million for the twelve months ended December 31, 2017. Cloud subscription revenue was $23.1 million for the twelve months ended December 31, 2018, compared to $9.6 million for the twelve months ended December 31, 2017.
• GAAP operating income was $133.9 million for the twelve months ended December 31, 2018, compared to $185.6 million for the twelve months ended December 31, 2017.
• Adjusted operating income, a non-GAAP measure, was $154.2 million for the twelve months ended December 31, 2018, compared to $205.2 million for the twelve months ended December 31, 2017. 
• Cash flow from operations was $137.3 million in the twelve months ended December 31, 2018, compared to $164.1 million in the twelve months ended December 31, 2017.
• During the twelve months ended December 31, 2018, the Company repurchased 3,147,466 shares of Manhattan Associates common stock under the share repurchase program authorized by our Board of Directors, for a total investment of $143.3 million.

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 because of our 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.

2019 GUIDANCE

Manhattan Associates provides the following revenue, operating margin and diluted earnings per share guidance for the full year 2019:

		Guidance Range - 2019 Full Year
	($'s in millions, except operating margin and EPS)	$ Range								% Growth Range
	Total revenue	$	564			$	576			1		%			3		%
	Operating Margin:
	GAAP operating margin		15.5	%			15.8	%
	Equity-based compensation		5.5	%			5.4	%
	Adjusted operating margin(1)		21.0	%			21.2	%
	Diluted earnings per share (EPS):
	GAAP EPS	$	1.03			$	1.07			-35		%			-32		%
	Equity-based compensation		0.35				0.35
	Adjusted EPS(1)	$	1.38			$	1.42			-23		%			-21		%
	(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 these items if applicable.

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, 2018, financial results will be held today, February 5, 2019, at 4:30 p.m. Eastern Time. We invite investors 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 ­­­­­­­­9549358 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 2019 earnings release.

GAAP VERSUS NON-GAAP PRESENTATION

The Company provides adjusted operating income and margin, 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 similarly titled non-GAAP 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 and twelve months ended December 31, 2018. 

Non-GAAP adjusted operating income and margin, 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 “2019 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-a service/cloud-based model, disruption in the retail sector, the possible effect of new U.S. tariffs on imports from other countries (and possible responsive tariffs on U.S. exports by other countries) on international commerce, 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 and in Item 1A of Part II in subsequent Quarterly Reports on Form 10-Q. 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,
	2018				2017				2018				2017
	(unaudited)				(unaudited)
Revenue:
Cloud subscriptions	$	6,803			$	3,188			$	23,104			$	9,596
Software license		13,314				14,712				45,368				72,313
Maintenance		36,466				37,325				147,033				142,998
Services		84,525				77,183				329,685				326,502
Hardware		3,258				11,678				13,967				43,190
Total revenue		144,366				144,086				559,157				594,599
Costs and expenses:
Cost of software license		682				1,377				5,297				5,483
Cost of cloud subscriptions, maintenance and services		62,138				48,934				235,584				208,045
Cost of hardware		-				8,416				-				32,205
Research and development		18,208				14,630				71,896				57,704
Sales and marketing		13,843				13,222				51,262				47,482
General and administrative		13,222				11,764				52,618				46,054
Depreciation and amortization		1,997				2,197				8,613				9,060
Restructuring charge		-				(24	)			-				2,921
Total costs and expenses		110,090				100,516				425,270				408,954
Operating income		34,276				43,570				133,887				185,645
Other (loss) income, net		(901	)			(580	)			2,344				(812	)
Income before income taxes		33,375				42,990				136,231				184,833
Income tax provision		7,460				18,476				31,541				68,352
Net income	$	25,915			$	24,514			$	104,690			$	116,481
Basic earnings per share	$	0.40			$	0.36			$	1.58			$	1.68
Diluted earnings per share	$	0.40			$	0.36			$	1.58			$	1.68
Weighted average number of shares:
Basic		65,199				68,485				66,201				69,175
Diluted		65,526				68,791				66,434				69,424

