Manhattan Associates, Inc. (MANH) Q2 2016 Earnings Report, Transcript and Summary

Good afternoon. My name is Kelly, and I will be your conference facilitator today. At this time, I would like to welcome everyone to the Manhattan Associates Second Quarter 2016 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer period. [Operator Instructions] As a reminder, ladies and gentlemen, this call is being recorded today, Tuesday, July 19, 2016. I would now like to introduce Linda Pinne, Interim CFO and Chief Accounting Officer of Manhattan Associates. Ms. Pinne, you may begin your conference.

Thank you, Kelly, and good afternoon, everyone. Welcome to Manhattan Associates 2016 second quarter earnings call. I will review our cautionary language and then turn the call over to Eddie Capel, 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 risks and uncertainties, are not guarantees of future performance, and that actual results may differ materially from 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 2015 and the Risk Factor discussion in that report. We are under no obligation to update these statements. In addition, our comments include certain non-GAAP financial measures in an effort to provide additional information to investors. All non-GAAP measures have been reconciled to the related GAAP measures in accordance with SEC rules. You'll find the reconciliation schedule in Form 8-K we submitted to the SEC earlier today and on our website at manh.com. Now, I'll turn the call over to Eddie.

Great. Thanks, Linda, and good afternoon, everyone. For those of you that haven't met Linda, she's our Chief Accounting Officer and has been with Manhattan Associates for 11 years and serving as our interim CFO while we conduct our CFO search process. Now regarding our results, we continue to be very pleased with the financial performance in Q2 and the first half of 2016 and we're optimistic certainly by the near-term and long-term growth outlook as customers and prospects continue to invest in core supply chain, and omni-channel commerce initiatives. Our competitive position in the marketplace continues to be strong and customer satisfaction is strong across the globe. We delivered record total revenue in Q2 of $154.9 million, that's increasing 11% and record adjusted earnings per share of $0.49, increasing 32% over Q2, 2015. Software license revenue for the quarter was $20.6 million, up 4%. And we closed three $1 million-plus license deals in the quarter, all three with existing customers. Two of the large deals were in the U.S. and one was in Latin America. Our large deal activity was driven by a healthy mix of Warehouse Management solutions, Transportation Management and omni-channel initiatives. And in all three of the large deals, we were successful head-to-head against strong competition. Our sales team continues to execute well and our competitive win rates head-to-head against our major competitors remain strong at about 75% for the quarter. For the quarter, our license revenue from net new customers was 22%, bringing our year-to-date percentage to 36% running consistent with our first half performance in prior years. And while very upbeat regarding our business fundamentals, we do remain cautious regarding potential macroeconomic, geopolitical and FX volatility headwinds. As we've experienced in the past few weeks, currency markets have become increasingly volatile and its early stages in terms of assessing any potential changes in global customer investment sentiment. With this backdrop and our strong 2016 first half performance, we're raising our full-year earnings per share guidance and maintaining our full-year total revenue guidance. Our customers continue to face transformational challenges converging physical and digital retail with personalized service to the customer. The industry continues to be in the early stages of these investment cycles and we're aggressively investing to be the leading innovator in supply chain commerce solutions, focusing on the customer and winning market share with quality license pipeline activity, solid services business demand and strong customer satisfaction. I'll provide more color in my business update, following Linda's review of the financial results.

