Welcome to the Manhattan Associates first quarter 2009 earnings conference call. (Operator Instructions) As a reminder, ladies and gentlemen, this call is being recorded today, April 21, 2009. I would now like to introduce Pete Sinisgalli, President and Chief Executive Officer of Manhattan Associates, as well as Dennis Story, Chief Financial Officer. Dennis Story, you may begin your conference.

Welcome to Manhattan Associates 2009 first quarter earnings call. Before we launch into the results discussion, I will review our cautionary language and then turn the call over to Pete Sinisgalli, our CEO. During this call, including the question and answer session, we may make forward-looking statements regarding future events or future financial performance of Manhattan Associates. You are cautioned that these forward-looking statements involve risk and uncertainties, are not guarantees of future performance, and that actual results may differ materially from those in our forward-looking statements. I refer you to the reports Manhattan Associates files with the SEC for important factors that could cause actual results to differ materially from those in our projections, particularly our annual report on Form 10-K for fiscal 2008 and the risk factor discussion in that report. We are under no obligation to update these statements. In addition, our comments will cover certain non-GAAP financial measures. These measures are not in accordance with or an alternative for GAAP and may be different from non-GAAP measures used by other companies. We believe that this presentation of certain non-GAAP measures facilitates investors understanding of our historical operating trends with useful insight and to our profitability exclusive of unusual adjustments. Our Form 8-K filed today with the SEC and available from our website www.manh.com contains important disclosure about our use of non-GAAP measures. In addition, our earnings released filed with the Form 8-K reconciles our non-GAAP measures to the most directly comparable GAAP measures. Now, I'll turn the call over to Pete.

I'll cover an overview of our first quarter of 2009. Dennis will follow with details of our financial results, and I’ll wrap up with our outlook for the balance of 2009 and our financial guidance. And of course we'll be happy to answer your questions after our prepared remarks. As we noted in our April 2nd press release, first quarter 2009 license revenue was well below our plan. Our competitive win rate during the quarter continued strong, however, there just weren't enough businesses comfortable with the global economic outlook to commit capital to improve their supply chains. The financial impact of the shortfall of license revenue was substantial as our gross margin on license fees is about 90%. As a result, our EPS result for the quarter was also well below our plan. The Q1 license sales result in a downward revision by most economists of the macro environment for the remainder of 2009 has led us to revise our outlook for the last three quarters of 2009 and the full year. We've also adjusted our expense outlook for the balance of 2009 to reflect our revised revenue outlook. Earlier today we made the difficult decision to eliminate about 100 positions in Manhattan Associates and took other actions to lower expenses for 2009. We expect the positive financial benefit of these actions to substantially offset our reduced revenue expectation for 2009. Importantly, the expense cuts will not material impair our ability to make key investments in research and development to further extend our competitive advantages. I'll provide details of our plans and cover our outlook for Q2 and 2009 following Dennis's remarks.

I will cover adjusted financial results first and then provide a summary of our GAAP earnings. As Pete mentioned, the difficult macroeconomic environment continues to put pressure on revenues and consequently earnings. As we saw license deals continue to push due to lack of economic visibility, we delivered $0.07 of adjusted EPS in the first quarter compared to $0.35 in Q1 2008 driven by lower revenue. Adjusted net income of $1.7 million in the quarter decreased 80% over Q1 of 2008. There is no question that our business is feeling the impact of this unprecedented economic downturn, however, we encourage investors to consider key takeaways from our Q1 performance that clearly indicate the strength of our business in a tumultuous economy. Number one, we have a strong track record of managing expenses wisely and taking prudent actions necessary to protect earnings, Q1 2009 total expenses decreased 25% over Q1 2008 and are down 15% sequentially over Q4 of 2008. Number two, our services margins continue to be world class. We delivered services margins of 54.7% in Q1 compared to 51.5% in Q4 2008 and 47.9% in Q1 of 2008. Number three, our operating cash flow is very strong. We generated $12.7 million in Q1 more than doubling Q1 2008 operating cash flow of $6.1 million. And number four our balance sheet continues to be very solid. Of our $89 million in total cash and investments, $86 million is highly liquid. Five, our capital structure is efficient and well managed. We have no debt and our operating cash flow enabled us to self-fund $10 million in accretive share repurchases this quarter. And number six, our heritage commitment to supply chain leadership sets us apart. We continue to invest meaningfully in R&D to enable our customers to design and operate strategic supply…

