Manhattan Associates, Inc. (MANH) Q3 2022 Earnings Report, Transcript and Summary

Good afternoon, everyone. My name is Robert, and I'll be your conference facilitator today. At this time, I'd like to welcome everyone to the Manhattan Associates Third Quarter Earnings Conference Call. [Operator Instructions] As a reminder, ladies and gentlemen, this call is being recorded today, October 25. I would now like to introduce your host, Mr. Michael Bauer, Head of Investor Relations of Manhattan Associates. Mr. Bauer, you may begin.

Thank you, Robert, and good afternoon, everyone. Welcome to Manhattan Associates 2022 third 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, the turbulent global macro environment could impact our performance and cause actual results to differ materially from our projections. We have 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 Ed.

Thanks, Mike. Well, good afternoon, everyone, and thank you for joining us as we review our third quarter results, discuss our updated full year 2022 outlook and provide some preliminary color on our thinking around 2023. Both Q3 and year-to-date results were record-setting for Manhattan Associates with Q3 total revenue of $198 million and adjusted earnings per share of $0.66. Both exceeded our expectations. Demand is strong. Customer satisfaction is solid, and we continue to be the leading innovator in core supply chain execution, omnichannel solutions and retail point-of-sale commerce. And while we remain cautious regarding the global economy, we continue to set aggressive growth and investment goals. This includes strategically allocating capital towards industry-leading innovation, enabling customer success and expanding our addressable market. We expect these efforts to further deliver on our long-term growth and earnings objectives. We remain optimistic on our outlook for the remainder of the year and into 2023. And as such, we're raising our 2020 guidance for both revenue and earnings. Q3 was our sixth consecutive record revenue quarter, highlighted by 41% growth in cloud revenue and 17% growth in services revenue. This encompasses double-digit revenue growth across all of our geographies. These strong results drove our top line at performance and solid earnings leverage in the quarter. Our global teams are exceedingly busy in the field and are executing well for our customers. Following by new product sales and system upgrades, we're experiencing strong services demand and continue to actively recruit into our services team around the world to meet demand and further drive customer satisfaction. And this includes hiring over 500 new team members across our company in the first 9 months of 2022, slightly exceeding our original plans. While we're prudently cautious, we still remain focused on adding additional exceptional talent. Foundational to our growth is Manhattan's ability to deliver industry-leading innovation and services to our customers, a mission-critical Manhattan platform and solutions are differentiated and the key components in our customers' success, providing them with the ability to best serve their end markets, adapt quickly and efficiently to changing market conditions and profitably scale their businesses. These powerful benefits contributed to our strong customer satisfaction levels and 75% plus win rates within the quarter. And despite noticeable FX headwinds, RPO, the leading indicator of our growth, increased 69% to $970 million at the end of Q3. On a constant currency basis, which uses the one year ago FX rates, RPO crossed the $1 billion milestone. Now it's up 76%. Importantly though, demand for our cloud solutions continues to be strong and resilient across our product portfolio. From a vertical perspective, retail, manufacturing and wholesale continue to drive more than 80% of our bookings in the quarter. And across our solutions, the sub-verticals are pretty diverse. For example, the quarter cloud deals included a manufacturer and distributor engineered components, a sporting goods and outdoor recreational retailer, an aerospace and defense company, a grocery retailer, an appliance and electronics manufacturer and a food and beverage company, among many others. Our pipeline continues to be robust with solid demand across our product suites. Net new potential customers represented about 35% of that demand. And year-to-date, new logos have generated a full half of our total bookings. And as I mentioned earlier, our global professional services businesses are all performing very well, posting record revenue results with Q3 revenue up 17%, and we continue to receive high marks for customer satisfaction, conducting well over 100 go-lives in the quarter. While our R&D spend plays to eclipse $100 million this year, let's move to a quick update on our industry-leading solutions, starting with Manhattan Active Transportation Management. Across industries and geographies, we continue to experience strong demand and win rates from Manhattan Active TM. And like Manhattan Active Warehouse Management, Manhattan Active Transportation Management serves the needs of retailers, grocers, the food and beverage industry, pharmaceutical distributors, industrial distributors and many others. And that same principle holds true across geographies with Manhattan Active TM already live on three continents with a fourth in process. Now according to Gartner, the total addressable market for WMS and TMS are approximately the same size and present a significant growth opportunity for Manhattan. Both WMS and TMS markets are large, global and span nearly all industries. In Manhattan active Supply Chain, which comprises of Manhattan Active Warehouse Management and Manhattan Active Transportation Management has launched us the ability to provide leading-edge supply chain technologies to customers across industries and across the globe. And as supply chain practitioners hunger for continuous innovation, a