Manhattan Associates, Inc. (MANH) Q1 2012 Earnings Report, Transcript and Summary

Good afternoon. My name is Mike, and I will be your conference operator today. At this time, I would like to welcome everyone to the Manhattan Associates First Quarter 2012 Conference Call. [Operator Instructions] Mr. Dennis Story, you may begin your conference call.

Thank you, Mike, and good afternoon, everyone. Welcome to Manhattan Associates 2012 First Quarter Earnings Call. 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're cautioned that these forward-looking statements involve risks and uncertainties, are not guarantees of future performance and that actual results may differ materially from any projections contained 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 2011 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 to 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 into our profitability, exclusive of unusual adjustments. Our Form 8-K filed today with the SEC and available from our website, manh.com, contains important disclosures about our use of non-GAAP measures. In addition, our earnings release 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.

Thanks, Dennis. I'll start the call with an overview of our performance in the first quarter. Dennis will follow with details of our financial results. I'll return to cover operating activities for the quarter and then we'll be happy to answer your questions. I'm very pleased with our first quarter results. All of our financial and non-financial metrics were strong for the quarter. License revenue doubled off a weak Q1 of 2011. Total revenue was a new record for us, both for the first quarter and for any quarter in our history and was up 28% over last year. Adjusted EPS for the first quarter was $0.60, up 46% versus the prior year. We closed 5 $1 million plus license deals in the quarter, 3 with new customers and 2 with existing customers. One of the large deals was in Europe and 4 were in the United States. The Europe deal and 2 of the U.S. deals were led by our Warehouse Management solution. It was nice to see this quarter that the other 2 large U.S. deals were led by our transportation solution. In one of the 2 transportation deals, we beat Oracle head-to-head for a new customer. And in the other, we'll be replacing JDA's Manugistics product at an existing Manhattan customer. On a deal count basis, our overall competitive win rate in the quarter continued to be very strong at 3 out of 4 against our major competitors. Importantly, at the dollar value of the deals won and loss is estimated, the proportion of total deal value we won as percent of the total value of all deals is considerably higher than the 3 and 4 deals won metric as our losses tend to be on the small deals. Our Services businesses are strong, customer satisfaction is good, implementations of our solutions continue to go well and we're excited about our next release of our software solutions. Overall, we're performing well. I'll provide more color on this following Dennis' review of our financial results. Dennis?