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,
		2018				2017				2018				2017
Operating income		$	34,276			$	43,570			$	133,887			$	185,645
Equity-based compensation (a)			5,291				5,188				19,864				16,229
Purchase amortization (c)			108				107				430				430
Restructuring charge (d)			-				(24	)			-				2,921
Adjusted operating income (Non-GAAP)		$	39,675			$	48,841			$	154,181			$	205,225
Income tax provision		$	7,460			$	18,476			$	31,541			$	68,352
Equity-based compensation (a)			1,092				1,934				4,662				5,964
Tax benefit of stock awards vested (b)			6				14				777				1,911
Purchase amortization (c)			22				40				101				158
Restructuring charge (d)			-				(2	)			-				1,073
U.S. Tax Cuts and Jobs Act impact (e)			(146	)			(2,825	)			202				(2,825	)
Adjusted income tax provision (Non-GAAP)		$	8,434			$	17,637			$	37,283			$	74,633
Net income		$	25,915			$	24,514			$	104,690			$	116,481
Equity-based compensation (a)			4,199				3,254				15,202				10,265
Tax benefit of stock awards vested (b)			(6	)			(14	)			(777	)			(1,911	)
Purchase amortization (c)			86				67				329				272
Restructuring charge (d)			-				(22	)			-				1,848
U.S. Tax Cuts and Jobs Act impact (e)			146				2,825				(202	)			2,825
Adjusted net income (Non-GAAP)		$	30,340			$	30,624			$	119,242			$	129,780
Diluted EPS		$	0.40			$	0.36			$	1.58			$	1.68
Equity-based compensation (a)			0.06				0.05				0.23				0.15
Tax benefit of stock awards vested (b)			-				-				(0.01	)			(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)		$	0.46			$	0.45			$	1.79			$	1.87
Fully diluted shares			65,526				68,791				66,434				69,424

(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 today with the SEC. Equity-based compensation is included in the following GAAP operating expense lines for the three and twelve months ended December 31, 2018, and 2017:

		Three Months Ended December 31,								Year Ended December 31,
		2018				2017				2018				2017
Cost of services		$	1,583			$	1,398			$	5,787			$	3,994
Research and development			1,095				1,280				4,230				3,208
Sales and marketing			545				690				2,041				2,240
General and administrative			2,068				1,820				7,806				6,787
Total equity-based compensation		$	5,291			$	5,188			$	19,864			$	16,229

(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 with 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 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 retail sector headwinds and to align our services capacity with demand. That action did 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 that initiative, we recorded a charge of approximately $2.9 million in 2017. The charge primarily consisted of employee severance, employee transition and outplacement costs. We excluded that charge from adjusted non-GAAP results because we do not believe the charge was a cost resulting from normal operating activities and for the other reasons explained in our Current Report on Form 8-K filed with the SEC.

(e)     In the fourth quarter of 2017, we recorded a provisional net one-time tax of $2.8 million because of the enactment of the Tax Cuts and Jobs 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 finalized our calculations, resulting in a tax benefit of $0.2 million during the twelve months ended December 31, 2018.

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

		December 31, 2018				December 31, 2017
ASSETS
Current Assets:
Cash and cash equivalents		$	99,126			$	125,522
Short-term investments			1,440				-
Accounts receivable, net of allowance of $2,589 and $2,692 at December 31, 2018 and December 31, 2017, respectively			100,108				92,231
Prepaid expenses and other current assets			14,708				10,320
Total current assets			215,382				228,073
Property and equipment, net			14,318				15,493
Goodwill, net			62,240				62,248
Deferred income taxes			5,442				1,877
Other assets			9,768				7,304
Total assets		$	307,150			$	314,995
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable		$	18,181			$	14,028
Accrued compensation and benefits			29,485				15,826
Accrued and other liabilities			12,161				12,105
Deferred revenue			81,894				75,068
Income taxes payable			3,543				7,228
Total current liabilities			145,264				124,255
Other non-current liabilities			14,739				15,784
Shareholders' equity:
Preferred stock, no par value; 20,000,000 shares authorized, no shares issued or outstanding at December 31, 2018 and December 31, 2017			-				-
Common stock, $.01 par value; 200,000,000 shares authorized; 64,860,419 and 67,776,138 shares issued and outstanding at December 31, 2018 and December 31, 2017, respectively			649				678
Retained earnings			163,359				186,117
Accumulated other comprehensive loss			(16,861	)			(11,839	)
Total shareholders' equity			147,147				174,956
Total liabilities and shareholders' equity		$	307,150			$	314,995