Thanks, Eddie. I will cover our second quarter results and then review our updated 2016 full-year guidance. We posted Q2 total revenue of $154.9 million, representing organic growth of 11%. Excluding FX impact, total revenue grew 12%. For the quarter, Americas grew total revenue 12%, EMEA growth was up 6%, and APAC was up 19%. Adjusted earnings per share for the quarter was $0.49, up 32% over prior year and our GAAP diluted earnings per share was $0.46, increasing 31%. For your reference, a detailed reconciliation of GAAP to non-GAAP adjustments is included in our earnings release today. License revenue for the quarter totaled $20.6 million. From a regional perspective, Americas posted license revenue of $17.3 million, EMEA $2.2 million, and APAC $1.1 million. As always, our license performance depends heavily on the number and relative value of large deals we close in any quarter. With a somewhat sluggish global macro and FX headwinds, we are targeting the lower end of our license growth goal of about 6% to 8% for 2016. Shifting to services, demand continues to be solid. Q2 services revenue totaled $119.8 million increasing 12% over prior year. Our services revenue is composed of two revenue streams, consulting and maintenance. Consulting revenue for the quarter totaled a record $87 million growing 14% over Q2 2015 and sequentially up 3%, which was slightly below our expected growth rate due to a few large customer programs slowing down a little during Q2. The long-term outlook of our services business is very healthy and given this positive outlook and demand for our services, we hired an additional 55 consulting associates in late June and continue to focus on hiring additional resources. Maintenance revenue for the quarter totaled $32.8 million, increasing 7% over last year on strong collections. License revenue growth, cash collections and retention rates of 90%-plus contributed to year-over-year growth. As a reminder, we recognize maintenance renewal revenue on a cash basis. So timing of cash collections can cause quarter-to-quarter variability. Consolidated service margin for the quarter was 60.3%, benefiting from solid productivity, as well as 190 basis point improvement over prior year due to $1.3 million less in incentive compensation and an $800,000 annual state payroll tax credit received in the quarter, which is usually received in Q1. These factors also increased our year-to-date services margin by 50 basis points over prior year. We expect our full-year 2016 services margin to be in the 57.8% to 58.1% range. Turning to operating income and margin, Q2 adjusted operating income totaled a record $55.9 million with operating margin of 36.1%, up from 31.7% in Q2 2015. 270 basis points of the margin improvement is attributable to lower incentive compensation and the timing of the state payroll tax credit. Year-to-date, these factors also increased our margin by 80 basis points over prior year. While our first tax margin profile is exceptional, our growth and productivity is ahead of our planned investments in innovation, marketing and business infrastructure. If the timing of the investment spending was as planned, our first half results would have included about $4 million to $5 million in incremental investments in R&D and marketing resources along with infrastructure investment in IT and facilities. We are currently forecasting these investments in the second half. With strong first half results, we are raising our 2016 full-year margin expansion goal to about 140 basis points to 170 basis points, up from our previous estimate increase of 75 basis points to 100 basis points. We should exit 2016 with full-year operating margin between 33.1% and 33.4% versus 31.7% in 2015. We expect our second half operating margin to improve about 20 basis points over 2015. Sequentially, from 2016 first half, margins will be lower as we factor in traditional summer and holiday seasonality in Q3 and Q4, and as we increase investment in services, R&D and marketing personnel and IT infrastructure improvements in support of continued growth in 2016 and 2017. While we are mindful of any required adjustments if the global macro slumps, we continue to be in a solid hiring mode to fulfill ongoing customer demand and looking to strategically add R&D talent to increase our investment in innovation, particularly focused on our omni-channel platform for the modern retailer. Below the line, other income, about half was interest income on cash and the other half primarily unrealized FX gains. Regarding taxes, our adjusted effective income tax rate was 37% for Q2. We continue to project a full-year effective tax rate of 37%. Diluted shares for the quarter totaled 72.2 million shares, down from Q4 2015 shares of 73.6 million. We repurchased about 551,000 shares of common stock in the quarter totaling $35 million. We estimate second half diluted shares to be 72.1 million for Q3 and Q4 and the full-year weighted average diluted shares to be about 72.5 million. This estimate does not assume additional common stock repurchases. Lastly on shares, last week our board approved raising our share repurchase authority limit to a total of $50 million. That covers the P&L results. Turning to cash from operations, Q2 2016 was $19.1 million compared to Q2 2015 $27.5 million. First half operating cash flow totaled $59.5 million compared to $42.7 million in 2015, up 39% on earnings growth and strong global collections. DSOs were 55 days versus 51 days in Q1 2016. Capital expenditures were $2.3 million in the quarter and we estimate full-year 2016 CapEx to be about $12 million to $14 million. Our balance sheet continues to support stability and long-term strategic flexibility with cash and investments totaling $95 million at June 30, 2016 and zero debt compared to $115 million reported last quarter Q1 2016. Now, I will update our 2016 guidance and then hand off to Eddie for the business update. As Eddie mentioned, we remain somewhat cautious given the global macro and FX currency headwinds. However, we are raising our full-year 2016 total EPS guidance and maintaining our full-year total revenue guidance. For revenue, our guidance for full-year total revenue of $615 million to $620 million represents about 11% growth over 2015. With current global macro uncertainty, we are pegging our growth estimate at 10.5%. We are modeling greater FX volatility in the second half forecasting a negative impact of about $2.4 million or 40 basis points versus our previous guidance and we remain cautious regarding timing of customer investment, if any significant market volatility persists. We expect our full-year total revenue percentage split to be about 49.5% first half versus 50.5% second half. With the Q4 holiday season, as in prior years, we are modeling a sequential decline in services revenue of about 4% from Q3 2016 to Q4 2016. For adjusted diluted earnings per share, we are raising our guidance $0.05 to $1.78 to $1.81 representing 17% to 19% growth over 2015 adjusted EPS of $1.52. Our previous guidance was 14% to 16% growth. We expect our full-year percentage EPS split to be about 51% first half versus 49% second half. For GAAP diluted earnings per share, we expect to deliver $1.63 to $1.66 representing 16% to 19% growth over 2015 GAAP EPS of $1.40. The $0.15 full-year EPS difference between GAAP and non-GAAP adjusted EPS mainly represents the impact of stock-based compensation. In summary, we are currently modeling a solid full-year 2016 growth profile for total revenue of about 10.5% at the lower end of our guidance and adjusted earnings per share of about 18%. That covers our 2016 guidance, now I'll turn the call back to Eddie for the business update.