Thanks, Pete. I'm going to cover our Q1 2012 non-GAAP results and GAAP EPS performance, and then I'll review our updated 2012 full year guidance. As Pete noted, a solid start to 2012, posting $91.5 million in total revenue, the highest quarterly result in our company's history, besting our previous record of $90.5 million in Q2 2008. Total revenue increased 28% over Q1 2011, as license revenue doubled against the weak comp, and Services posted 25% revenue growth. On a regional basis, Americas grew total revenue, 22%; EMEA, 49%; and APAC, 84%, over Q1 last year. Adjusted earnings per share for the quarter was $0.60, increasing 46% over prior year fueled by revenue growth. On an apples-to-apples basis, our Q1 2012 EPS grew 69%. We arrived at 69% growth by reducing the Q1 2012 result by $0.06 and reducing the Q1 2011 result by $0.09. Our Q1 2012 EPS result includes a $2 million, or $0.06 of EPS benefit, from recognition of previously deferred services revenue from a large services engagement, as we successfully completed our contract delivery requirements in Q1. As a reminder, our Q1 2011 adjusted EPS result benefited from a nonrecurring $0.09 India income tax benefit. License revenue for the quarter totaled $15.6 million, doubling over the $7.8 million we recognized in Q1 2011. From a regional perspective, Americas posted license revenue of $11 million; EMEA, $4.1 million; and APAC, $539,000. Our license performance continues to depend heavily on the number and relative value of large deals we close in a given quarter. And as Pete mentioned, we had a solid Q1 with 5 $1-plus million deals closed. While large-sized deal activity has been solid for the past 4 quarters, we remain cautious as a tepid global economic recovery continues to shape buying decisions and estimating sales cycles for large deals still remain somewhat less predictable than pre-2009. Now shifting to Services. Demand continues to be very solid. Q1 services revenue totaled $70.4 million, increasing 25% year-over-year. As you may recall, our services revenue was comprised of 2 revenue streams: Consulting and Maintenance. Our consulting revenue for the quarter totaled $46.6 million, growing 33% over Q1 last year. Apples-to-apples, consulting revenue grew 27%, excluding the $2 million of previously deferred consulting revenue recognized in Q1. Our previous 2012 annual guidance included the impact of this revenue and its associated earnings in Q2, so we were able to pull this particular contract in, in Q1 on a timing basis. So it impacted our Q1 results pretty significantly. Historically, large deferred services revenue contracts have been atypical for Manhattan, so their impact can create material impacts to inter-period comps. You may recall, last year's Q2 2011 results included a $3 million, or $0.09 EPS benefit, associated with another deferred services revenue contract, which will have a significant impact on this year's Q2 2012 comps. When these contracts arise, the challenge is forecasting recognition timing, as it is generally contingent upon software delivery and customer acceptance. Moving on to maintenance revenue. Q1 2012 revenue totaled $23.7 million, increasing 14% over last year. Solid license revenue growth over the last 4 quarters, cash collections and retention rates of 90-plus percent, contributed to the year-over-year growth. As a reminder, we recognize maintenance renewal revenue on a cash basis, so the timing of cash collections can cause inter-period lumpiness from quarter-to-quarter as well. Consolidated services margins for the quarter were 54.8% compared to 55.9% sequentially from Q4 2011 and 56.1% in Q1 2011. We mentioned in our last call that we expected our Q1 2012 Services margin to be between 52.5% and 53.5%, reflecting the full cost of 60 new hires in the back end of Q4 2011 and our plan to add 100-plus billable resources in Q1. Excluding the impact of the $2 million deferred Services revenue, which essentially is carrying no incremental cost, our underlying services margin for the quarter would have been 53.4%. Though we didn't fully achieve our aggressive hiring goal, we made significant progress toward adding billable staff in the quarter. We expect our first half 2012 services margins to fall in the range of 54.2% to 54.5% and our full year 2012 services margins to normalize into the 53.5% to 54.5% range as we execute our plan to align billable capacity to support business booked and capture additional pipeline opportunity. So turning to operating income and margins. Through strong license and services revenue growth and solid services productivity, we did deliver record Q1 adjusted operating income of $19.6 million, with an operating margin of 21.4%. We were expecting our Q1 operating margin to be in the 19.5% to 20% range, and excluding the $2 million deferred services revenue impact in the quarter, our underlying operating margin was 19.7%. For the full year, we are targeting a 50- to 80-basis-point expansion in 2012 operating margin. We expect Q2 through Q4 operating margins to range between 21.5% and 23% adjusted for quarterly license and services revenue mix due to seasonality. Other income, which includes net interest income, net gains or losses on asset disposals and the net impact of realized and unrealized foreign exchange gains or losses, was a negative $124,000 in Q1 2012 due to FX losses of $369,000 in the quarter. Consistent with prior years, we do not attempt to budget or forecast FX gains or losses in other income, so the $0.05 positive EPS impact in 2011 results in a negative impact to our full year EPS growth forecast for 2012. On the taxes front, our adjusted effective income tax rate for Q1 was 36% against our original projection of 34%, resulting in a -- in $0.02 of diluted EPS impact to the quarter. Higher domestic to foreign taxable income mix, combined with the 2011 expiration of the R&D tax credit legislation in the U.S. is driving the effective tax rate