Good afternoon. My name is Sarah, and I will be your conference facilitator today. At this time, I would like to welcome everyone to the Manhattan Associates Fourth Quarter 2017 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. As a reminder, ladies and gentlemen, this call is being recorded today, February 6, 2018. I would now like to introduce Eddie Capel, CEO; and Dennis Story, CFO, of Manhattan Associates. Mr. Story, you may begin your conference.

Thank you, Sarah, and good afternoon, everyone. Welcome to Manhattan Associates 2017 fourth quarter earnings call. I'll 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 2016 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 reconciliation schedules in the Form 8-K we submitted to the SEC earlier today and on our website at manh.com. Since the highly successful release of our Manhattan Active Solutions last year and with cloud revenue now representing 12% of our full year 2017 software revenue, we've taken the opportunity to reformat our income statement in order to provide improved clarity. As a result, we will now break out cloud subscription revenue and on-premise license revenue in our reporting. And to enable you to better gauge the progress of our recurring revenue, we will also report maintenance revenue separately. In anticipation of the new ASC 606 accounting rules that require us to report hardware revenue net of expense starting in 2018, we will maintain a separate hardware-only revenue line. Finally, going forward, our services revenue line will include consulting services revenue along with billed travel revenues that were previously combined with hardware revenue. With regard to cost of revenue, we will break out cost of license so that you can determine the gross margin of our on-premise license revenue. We will also combine our various service type cost into a single cost of cloud, maintenance and services line. Because that hardware revenue will be reported net of cost beginning in 2018, our hardware gross margin will, by definition, become 100%, starting next – starting in 2018 when we report Q1 results. So you can refresh your models. We have included a supplemental schedule in our earnings release, which discloses eight quarters of history in the new format. Our comments in the remainder of this call will align with the new format. And with that said and with that background, now I'll turn the call over to Eddie.

Thanks, Dennis, and good afternoon, everyone, and thank you for joining us to review Manhattan's 2017 fourth quarter. There's a lot to cover as we close out 2017 and transition into 2018, including significant strategic and operational initiatives that we're driving. In fourth quarter 2017 and in line with guidance, we delivered total revenue of $144 million. That's down 2% year-over-year, and $0.45 of adjusted EPS also down 2% versus prior year. Now on a perpetual equivalent growth basis, total revenue was flat and adjusted EPS was up 3%. Two primary factors influenced our 2017 financial results, which were neutral for 2016. First was the sluggish pace of enterprise technology spending for many of our customers, particularly retailers as they grappled with shifts in their industry dynamics. And second was our significant business model change as we transition to subscription cloud-based solutions and its impact on revenue recognition. The following operational metrics illustrate our continued leadership and performance stability. We continue to grow globally, opening offices in Chile, Germany and Italy, and 28% of our full year 2017 revenue came from outside of the U.S. Our new innovation excited both existing and new customers. Our cloud offerings represented 12% of our full year software revenue and 18% of our Q4 software revenue, with strong pipeline and interest in the Manhattan Active suite of solutions. New logos represented 30% of our Q4 deals closed with those new logos representing 40% of our full year 2017 closed deals. And we continue to perform well versus the competition with competitive win rates topping 70%. And WMS and non-WMS software revenue mix was about 65%. Retail, consumer goods, food and beverage and third party logistics drove more than 50% of our revenues. And we continue to aggressively invest in research and development with $58…

Okay. Thanks, Eddie, and let's strap it on. Please note unless otherwise specified, I'll be discussing non-GAAP results, which we term adjusted results. Total fourth quarter revenue of $144 million was in line with guidance, down over prior year $4 million or 2%. Year-over-year software revenue was down $4 million as a result of a higher mix of subscription bookings. Recurring software revenue, which is cloud subscriptions plus maintenance, was 31% in the quarter, excluding hardware revenue. Quarterly maintenance revenue increased $2.5 million over the same period in 2016. Consulting services was down $4 million and hardware revenue was up $3 million over prior year. Geographically, Americas was down 7%, EMEA was up 24%, and APAC grew 7%. On adjusted earnings per share for the quarter, we put up $0.45 per share in line with guidance and down over prior year $0.01 or 2%. Adjusting for the on-prem equivalent, our adjusted EPS would have been $0.48. Our GAAP earnings per share was $0.36 in the quarter compared to $0.42 in Q4 2016, as we recorded a one-time GAAP only charged of $2.8 million or $0.04 of EPS impact from the U.S. Tax Cuts and Jobs Act in Q4, primarily related to the repatriation tax on foreign earnings and the re-measurement of our deferred tax assets. Q4 software revenue, which consists of license and subscription, was $18 million down $4.2 million over prior year, on the mix of subscription bookings and delayed decision making on a few deals in the Americas. Our Q4 cloud subscription revenue recognized was $3.2 million, more than doubling versus $1.4 million in Q4 2016, with the 2016 comp representing subscription revenue from our TMS SaaS offerings. With the deferral of more license revenue into future quarters, our perpetual license equivalent for the quarter was $21.3 million,…