truly cloud-native always current unified solution is uniquely positioned to provide the customers a platform for core development. And as a result, we're seeing a growing number of our Manhattan Active WM customers also subscribe to Manhattan Active Transportation Management. In just five quarters after launching Manhattan Active Transportation Management, we believe this growing attach rate for the solution is further indication that our target markets understand and appreciate the many benefits of supply chain unification. Unlike application integration, which several software vendors can offer, true solution unification can only be achieved by replatforming applications to our truly cloud-native and shared collection of micro services. This state-of-the-art common platform makes this unification possible and gives Manhattan Active Supply Chain applications a clear advantage over the competition. And the great thing about the concept of solution unification is that it works up and down the application stack. Macro unification delivers powerful benefits from the suite level, such as with the Manhattan Active Omni and Manhattan Active Supply Chain, but unification also delivers benefits all the way down to the feature level. Many of our early activating customers are already benefiting from the Manhattan Active WM's combination of warehouse management, labor management, automation, orchestration, yard management, slotting optimization and a number of historically separate applications well built into a unified solution. Now moving to our retail specific capabilities. We continue to progress at a rapid pace, implementing Manhattan Active store solutions across a number of leading retailers. To-date, we have Manhattan Active Solutions running in more than 20,000 stores, enabling over 140,000 daily store users across 70 countries. The point-of-sale continues to be a strategic focus for us, and our message around the importance of running an omnichannel native point of sale continues to resonate. We believe strongly that to achieve omni-channel operational excellence, store systems must be an extension of the retailer's digital platform. Manhattan is the only technology provider who can provide best-in-class capabilities, serving both the digital and the physical store channels, and we continue to add new prospects to our point-of-sale pipeline and anticipate an active Q4 with respect to point-of-sale. So in summary, Manhattan Active Supply Chain continues to be a real force in the market with new customers subscribing and existing customers going live on a weekly basis. But before I hand off to Dennis, I'm also excited to share that Manhattan Associates recently won a TrustRadius 2020 firm Tech Cares Award for our corporate social responsibility and ESG initiatives. Our company was specifically recognized for both our commitment to building environmental sustainability into the supply chain and also our employee wellness program. So that concludes my business update. Dennis is going to provide you with an update of our financial performance and 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 extremely well in a challenging macro environment. Now in the quarter, we delivered strong financial results as both our Q3 and year-to-date results compare favorably to the rule of 40 plus Manhattan has solid visibility, and we continue to deliver strong metrics across growth, profitability and cash flow. I'll start with a recap of the quarter with growth rates on a year-over-year basis unless otherwise stated. Additionally, due to the volatile FX environment, we are also providing constant currency growth to demonstrate apples-to-apples comps. Unless otherwise stated, constant currency will compare results as if rates were unchanged from the year ago period. Total revenue was a record $198 million up 17% as reported and up 21% in constant currency. Excluding license and maintenance revenue, which removes the compression driven by our cloud transition, as-reported total revenue was up 23% and 27% in constant currency. Q3 cloud revenue totaled $45 million up 41%. And as Eddie highlighted, we ended the quarter with RPO of $970 million, up 69%. Excluding FX, RPO totaled $1.01 billion, up 76% and assumes year ago FX rates. Sequential growth was 10% and assumes FX rates remain unchanged from the June 30 levels. Looking ahead to Q4, we expect RPO to be at the high end of our prior guidepost range of $950 million to $1.05 billion on an as-reported basis and exceed the range, excluding FX. As of September 30, over 97% of our RPO represents true cloud native subscriptions. As Eddie mentioned, Q3 global services revenue was a record $103 million, up 17% and as cloud sales continue to fuel services revenue growth globally. Our Q3 operating profit totaled $51 million with adjusted operating margin of roughly 20% and which includes $13 million of incremental performance-based compensation accruals. On a normalized basis, operating margin would be approximately 32%. I'd call that tapping on the door of rule of 50. The quarter's better-than-expected margin performance was driven by revenue growth and operating leverage. Importantly, we continue to invest for future growth. For the quarter, Q3 adjusted earnings per share was $0.66, and GAAP earnings per share totaled $0.47. Turning to cash. Q3 operating cash flow was a solid $40 million, and year-to-date operating cash flow was $124 million. Q3 adjusted EBITDA margin was 27%. Free cash flow margin was 19% and was impacted by timing of cash taxes paid and accounts receivable billings. As previously discussed, the year-to-date decline in operating cash is solely tied to the incremental cash taxes paid associated with the U.S. Tax Cuts and Jobs Act that did not impact the year ago period. Year-to-date, we have paid $42 million in cash taxes compared to $18 million over the first 9 months of 2021, with the vast majority of the increase