increase. As a result, we are now raising our projected full year effective tax rate to 35.5%, which negatively impacts EPS by about $0.07 for the full year. We project our Q2 effective tax rate to be 36%, Q3's rate to be 34.5% and Q4's rate to be 36%. Q3's rate is expected to be lower due to the release of FIN 48 tax reserves associated with the filing of our 2011 U.S. federal tax return. Now if Congress retroactively extends the R&D tax credit legislation for the 2012 tax year, we believe our annual effective rate would improve, allowing us to recapture some of the negative EPS impact. However, it would be imprudent for us to plan for that credit, particularly in an election year. Transitioning to diluted shares. We continue to efficiently manage our capital structure with our share buyback program, which has historically been highly accretive to our shareholders. For the quarter, diluted shares totaled 20,637,000 shares, down sequentially from Q4 2011 shares of 20,923,000 shares. In Q1, we repurchased 653,000 shares of Manhattan common stock, totaling $30.6 million of investment against option exercises of 629,000 shares. And last week, our board approved raising our share repurchase authority limit to a total of $50 million. For 2012, taking into account the impact of Q1 share repurchases and option exercises, we are now estimating full year diluted shares in the range of 20.5 million to 20.6 million. We currently expect Q2 through Q4 2012 diluted shares to be about 20.5 million. Our estimate does not assume additional common stock repurchases and depends on a number of variables including stock price, option exercises, forfeitures and share repurchases, which can significantly impact estimates. So that covers the adjusted results. Our Q1 2012 GAAP diluted earnings per share was a record $0.55, increasing 72% over $0.32 we posted in Q1 2011. Our GAAP performance was driven by the strength of adjusted operating results, and a detailed reconciliation of GAAP to non-GAAP adjustments is included in our earnings release today. So that covers the overall P&L results. Turning to cash flow. For the quarter, cash flow from operations was $13.1 million, increasing 61% over $8.1 million generated in Q1 2011. DSOs improved to 57 days versus 62 days in Q4 of 2011. And capital expenditures were $1.8 million in the quarter, and we estimate full year 2012 CapEx to be about $6 million to $8 million. Our balance sheet continues to support long-term strategic flexibility and stability with our cash and investments balance at March 31, 2012, totaling $97.5 million compared to $99 million at the end of Q4 2011. The net decrease in cash from December 2011 is principally due to our share buyback program. Now I'll update our 2012 guidance and then hand off to Pete for the business update. As I mentioned earlier, while the global economic recovery remains tepid, for our target markets we are cautiously optimistic that investment activity is going to continue so we are raising guidance. For 2012 revenue, our updated guidance for the full year total revenue was $365 million to $375 million, representing a growth rate range of 11% to 14% over 2011 and an improvement to our previous range of $363 million to $370 million, representing 10% to 12% growth. Overall, we expect our full year total revenue percentage split to be about 50-50 first half versus second half. We expect a more typical seasonal pattern with Q1 and Q3 license revenue being lower than Q2 and Q4 license revenue, and services revenue lower in Q4 due to the seasonal holidays. For 2012 adjusted diluted earnings per share, we are raising our range $0.05 to $2.55 to $2.60, representing 10% to 12% growth over 2011 adjusted EPS of $2.32, while absorbing the negative $0.07 EPS impact on our higher-than-planned effective tax rate. Apples-to-apples, 2012 adjusted EPS growth is projected to be 17% to 19%, subtracting from 2011's adjusted EPS, the $0.09 nonrecurring India income tax benefit and $0.05 of FX gains realized in the second half of 2011 in other income. We continue to expect full year EPS to have about the same percentage split of 48% in the first half and 52% in the second half that we discussed in previous guidance. For 2012 GAAP diluted earnings per share, we expect to deliver $2.27 to $2.32, representing 9% to 11% growth over 2011 GAAP EPS of $2.09. The $0.28 full year EPS difference between GAAP to non-GAAP EPS represents the impact of stock-based compensation. We expect the EPS impact to be about $0.07 per quarter. Regarding adjusted operating margins, we continue to focus on year-over-year adjusted operating margin expansion and are moving our 50 basis point expansion objective to 50- to 80-basis-point improvement over 2011. We expect Q2 through Q4 operating margins to range between 21.5% and 23% adjusted for quarterly license and services revenue mix due to seasonality. And finally, as a reminder, our Q2 revenue and earnings per share growth comps will be impacted by last year's $3 million of previously deferred services revenue on a contract recognized in Q2 2011 and the associated $0.09 of EPS benefit that came along with that $3 million. Considering the material impact on revenue and EPS comps with license revenue performance, large deferred revenue contracts and the nonrecurring India income tax benefit, the best proxy for revenue and earnings per share growth comps is looking at our combined first-half results. Based on our full year guidance, we expect first-half total revenue growth of about 14% to 15% and adjusted EPS growth of about 14% to 16%, respectively, on a reported basis. And on apples-to-apples, first-half EPS growth should be about 25% to 27%. And when you subtract first-half adjusted EPS from first-half adjusted EPS, the $0.09 nonrecurring India income tax benefit recognized in Q1 2011. So that covers the updated 2012 guidance and Q1 2012 results. Now I'll turn the call back to Pete for the business update.

