Manhattan Associates, Inc. (MANH) Q2 2022 Earnings Report, Transcript and Summary

Good afternoon. My name is Dilem and I'll be your conference facilitator today. At this time, all participants are in a listen-only mode. I'd like to welcome everyone to the Manhattan Associates Q2 Earnings Conference Call. After the speakers' remarks, there will be a question-and-answer session. [Operator Instructions] As a reminder ladies and gentlemen this call is being recorded today July 26, 2022. I would now like to introduce Mr. Michael Bauer, Head of Investor Relations of Manhattan Associates. Mr. Bauer you may begin your conference.

Thank you, Dilem and good afternoon everyone. Welcome to Manhattan Associates' 2022 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 the 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 the 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 year 2021 and the risk factor discussion in that report as well as any risk factor updates we provide in our subsequent Form 10-Qs. We note in particular that turbulent global macro environment could impact our performance and cause actual results to differ materially from our projections. 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. We have reconciled all non-GAAP measures 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. Now, I'll turn the call over to Eddie.

Thanks Mike. Well, good afternoon everyone and thank you for joining us as we review our second quarter results and discuss the increased outlook that we have for full year 2022. Manhattan delivered a record Q2 and record first half results generating Q2 total revenue of $192 million and adjusted earnings per share of $0.69, both exceeding our expectations. Specifically, 48% growth in cloud revenue and 19% growth in services revenue drove a topline outperformance and strong earnings leverage in the quarter. Our global teams are executing very well for our customers and we continue to invest in our people and in R&D. Our consistent investment and unmatched industry expertise are key factors in our continued strong customer satisfaction levels and innovation that differentiates our mission-critical Manhattan Active platform and solutions. The industry-leading innovation that we're delivering to the market is a key component to our customers' success providing them with the ability to adapt quickly and efficiently to changing market conditions and profitably scale their businesses. Frankly, factors that contributed to a 75% win rates in the quarter. Now, despite FX headwinds in Q2, RPO, the leading indicator of our growth, increased 84% to $898 million. Excluding the FX impact due to the strong dollar, RPO totaled $928 million, up 90%. And regardless of any FX movements, we're on pace to exceed our prior outlook of $1 billion in RPO for the second half of this year. Demand for our cloud solutions is strong and broad-based across products, industry verticals, and geographic locations. It also remains robust from both new and existing customers. Similar to Q1, demand from net new customers was particularly strong and contributed 50% of our total bookings in the quarter. And while the mix of bookings will certainly vary on a quarterly basis, we believe that net new customers generating about 55% of our cloud bookings in the first half of the year exemplifies the unique value that we're delivering to the market and a large and growing opportunity. From a vertical perspective, retail, manufacturing, and wholesale, continue to drive more than 80% of our bookings in the quarter. Across our cloud solutions, the sub-verticals are pretty diverse. For example, in the quarter cloud deals one include a manufacturer of recreational vehicles food distribution wholesaler, a Japanese multinational conglomerate that specializes in electronics and industrial products, a specialty retailer of automotive parts, an industrial manufacturer and a large fashion brand as well as a number of others. So, as you can see pretty diverse. And our cloud pipeline continues to be robust with solid demand across our product suites. And net new customers represent about 35% of that demand. On the services front, our global team continues to execute very well conducting well over... [Technical Difficulty]

Please remain on the line. Your conference will resume shortly. [Technical Difficulty]

I heard the verticals.

Okay.

Hi, Dilem?

Yes, you're back on.

We're back on. Are we in the public's call, right now?

Yes, we are live at the moment.