due to the new law. We continue to expect between $25 million and $30 million of additional tax payments in 2022. For more information, I'd refer you to Item 8 in our earnings release supplemental information schedules. Turning to the balance sheet. Deferred revenue increased 24% year-over-year to $169 million with subscriptions totaling over 50% of the line item. Similarly, to free cash flow, deferred revenue was impacted by the quarterly fluctuation of cash receipts. Specifically, some customers paid us in Q2 of this year versus Q3 of 2021. And - we ended the quarter with $197 million in cash and zero debt. In the quarter, we invested $50 million in share repurchases and resulting in $150 million in buybacks year-to-date. Also, our Board has approved the replenishing of our $70 million share repurchase authority. Now turning to updated 2022 guidance. With our strong year-to-date performance and increasing visibility, we are raising our 2022 outlook on both the top and bottom lines and are on pace to deliver our third consecutive record revenue year. As such, the midpoint of our total revenue range is increasing to $751.5 million representing 13% growth as reported and 16% constant currency. This is up from our prior guidance midpoint of $737 million and 11% growth. Excluding license and maintenance attrition, 2022 growth would be 23% as reported and 26% in constant currency. That's pretty solid. Inclusive of our increased investment in hiring, we continue to anticipate full year adjusted operating margin to be about 25.5% and which is in line with our prior guidance range and ahead of our original margin target of 23.25%. For full year adjusted earnings per share, the midpoint of our range is increasing to $2.44, up from our prior midpoint of $2.37. For GAAP EPS, yes, that's GAAP EPS, the midpoint is moving to $1.72, up from the prior midpoint of $1.65. Note the difference between non-GAAP and GAAP is solely our investment in equity-based compensation. This implies Q4 revenue of $182.5 million, targeting cloud revenue of $47.5 million, services revenue of $93.5 million and maintenance revenue of $32.5 million. Operating margin is targeted at 21.8%, resulting in adjusted earnings per share of $0.49. As previously mentioned on prior calls, our Q4 margin accounts for retail peak seasonality, which traditionally, on a sequential basis, is down from Q3 as customers idle implementations to focus on their busy season. So that covers the 2022 guidance update, and we're going to move to preliminary 2023 parameters. Our financial objective is to deliver sustainable double-digit top line growth and top quartile operating margins benchmarked against enterprise SaaS comps. Please refer to Item 9 on our earnings release for our updated 2022 and 2023 guidepost. We are also reiterating our 2024 guidepost estimates that we published in February, which, on an FX-adjusted basis, should be used as a baseline for our future performance. Note, our published 2024 guidepost have not been adjusted for currency movements. As Eddie highlighted, we are taking a cautious approach to the volatile macro environment, balancing our optimism regarding our large and growing opportunity, strong, resilient demand across our solutions with the uncertain economic outlook. Additionally, we are currently in our budget cycle and will firm up our 2023 parameters on our Q4 call in early February. Accounting for the current FX environment, our preliminary estimate for 2023 total revenue is $800 million to $820 million, representing 16% growth excluding license and maintenance attrition and 8% reported growth at the midpoint. If rates would mean at June 30 levels, our 2023 total revenue range would be $10 million higher or approximately $820 million at the midpoint. For 2023, cloud revenue, we are targeting $230 million to $233 million, representing 35% growth at the midpoint. This compares favorably to our prior guide post midpoint of $230 million that used year-end 2021 FX rates. If rates remained at 2021 levels, the midpoint of our cloud revenue range would increase to $239 million. For RPO, we are targeting a range of $1.3 billion to $1.4 billion, representing about 30% growth at the midpoint, which compares favorably to our prior guidepost midpoint of $1.325 billion. Yes, that's $1.325 billion. That used year-end 2021 FX rates. If rates remained at 2021 levels, our RPO range will be about $50 million higher. Additionally, as previously discussed, our bookings performance is impacted by the number and relative value of large deals we close in any quarter, which can potentially cause lumpiness or nonlinear bookings throughout the year. Our services demand continues to be fueled by cloud, resulting in solid visibility. In 2023, we are targeting services revenue of $417 million to $425 million, which represents 9% growth at the midpoint, 10% excluding the impact of FX. On attrition to cloud, we expect maintenance revenue to be $115 million to $122 million or a 15% decline at the midpoint and license revenue to be about 1% of total revenue. We expect our adjusted operating margin to be roughly unchanged from our current 2022 projections. While we continue to track ahead of our original margin expectations, the combination of opportunistic investment in our business and hiring supply chain talent as well as attrition to cloud is masking some of the inherent leverage in our model. We expect our effective tax rate to be 21.7% and our diluted share count to be approximately 63.4 million shares, which assumes no buyback activity. In summary, for 2023 parameters and on an as-reported basis, we expect total revenue x license and maintenance attrition to increase 16%, cloud revenue to increase 35%, services revenue to increase 9%, RPO to increase 30% and for us to achieve 25.5% operating margin. So that comes a very stout financial performance update and outlook. Thank you, and back to Eddie for some closing remarks.

