Good afternoon. My name is Angel and I will be your conference facilitator today. At this time, I would like to welcome everyone to Manhattan Associates Fourth Quarter 2016 Earnings Conference Call. [Operator Instructions] After the speaker's remark there will be a question-and-answer period. [Operator Instruction] As a reminder, ladies and gentlemen, this call is being recorded today, January 31st, 2017. I would now like to introduce Dennis Story, CFO of Manhattan Associates. Dennis, you may begin your conference.

Thank you, Angel and good afternoon everyone. Welcome to Manhattan Associates 2016 fourth 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 will find the reconciliation schedules in our Form 8-K we submitted to the SEC earlier today and on our Web site at manh.com. Now, I will turn the call over to Eddie.

Good afternoon everyone. 2016 was a very successful year for Manhattan Associates. Despite some persistent global micro sluggishness and the recent services, revenue headwinds we strengthened our company significantly in 2016 and we improved our market leadership position. We posted solid fourth quarter and full year financial results marking a fifth consecutive year of record revenue, operating profit, earnings per share and operating cash flow performance. Importantly, we exited 2016 with strong second half license momentum, as well as solid demand for omni-channel, store and distribution management solutions. Our associates also continue to execute very well and maintain a strong commitment to providing our customers with a very high level of expert service. Q4 total revenue increased 4% over the same period last year to $148 million and adjusted earnings per share increased 18% to $0.46. Full year 2016 total revenue was 605 million, increasing 9% and adjusted earnings per share were $1.87, increasing 23%. At a combination of continued revenue growth in the face of stressed retail markets and FX headwinds, but along with prudent expense discipline led to our record performance. Our Q4 software license revenue was 22.1 million, up 8% over 2015, and we closed seven $1 million plus license deals in the quarter. Two of which were with new customers, six of the deals were U.S. based and one was in Europe. Our large deal activity continues to be driven by a healthy mix of platform based warehouse management, transformation and omni-channel initiatives both in the U.S. and our international markets. Our deal activity also spanned some diverse industries including industrial, wholesale, distribution, wine and spirits, specialty retail, department stores and third party logistics. So, for the year we closed 18 $1 million plus deals. Five of these deals were with new customers and 13 with…

Thanks, Eddie. I will review our financial performance, and finish with our 2017 guidance. So as Eddie noted we delivered Q4 total revenue of $147.6 million, increasing 4% over 2015. Adjusting for currency headwinds total revenue grew 5.4% and that’s organic growth. By region, Americas grew 5%, APAC increased 3% and Europe decline 2% compared to Q4 of last year. Full year total revenue was $604.6 million increasing 9% over 2015, full year by region Americas grew 11%, APAC increased by 13% and Europe decline 5%. Q4 adjusted earnings per share was $0.46, up 18% over 2015 and our GAAP diluted earnings per share was a record $0.42, increasing 17%. Full year adjusted GAAP and adjusted EPS both grew 23%, year-over-year with $1.72 in GAAP EPS and $1.87 in adjusted EPS. A detailed reconciliation of GAAP to non-GAAP adjustments is included in our earnings release today. The remainder of my P&L discussion represents our adjusted results. So license revenue for the quarter totaled $22.1 million, up 8% over prior year. And full year license revenue was $85 million, increasing 8% over 2015. We continue to experience solid activity in our target markets and the demand environment remains quite positive. We finished the year out strong, closing 12 of our 18 $1 million plus deals in the second half, leading to total license growth of 11% versus 2015. For 2017 our goal is to achieve a 5% to 6% license growth rate verses 2016, our growth forecast includes the 2% haircut for negative FX impact and a 3% reduction for a modern transition from traditional, on premise software revenue recognition to cloud base subscription revenue. While the recurring revenue metrics are not material at this stage, customer demand certainly is increasing and we expect transaction growth in 2017. Finally, as we've…