Clearly companies in Manhattan's core markets are approaching strategic investments very conservatively as they try to manage the impact a turbulent economy is having on their businesses. While we typically close $3 to $5 million plus deals each quarter and have about half our license revenue driven by new customers, in Q1 we saw a marked difference. We had no license revenue transactions greater than $1 million and existing customers made up about 80% of total first quarter licensees. With the overall market challenges, new customers and large potential deals sat on the sidelines. While professional services revenue was down year-over-year, our services organizations executed well. During the quarter, we took more than 70 client sites live on our solutions and our research and technology teams continue to make solid progress on our product and technology roadmaps. Lastly, at the end of Q1 we had about 2,050 employees, which is a decrease of about 50 people since the end of Q4. That wraps up our comments about the first quarter. During our earnings call last quarter, I mentioned that our 2009 outlook was based on a view that the first half of 2009 would be similar to the last half of 2008, but that the second half of 2009 would show some improvement. Well, like a lot of others, I got that wrong. The global economy in Q1 was a lot worse than it was in the second half of 2008 and most economists now have revised down their forecasts and do not expect improvement in the second half of 2009. Our revised outlook for 2009 reflects that view. Given a reduced outlook for revenue in 2009, we've taken actions to lower costs to better manage and match to a lower revenue forecast. I'll now cover details of those actions.…

(Operator Instructions) Your first question comes from Michael Huang from Thinkequity. Michael Huang – Thinkequity: Hey, guys, a couple questions for you. The first one, so if you think about $10 million of license revenue through the balance of the year on the low end, what would be the biggest lever to drive that kind of modest improvement relative to what you did in Q1? Would it be large deal improvement or is it activity with new customers, or is there something else that you are doing from a sales messaging standpoint that could help you achieve that?

You know, Michael, I would think the most important variable in front of us is a stable or a somewhat stable macro environment. One of the things we wrestled with in the first quarter was some of the conflicting messages about the financial segment, the ability to borrow and the impact that had on our customer base. So I would suggest to you that leading variables certainly outside of Manhattan's control is the overall macro economy and having some stability in the economy. I think over the last four weeks or so we've started to see some of that and we're cautiously optimistic that that will hold, but I think the biggest variable will be the ability of our customers to have some confidence in the environment in which they're working. Now, having said that certainly we would expect in more normal times, as we have in the past, to have several million plus dollar deals in the quarter, historically we've had three to five and historically Q2's been a strong quarter for us for license fees. We'd also expect in a more stable economy that new customers would be willing to commit capital to supply chain improvements, in particular in some cases since those initiatives have been delayed for several quarters. So we would think a combination of a more stable macro environment would lead to several large deals closing in the quarter, and more new customers willing to commit to important supply chain initiatives. Michael Huang – Thinkequity: So when you actually look you at the cross-section of your pipeline, can you talk a little bit about the various vertical exposures that you have and maybe help us understand the product mix within there, as well? Specifically, I was hoping to better understand how much of that pipeline is with retailers and how much is outside of that and would you feel more comfortable in one vertical versus another?

Yes, it's a great question. Our pipeline generally very closely reflects our historical close experience for both products and verticals. So for instance, if you look at our pipeline today, you'd see more than half of our pipeline is clients that fall into the consumer goods, retail and third-party logistics categories. And you'd also find a good proportion, about half of our pipeline in the area of distribution management. Historically, those have been about our close rates, or close statistics for those verticals and product categories and our pipeline reflects that, as well. Michael Huang – Thinkequity: And then so with respect to the balance of 2009, do you expect close rates to be better versus historical than any of those product areas? So for example, is it easier to get a transportation management deal done now versus in the past relative to warehouse management?