Thanks, Dennis. First, a bit of color on the deals we closed in Q1. As I mentioned in my opening comments, we closed 5 large deals in the quarter, 3 with new customers. Overall, 50% of our Q1 license revenue was from new customers and 50% from the install base. We're quite pleased to be able to capture half of our license revenue from new customers. And we're also thrilled to sell additional solutions to existing customers. We're encouraged by our ability to win new customers which generate new opportunities for cross-selling additional solutions to these customers in the future. Overall, about 55% of license revenue in the quarter were tied to Warehouse Management solutions and 45% to our other solutions. Together, retail, consumer goods and logistics service provider verticals where once again strong contributors to our license fees and made up more than half of license revenue. We had a successful quarter adding new clients and expanding our relationship with existing clients. Software license wins with new customers that have permitted us to share the names include Anderson-Dubose, Central Retail, EARP Meat Company, Forever Direct, Gateway Distribution, Itella, Luolai Home Textile and Origin Enterprises. Expanding partnerships with existing customers included Alliant Techsytems, Asda, ATB, Buffalo Hospital Supply Co., Ceva Logistics, Coleman Cable, Damco Distribution Services, J. Crew, Jumei, Leroy Merlin, Laura Ashley, Lesaint Logistics, Masscash, Nature's Best, Niagara Bottling, Nike, Oatey, Orchard Supply Hardware, Performance Team Freight, PetSmart, Teavana, Carter's and Winn-Dixie, pretty good list of brands secured in the first quarter. We're encouraged that our global software sales pipeline remains strong, and our selling teams around the world are quite busy. As Dennis mentioned, our Professional Service businesses around the world performed very well in Q1. While the global economy remains difficult to forecast and could impact the timing of license revenue from quarter-to-quarter, our Service business is more predictable and our outlook across all 3 regions remains strong. A key achievement in our growth in successful implementations is our platform solutions. We now have 15 client sites live -- I'm sorry, 15 clients live at 32 sites utilizing our platform-based Warehouse Management solution. In addition, we have about 25 additional customers implementing our platform WMS at about 50 sites. Including all solutions, for the quarter, we have about 60 customer sites go live with our software. About half of the Q1 implementations were on our platform and we now have about 200 implementations of our solutions on our supply chain process platform. At the end of the first quarter, we had a little more than 2,200 employees around the globe. That's about 75 more than at the end of Q4 and almost 300 more than 1 year go. The vast majority of the headcount growth is on our Professional Services group. We finished the quarter with 63 people in sales and sales management, the same as at the December time period. In 2 weeks, we'll host our annual customer conference, which we call Momentum 2012 at the Hilton hotel in Orlando, Florida. The conference theme this year is Platform Payoff and the content is all about the benefits of utilizing our suite of solutions on a common supply chain process platform. We'll be showcasing numerous ways customers can leverage Manhattan's platform approach to lower total cost of ownership and extend market advantage. Much of the material will be presented by our customers, and registrations are up nicely compared to last year. We're looking forward to sharing time and a little fun with our global customers. So let me close our prepared remarks with a brief summary. There's plenty of room for improvement across Manhattan Associates, and we're focused on making those improvements. Nonetheless, I'm quite pleased with our performance in Q1 and our market position. We have the world's most talented supply chain employees, the best software solutions and a solid market momentum story. We're intent to leverage these advantages in the future to continue to delight our customers, create attractive career paths for our team members and provide substantial rewards for our shareholders. Operator, we'll now take questions.