All right. Thanks, Dennis. Well, clearly, as success continues to be driven by delivering innovation that anticipates the needs of the evolving market, focuses on customer success and leverages our deep domain expertise. And while some global and retail macroeconomic conditions give us reason to be cautious, we're bullish on the market opportunity ahead of us for sure. Supply chain complexity and retail evolution in the target markets, in fact, bring continued need for our solutions among our customers and will continue fueling multi-year investment cycles from us at Manhattan Associates. The move to subscription and cloud-based models is positive and is clearly outpacing our expectations. Customer feedback on our exciting market-leading innovation demonstrates that we're delivering true differentiation, and we're investing significant energy and capital into advancing the world's leading suite of supply chain commerce solutions to extend our market leadership in 2018, and as Dennis articulated, well beyond. Our competitive position is strong. We continue to invest in innovation to extend our addressable market, our market leadership and our differentiation. And with the world's most talented supply chain commerce employees, the best software solutions and the market dynamics that require customers to adapt and invest in supply chain innovation, we believe that we're very well-positioned for 2018 and beyond. So with that, Sarah, we're ready to take any questions.

All right. Thank you. Your first question comes from Terry Tillman with SunTrust.

Hey. Good afternoon, gentlemen. Can you hear me?

We can, Terry. Yes.

Okay. So first, Dennis, thanks for all the color. It's a lot to chew, but it was all worthwhile. So appreciate that. I guess, Eddie, with these new office openings, maybe next quarter, as there's more to analyze, maybe we can do the next call in the Italian office or in Chile. Just keep that – just think about it, okay, and get back to us.

Sure. And if you'd like to join us there, Terry, in the general location, you'd be welcome.

Okay. I guess. Thank you.

Yeah.

So first question is just on the services business. I think, Dennis, unless I had it wrong, you're talking about a 4% to 2% contraction in 2018. And if that's wrong, you can correct me. But going with that assumption, I guess what I'm curious about is, A, what kind of visibility are you getting in terms of the stabilization and/or confidence in stabilization? And B, any early dynamics around some of these earlier cloud rollouts in terms of are they carrying meaningful services? So that's the first multi-part question.

Yeah. So on visibility and stabilization, what we're looking at is backlog and in pipeline, new pipeline. And what we're seeing in terms of advancers versus decliners in the mix is we're narrowing the gap on the advancers versus decliners, but we haven't reached the breakeven point from that perspective.

And hence, it's 4% to 2% down you said?

Yeah.

Yeah. And Dennis, in terms of the – so there's two things here. We have ACV, which you may not give us the quarter-to-quarter, blow-by-blow on the cloud business. But then recognize subscription revenue, if I recall originally, I think I had like the range was somewhere like $21 million to $25 million. You're talking about $20 million. Maybe you could give us some puts and takes on the $20 million number? Is there anything about timing of rev rec or is there more conservatism? Just maybe help us reconcile that.

Yeah. There's no issue on timing of rev rec, other than we – with two quarters under our belt, timing can be a challenge in terms of forecasting the pace, Terry. So there's no rev rec particular issue. We're just adding an element we hope tap wood of conservatism to our forecast.

Okay, got it. And then, my last question, just Eddie for you in terms of watching the story over the years and the evolution and the product expansion, market expansion, et cetera. Active Omni is interesting, but it's definitely a new market territory you're getting into. You're in the front of the store. You're helping them engage with customers and you talked about the customer engagement product. One of the things that we're looking for, I would assume, that would be important is sales hiring. I see a few open jobs on the website for account executives. And I'm just curious what is your strategy and how would you report on how well you're doing in hiring new folks. Because it seems to me Active Omni is going to take more feet on the street to get out there and tell retailers that you have these products.