Yes, our assumptions are across the board that our close rates for the balance of 2009 by vertical and by product will be below our historical achievements. So certainly, in certain areas there's a couple of product categories where in this environment we'd expect to see a little bit better success than perhaps other environments, inventory optimization, some of the labor management solutions. I think when the economy begins to stabilize we'll see good responses in those areas. But I would expect our close rates for distribution management, transportation management, or to lifecycle management, and so forth over the balance of 2009 we're planning for those to be lower than what we've experienced in the past. Michael Huang – Thinkequity: Last question for you, so with respect to what you've seen so far in Q2, have you had any success getting any large deals get done, or is there anything that gives you confidence that you'll be able to get a couple or several done in Q2?

We won't provide specific comments on that, as we've never had in the past, but I will tell you that, as I mentioned in my earlier comments, the stability, or the appearance of stability in the economy over the first couple of weeks of April are an encouraging sign. The key variable or one of the key variables we wrestle with is our client's confidence in the economy going forward, and as their confidence builds, our ability to close business will build, as well. So I think the level of stability seen, at least so far in the first part of Q2 gives us incremental confidence in our ability to meet our goals for the quarter. Thank you, Michael.

Your next question comes from Terry Tillman – Raymond James. Andrew Shaw for Terry Tillman – Raymond James: Hey, guys, this is actually Andrew Shaw on for Terry. The first question for you in terms of scope, where are you guys in terms of the number of modules that have been kind of ported over there, and also on that, when will the core WMS be moved over?

Yes, it's a great question. And I think we mentioned at the last quarterly call, Andrew that 22 of our products have been migrated over to the supply chain process platform. We were quite pleased with that progress. As I think most of you probably know, we have not yet completed the migration of our warehouse management solution to that platform. We don't have an announced date for that, but I will tell you we are making very good progress and are looking forward to the day when we can announce the launch of WMS on the platform. We're making good progress, and we're just not at a point yet where we're announcing a date for that. Andrew Shaw for Terry Tillman – Raymond James: Okay. And then what kind of margin benefit long-term do you think this offers once you get the rest of the module moved over?

Yes, we would think margin benefit would come in two primary areas. I think once we have all the products on the platform our ability to increase sales will be noticeable. I think we'll have a very compelling value proposition, both from a total return on investment, as well as a customer's total cost of ownership, the ability to leverage our five broad categories of products on a common business process platform with common business objects and to optimize across those application sets, we think will be very powerful to the customers that we target, and believe revenue growth should be enhanced by that. In addition to the opportunity to grow revenue more quickly, there will be some internal cost efficiencies that could be gained, some in the area of research and development, but certainly also in other areas of our company as we focus on a technology stack that we think will be a powerful go-forward strategy. Andrew Shaw for Terry Tillman – Raymond James: Okay. And then just last question for you, is there any thought on maybe having more of a subscription like offering that can maybe make the required upfront commitment less onerous for struggling retailers or the like?

We've examined that over the years and have had mixed experience with that. As you may know, we have a subscription-based offering for our transportation solution and our replenishment, or inventory optimization solution, and have customers utilizing both of those product sets on a software to service subscription basis. We've had some solid success there with those two applications. We've evaluated the opportunity to offer more of our services on a subscription basis. And at the moment, the marketplaces and the applications we provide haven't lent themselves to software as a service. That's primarily because we target large organizations that would like to capture the economies of scale of purchasing the application for themselves, as opposed to playing on a subscription basis. And because most of those larger organizations do want to be able to modify, customize or tailor a solution for their specific business process. And that's more common in supply chain than in other areas of enterprise applications, but having said that, our team is constantly talking to our customers, prospects, industry experts, technology experts to stay on top of the latest evolutions and the benefits of cloud computing. And we'll continue to modify our position as customers demand it.