Okay. Very good. All right. Well, everybody, I'm very sorry about the technical difficulties. But I'll pick back up and talk a little bit about our cloud pipeline. I think I had mentioned that the vertical diversity that we experienced in Q2. But our cloud pipeline, I think I mentioned this continues to be robust with solid demand across our product suite. And our net new customers represent about 35% of the demand in our pipeline. And on the services front, our global team continues to execute incredibly well, and they conducted well over 100 go-lives in the quarter. And company-wide, we continue to make really great progress against our hiring. We added over 300 new team members during the first half of the year and expect to be at least 4,000 employees by the conclusion of 2022. These hires will contribute to our ability to meet our future customer needs, grow our market share and extend our addressable market. Now speaking of our team, we are very proud that we were recently voted by them a Top Place to Work in Atlanta for the 10th consecutive year. And we won similar awards this year in India, Australia and Singapore. I'm also very happy to report that in mid-May we hosted in person our annual customer conference and it really was a great success. Attendance for the event was strong and terrific to see and talk and collaborate with our customers and partners face-to-face about our innovation and product strategy. At the conference, we brought together the industry's top agents of change and we laid out our vision for agile and sustainable supply chain commerce. So let me spend a moment or two on a couple of the newer product concepts that we rolled out at the event, solution assembly and our Manhattan Active platform developer portal. So, regarding solution assembly. We see this concept as the logical next step for the solution unification strategy that we introduced in 2017. Now as a reminder solution unification refers to the unique way that we deliver best-in-class order management point-of-sale and customer relationship management into a single unified experience called, Manhattan Active Omni. And this same concept holds true for the unification of active supply chain with warehouse management, transportation management, yard management, automation orchestration and so on. In our Momentum this year, we introduced our customers to the concept of solution assemblies. And assemblies refer to the Manhattan design to develop end-to-end flows which span our major Manhattan Active cloud offerings: Omni, supply chain and inventory. So let me give you a quick example to illustrate the power of assemblies and the strong cross-selling opportunities within our solutions. Given the challenge that inventory continues to pose, let's review a solution assembly in this area that we specifically demonstrated at Momentum. By assembling Manhattan Active Allocation and Manhattan Active Omni, we help our fashion and apparel customers maximize margin and sell-through of their own inventory from the time the inventory arrives in the market to the end of the selling season. The key to this particular assembly is the way that allocation continuously informs order management about the health of every inventory position throughout the supply chain network. And armed with this real-time inventory health data OMS uses the global view of direct-to-consumer demand to proactively reduce inventory positions where they're running heavy and avoid those locations where they're running light. Assembling, allocation and order management it's really made possible via the unique way that we connect APIs across our cloud deployments. And this out-of-the-box assembly reduces both IT complexity and delivers material revenue margin uplift, in this case for our specialty and apparel customers. Now turning now to one of the other key highlights from momentum, technology. Since we introduced the Manhattan Active platform in 2017 its cloud-native, evergreen and auto-scaling capabilities have delivered game-changing innovation for our customers. And as we've talked about, these technical capabilities have been really important differentiators for our solution across a number of application categories. Like the functional capabilities of the Manhattan Active applications, our technology in particular the extensibility of our underlying tech platform is vital to our technology-focused customers. So, at Momentum we introduced the Manhattan Active platform developer portal, a self-guided reference tool for the technologists and developers within our customer base. Now paired with Pro-Active our platform's tool for extending the base behavior of Manhattan Active applications, the developer portal provides technologists with the ability to incorporate our extensive library of APIs into their broader technical landscape. And we believe that the strong demand that we're seeing from Manhattan Active applications reflects the mission-critical and strategic innovation that we continue to develop. Enhancing customer experiences and customer service remains top of mind for leading enterprises. And when combined with the capabilities that we offer around maximizing revenue and profitability of owned inventory, we expect demand for our solutions to remain strong. And that concludes my business update. Dennis is going to provide you with an update, on our financial performance and our enhanced outlook. And then I'll close our prepared remarks, with a brief summary, before we move to Q&A. So, Dennis?