Well, thanks Linda. As I mentioned, we're off to a very good start in 2016 despite a challenging macro environment. We continue to see solid progress in our core verticals led by retail with a meaningful portion of our WMS and non-WMS license and services revenue activity driven by digital commerce and technology modernization programs. Our competitive position continues to be quite strong. And we continue to be in a growth and investment phase, investing in innovation, marketing and business infrastructure to support our company growth, and to support increased market share and position Manhattan Associates for the next wave of retail multichannel selling, entering 2017. As I discussed at the beginning of the call, we recognized three large deals in the quarter, one in retail, one in food and beverage, and one with a third-party logistics provider. All deals were driven by strategic supply chain modernization programs. In Q2, our license fee mix was weighted at about 58%, 42% between our Warehouse Management and other solutions. And a meaningful portion of our WMS and non-WMS license and services revenue activity continues to be driven by existing and new customer omni-channel initiatives and legacy supply chain modernization. The retail, consumer goods, food and beverage verticals were our strongest license fee contributors, making up more than half of the Q2 license revenue. Q2 software license win with new customers that have permitted us to share their names include Castlery, C&A Marketing, Guangzhou Pharmaceutical, SKYE Group, Tommy Bahama, Uniform Advantage and YOGYA Group. Q2 expanding relationships with existing customers included Alliance Healthcare, Antalis, Avon Products, Big Lots, Bodega Latina, Buyers Products Company, Cabela's, Casella wine, Christian Dior perfumes, Dale Pack Fanatics, Floor & Decor, Forever Direct, GENCO, Harris Teeter, Hy-Vee, Kuehne Nagel, Letco Medical, National Logistics Services, Osborn, Hennessy Logistics, RedMart, Safeway, Swift Transportation Company, The Hillman Group, UPS Supply Chain Management, WesTrac and WineWorks. Our professional services business around the world continues to perform very well, posting record revenues with Q2 revenue up 14% and receiving high marks for customer satisfaction. Our global services team have been very busy with core supply chain and retail omni-channel supply chain commerce enablement initiatives with over 300 system go-lives over the past 12 months. And as Linda mentioned, demand and visibility continues to be solid as we added another 55 associates to our global team in Q2. And our plans for the balance of 2016 call for adding about 100 more net new associates to meet the demands of our customers. We'll closely monitor how customers and prospects adapt to the recent macro headwinds and if required we'll adjust accordingly to balance the capacity with demand. And as you know, we continue to be the leading innovator in supply chain technology. For the quarter, we invested $13.5 million in research and development with about 675 people dedicated to R&D. At the core of our success is our strategy to be a serial investor in forward thinking innovation to expand our addressable market and deliver market-leading differentiated capabilities to our customers. And as I mentioned previously, our 2016 plans call for an increased R&D investment beyond our core supply chain solutions, developing the industry's leading multi-channel retail store platform with point-of-sale and clienteling capabilities focused on the consumer. As we discussed in our Q1 earnings call, our 2016 version of our three core applications, Warehouse Management, Transportation Management, and Order Management are now in full swing of being implemented across our customer base. Our new WMS capabilities focused on helping customers scale both their workforce and their overall facility capabilities have been well received by our customers and our prospective customers as evidenced by some of the key WMS wins this quarter. We continue to invest and innovate in the WMS space at a pace well beyond the rest of the market. TMS also continues to experience growth at Manhattan and successful deployments, happy customers and a number of new capabilities in the application have helped us convert WMS customers into TMS customers as well. And as we go forward, we'll be broadening our industry and geographic target markets for TMS. We've proven our current application can compete very effectively outside of our historical targets of grocery and retail in the U.S. and we plan to leverage this trend. On the omni-channel front, we've taken about 10 customers