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

		Year Ended December 31,
		2018				2017
Operating activities:
Net income		$	104,690			$	116,481
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			8,613				9,060
Equity-based compensation			19,864				16,229
Loss on disposal of equipment			59				152
Deferred income taxes			(4,265	)			1,574
Unrealized foreign currency loss			298				196
Changes in operating assets and liabilities:
Accounts receivable, net			(9,341	)			10,139
Other assets			(4,357	)			661
Accounts payable, accrued and other liabilities			18,603				(5,354	)
Income taxes			(4,390	)			1,876
Deferred revenue			7,575				13,052
Net cash provided by operating activities			137,349				164,066
Investing activities:
Purchases of property and equipment			(7,306	)			(6,199	)
Net (purchases) maturities of short-term investments			(2,532	)			429
Net cash used in investing activities			(9,838	)			(5,770	)
Financing activities:
Purchase of common stock			(149,322	)			(131,707	)
Net cash used in financing activities			(149,322	)			(131,707	)
Foreign currency impact on cash			(4,585	)			3,318
Net change in cash and cash equivalents			(26,396	)			29,907
Cash and cash equivalents at beginning of period			125,522				95,615
Cash and cash equivalents at end of period		$	99,126			$	125,522

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				2nd Qtr				3rd Qtr				4th Qtr				Full Year
GAAP Diluted EPS	$	0.40			$	0.45			$	0.47			$	0.36			$	1.68			$	0.33			$	0.42			$	0.43			$	0.40			$	1.58
Adjustments to GAAP:
Equity-based compensation		0.04				0.03				0.03				0.05				0.15				0.05				0.06				0.06				0.06				0.23
Tax benefit of stock awards vested		(0.03	)			-				-				-				(0.03	)			(0.01	)			-				-				-				(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			$	0.47			$	0.49			$	0.46			$	1.79
Fully Diluted Shares		70,247				69,421				69,135				68,791				69,424				67,736				66,535				65,901				65,526				66,434

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				2nd Qtr				3rd Qtr				4th Qtr				Full Year
Revenue:
Americas	$	113,115			$	123,658			$	124,833			$	115,543			$	477,149			$	104,615			$	112,945			$	113,886			$	114,040			$	445,486
EMEA		23,360				22,028				18,453				21,508				85,349				19,164				21,356				21,181				23,043				84,744
APAC		7,014				8,455				9,597				7,035				32,101				6,790				7,570				7,284				7,283				28,927
	$	143,489			$	154,141			$	152,883			$	144,086			$	594,599			$	130,569			$	141,871			$	142,351			$	144,366			$	559,157
GAAP Operating Income:
Americas	$	28,713			$	35,717			$	39,295			$	32,968			$	136,693			$	20,318			$	26,589			$	26,200			$	24,422			$	97,529
EMEA		10,754				9,995				7,128				7,952				35,829				5,475				6,252				7,413				7,297				26,437
APAC		2,253				3,547				4,673				2,650				13,123				2,037				2,844				2,483				2,557				9,921
	$	41,720			$	49,259			$	51,096			$	43,570			$	185,645			$	27,830			$	35,685			$	36,096			$	34,276			$	133,887
Adjustments (pre-tax):
Americas:
Equity-based compensation	$	4,472			$	2,796			$	3,773			$	5,188			$	16,229			$	4,343			$	4,927				5,303			$	5,291			$	19,864
Purchase amortization		107				108				108				107				430				107				108				107				108				430
Restructuring charge		-				2,908				(77	)			(18	)			2,813				-				-				-				-				-
	$	4,579			$	5,812			$	3,804			$	5,277			$	19,472			$	4,450			$	5,035			$	5,410			$	5,399			$	20,294
EMEA:
Restructuring charge		-				114				-				(6	)			108				-				-				-				-				-
Adjusted non-GAAP Operating Income:
Americas	$	33,292			$	41,529			$	43,099			$	38,245			$	156,165			$	24,768			$	31,624			$	31,610			$	29,821			$	117,823
EMEA		10,754				10,109				7,128				7,946				35,937				5,475				6,252				7,413				7,297				26,437
APAC		2,253				3,547				4,673				2,650				13,123				2,037				2,844				2,483				2,557				9,921
	$	46,299			$	55,185			$	54,900			$	48,841			$	205,225			$	32,280			$	40,720			$	41,506			$	39,675			$	154,181

 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				2nd Qtr				3rd Qtr				4th Qtr				Full Year
Revenue	$	(1,547	)		$	(1,219	)		$	536			$	1,820			$	(410	)		$	2,781			$	1,699			$	(581	)		$	(1,068	)		$	2,831
Costs and expenses		(789	)			(396	)			723				1,485				1,023				2,328				831				(1,177	)			(1,774	)			208
Operating income		(758	)			(823	)			(187	)			335				(1,433	)			453				868				596				706				2,623
Foreign currency gains (losses) in other income		(646	)			(348	)			(81	)			(771	)			(1,846	)			366				705				1,431				(1,185	)			1,317
	$	(1,404	)		$	(1,171	)		$	(268	)		$	(436	)		$	(3,279	)		$	819			$	1,573			$	2,027			$	(479	)		$	3,940