Well, thanks Dennis. Before I get into the quarter detail, 2016 was a very successful year for Manhattan Associates on many fronts. We delivered record financial results, revenue operating profit EPS and cash flow. We continued to take market share and expand our addressable market. Our competitive position grew stronger, we remained the leading technology innovator in supply chain commerce. We focused on our customers and continue to improve customer satisfaction. Our domain expertise is growing as we continue to attract and retain the most talented supply chain professionals. And despite macro and secular headwinds, we're existing 2016 stronger than we entered, and we’re excited about our prospects for 2017 and beyond. We were quite active in 2016 investing and growing our business, delivering new innovations such as the development and market launch of our fully integrated omni-channel point of sales and client telling solution. Driving market awareness of our retail and point of sale capabilities and working hard to earn greater mind share. As we entered 2017, we’re aggressively investing in innovation and market awareness to position Manhattan for the next wave of retail multi-channel selling solutions. As I discussed at the beginning of the call, we recognized seven large deals in the quarter, three in retail, two in wholesale, one in third party logistics and one in industrial. Two of the seven deals with new customers for Manhattan and we're driven by strategic technology modernization programs. In Q4 our license fee mix was weighted at about 55%-45% split between our warehouse management and our other solutions, with a meaningful portion of both WMS and non-WMS license and service revenue related to omni-channel programs. We also closed the largest store inventory and fulfillment deal to date, which was encouraging. The retail, consumer goods, food and beverage and third party…

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

Eddie, the first question is, you talked about well, it was good to see the license strength in the fourth quarter continued from what was on 3Q, but you've made a comment kind of in passing talking about some early positive signs in the first quarter. Is there anything you can say about what you're seeing on the license business as we're in January and headed through the first quarter? Are you -- is that related to large deals that have closed or things that slipped out of 4Q that have closed? Give us a little bit more color on, when you used, I think the word optimism.

So, not too many details at this very early point in the quarter Terry but as you know -- actually we had a terrific year in all of 2016, but particularly Q3 and Q4 were encouraging, and the pipeline in the early part of 2017 feels as strong as it was in Q3, and Q4. So, we're certainly encouraged about where we are. A little too early in the quarter be talking about any specifics, but certainly positive momentum and we're encouraged.

Got it. And I guess 2017 a year where there is evolution here in the new product and important new products, retail selling platform, could you maybe reconcile as you guys come to market with that and then the headlines around brick-and-mortar challenges, is there any issues in terms of -- as you're launching that product, will the market be receptive as these brick-and-mortar entities maybe looking at downsizing their brick-and-mortar footprint. How do you sell into that kind of environment where perception wise it looks tough?

It's a traffic question. I mean there is certainly is some downsizing of bricks-and-mortar assets for sure, we're seeing that in the news on a pretty frequent basis here. But -- as well as some of that downsizing going on, this is clearly a reinvention of the retail footprint. What used to be purely a cash-and-carry selling environment has now transitioned to or is transitioning to those retail stores being everything from boutique, to a gallery, to a distribution center, to a customer service center and the solutions that have traditionally been at the center of retail stores no longer provide the necessary tools that store associates need. So we certainly think there is a place for the next generation of retail store solutions, in fact, we think that the current solutions really are ripe for replacement, not on a quarter-by-quarter basis, but over the next several years. Now we just came off of the National Retail Federation conference in New York, where certainly we were spending a lot of time with our customers, with prospects, sharing with them our vision for the next generation of retail store solutions and got terrific feedback. So we're quite encouraged by the market momentum.

Got it and I just Dennis, you gave a lot of color, so I appreciate all the color as it relates to the quarter itself than the outlook commentary. One thing I'm curious about, it looks -- so you're looking at 5% to 6% license growth, there are 2 point FX headwinds. So it looks like the license growth would be a moderate acceleration from what you all guided to in 2016 originally. Now the other thing that seems like kind of a newer dynamic is the potential of impact or headwinds around subscription revenue or the shift to subscription. Is that related to some of your existing or preexisting SKUs or is that related to the potential selling of this new set of products you launch later this year? Thank you.

Great question Terry, it relates to our existing SKUs. So namely, the big one would be transportation and the shift there. So we're definitely seeing traction there, but as Eddie mentioned and I believe I mentioned, customers are starting to look for the recurring revenue model in other products as well.

Your next question is coming from the line of Matt Pfau with William Blair. Your line is open.

First just wanted to know if we can get a little bit more clarity on, I guess, the expectations in terms of what's changed between when you gave your initial outlook in 2017 last quarter, and then versus now in relation to the delayed deals. Was there further delays or cancelations, may be just some insight as to what sort of changed between the two quarters?

Yes, Matt sure, Eddie here. So just to be clear these are not really deals per say, and they're certainly not deals they have been canceled. These are focused around services implementations that have any combination of being paused, delayed somewhat, slowed down just largely I think is, not exclusively, but largely as the retailers and retail environment, retrench and formulate their strategies going into the balance of 2017. So these are services programs, not deal cancelations and things that have been lost to competitors.