live with new systems or upgrades in Q2. Within our application vernacular we define omni-channel to mean our Order Management, store inventory and fulfillment, point-of-sale and clienteling applications. And we see strong ongoing interest from our omni-channel customers to remain as current as possible with our technology, given the rapid pace of change in the market requirements and our applications themselves. And we continue to see great results both on implementations and in competitive sales cycles my market-leading omni-channel customer service solution available to commerce and store inventory and fulfillment solutions. Without exception, our customers who take their store inventory to market through their digital channel by fulfilling from the stores, see sales lifts and faster and map more profitable sell-through of their inventory positions. These data points continue to reinforce the concept that inventory management, inclusive of forecasting, planning and replenishment need to work differently in an omni-channel commerce environment. So turning to our inventory applications, in Q2 we shipped the 2016 release of our demand forecasting and inventory optimization solutions. And as I mentioned in relation to omni-channel applications, the world of inventory planning within retail is undergoing significant change and we're leaning into these trends within retail and in 2016, we've introduced a number of new capabilities to address these market needs. And finally on the product front, our point-of-sale and clienteling applications continue their brisk pace of development. A couple of our active point-of-sale customers are international, particularly in Mexico and Chile, and recently we've invested to localize the point-of-sale solution, which of course involves everything from translation to currency to payment to tax, in terms of enhancements and affordances within the solution. As we continue to build out the omni-channel operating platform of the future, which of course entails providing the right tools to every retail sales, service and fulfillment associate in the enterprise. It's important that we consider the global store associate of tomorrow. And turning to our associates, we ended Q2 with about 3,060 employees around the globe, that's up 7% over prior year Q2, and nearly 90% of our head count growth is in professional services on strong demand to support top line growth and customer satisfaction. We finished the quarter with 63 people in sales and sales management with 57 quota carrying reps, that's down five from last quarter, due primarily to some international attrition. And we intend to continue to be opportunistic and look to add about a half a dozen or more talented sales professionals to the company. And as I mentioned in the last call in May, we held our annual customer conference, Momentum 2016 at the Walt Disney World Dolphin Hotel in Orlando, Florida. It was our biggest Momentum ever with record attendance of over 1,200 of the best and brightest supply chain and professionals coming together to exchange ideas and concepts and we had the privilege to share with them Manhattan's go forward strategy and programs. The conference theme was, deliver a fulfilling experience. We focused on the speed and complexity required for supply chain commerce to go from excelling – just fulfillment to excelling at delivering a fully fulfilling experience. Throughout our conference we illustrated how clients are redesigning their omni-channel strategies, ensuring each customer has a fulfilling experience at every touch point across the supply chain, while showcasing new technology to support e-commerce in the warehouse, transportation and retail store operations. So let me close my prepared remarks with a brief summary. We're very pleased with our first half performance in 2016, while global macro-economic growth and volatility risk continues to give us reason to be somewhat cautious, we're very optimistic about the future and remain focused on investing in our customers and getting them ready for the commerce world. Retail commerce and supply chain complexity in our target markets continues to increase driven by the digitalization and e-commerce world which are fueling multiyear investment cycles. Our relative competitive position continues to be strong and we continue to invest in innovation to extend our market leadership and differentiation. With the world's most talented supply chain employees, best software solutions and good market momentum, we believe we're very well positioned for the balance of 2016 and beyond. So Kelly, we'd now be happy to take any questions.