Thanks, Eddie. Our Manhattan global teams continue to execute exceptionally well, as we delivered strong financial results across the board, while significantly investing in the business. We are tracking well compared to the Rule of 40, as top to bottom line we continue to raise the bar in a choppy macro environment, delivering strong quality of earnings that includes growth, profitability, cash flow and great balance sheet metrics. I'll start with a quick recap of the quarter, with growth rates on a year-over-year basis unless otherwise stated. So total revenue was a record $192 million, up 16% as reported and up 18% in constant currency. Excluding license and maintenance revenue, which removes the compression driven by our cloud transition, as reported total revenue was up 26%. Q2 cloud revenue totaled $42 million, up 48%. We ended the quarter, with RPO of $898 million growing 84% and 11% sequentially. As Eddie mentioned, excluding approximately $30 million in first half FX headwinds, RPO totaled $928 million up 90%. We are well positioned to exceed the high end of our $1 billion RPO outlook, during the second half of this year, of which we estimate $15 million to $20 million in potential FX headwinds. Regarding RPO, we expect to update guideposts on our Q3 earnings call. Q2 services revenue knocked it out of the park passing the century mark, recording $101 million up 19%, as cloud sales continue to fuel services revenue growth globally. Our Q2 operating profit totaled $53 million, with adjusted operating margin of 27.5%. And importantly, we continue to invest for future growth. In Q2, revenue growth combined with operating leverage drove the outperformance versus our prior 24% operating margin target for the quarter. This resulted in record Q2 earnings per share of $0.69, up 13% and GAAP EPS was $0.49. Turning to cash is king. Q2 operating cash flow was a solid $53 million up 16%. Adjusted EBITDA margin was 28%, and free cash flow margin was 27%. As we discussed last quarter, our Q2 cash flow absorbed $13 million of incremental cash tax associated with the US Tax Cuts and Jobs Act, that did not impact us a year ago -- in the year-ago period. I refer you to Item eight on our earnings release, for more information on the timing of cash tax payments under this new law. Regarding our balance sheet, let's start with solid. Deferred revenue increased 42% year-over-year to $179 million. We ended the quarter with $214 million in cash and zero debt. In the quarter, we invested $50 million in share repurchases resulting in $100 million in buybacks invested year-to-date. Also our Board has approved the replenishment of our $75 million share repurchase authority. Now turning to our updated 2022 guidance. As consistently mentioned, our financial objective is to deliver sustainable double-digit, top line growth and top quartile operating margins, benchmarked against enterprise SaaS comps, of which we are doing. With our strong first half performance, and increasing visibility we are again raising our 2022 outlook. We are raising our total revenue range to $733 million to $741 million, with a $737 million midpoint, representing 11% growth as reported and 14% growth removing FX impacts. This is up from our prior guidance midpoint of $723.5 million and 9% growth. Excluding license and maintenance attrition, growth would be 21% as reported and 24% removing FX. For Q3, we expect total revenue of $183 million to $187 million with $185 million midpoint, delivering 9% growth year-over-year. Excluding license and maintenance revenue, Q3's expected growth at the midpoint is 18% and removing FX growth would be 22%. We are increasing our operating margin range to 25.5% to 25.7%, up from our prior midpoint of 24.5% and our original midpoint of 23.25%. And we have previously highlighted our 2022 operating margin guidance factors in continued investments for growth including hiring talent. Yes, I said we are hiring. Talent retention and performance-based compensation as well as the return of pandemic-impacted expenses such as our in-person Momentum conference as well. Also just a reminder, our margin is also impacted by license and maintenance attrition and customer demand for our cloud solutions. Regarding full year adjusted earnings per share, we are raising the range to $2.35 to $2.39, with a $2.37 midpoint, which is up 9% from our prior midpoint of $2.18. And for GAAP EPS, our guidance range is moving up to $1.63 to $1.67. For Q3, we expect adjusted EPS of $0.56 to $0.58 and GAAP EPS of $0.36 to $0.38, with the difference between adjusted EPS and GAAP EPS, solely representing investment and equity-based compensation. Further drilling down on revenue for the full year 2022, we are increasing our cloud revenue range to $170 million to $172 million, representing 40% growth at the midpoint. We estimate cloud revenue will be approximately $44 million in Q3 and $47 million in Q4 at the midpoint. And for our services revenue, we are increasing our forecast to $382 million to $387 million. At the midpoint, this represents 15% growth and on a quarterly basis represents Q3 services revenue of $101 million and for Q4, $93 million accounting for traditional retail peak seasonality. For maintenance revenue, we are slightly refining our revenue range [Technical Difficulty]

Can you hear us, operator?

Yes we can. Your line is open sir. You can go ahead.

Yes, yes we can.

Yes. Okay. So I'll just backing it up here a little bit. For maintenance revenue we are slightly refining our revenue range to $135.5 million to $136.5 million at the midpoint for Q3. We anticipate maintenance revenue of $33 million and $32 million in Q4. We expect license revenue to be about 2.5% of total revenue, averaging about $3 million in license revenue per quarter for the remainder of the year. For hardware, we expect about $4 million in Q3 and $5.5 million in Q4. Now moving or shifting to what we do well which is profitability. For consolidated subscription maintenance and services, we expect margin to be about 54% in Q3 and 53% in Q4. For operating margin at the midpoint, we expect about 25% for Q3 and 23% in Q4. Remember, the Q4 sequential decline in margin accounts for retail peak seasonality. All set at the midpoint of our guide, we expect to achieve full year operating margin of 25.6%. Finally, we expect our tax rate to be 21.7% and diluted share count to be approximately 63.5 million shares, which assumes no buyback activity. And finally in all caps that covers our resilient financial performance update for Q2 and first half of the year. Thank you. And back to Eddie for some closing remarks.