Your next question comes from Brad Reback – Oppenheimer. Brad Reback – Oppenheimer & Co.: So when we get to the other side of this, whenever that is, what type of leverage should we expect in the business? Will a lot of these cuts that you've made be able to stay in place or does the service margin go back to that 51% range and some of these other cost savings you'll have to make up, so maybe there's a little limited leverage for a period of time there?

There probably would be limited leverage other than, no, I think we'll see greater leverage coming from the license revenue rebound. Obviously, with a 90%-ish, 90% plus gross margin on license revenue, that has the most material impact on our overall margins. So we'd expect license revenue acceleration would have a nice positive impact on our overall margin. Our services margins, we've done a bit of analysis on this and believe we currently have, if not the best, about the best in the world for professional services organizations. So while we believe we can continue to improve, we don't believe the opportunity to improve there is dramatic. But one of the things we're looking forward to is the time where there's greater customer demand for our services offerings and we'll continue to be able to expand the revenue growth there. And obviously, as the license revenue grows, the maintenance revenue will grow and maintenance revenue has a very high gross margin, as does license revenues. So the combination of accelerated license revenue growth and maintenance growth, we think will positively affect the overall margin. But you're right Brad, on the services basis, I think our team does a very good job of managing that and believe that there's some upside to that but probably not dramatic. Brad Reback – Oppenheimer & Co.: And Pete, on the maintenance side, and Dennis, you mentioned that there's some lumpiness you saw on a cash basis. I was looking back over the last three years, and for the most part the business has been flat-topped, sequentially. I think there was one quarter where it was down $100,000. That's a fairly significant decline. Have those payments come in thus far in the month of April? Are there bankruptcies? What caused that dramatic amount of lumpiness?

So Brad, a couple things, primarily we changed that accounting about a year ago, so that's going to impact some of the, when you look at the historical trends, but it's really not an area that I'm concerned about. It's just the economy and just managing that through with our existing customer base. So the timing is we've done a great job with overall cash flow, and I don't have any significant concerns. It's just timing.

Your next question comes from Mark Schappel – the Benchmark... Mark Schappel – Benchmark Company: Pete, starting with you, could you just, given the fact that your gross margins meaningfully increased in the quarter, is it fair to assume that you saw the revenue shortfall of Pruitt pretty early on in the quarter?

Well, Mark, one of the things we noticed going back to last fall it was pretty clear that the economy wasn't going to be as strong in 2009 as we hoped. So as you may recall we took actions in October to reduce headcount and cut some other costs to better position ourselves for 2009. So we certainly were expecting more challenges than we saw in the first part of 2008. So I think we were at that time appropriately aggressive in right-sizing the company. What has changed though since the middle part of Q1 is our outlook on the balance of 2009 no longer has us expecting an improvement in the second half of the year, so that was largely the reason for the actions we announced a little while ago. But we do think we're reasonably well positioned to weather the economy, continue to invest substantially in research and development in our product and technology roadmaps, and believe we'll be a strong company once we come out of the economic turbulence. Mark Schappel – Benchmark Company: In your prepared remarks you mentioned that your competitive run rates continue to be strong and I was wondering if you could just go into a little bit more detail on this.

We do, I think, a pretty good job of mapping our competitive wins and losses against five larger companies that we compete with often. And, as has been the case over the past couple of years, in the quarter we won about two out of every three deals we competed in. So we've historically had about a two-thirds win rate, and in Q1 we had about that same two-thirds win rate. The challenge, of course, there just weren't enough deals for we and our competitors to fight over in Q1. But we feel our win rate continues to be solid and importantly solid in the most important deals, the strategic deals that are up for grabs in the supply chain space. Mark Schappel – Benchmark Company: And then Dennis, a question for you, I did not catch the warehouse management to non-warehouse management mix. Could you just repeat that?