Thank you. Yeah, certainly, we would agree with you – we would agree with you, Terry. Frankly, the front-end of that funnel really starts with additional spend in marketing to drive awareness and messaging frankly into the marketplace. I do agree with you that there is select domain expertise that we're looking to acquire in the white space areas for us. So that certainly is another focus and we still have some opportunity for increased account coverage as well. So certainly, we'd agree and that is the area of focus for hiring and investment in sales and marketing personnel.

Thank you.

Your next question comes from Brian Peterson with Raymond James. Brian Peterson - Raymond James & Associates, Inc.: Hi. Thanks for taking the questions. So, just a clarification on the comments on the deal sizes. Dennis, I wanted to know if that's solely related to Active Omni where we might have some more modulized pricing and people are just picking different components of it, or are we seeing that on the WMS side as well?

No, I'm referring to the transition from a perpetual license to a cloud subscription there, Brian. Brian Peterson - Raymond James & Associates, Inc.: Yeah. Okay. So that's specifically just related to the license to (46:14) subscription dynamic, the like-for-like deal sizes aren't down. I just want to clarify that.

That's correct. That's correct. Brian Peterson - Raymond James & Associates, Inc.: Okay, got it. And just on the slippage, I was at NRF and I would say the environment was definitely better than it's been over the last couple of years. So I'm just curious, from your perspective, were you a little surprised that maybe some of the deals didn't get close in the fourth quarter? And if we think about what we've seen so far in the first quarter, have you seen some of those deals actually get done?

Yeah. So, I was at NRF as well, Brian, and I would agree with you. I would say that the mood was a little more up-tempo and buoyant than it's been really for the last three or four years even. So it certainly was – certainly was excited about that. In terms of the deal pushes, it was a small number and there's nothing particularly endemic about it, but just general timing issues, decision-making issues and so forth. Some of that I think, no doubt, tied to the reconstitution and the rebalancing of the digital and bricks and mortar businesses in retail, but we expect to see that bounce back in 2018. In terms of your specific question as to have 2017 deals sort of pushed into 2018 and get closed, the answer to that is no, not yet. Brian Peterson - Raymond James & Associates, Inc.: Got it. Thanks, guys.

Sure. My pleasure, Brian. Thank you.

Your next question comes from Monika Garg with KeyBanc.

Hi. Thanks for taking my question. First, on the service revenue, the 2022 guidance you have given us, how should we think about the services line trending from here? And second part is 2/3 of the services is really from expansions and upgrades. So as you move to the cloud, what happens to that?

So, I'll take the front end of that, Monika, is with the parameters that we gave, when you lay those out in your model, you should be able to calibrate services. We're being conservative or we intend to be somewhat conservative on the services line within our growth projections.

And as far as the upgrade revenue, for those deals that end up being subscription-based, the upgrade is built into the subscription cost. So, the services are still there, they're smaller pieces of work, but they move from the services line to the subscription line.

I mean, over time, we expect to shift our overall revenue mix to a higher recurring revenue mix and we would see services become less prevalent in terms of overall total percentage of our revenue, but still a growing part of the pie.

Got it. Okay. Then, for 2018, I think you're reducing the revenue by $10 million. You gave us the color around $5 million for software. Given you saw a couple of millions of perpetual being shipped into 2018, could you help reconcile rest of the delta, which is about $6 million to $8 million?

Yeah, the balance is coming from services.

Got it. Thank you.

Your next question comes from Mark Schappel with Benchmark.

Hi, good evening.

Hey, Mark.

So, Eddie, the company reset the performance-based comp for the sales force at the beginning of the year, mainly due to the new cloud solutions and some of the changes here. I realize it's still early days, but I was wondering if you could maybe add a little bit of color on how that's being received at this point.

Well, the incentive-based comp reset is not specific to the sales organization. It's across the board. Given that we did not make our numbers certainly in the back half of 2017, we didn't pay across the board performance-based compensation. Therefore, we've got to reset that for 2017. In terms of our sales force and sales organization, they are compensated essentially the same way and at the same levels for cloud-based deals as they are for perpetual deals. And the reasoning behind that is we want the decision that the customer makes between cloud and perpetual essentially or on-premise to be entirely their decision to be, frankly, driven for the right reasons and not because any of our sales guys, frankly, or any of us at all are incentivized one way or the other. We want it to be a very natural decision-making process.