Yes, perfect. Thanks, Dennis. Well, listen, I apologize again for the technical blips that we may have had during the call. I hope it didn't impede your ability to understand the breadth of our Q2. Because despite the FX drag that we saw in the quarter, we're very pleased with our second quarter results and frankly our year-to-date results. And while we continue to operate in turbulent global -- a turbulent global macro environment, our teams are executing incredibly well and our business momentum remains very positive. Demand for our solutions is strong and our pipelines continue to progress very well as new and existing customers both want to shift to our industry-leading cloud-native applications. So thanks everybody again for joining our call. And also, thank you to our employees for all the fabulous work that you're doing around the globe. With that, Dilem will be happy to take any questions.

Thank you, sir. [Operator Instructions] And I show our first question comes from the line of Terry Tillman from Truist. Please go ahead.

Yeah. First, congratulations, and you can't be silent despite a bad conference call operation, so it's good to see the results in there. I guess if it wasn't for currency, you got pretty darn close to even getting the low end of the ending of your RPO. So that was good to see. And thanks for the FX impact color. All right enough of my preamble. One question I was going to ask you Dennis just relates to, there was a pretty meaningful subscription or cloud subscription revenue acceleration in 2Q. It was up to 48%. I know you're not giving any update on guidepost, but like the idea is the way subscription revenue would build, it would actually really accelerate into 2024, if I'm not mistaken. I know you're not giving any updates, but we're already seeing an acceleration in 2Q. How are you thinking about cloud sub revenue and the visibility over the next couple of quarters and into next year?

Ladies and gentlemen, please continue to hold. Your conference call will resume momentarily. Okay. Mr. Bauer, are you back on?

Terrific. Thank you.

All right, Dilem. Well, I think we've concluded the call. We'd be happy to take any questions that might be in the line.

Sure. Mr. Tillman, your line is open. Could you please repeat your question?

Yes. And this gives me an opportunity to clean the question up. It was a sloppy question so now I'm going to make it real tight. So Dennis the question is that cloud subscription revenue accelerated actually notably up to 48%. I know you're not changing any of the guideposts across the KPIs. But is there any potential change from what you all were thinking originally about how the cloud sub revenue builds over the next couple of years including the acceleration in 2024?

I would say we're optimistic about that Terry. But given the guideposts that we provided we're multi-year. We did make it clear that we'll only revise those longer-term estimates on an annual basis. So we're definitely encouraged, but I think we'll defer frankly that question and the answer to the question until the end of the year.

Okay. Got it. Maybe Dennis I'll follow-up for you though on the cash flow. Anything to think about, I mean, I know the seasonality [Technical Difficulty] on expenses and then PS revenue but you had the cash impact the tax cash impact, but you saw a strong cash flow. Any sense on how we think about 3Q and 4Q cash flow? And then I had a final question for Eddie.

Our cash flow margin will probably be similar to our operating margin right in that range.

For both quarters?

Yes.

Okay. Cool. And then maybe Eddie just it feels like old days of me wanting to ask about a WMS refresh cycle. And in your case it's -- you've got the cloud innovation that's going to draw people into wanting to do that. Can you give us an update on where you are in terms of customers that are now embarking on the cloud WM strategy? I know you gave us an update over the last couple of quarters. Just where is it building now in terms of how many folks are in process? Thank you.

Yes, that's a great question. I think it changes on every few days. So I might be off plus or minus one or two. But we're at about 73 customers under contract Terry across, I think, we're either 11 or 12 countries now one of the two. And we're over 40 sites are live across the customer base. We frankly are pretty busy summer season here of go-lives and so forth. So it's definitely very encouraging.

That's great. Nice job. Good luck for the second half. Thanks.

Thank you. Thank you, Terry. Appreciate it.

Thank you. And I show our next question comes from the line of Brian Peterson from Raymond James. Please go ahead.