[Operator Instructions] Your first question comes from the line of Terry Tillman from Raymond James. Terrell Frederick Tillman - Raymond James & Associates, Inc., Research Division: First 2 questions are more finance questions for you, Dennis. In terms of the revenue guidance for the full year, you did rate that at both the lower end and the high end. What are the swing factors there? I mean, is it all attributable to Services? Is there anything implicit in there on the license side or hardware? How do I think about the rationale for the upping of the revenue guidance?

A little stronger Services. And yes, we got off to a good start on the license in Q1, so with that flow-through. Terrell Frederick Tillman - Raymond James & Associates, Inc., Research Division: Okay. And Dennis, in terms of the service margin guidance for the year, can you just remind me? I just don't remember what it was for the year previously and did you do anything there? Is that 30 basis points? You said 50 to 80 for the full operating margin. Is the delta because of the service margin for the year being a little bit higher than expected? Or is that not the case?

That's not the case. We kept it the same for the full year as our previous guidance, Terry. Terrell Frederick Tillman - Raymond James & Associates, Inc., Research Division: So the overall operating margin moving a little bit higher than the range now, is that just a little bit of a mix with license revenue or revenue mix?

Yes, a little mix on the license revenue, but managing operating expenses as well. Terrell Frederick Tillman - Raymond James & Associates, Inc., Research Division: Okay, okay. And then, Pete, the 5 deals over $1 million. In my years of covering the story, I don't actually recall 5 deals over $1 million in the seasonally slow first quarter. I ought to go back to look maybe in '99 or 2000 to make sure I'm not missing a year, but what's up with that? Is there pent-up demand that maybe was because of those couple of years where there's really a -- really hard hit? How could you explain that because that's actually, I think, equivalent to the fourth quarter?

Yes, Terry, you're correct. We had 4 in 2010, large deals coming off the very slow 2009, as I'm sure you'll all recall. We did do 5 large deals in Q4 of last year and 5 in Q1 is a good outcome. We're quite pleased by that. I think it ties to a couple of things we mentioned on the call, the past, well, 4 or so quarters that we had a nice pipeline of large deals and large deal activity was good. That continues to be the case. So we're cautiously optimistic, as both Dennis and I shared on our comments, about the large deal activity. We also benefit by continuing improvement in our competitive position, so our win rate remains strong. And in particular, our win rate among the larger deals is a very helpful delivery on that large deal pipeline opportunity. There probably is a little bit of backlog still hanging around in the pipeline from the 2008, 2009 timeframe, as there continues to be some concern globally and in the United States with the macroeconomy. So I do think there's a little bit of hesitancy in there that may have helped us a bit the Q1. But overall, I think, Terry, it's a modestly improving economy, meaningfully improving competitive position from Manhattan Associates and some good dynamics happening in the marketplace and the market verticals that we serve, things like the continued emergence of multichannel retailing, globalization, some of the supply chain challenges that have been publicized over the past couple of quarters, and we're all lending support to the story that companies need to upgrade and improve and extend their supply chains. Terrell Frederick Tillman - Raymond James & Associates, Inc., Research Division: Okay. And maybe my last question's more of a theme -- thematic question. It seems like there's always a pendulum shift in terms of where we are, in terms of best of breed versus going with your ERP suite provider for Warehouse Management systems. I realize you have other products and some selling well, but I do want to focus on WMS. Where do think we are now in the pendulum in terms of your customers and prospects looking at, "Look, we need best of breed. We need the best functionality" versus,"Our ERP vendor can get it done for us?" Is it -- has it shifted more to best of breed? Or is it about where it was? Or where do you see us in that kind of pendulum?