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				2nd Qtr				3rd Qtr				4th Qtr				Full Year
Operating income	$	(70	)		$	(326	)		$	(338	)		$	(345	)		$	(1,079	)		$	(360	)		$	359			$	828			$	1,066			$	1,893
Foreign currency gains (losses) in other income		(320	)			(190	)			71				(43	)			(482	)			210				1,120				1,572				(1,074	)			1,828
Total impact of changes in the Indian Rupee	$	(390	)		$	(516	)		$	(267	)		$	(388	)		$	(1,561	)		$	(150	)		$	1,479			$	2,400			$	(8	)		$	3,721

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

	2017																				2018
	1st Qtr				2nd Qtr				3rd Qtr				4th Qtr				Full Year				1st Qtr				2nd Qtr				3rd Qtr				4th Qtr				Full Year
Interest income	$	293			$	264			$	314			$	303			$	1,174			$	347			$	241			$	201			$	278			$	1,067
Foreign currency gains (losses)		(646	)			(348	)			(81	)			(771	)			(1,846	)			366				705				1,431				(1,185	)			1,317
Other non-operating income (expense)		(18	)			16				(26	)			(112	)			(140	)			8				40				(94	)			6				(40	)
Total other income (loss)	$	(371	)		$	(68	)		$	207			$	(580	)		$	(812	)		$	721			$	986			$	1,538			$	(901	)		$	2,344

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

	2017																				2018
	1st Qtr				2nd Qtr				3rd Qtr				4th Qtr				Full Year				1st Qtr				2nd Qtr				3rd Qtr				4th Qtr				Full Year
Capital expenditures	$	789			$	1,914			$	1,194			$	2,302			$	6,199			$	2,174			$	1,881			$	1,481			$	1,770			$	7,306

 6.            Stock Repurchase Activity (in thousands):

	2017																				2018
	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		1,004				535				-				1,156				2,695				1,158				1,082				389				519				3,148
Shares withheld for taxes due upon vesting of restricted stock		131				1				2				1				135				111				1				3				-				115
Total shares purchased		1,135				536				2				1,157				2,830				1,269				1,083				392				519				3,263
Total cash paid for shares purchased under publicly-announced buy-back program	$	49,978			$	24,974			$	-			$	49,953			$	124,905			$	49,972			$	47,876			$	20,669			$	24,757			$	143,274
Total cash paid for shares withheld for taxes due upon vesting of restricted stock		6,641				27				80				54				6,802				5,843				23				175				7				6,048
Total cash paid for shares repurchased	$	56,619			$	25,001			$	80			$	50,007			$	131,707			$	55,815			$	47,899			$	20,844			$	24,764			$	149,322

7.           Impact of Cloud Transition

Because of our 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. These reclassifications did not affect total revenue, operating income or net income. The following table reflects the comparison between the former and new presentation (in thousands):

	2017																				2018
	1st Qtr				2nd Qtr				3rd Qtr				4th Qtr				Full Year				1st Qtr				2nd Qtr				3rd Qtr				4th Qtr				Full Year
Former Presentation:
Software license	$	22,773			$	22,442			$	18,794			$	17,900			$	81,909			$	12,024			$	18,350			$	17,981			$	20,117			$	68,472
Services		108,833				116,828				115,555				110,394				451,610				111,701				115,051				116,911				116,256				459,919
Hardware and other		11,883				14,871				18,534				15,792				61,080				6,844				8,470				7,459				7,993				30,766
	$	143,489			$	154,141			$	152,883			$	144,086			$	594,599			$	130,569			$	141,871			$	142,351			$	144,366			$	559,157
Cost of license	$	2,240			$	2,355			$	2,830			$	3,169			$	10,594			$	3,982			$	5,534			$	5,789			$	6,023			$	21,328
Cost of services		49,743				47,751				44,750				43,053				185,297				50,348				49,475				50,984				52,093				202,900
Cost of hardware and other		9,638				12,207				15,492				12,505				49,842				3,464				4,072				4,413				4,704				16,653
	$	61,621			$	62,313			$	63,072			$	58,727			$	245,733			$	57,794			$	59,081			$	61,186			$	62,820			$	240,881
New Presentation:
Cloud subscriptions (a)	$	1,496			$	2,378			$	2,534			$	3,188			$	9,596			$	4,469			$	5,377			$	6,455			$	6,803			$	23,104
Software license		21,277				20,064				16,260				14,712				72,313				7,555				12,973				11,526				13,314				45,368
Maintenance		33,376				35,959				36,338				37,325				142,998				36,397				36,993				37,177				36,466				147,033
Services		79,781				85,327				84,211				77,183				326,502				78,757				82,267				84,136				84,525				329,685
Hardware		7,559				10,413				13,540				11,678				43,190				3,391				4,261				3,057				3,258				13,967
	$	143,489			$	154,141			$	152,883			$	144,086			$	594,599			$	130,569			$	141,871			$	142,351			$	144,366			$	559,157
Cost of license	$	1,352			$	1,438			$	1,316			$	1,377			$	5,483			$	1,308			$	2,096			$	1,211			$	682			$	5,297
Cost of cloud subscriptions, maintenance and services (b)		54,899				53,109				51,103				48,934				208,045				56,486				56,985				59,975				62,138				235,584
Cost of hardware		5,370				7,766				10,653				8,416				32,205				-				-				-				-				-
	$	61,621			$	62,313			$	63,072			$	58,727			$	245,733			$	57,794			$	59,081			$	61,186			$	62,820			$	240,881