Hey, gentlemen, congrats on the strong quarter. So I wanted to unpack the services strength a bit. It was up 19% on an 18% comp. And obviously, the guidance is up for the year. How do you think about the trajectory of that business? I mean, we're all seeing the news in terms of the macro, but obviously the RPO growth is really strong. There just seems to be a lot of crosscurrents out there. So, yes, as we think about maybe the kind of two to three-year outlook for services like how do we think about that in the current macro?

Yes. Well, again from a -- when we think about the two to three-year outlook, Brian, we'll update that at the end of the year. I think updating two or three-year outlooks every couple of quarters might be -- have a bit too much volatility built into it. But having said that as you know we have good visibility into our services demand frankly because of the software sales and…

Ladies and gentlemen, please continue to hold. Your call will resume momentarily. [Technical Difficulty]

Can you guys hear us now?

Yes, we can.

Yes. I'm live. Eddie, I can hear you.

Okay. Very good. Thank you, Brian. Sorry, sorry about that. So, obviously, services kind of lags a little bit. The software sales we've seen very strong software sales. We see strong demand for our services. You can see that frankly in the hiring profile that we have. We've added 300 people so far this year. We're going to add another couple of hundred at least in the balance of the year to top 4,000 associates. We've got good visibility at the next several quarters from a services demand perspective. And we feel -- obviously we feel terrific about it. There is -- I know there's been, some questions about will the services attach rate be the same for our cloud solutions as they were on-prem. And we've been saying yes to that. And I think now you can actually see that coming to the fore in that services revenue growth.

No. That's great. And Eddie maybe just following up and sorry for double dipping on the macro questions here, but you mentioned the kind of diversification into the verticals. I'd love to get your sense of the health of the diversification of the customer base today maybe versus prior economic challenge periods of that 2009. And I'd love to just hear kind of how the product portfolio has changed? And maybe where in terms of customer exposure or health is different today versus maybe five years ago?

Yes. I mean clearly more diversity across verticals for us helps with less exposure and so forth. But in general, even where particular segments of the market might be challenged, there is still a desire to make sure they maximize market share, maximize customer satisfaction and maximize customer retention. And that's what we can help with. So even in a market that tightens up a little bit, there is still obviously competition to ensure that customers are being serviced with inventory, serviced at the levels that they expect and so forth. And those are the areas that we can help. Hence the reason I believe, we continue to see kind of strong demand for both our solutions and our services.

50% net new logos, year-to-date.

Yeah.

Understood. Thanks guys. Congrats.

Thank you, Brian.

Thank you. And I show our next question comes from the line of Matt Pfau from William Blair. Please go ahead.

Hey guys thanks for taking my question and great results. I wanted to ask on the new customers that you added and the strength that you're seeing there. So maybe just what do you think is driving that? And I appreciate that it can change from quarter-to-quarter. And then, when we look at that 50% coming from net new customers and the cloud pipeline is at 35%, does that indicate that your close rates are better with new customers? Or what accounts for that discrepancy? Thanks.

Yes. Yeah, I think the second piece is just a little bit of variability quarter-by-quarter Matt. So it's not -- there's nothing frankly too analytical to build into that. But in terms of what we think is driving the new logo acquisition overall is really a couple of things. One is we're seeing our penetration into verticals that we've not been as strong in before manufacturing particularly. And that tends to be driven by those manufacturing companies beginning to go direct to consumer, okay and needing the types of sophisticated supply chain capabilities that we offer. Secondly, we are having some pretty good success replacing some older systems of whether it be competitors from the bygone years or takeaway from current competitors again, because of the underlying technology strategy that we have and the advanced capabilities that we're delivering to the market that are frankly needed today.

Got it. And then, just in terms of -- again to switch over to the macro the demand that you're seeing. Obviously some of your retail, customers or prospects could be feeling pressure in their business partly that's driven by inflation and higher cost which your solutions can help solve. Is that playing a role in terms of what products are interested in? Or how they're thinking about adopting your solutions at all?

Matt, I would tell you I think that's likely going forward. To-date it's been more focused on how do we -- how do our customers attract and retain and service their customers. And I think their -- I believe their focus certainly is turbulent times approach on making sure that they have great customer loyalty and they have great inventory management. Again, both of those things we can help with.

Okay. Great. Thanks, guys. Appreciate it.

Thanks. Thank you, Matt.

Thank you. And I show our next question comes from the line of Mark Schappel from Loop Capital. Please, go ahead.