Yes, I would suggest to you it's about where it's been, frankly, since I joined Manhattan Associates 8 years ago. Eight years ago, the story was that the best of breeds provide deeper, richer functionality, but that CTOs and CIOs over time would lean more towards the full extended ERP suite of solutions. And I think over the last 8 years, we have proven that depth and breadth of our solutions on a real competitive advantage, particularly the companies with complex distribution challenges. So I don't think the pendulum has swung much one way or other, I think, for our target markets. I don't think the ERPs are any more appealing today than they were 8 years ago, but I would put in a little selfish plug. I think some of the investments we've made over that time period, the $0.25 billion that we've invested in the last 6 years in R&D to build a broader suite of solutions on a common supply chain platform, I think neutralizes some of the CIO, CTO positions about the lower cost of technology ownership and puts us in an even better position relevant to the ERPs. But to summarize the answer to your question is I don't think the pendulum has swung much overall, and I think in many regards, that's been beneficial to Manhattan.

Your next question comes from the line of Yun Kim from ThinkEquity.

So obviously, just another question around the strength in your $1 million-plus business. Specifically, how many were driven by -- I think last call we talked about some of them were driven by legacy replacement deals, how many were driven by them? I think you mentioned that one of the transportation deal was a replacement deal?

Yes, yes, yes. It continues to be a good mix, Yun, so we did mention that one of that transportation deals was for a new customer, replacing a legacy system there. The other is a replacement of one of our competitors on the transportation side. In the WMS side, which we said were led 3 of the 5 large deals, WMS led, 2 transportation led, on the WMS deals, one of those nice win for us is a replacement for a meaningful competitor of ours in the WMS space. So we're quite thrilled about that and that should be quite exciting. And the other 2 cases, we're replacing legacy systems. So combination, 2 of the 5 replacing competitors, the other 3 replacing legacy.

Got it. Okay, great. And you continue to see the -- within your sales pipeline, just replacement deals is still a pretty meaningful portion of your business going forward?

I assume you mean by that, Yun, replacement of legacy systems?

Exactly. Legacy -- yes, legacy replacement deals, yes.

Yes, we see a substantial opportunity for us in 2012 and beyond. Most folks still estimate that about half of the market is supported by homegrown systems built in the '90s. And we believe we have developed a substantially better mousetrap and provide greater value at a lower cost of ownership and then trying to upgrade or enhance legacy systems so we see a great opportunity for ourselves there. And candidly, we're also quite enthusiastic about replacing our competitors in quite a few opportunities.

Okay, great. And then your consulting revenue in the quarter was, I believe, was the highest level, or at least over the last 5 years, even if you take out that $2 million benefit. Do you feel that you're at a certain scale with your consulting business that you can now maybe continue to expand that capacity with having much -- with only minimal impact on the margins? Or do you feel that whenever you need to ramp up, you will continue to impact margins a little bit?

So Yun, it's a delicate balance. Candidly, since this is an hourly business, add more revenue. You need to add more people, so we certainly recognize that. And we'd also tell you one of the things we're very focused on is maintaining and continuing to the degree possible improving customer satisfaction and want to make sure we've got the staff available to ensure customer satisfaction. So we will continue to do some hiring in advance of the specific needs. But I will also tell you, we are quite pleased with the Services business. It's a huge competitive advantage for us. It's something we -- I believe we do extraordinarily well. We think it complements the value of our software solutions, and we're quite excited about it. We believe we've got, if not the world's best, pretty close to the world's best gross margin on Services and we find that business attractive. As you noted, the strongest quarter in history on professional services revenue. And we think the pipelines for that business continue to be quite good, and we're looking forward to adding staff in Q2, 3 and 4 to be able to address the needs of our markets.

So regarding your relationship with system integrators and other partners around the consulting work, I mean, do you feel that you're at a scale of a certain level that maybe you could potentially start to more aggressively offload some of that work to the system integrators and not really affect the quality of your overall performance? I mean, is that something that you guys may be thinking about down the road?

We've looked at that many times, Yun, and in some spots, I think we do a nice job of working with all of the major third-party integrators, whether it's IBM or Accenture, Capgemini, Deloitte and others, to make sure that we complement their service offerings. In almost all cases, we will do the implementation and support services for our software and the other third-party integrators will help with the transformation of IT and other business processes. We think we've developed a very good balanced relationship with the other big third-party firms while staying very focused on implementing our software effectively. And we think we and they are pleased with that relationship. So in the near term, anyway, I don't see us outsourcing our software implementation service to partners, but do see us continuing to maintain very strong relationships with the world's best third-party integrators.