Sure, when we liked at the services pipeline, year-over-year growth without putting handicap on it, it's certainly solid compared to last year Matt, the challenge is just predicting the timing of when some of these retailers are going to re-launch on some of their programs.

Sure. I guess to that point Dennis, is there anything that you guys, I guess, learned from this experience that can be applied down the road to maybe make that a bit more predictable. As you think about how retailers are going to consume, especially some of the newer maybe more complex solutions that you are selling them?

I would say, we're all -- we are very much into visibility and pipeline in capacity management and it's a great question, we're doubling back-down and trying to look at metrics and it's early to predict any long-term trends that's why we were pretty aggressive with our guidance from a conservatism point of view.

Got it. And just wanted to touch on the cloud or that move to subscription, a bit. I guess in terms of -- it sounds like right now the primary demands with TMS but potentially some other components down the road. So I guess number one, is this something you think can eventually be applied to all of your business or are there certain parts of your business that you don’t sort of foresee moving to the subscription model. And then, I guess also in that sense, as customers move to subscription products. What does, besides the obvious transition headwind there from the revenue perspective, is there anything else as we think about the lifetime value, that customer or profitability that changes as they move to the subscription model for you?

Let's see, so first of all Matt, in terms of the products that are best suited to a subscription base model and there are certainly some that are more attuned than others. I think overtime and to some extent depending upon the Tier of customer, they all have the opportunity to move to a subscription base model. If I were putting sort of essentially a sequence of likely priority, certainly TMS would be top of the list. We've seen that, we've talked about that, with our extended enterprise management probably number two, probably order management and number three and then we saw its tail-off to warehouse management and inventory optimization that would be sort of the sequence that I would see. And then from a -- what we would or how we would categorize Tier of customer, you tend to see the smaller closer to SMB type customers adopting a cloud and subscription model first, with particularly the Tier 1 and Tier 2 guys wanting to run our solutions in the cloud, but not on a subscription model. And then with regard to the second question, I think the opportunity for lifetime value of a customer in a subscription based world versus a traditional kind of on-prem license world, it goes up. Many of the things frankly are equal, but as we are rolling in to that subscription cost, all of the infrastructure cost and so forth than it increases the potential lifetime value of the customer.

Got it, that's helpful. Thanks for taking my questions guys. That's it from me.

Your final question comes from the line of Mark Schappel with Benchmark. Your line is open.

Starting with your services business stalling as a result of these delayed projects, why hire up at this stage?

Well, just to be clear, I am not sure I would categorize it as a staling Mark. We still are -- we still grew in Q4, we still are projecting growth for 2017. So it's not exactly a stalling of the business but it is a temporary deceleration of growth. Not a stalling of the business. So we still have solid customer demand, number one. Number two, as you've seen we've had strong license performance throughout 2016, but particularly in a second half of the year and that will pull through strong services revenue with it. Customers don’t buy license revenue -- licensed products not to implement them. So we still got pretty strong demand, just not quite as strong as it was in the last couple or three years. So that has driven us to a position where we still need to hire, to fulfill customer demand and drive revenue and so forth. Not quite a stalled situation.

So Mark, as in mentioned the pipeline is up and we've got a long, long track record of being able to manage our capacity very well in a good track record. And I think that bores out in the margin profile that I laid out for 2017 with a range of 58.3% to 58.5%, that’s really just about in line with the 58.6% that we did in 2016 and its still world class. So if we weren’t managing our capacity appropriately, you would see much more drag on the margin profile of the company in and off itself. So we seek the bottom, we hope tap on wood the bottom is Q1 and then the trajectory starts to move back up. Unfortunately, from a timing point of view we're just straddling the back half of 2016 and the first half of 2017 in our current outlook. And the challenge is more just timing of when the reacceleration starts because of the one uncontrollable for us is, when the customer is going to pull the trigger.

Okay, great thank you and then finally, Eddie, with respect to the new cloud product, I believe it was call the Adaptive Network Fulfillment, when do you expect to have something NGA there?

So that’s shortly in the first half, Mark, will be in the next couple of three or four weeks, but for sure in the first half of 2017. And at the absolute latest, if you are able to join us at our Customer Conference in early May, you'll certainly get the opportunity to hear about it in detail there.

Okay, great thank you.

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

Terrific, well thank you Angel. And thank you everybody for taking the time to join us in our Q4 earnings call this afternoon. As we have said we are very pleased that 2016 results cautiously optimistic about 2017 and we'll forward to reporting on Q1 in about 90 days from now. Thank you.

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