Hi. Thank you for taking my question. And nice job on the quarter. Eddie, I was wondering if you could just comment on your point-of-sale solutions or your point-of-sale business during the quarter. If I recall correctly, you started seeing larger projects return to that business a few quarters ago. And I was wondering if that's still the case.

Yes, it is. It is. In fact, we had a couple of very nice wins in the quarter, more to come a little bit later, but some very strategic wins across multi-brand -- across our multi-brand conglomerate. Our go-lives are going well. We've seen two or three smaller, granted, 100 150, 250 store chains complete rollout of our point of sale across their entire network. And that in turn, as we've talked about many times, is building some nice momentum for us. So very excited about the opportunity, very excited about the reception. And again, multi-year strategy clearly, but definitely encouraged about where we are.

Okay, great. Thank you. And then as a follow-up just to build on an earlier question. I was wondering if you could just comment on what you're seeing, specifically in the retail sector. It just appears from your results and guide that you're not seeing any sign of a slowdown in the year in respect of --

Yes. I mean, the pipelines are strong, demand is strong, win rate is strong and that is, obviously, true on the software side, but the pull-through on the services side is also strong too. And, obviously, what that indicates is that, once software is purchased, our customers are anxious to get that software live and delivering value for them. So we feel pretty good about the demand profile for sure, again, based on the pipeline and the visibility we have for the services business over the next several quarters.

Great. Thank you. That’s all for me.

Thanks. Thank you, Mark.

Thank you. And I show our next question comes from the line of where Blair Abernethy from Rosenblatt Securities. Please, go ahead.

Thanks. Nice quarter guys.

Thank you, Blair.

Just first question, just around -- following up on the point-of-sale side of things. I'm just wondering if you can refresh us on your go-to-market here in pursuing new customers in the point-of-sale side. And how much -- or are you relying upon channel partners here? Or what's sort of your strategy with that?

No. Our strategy is one of going direct, Blair. So we're direct in the market. Of course, we've got partners who help with implementations and those kinds of things. But our go-to-market strategy is definitely through our direct sales force and that's where we're seeing the success.

Okay, great. And then, just shifting over to the cloud question -- customers here. So the net new cloud customers are you -- can you give us a sense of what their -- is there an average or sort of range at which they're landing at these new customers? And then after a year, sort of, how those businesses are growing for you?

Well, we don't disclose the deal size, Blair, I’m sorry. So I can't comment on that. But in terms of the implementations post sale, they're going well. A, they're going well; and B, as I mentioned I think a little earlier, we've got a very busy summer and fall in front of us. Some really terrific brands, both here in the US and around the world and getting great feedback frankly.

Great. Thanks very much for your help.

Our pleasure, Blair, and thanks for taking the time.

Thank you. And I show our last question comes from the line of Joe Vruwink from Baird. Please go ahead.

Great. Hi, everyone. I wanted to go back to macro a little bit. One thing that's been kind of fascinating, we had big supply chain trade shows throughout the spring, summer. Your customer conference was thrown in there. And really every indication we heard throughout that timeframe was supply chain project inquiries going up, year has started stronger than 2021 left off. And that's obviously a big point in contrast to the incremental updates we've been getting from kind of the retail macro where it seems like everything is kind of moderating and a lot of your customers are maybe resetting expectations. How would you maybe characterize the divergence between the two things? And is it maybe the case where a lot of your customers, obviously, realize criticality around supply chain new investments? So, last year was maybe a year of getting budgets ready, vendor assessments in place and now, we're simply moving into the period of allocating these dollars and making the commitments?

Sorry. Please continue to standby. Your host will join momentarily. [Technical Difficulty]

Mr. Bauer, I show you're back on? Please remain on the line. Your conference will resume shortly.

Dilem, can you hear?

Yes, I hear you now sir. Mr. Bauer, can you hear me?

Dilem, can you hear us?

Yes, I can now.

You can hear us?

Yes, I can hear you. I have Mr. Vruwink still on the line. You may proceed with your question.

Well, again, everyone, we certainly very much appreciate your patience this afternoon given the technical difficulties we had. We are very appreciative of your support. We'll be sure not to have any technical difficulties 90 days from now when we look forward to reviewing our Q3 results with you. In the meantime, please enjoy the rest of the summer. Thank you.

This concludes today's conference call. Thank you for participating. You may all disconnect.