Great. Thanks, Dennis. Well, look, despite the volatile macro conditions, our global teams are executing extremely well. And we're really encouraged by the resiliency of our business. We're pleased with our results and the strong demand for our solutions really across the world. But most importantly, we remain confident in our ability to deliver success for our customers and help them with their digital transformation. So with that, thanks to everybody for joining the call and to our employees for their great work and dedication. With that, Robert, we'd be happy to take any questions.

Thank you. [Operator Instructions] Our first question comes from Terry Tillman with Truist Securities. Pleaser proceed with your question.

Hi, good afternoon, gentlemen. First, I guess, congrats on GAAP earnings and tapping on the rule of 50.

Thank you.

So a couple of questions. Maybe first, Eddie, for you, we get asked the question a lot about the retail complex in general and e-commerce and just potentially impact on your business. The way I'd like to frame this question is if in retail-related industries in e-commerce, if we're shifting from just trying to sell as much as you can when demand is strong to managing maybe even excess inventory or trying to enhance service level, do the conversations, are they changing in terms of maybe what products you need to lead with and/or just the directional dynamics around their budgets?

There's just modest adjustments, Terry, when it comes down to it. I mean I think, obviously, you framed the general dynamic in the market well. But at the end of the day, you still don't get away from retailers really wanting to drive that loyalty and customer satisfaction. So being able to keep the promise is still very, very important to again drive that loyalty and reputation. And of course, we're right in the middle of helping them do that.

Got it. And I guess maybe a follow-up for you, Eddie, is any more color you could share on the important product cycle around cloud WMS? I think you've given some commentary over the quarters in terms of - given us some crumbs, so to speak, in terms of where you are in either go-lives or just total customer count. Just any more you can share about where you ended at the end of 3Q or how you think about it by the end of the year. And then I had a follow-up for Dennis.

Yes. So let's see. We're at about 80 customers under contract, just a couple more than that. I think NAV will us use 80 for a ran number. Still strong demand around the globe, still strong from Tier 1 and strong across industries. We've mentioned before, we've for Eclipse a, frankly, the 100,000 users of WMS under native the Manhattan Active WM subscription. So we just - we continue to be very pleased with that particular product.

That's great to hear. And I guess, maybe, Dennis, for you in terms of - it was notable to call out across FX, but then also the accrual, I'd like to double-click into that a little bit. So this $13 million was incremental. This was a new accrual in the third quarter, if I'm not mistaken. So otherwise, the margin would have been even stronger than it was. How do we allocate the $13 million? Was some of it up in the cost of revenue or the three OpEx items? Any more you could share on the $13 million? Thank you.

So we've basically spread that up and down the P&L, Terry, in terms of department structure. And you'll see that in the 10-Q as well, which we probably will be publishing tomorrow.

Okay, great. Congrats again.

Thank you, Terry.

Our next question comes from Joe Vruwink with Baird. Please proceed with your question.