[Operator Instructions] Your first question comes from the line of Terry Tillman of Raymond James. Your line is open.

Hi. Good afternoon. Hopefully you can hear me. Hi Eddie and welcome to the call Linda.

Thank you.

Okay. So a lot of detail to go through there, a lot of color and thanks Eddie for all the customer perspective and the product side too. On the product side, in terms of one of your more immature, the future growth opportunity areas on the retail store. So, whether it's the point-of-sale or clienteling, you've talked in the past about some early customers. How is selling to additional prospects or customers going or should we really think about that more of a 2017 event in terms of additional retail store business?

Yeah. So activity is strong there, Terry, for sure. Obviously, we're getting established in the marketplace, driving awareness, continuing to build out our solutions. And really as we talked about before both 2016 and 2017, we expect to get just a handful of early adopter customers with the real momentum around financial impact, positive financial impact coming in 2018, 2019 and 2020. But certainly the reception of the solutions in the marketplace has been very strong. We highlighted these solutions I think quite effectively at our user conference and as I say are seeing certainly a lot of interest.

Okay. And in terms of just – we get questions about cloud and how it pervades potential in the future of the digital commerce realm. I know in the past, you've talked about how you already are in the cloud if you will, in terms of some of your solutions like Transportation Management and a lot of folks will use private cloud for your solutions. But what about a broader set of your products potentially being consumed in a cloud model, how do you see that unfolding, or do you see that unfolding?

Yeah, I think the adoption of first of all cloud technologies, and then secondly cloud financial delivery models, which are quite different from one another, are inevitable. The question is when and in what priority for our solutions? As we've talked about before and as you acknowledged, some of our solutions are very well suited to cloud technology and delivery models, others not quite so much. But I think there's clearly still inevitability there. So we're working diligently still to move the right solutions at the right time into the cloud as the market needs. As you also quite rightly noted, a number of our customers given the Tier 1 nature of their standing have their own private cloud. So, a pretty large percentage of the deployments that we do from a technology perspective are already in the cloud just the private clouds of our customers.

Okay. And I want to avoid analysis paralysis. If I can get that out right here, but you have lots of metrics you guys provide and it's kind of glass half full, glass half empty in terms of when I look at your large deals, it was six year-to-date, I think, and then last year it was 11. Yet you are growing year-over-year on a year-to-date basis and in the second quarter versus last year there were some macro kind of concerns late in the quarter. So it looks like either, A, the volume of business was there to cover up less large deals, or maybe the fewer large deals you had were that much larger, or was there something about the totality of the business seeing a higher ASP?

Yeah. So, I think, again, well noted Terry that reading too much into kind of a big deal activity can be a little bit dangerous. So the way we quantify a big deal is $1 million and above. If we close deals for $995,000, that doesn't qualify as a big deal in our categorization. By the same token, if we close a deal for significantly more than $1 million, it's still just a deal that is $1 million plus. We had very good activity across the board. Again, without going into analysis paralysis, I think, it would be fair to assume that we had a very good spread of deals in Q1, and it wouldn't be a bad assumption to assume we had quite a number of deals knocking on the door of that magic $1 million number, but not quite reaching it.

Okay. All right. Thank you.

Sure. My pleasure Terry. Thank you.

And your next question comes from the line of Mark Schappel from Benchmark. Your line is open.

Hi, good evening, good job on the quarter.