Reconciliation of Selected GAAP to Non-GAAP Measure:
	2017																				2018
	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	$	49,743			$	47,751			$	44,750			$	43,053			$	185,297			$	50,348			$	49,475			$	50,984			$	52,093			$	202,900
Equity-based compensation (c)		(1,141	)			(580	)			(875	)			(1,398	)			(3,994	)			(1,117	)			(1,556	)			(1,531	)			(1,583	)			(5,787	)
Adjusted Cost of services	$	48,602			$	47,171			$	43,875			$	41,655			$	181,303			$	49,231			$	47,919			$	49,453			$	50,510			$	197,113
New Presentation:
Cost of cloud subscriptions, maintenance and services (b)	$	54,899			$	53,109			$	51,103			$	48,934			$	208,045			$	56,486			$	56,985			$	59,975			$	62,138			$	235,584
Equity-based compensation (c)		(1,141	)			(580	)			(875	)			(1,398	)			(3,994	)			(1,117	)			(1,556	)			(1,531	)			(1,583	)			(5,787	)
Adjusted Cost of cloud subscriptions, maintenance and services	$	53,758			$	52,529			$	50,228			$	47,536			$	204,051			$	55,369			$	55,429			$	58,444			$	60,555			$	229,797

1. Cloud subscriptions includes software as a service (“SaaS”) and arrangements that 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. 
2. Cost of cloud subscriptions, maintenance and services consists primarily of salaries and other personnel-related expenses of employees dedicated to cloud subscriptions; maintenance services; professional and technical services; and hosting fees. 
3. 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 today with the SEC.

8.        ASC 606 Adoption

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 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 (in thousands):

	2017																				2018
	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	$	7,559			$	10,413			$	13,540			$	11,678			$	43,190			$	11,224			$	16,252			$	10,575			$	11,863			$	49,914
Cost of Revenue
Cost of Hardware		(5,370	)			(7,766	)			(10,653	)			(8,416	)			(32,205	)			(7,833	)			(11,991	)			(7,518	)			(8,605	)			(35,947	)
Hardware Revenue, net	$	2,189			$	2,647			$	2,887			$	3,262			$	10,985			$	3,391			$	4,261			$	3,057			$	3,258			$	13,967
Proforma Presentation of Hardware Revenue - Post ASC 606 Using Full Retrospective Method:
Hardware Revenue	$	2,189			$	2,647			$	2,887			$	3,262			$	10,985			$	3,391			$	4,261			$	3,057			$	3,258			$	13,967

9.        Remaining Performance Obligations

Under the new revenue recognition standard, we now disclose revenue we expect to recognize from our remaining performance obligations.  Our reported performance obligations primarily represent cloud subscriptions with a non-cancelable term greater than one year (including cloud deferred revenue as well as cloud amounts that will be invoiced and recognized as revenue in future periods).  Our deferred revenue on the balance sheet primarily relates to our maintenance contracts, which are typically one year in duration and are not included in the remaining performance obligations.  Below are our remaining performance obligations as of the end of each period (in thousands):

	December 31, 2017				March 31, 2018				June 30, 2018				September 30, 2018				December 31, 2018
Remaining Performance Obligations	$	27,535			$	33,999			$	58,434			$	64,175			$	76,990

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