Your next question comes of the line of Mike Schappel from Benchmark.

Pete, starting with you, it looks like you ended the quarter with about 63 people in sales and sales management. I was wondering if you could help us out a little bit on where you expect that to end the year.

Yes. And Mark, it's a great question. In a perfect world, we'll probably add about a half dozen. I think I mentioned on the call after Q4 about 90 days ago, that we were looking to add about a half dozen people in sales during 2012. We didn't make a lot of progress in total in the first quarter, but we did have a person or 2 leave and replaced by, we think, strong people in our sales and sales management roles. So we continue to think that something along the lines of 6, maybe 8 folks added to sales would be appropriate as we finish off 2012 and head into 2013.

Okay. And on the Services front, with respect to hiring, I think you're going to try to hire about 100 people this quarter. It looks like you got relatively close, close to 70 by my account. Do you expect -- are you pretty much done for the year on the Services front? Or do you still see that going forward at a pretty aggressive rate?

No, we will likely go forward at a pretty aggressive rate, Mark. We've got a very attractive services queue and we think a great opportunity to build our business and drive customer satisfaction in helping clients transform their supply chains. We'll probably add something like 100 in Q2 and something like 100 in Q3 would be my guess. I know we probably won't get all the way there, but similar to our outlook for Q1, I think we'll make some real progress. We've been recruiting on campus throughout the first part of this year and have a very talented group of college grads. We expect to start with this over the summer to help build our team, and we expect to see some very strong performance from our Services business over the balance of 2012 and into '13 and '14.

Okay. And then in the repeat and retail sector, multichannel and showrooming have been very prominent themes, specifically in the business press over the last couple of months. I was wondering if you could address a little more detail about how your products are helping address some of these themes.

Terrific, we'll be happy to. We've been talking about the opportunities in multichannel for the past couple of years. Some of our products are specifically designed to help retailers and consumer goods companies that shift to retailers manage the multichannel opportunity most efficiently. So the real opportunity there is to make sure the right product's at the right place, at the right time, at the lowest cost across all your channels. The buzzword today is omni-channel, not multichannel, the basically presenting one face to the customer, whether they're in brick-and-mortar, buying opportunities, online, looking at a catalog and so forth. And our solution helps them most efficiently to ensure that inventory gets to the appropriate place at the most effective time. We've talked extensively about our Order Lifecycle Management solution. That is the glue that ties together supply chain planning, inventory, transportation, warehouse management, labor management and believe that continuing focus of retailers on optimizing their omni-channel offerings is a great opportunity for Manhattan to help those companies drive greater efficiency. The showrooming issue is one that is also quite attractive for, I believe, our portfolio of solutions. Showrooming is basically the concept that consumers leveraging mobile technologies, smartphones will walk into brick-and-mortar stores, scan a bar code, determine that somebody else offers a better price on the product, walk out of the store and then go online to buy that product. And I think everyone on the call probably has heard the example of Best Buy being labeled as Amazon's showroom, which I'm sure Best Buy is not very pleased with that. But the opportunity there is for retailers to come up with a better value proposition and then not just compete it with commodity product at commodity prices, but come up with more specialty-exclusive offers, exclusive products to provide one of the key capabilities that our software offers, the idea and the opportunity to buy online and pick up in store. It's one of the key features that our Order Lifecycle Management solution offers and as, obviously, a key differentiator from the online-only opportunities like Amazon. So there's been an awful lot of talk about what retailers can do to neutralize or turn the showrooming effects on their businesses and stop the penetration of online-only retailers, and we believe our solutions have a nice opportunity to fit into that conversation. So we look at both multichannel or omni-channel, and showrooming is a big opportunity for us to continue to work with our partners to improve their performance.

There are no further questions at this time. I turn the call back over to the presenters.

Very good. Well, thank you all for joining us this afternoon. We look forward to speaking with you again in 3 months. Thanks, and have a good evening.