The warehouse management was about 60% in the quarter, non-warehouse 40%, so 60-40.

Your next question comes from Yun Kim – Broadpoint AmTech. Yun Kim – Broadpoint AmTech: I apologize for the background noise, I am at a conference. The obvious question, could you just talk about the status of those deals that did not close in the March quarter? Whether some of them have simply been pushed out until the customers IT budget has been sent or are you just being delayed until the environment improves out there, which could mean that it could be next year before you [inaudible].

Yes, I'll be happy to, Yun. We’ll give you our best perspective on that. In many cases the deals have been postponed until customers are more confident with the macro environment. So in several cases deals have been reviewed by senior management or budgeted for 2009. Teams have been identified within the customers to begin the implementation and roll out programs, but the decision makers are just not comfortable or confident in the moment with what they see over the next nine months and the prospects for their business, so they're withholding making capital commitments in many cases. But we're confident in more than a few cases we've been selected as the vendor of choice, and once those companies get confident that their businesses are on sound footing, we expect those deals to close. So for the most part they've been deals that have been pushed off until a better economic time arrives. Now, in some cases that means customers will not start those programs until 2010, but we believe there's enough activity in our 2009 pipeline certainly to achieve the goals that we talked about a few moments ago. Yun Kim – Broadpoint Capital: So is it fair to say that for the rest of the year you are expecting the number [inaudible] to be down quite a bit from last year and most of the [inaudible].

Your question broke up a little bit, Yun. I think I got it but let me repeat it because I'm not sure anybody else on the call had the same difficulty we did. Your question I think said over the balance of the year are we expecting large deals to close at a lower rate than in the past and the difference to be made up by small mid-size deals? Is that your question? At the moment, our mixed pipeline, close rates and so forth assumes about the same balance of larger deals to mid-size deals as we've had in the past. Now we're assuming both will be down from prior years in the 10 to 15 minute range that we are using as a high and our low end kind of general expectation. But we're expecting our balance to be about the same, but not material different from that.

Yun, that would be 10 to 15 million. Yun Kim – Broadpoint Capital: I just wanted to throw out a fairly open ended question here. How do you feel about your current business model in terms of the services mix? I think the maintenance revenue as a percentage of total revenue is relatively low but is a typical industry average, and then also your ability to penetrate your market opportunity today with the current job in marketing strategy. Do you see an opportunity perhaps invest more aggressively in some smaller regional consulting vendors than [inaudible] you have already made some type of consulting maybe perhaps using acquisitions to license your business model. I just wanted to throw some of those questions out there.

That's a very good set of questions. We debate that internally regularly. What is the most attractive go-forward business model and how can we modify our business to increase the return to shareholders. We believe the space we compete in the supply chain optimization space has a very good opportunity for both application software and its maintenance associated with it, as well as a services business. As mentioned earlier about software as a service delivery mechanism, many of our customers would prefer to buy software on a perpetual license basis, pay maintenance, but also help us implement that software to lead to improved supply chain performance. The ability to modify, localize, customize and tailor the software to their specific supply chain work flow gives us a meaningful competitive advantage, I believe, in our market space. So while the services mix is a higher percentage of overall revenue than in most enterprise software categories, I believe our services mix is a real competitive advantage for Manhattan. So ballpark we have about, if you exclude our hardware business, about 25% of our revenue generally is licensees, 25% maintenance fees, and about 50% professional services and I believe that's one of the things that really does give us sustainable competitive advantage. Some of the big guys, the SAPs and the Oracle's of the world will have a hard time competing with our supply chain solutions largely because of the depth and breadth of our services teams and their capability to increase the value of our software. So we think that revenue mix, while it is a little bit unconventional for a software company, gives us sustainable competitive advantage. Having said that, we're constantly looking for acquisition opportunities to complement our supply chain product footprint. As we said on a couple of calls, we'd…

This concludes today's Manhattan Associates first quarter 2009 earnings conference call. You may now disconnect your lines.