Great. Hi, everyone. I guess on the 2023 outlook, one of the interesting things is that the maintenance revenue is expected to see an accelerated pace of decline. I guess we've kind of been talking a lot this year about how good new logo interest has been in Active WM. Are you starting to get the indication from the big installed base that those customers are now ready to move at a more aggressive pace? And if that's true, is the potential revenue benefit from that - and understand there's a lot that's uncertain, but is that something that is maybe 2024, 2025 kind of that time frame for getting an inflection in growth?

No real change in dynamic there, Joe. But some of the maintenance starts to fall off in 2023. And part of that is for deals, frankly, that we've signed in prior years that we're coming to a point of go-live and that maintenance is start to tail off in 2023. So I appreciate the question. It's a clever one, but there really is no major change in trajectory or dynamic there.

Okay. And then just on the broader approach you took to kind of recalibrating the 2023 numbers. It seems like we have, on one hand, your performance and execution, which has been really good, and it sounds like really no changes in that. And then there's also a macro overlay where you don't want to get ahead of yourself, you want to bake in the uncertainty that's out there. I guess how would you kind of characterize one versus the other as we, investors, approach Manhattan into next year? Is there any sort of historical precedent where you would go back in time and say, In a tougher macro, this is what has been relevant to our business? Or kind of what's kind of the puts and takes on your ability to execute versus the macro?

Well, in the - Joe, in the three or four of these twists and turns that I've been through in my 20 years, we've followed a similar pattern. We've managed through the uncertainty. We've always done that pretty well, and we've invested into it. And in general, that will be our strategy regardless of what happens in 2023 and beyond. And the balance here is that we feel very positive and optimistic about our future performance. And frankly, we've looked as deep into the crystal ball as we possibly can, but we still see the glass is a little foggy when we look deep into it. So that's why we're taking sort of a cautious approach. Obviously, we feel great about our balance sheet position going into any turbulent times with cash on the balance sheet, zero debt and so forth. It gives us the flexibility that we need to be able to continue on with that strategy that I alluded to, which is focus on our customers, focus on our people, manage through uncertainty but invest into it.

And then one quick one, if I may, Eddie, just your comment on kind of investing into uncertainty with the margin outlook kind of being flattish as opposed to getting a bit of improvement. Next year, I'd imagine this is part of it. Any particular areas you think are opportunities for investment?

Not particularly. I mean across the portfolio, frankly. We've got some great opportunities across the portfolio and the areas that we've talked about before in terms of expanding our total addressable market.

Okay. Thank you very much.

Our pleasure, Joe. Thank you.

Our next question is from Brian Peterson with Raymond James. Please proceed with your question.

Hi, gentlemen. Just maybe following up on the margin outlook for next year. Dennis, typically or at least over the last few years, you guys have guided down in terms of the margins. And obviously, you've outperformed and you've executed really well against that. I'm just curious, are we seeing just more leverage now given that the product investments that you've made are maybe more leverageable or updated stance on hiring? I'd just be curious, maybe some qualitative inputs on what went into that.

Yes. I think we definitely have some leverage opportunity. The other side of the equation is we've got such strong demand. We've got to continue to aggressively hire. So good problems to have there, Brian.

No. Understood. And Eddie, maybe one quick follow-up for you. Just with your 80-or-so active WM customers that you have, how are those - how does this look from a land versus expand perspective? I guess I'm trying to understand are you getting in at a near 100% penetration in terms of the DC footprint? Or is it kind of starting small and you have an expand motion over time?

It's a combination, Brian. We're still at about - which is very positive. We're still at about 50-50 in terms of - meaning 50% brand new customers that we've never done business before, 50% existing customers converting. And then when you look at the opportunity to continue to expand our WMS footprint with both those categorizations of customers, it's - there's still plenty of opportunity there for sure.

Thanks Eddie.

My pleasure, Brian. Thank you.

Our next question comes from Matt Pfau with William Blair. Please proceed with your question.

Great. Thanks for taking my question guys. Wanted to ask on the visibility into '23 revenue guidance. So on the cloud side, I would assume that the RPO you have should give you pretty good visibility into that number, but correct me if I'm wrong there. But then on the services side, how much visibility do you have in that? What's the potential variability there, particularly in a weaker macro?