Thank you, Marty.

I believe Linda in her prepared remarks noted that license revenue is likely to come in at the lower end of the 6% to 8% targeted range, just wondered if you could just provide a few more details around that, and maybe some of the things out there that are causing you a little bit of a pause with respect to these numbers?

Yeah. Just really a little caution over what we've seen over the last month or two with the global macro uncertainty, Mark. We've certainly seen some headwinds from an FX perspective, we don't yet really know if there will be any impact in particularly in the international markets or even in the domestic markets of all the things that are going on there out in the world. Frankly, we haven't seen any yet, but it's early days in assessing that. So feel that we think it's prudent to guide toward the lower end of the range but still within those guide rails. I'm sure you saw [indiscernible] moving off of license revenue. So answering or making a point around a question that you didn't answer but on the total revenue side, Linda noted, we're forecasting an additional $2.4 million worth of FX headwinds in the second half that we did not forecast coming into the year. So when we think about the total revenue guidance, you know that has got negative [indiscernible] $2.5 million just here in the last month or two.

Okay. Great. Thank you. And then with respect to your quota carrying, hiring, my recollection was last quarter on the call, you noted that you wanted add six additional quota carriers and if I heard you correctly you were down five this quarter?

Yeah.

Are you just kind of reshuffling the decks a little bit here? Do you still plan to hire up in the back half of the year?

We do. We do. And obviously we have to always report accurate data within the quarter. So I think it's don't quote me on this, but either two or three of the quota carrying reps that moved out of the business in Q2 have already been replaced, right, and we'll report that obviously next quarter, but the plan is still to opportunistically add talent to the tune of four heads or five heads or six heads in the back half of the year. Yes.

Okay, great. And then finally a question I feel like I have to ask you even though I think I know the answer, but any update on the CFO search?

Going well. Going well, frankly, we've engaged with a professional Tier 1 executive search firm, seen a number of very good candidates. I'm pretty excited about the folks that we're talking to and hope to have something to talk to you about in the not too distant future.

Okay, Eddie. Thank you. That's all for me.

My pleasure Mark, thank you.

[Operator Instructions] Your next question comes from the line of Matt Pfau from William Blair. Your line is open.

Hi, guys. Thanks for taking my questions. First one to dig into a comment that I believe you made Linda, in terms of the – you said there were some services clients that were slowing down projects or something to that effect. Maybe could you just give a little bit more detail on that comment?

Sure. Yeah I mean basically we just had some large projects that were wrapping up during the quarter, so of course we have additional projects that will be coming into play soon but just from a timing perspective, we did have a few that slowed down.

Okay.

Nothing unusual there, just timing.

I got it.

We felt duty-bound to, as you know, we're a full transparency company mad. And we're a couple of programs slowed down just a little bit, but nothing to over read into it, still very strong demand for services going forward.

Got it. And then in terms of the investments that were potentially delayed a little bit, is there any reason for the delay of those investments?

Primarily we have not hired the R&D heads, find the R&D talent and hire the R&D heads that we expected to Matt, but still looking and plan to do that in the second half. From a marketing perspective, we're particularly focused on driving awareness of our newer solutions and so forth and whilst we are spending, the spend was just a little lower than we had originally anticipated and CapEx is just frankly a timing issue.

Got it. And then in terms of your customer sentiment and pipeline, what was the feeling I guess from discussions you had with customers at this year's conference versus prior years? Did you think things were potentially more positive or same no change versus what you've heard from customers in prior years at your customer conference?

Yeah, yeah good question. I would say based upon the fact that, the last couple of years have been very positive, this year was about the same. I don't want to make it sound ho-hum it was about the same because again the last couple of years have been quite positive. So, the new releases of our solutions very well received. New products, well received. And the general tone and sentiment around spending was pretty positive as I think as demonstrated by a record attendance of the event.

Got it and last one from me here on the TMS solution you threw in there, perhaps potentially targeting additional verticals than what you've been targeting with the TMS product. So is there any sort of change within the sales force that needs to go along with that or do you think you're fairly set up to just go out there and target additional verticals?