Okay. Thank you. That's helpful. And on the license deals that were pushed into 2018, I was wondering if you could give us a little bit more detail on that. Have any of those deals closed yet this quarter? And do you expect most of them to close in the Q1 period?

So the answer is no to have any of them closed yet in Q1. We expect some of them to close in Q1, but not all is really the short answer.

Great, thank you. That's all from me.

Sure. My pleasure. My pleasure, Mark. Thank you.

Your next question comes from Matt Pfau with William Blair. Matthew Charles Pfau - William Blair & Co. LLC: Hey, guys. Thanks for taking my questions. First, Dennis, I wanted to hit on the gross margin goal for 2022. If you look at the range you gave, it's fairly similar to what you posted in 2016 and 2017. So just wondering why as the cloud business ramps, it wouldn't have a bigger impact in terms of moving gross margins beyond that range that you have been in historically or at least in 2016 or 2017?

Yeah. Well, at this stage, we're attempting to add a little conservatism to our projections, Matt. And we'll have a multi-wave transition. As you know, our supply chain management solutions for the most part, the WMS, is not in the cloud at this stage and a lot of this is predicated on WMS move to the cloud and the timing and our conversions. Matthew Charles Pfau - William Blair & Co. LLC: Got it. Okay. And then also wanted to just hit on in terms of the macro expectations for 2018 and the retail environment. And I know in your comments for guidance you said you're still cautious about the retail environment, but does that mean you're sort of expecting, at least in the guidance, similar to 2017, or are you expecting some sort of improvement in 2018 versus 2017?

I think it's going to be similar in 2018 to 2017. I think just retail restructuring is going to be a multi-year program that we work through, but that creates a meaningful opportunity for us as well we believe with the new innovation releasing into the market. Matthew Charles Pfau - William Blair & Co. LLC: Got it. And then, in terms of the Active Omni products, I think one of the investment thesis on your part in terms of moving the grouping of omni-channel products there is to sort of encourage more cross-sell within your base. So what have you been seeing in terms of the deals that you've initially been engaged with customers, have customers perhaps been more open or to adopt more products than they would have previously or at least put those on the roadmaps. And then, in terms of the point-of-sale product specifically, what have you seen in terms of interest with that, now that it's on the Active Omni platform? Has that sort of increased your ability to potentially sell that into your base of customers?

Yeah, great questions, Matt. And certainly, you articulated our intentions well. We have – to be specific, we have not seen any folks buy more modules than they need kind of early, number one. Number two, we've seen great interest in point-of-sale. Obviously, it was launched whatever that was 30 days or so ago, so the reception has been exciting and has been – certainly, has been robust. But as of yet, we're too early into the cycle to see any cross-sell because we're still in the implementation of kind of the first modules of the solution that we've sold. But as we talk to our existing customers on Manhattan Active Omni about additional modules, there's certainly a lot of interest there and reason for optimism. Matthew Charles Pfau - William Blair & Co. LLC: Got it. And just last one follow-up for me on the Active Omni is, last quarter, if I remember correctly, you said that most of the initial interest or at least deals signed were from new customers. Did that continue in this quarter and what is the interest or reception been like from some of your existing customers?

Yeah. It's so good. I don't have the specific metrics or I probably shouldn't use it, but I think it was about 50-50 in Q4 from existing customers and maybe a little more skewed toward new. Matthew Charles Pfau - William Blair & Co. LLC: Got it. That's it for me, guys. Thanks.

Okay. Well, thank you, Matt.

And there are no further questions at this time. Do you have any closing remarks?

Terrific. Well, thank you, Sarah, and thank you, everybody, for joining us today. I know that, as Dennis mentioned, a lot to get a heads around in this particular call. We will continue to provide as much detail as we possibly can, and more detail as the quarters evolve. So, thank you again. And I do have to say one note of congratulations to Dennis for making it through the call. He's been very sick for the last two or three days. So, congratulations, Dennis, on making it through the call, and we look forward to speaking to everybody in about 90 days or so. Thank you.

This does conclude today's conference call. You may now disconnect.