You're certainly right about the first. We've got pretty good visibility into cloud revenue based upon deals signed in prior years and so forth. Obviously, we've still got to sign new deals in '23, both for '23 revenue and the years. In terms of services visibility, it's not all contracted work for sure. But we've got visibility into the rollout plans across our product portfolio, across geographies and across industry verticals. And is there an opportunity for some of those things - some of those projects to slow down? I suppose there is. But when you think about the fact that most of them are backed up by irrevocable subscription fees, it does seem like the likelihood that those things will slow down is lesser, number one, in no particular sequence. Number two, we are always considered mission-critical and central to business operations. So when you put those two things together, yes, can never say there isn't any risk, but we feel pretty good about the visibility, Matt.

Great. And just wanted to follow up on your comments around point of sale. I know that in your conference in May, it was a point of emphasis to make sure your customers are aware that you're in that market and have a new product, newer product there. Are you starting to see that materialize? Is that starting to build the pipeline?

It seems not just that event but all of the efforts that our team, particularly world-class marketing organization have put in to drive awareness through every avenue that we can gain. It certainly seems to be doing the trick, and our pipeline is building. And I think I mentioned in my prepared comments we're looking forward to a pretty active Q4 from a point-of-sale perspective.

Okay, great. Thanks guys. Appreciate it.

Our pleasure, Matt. Thank you.

Our next question comes from the line of Mark Schappel with Loop Capital. Please proceed with your question.

Hi, thank you for taking my question. And nice job in the quarter. Eddie, starting with you, based on the strong results, the guidance on the commentary, it appears that you're not seeing much of - any way of a slowdown in your business? Is this the correct way to read this?

I think that would be an accurate way to read it, Mark. But look, all of us, both personally and professionally. As I've mentioned before, we use that expression. We've looked as deep into the crystal ball as we can look. And as we look deeper and deeper, the glass is a little cloudy. So we're just applying a little caution to the outlook, too.

Okay. Understood. And I appreciate your earlier comments on the active TM product. And is the early success you're seeing coming from any particular industry or geography? I think you spoke earlier about maybe a 50-50 breakdown between new and existing customers. But what about industry or geographies? Are you seeing any particular strength?

No, it's - no, it's pretty balanced, Mark. Actually, as I mentioned, we're live on three continents. We've got the fourth in progress. So it gives you a little sense of the geographic dispersion. Europe happens to be pretty strong. I'm not saying it's an outlier but had some strong performance going on in Europe. And across the industry, we've got some good penetration in there, too. So a good start. We're only about five quarters in from the release of the new product, but we feel pretty good about where we are for sure.

Great. Thank you. I'll hand it off to someone else.

Okay. Terrific Mark. Thank you.

Our last question comes from the line of Blair Abernethy with Rosenblatt Securities. Please proceed with your question.

Thanks, and nice performance, guys. I just wanted to maybe get a little bit more color on the active WMS, the 80 customers. As some of the earliest customers become more seasoned, what's the - kind of what's sort of the dynamic you're seeing in terms of pull-through of other products?

Yes. I mean we're certainly seeing nice attach rate for transportation management. That's for sure. We continue to see expanded usage of WMS inside of that footprint. Labor management is a great and sort of obvious add-on into that portfolio as well. And then geographic expansion, where one of our customers or customers might well be starting in one geography and expanding that across the world. So pretty nice footprint expansion across the board there, frankly.

Yes. Blair, year-to-date, we have 30% of our year-to-date bookings is cross-sell, upsell. That's up from 20% last year, same period.

That's across all products but is certainly a big part of it.

Okay. Excellent. Excellent. And then just, Dennis, a quick one for you. As you kind of look at your 2023 margins and this declining maintenance revenue as the business transitions, I mean, is that - how much of a headwind is that from a margin perspective? And as you kind of look out to more of a three to five-year time frame, does that margin start to climb again?

Well, if you normalize the margins for license in CSSC, it's about 180 bps of upside from a normalized perspective. So margin model is pretty stout.

Okay. Okay. Great.

We have reached the end of the question-and-answer session. I would now like to turn the call back over to Eddie Capel for closing comments.

Good. Thank you, Robert, and thanks, everybody, for joining our call today. As you can tell, we're excited about where we are and even more excited about our future, and look forward to updating you on that again in about 90-days or so. Obviously, we won't speak to you between now and then. So I know it's a little early, but happy holidays to you all. Thanks. Bye-bye.

This concludes today's conference. You may disconnect your lines at this time, and we thank you for your participation.