I think we're well-positioned from a sales team product management perspective and so forth, feel very good there. We'll – our intention is also to increase our breadth internationally with TMS. So we are being conservative about rolling our solutions out in countries, frankly other than the U.S. and we've concluded through experience and comfort and so forth that now is the right time to broaden our reach with TMS internationally as well.

Got it. Thanks for taking my questions, guys.

My pleasure, Matt. See you.

And your next question comes from the line of Yun Kim from Brean Capital. Your line is open.

Thank you. First, welcome to the call, Linda and I have a question right off the bat for you, deferred revenue went down quite a bit sequentially about $7 million. Can you explain the dynamics there and is any of that related to some softness that you saw in the professional services, and how should we expect that to trend in second half?

Sure, yeah. Our deferred revenue balance is mainly made up of deferred maintenance, which I believe we've spoken about in the past. So, it's mainly impacted by the timing of maintenance renewal collections, which is why it was down a bit this quarter, but again nothing unusual it's just the timing of cash collections.

So, is it fair to say that we should see that bounce back in the third quarter, as you get your cash?

I would think, you're going to see it bounce back, but then you're also going to have that offset by the revenue that we're recognizing as we go through the year on the maintenance. So, probably about the same, probably a little bit up I would say.

Yep. Okay. Makes sense. Hey, Eddie, so can you just update us on the overall status of the competitive landscape out there around the omni-channel order management product, especially now that Salesforce.com recently acquired Demandware, and whether that's going to change anything? Do you see Salesforce.com going after the higher end enterprise market given that they have a strong sales and marketing capacity?

Yeah. So, good question. Certainly, I think that when we look at the acquisition of Demandware by Salesforce.com, it was certainly an interesting one. And for us did a nice job of validating the importance, and frankly the value of the space, right. No secret Salesforce.com paid about $2.8 billion for $100 million revenue company, so we feel like it stresses the importance and the value of the space. In terms of the competitive landscape for order management, it's interesting that you ask because just last week really the preeminent industry analyst for order management, Forrester Research released what they call the Forrester Wave, it's their about every two years. It's a very in depth analysis of all of the solutions that are available in the marketplace. It involves companies like ours, traveling to their offices, providing product demos. Obviously we talk about customers, implementations, capability, depth of professional services staff, future vision for the product, all of those kinds of things. And we were fortunate enough to come out as the strongest product in the marketplace, as ranked by Forrester. And if you actually – if you look at the report, you'll really see two companies that kind of standout really from everybody else, that's us and IBM, with certainly Demandware/Salesforce having nice solutions, but largely focused on e-commerce platforms for small to medium business.

Eddie, are you at all seeing potential customers potentially evaluating despite that we pour in, obviously you're strengthening their product at least delaying your overall sales process just to kind of reevaluate the Demandware product now that it's owned by Saleforce.com?

We have not seen that, Yun. Frankly, don't expect it, certainly not in the medium-term, anyway, for sure.

Right. And then, last question, Latin America has been a key contributor of seven-figure deals for you guys over the last several quarters, yeah, which is kind of interesting trend. Can you give us a sense on how sustainable that trend is and overall business activity level coming out of the Latin America?

So it has been a very nice contributor. I think it came to bear fruit. We've made a number of product investments to support the market, a number of organizational infrastructure investments to support the market as well. And both of those things have been going on over the last several years. And we've been fortunate enough to bear the fruits of those investments in the last kind of two years or three years. So it's not an overnight success, is my point. And I do think that that market has sustainability for sure for Manhattan Associates. Now, FX volatility and – certainly plays a part in the attractiveness of our solutions down in Latin America, so we'll have to keep our eye on that. But certainly we're planning on continued growth in that region and are very excited about it.

Okay. Great. Thank you so much.

My pleasure, Yun. Thank you.

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

Okay. Very good, Kelly. Well, thank you very much everybody for joining us in our Q2 earnings call. Again we're very pleased with the performance and look forward to sharing more news with you in about 90 days or so. Thank you.

This concludes today's conference call. You may now disconnect.