Manhattan Associates, Inc. (MANH) Q4 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call indicates strong financial performance with significant cash flow growth and improved margins. Product development is optimistic, especially with AI integration. The Q&A highlights confidence in cloud migrations and services growth, with bullish sentiment on AI efforts. While some responses were vague, the overall outlook is positive, with strong bookings and a robust pipeline. The predicted positive stock price movement is based on strong earnings, optimistic guidance, and potential growth in new business verticals.
Key Financial Performance
Revenue Revenue increased 6% to $270 million in Q4 2025, driven by 20% growth in cloud and a return to growth in services.
Adjusted Earnings Per Share (EPS) Adjusted EPS increased to $1.21 in Q4 2025, reflecting strong cloud revenue and operating leverage.
Remaining Performance Obligations (RPO) RPO increased 25% year-over-year to $2.2 billion in Q4 2025, driven by new logo momentum and 20% growth in new cloud bookings.
Ramped Annual Recurring Revenue (ARR) Ramped ARR exceeded $600 million at the end of 2025, up 23% compared to 2024, showcasing strong cloud revenue visibility.
Cloud Revenue Cloud revenue increased 20% in Q4 2025 to $109 million, contributing to a full-year increase of 21% to $408 million.
Services Revenue Services revenue returned to growth in Q4 2025, totaling $120 million, though it declined 4% for the full year to $503 million.
Operating Margin Adjusted operating margin for Q4 2025 was 33.8%, and for the full year, it was 35.8%, representing over 100 basis points of improvement over 2024.
Operating Cash Flow Operating cash flow increased 40% in Q4 2025 to $147 million, with a full-year increase of 32% to $389 million.
Free Cash Flow Margin Free cash flow margin was 52.7% in Q4 2025 and 34.6% for the full year, reflecting strong cash generation.
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Operating Highlights
AI Agents and Agent Foundry: Launched commercially with positive feedback from early adopters. These tools enhance automation, productivity, ROI, and customer satisfaction.
Enterprise Promise & Fulfill: New offering designed to optimize B2B order promising and fulfillment.
Active Point-of-Sale: Enhanced with Agentic AI to provide real-time sales insights and recommendations for store associates.
Fulfillment Optimization Simulation: New feature allowing customers to test and compare fulfillment strategies to adapt to business needs.
Cloud Revenue Growth: Achieved 20% growth in Q4 and 21% for the full year, with $408 million in revenue.
New Cloud Bookings: 75% of Q4 bookings were from new logos, with 55% of 2025 bookings from new logos.
Ramped ARR: Exceeded $600 million, up 23% year-over-year, showcasing strong cloud revenue visibility.
Sales and Marketing Reorganization: Global sales team reorganized under new leadership, with key hires and new programs introduced to drive growth.
Partner Program Update: Introduced updated partner program for global SIs, Manhattan specialists, and technology partners like Google and Shopify.
Services Revenue: Returned to growth earlier than expected, contributing to overall revenue increase.
Unified Product Portfolio: Focus on cross-selling unified solutions and converting on-premise customers to the cloud.
AI and Automation: Aggressive roadmap for enhancing AI capabilities and expanding Agentic AI offerings.
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Risk or Challenges
Turbulent global macro environment: The global macro environment is described as turbulent, which could impact the company's outperformance and cause actual results to differ materially from projections.
Customer liquidation: A customer liquidation caused a $1.3 million headwind to cloud revenue in Q4, which was not embedded in the company's guidance.
Cloud transition revenue compression: The transition to cloud services has caused revenue compression, particularly impacting license and maintenance revenue.
Tax law changes: The acceleration of domestic R&D cost deductions under the U.S. tax law change has increased tax reserves, impacting cash taxes.
Lumpiness in bookings performance: The number and relative value of large deals closed in any quarter can cause lumpiness or nonlinear bookings throughout the year, impacting financial predictability.
Attrition in license and maintenance revenue: License and maintenance revenue is expected to decline by 19% in 2026, representing a 4-point headwind to total revenue growth.
Retail peak seasonality: Retail peak seasonality impacts revenue and operating margin, particularly in Q4.
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Guidance & Outlook
Revenue Growth: For 2026, total revenue is expected to range between $1.133 billion and $1.153 billion, representing 10% growth excluding license and maintenance attrition and 6% overall growth.
Cloud Revenue: Cloud revenue is projected to increase by 21% to $492 million in 2026, with quarterly targets of $114 million in Q1, $121.5 million in Q2, $126 million in Q3, and $130.5 million in Q4.
Services Revenue: Services revenue is expected to grow by 3% to $517 million in 2026, with quarterly targets of $124 million in Q1, $131.5 million in Q2, $137 million in Q3, and $124 million in Q4.
RPO (Remaining Performance Obligations): RPO is targeted to grow by 18% to 20%, reaching $2.62 billion to $2.68 billion in 2026.
Adjusted Operating Margin: The adjusted operating margin for 2026 is expected to range between 34.5% and 35%, with quarterly margins of 31% in Q1, 34.7% in Q2, 36.9% in Q3, and 36.1% in Q4.
Adjusted Earnings Per Share (EPS): Adjusted EPS for 2026 is projected to range between $5.04 and $5.20, with Q1 EPS expected to be between $1.08 and $1.10.
GAAP Earnings Per Share (EPS): GAAP EPS for 2026 is expected to range between $3.37 and $3.53, with Q1 EPS projected to be between $0.64 and $0.66.
Tax Rate: The effective tax rate for 2026 is expected to be 22%.
Diluted Share Count: The diluted share count for 2026 is projected to be 61 million shares, assuming no buyback activity.
Strategic Investments: The company plans to onboard approximately 100 new services associates in January 2026 to support growth and the Agentic AI opportunity.
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Shareholder Return Plan
Share Repurchase Program: The company invested $75 million in share repurchases in Q4 2025, resulting in $275 million in buybacks for the full year 2025. Additionally, the Board has approved the replenishment of the $100 million share repurchase authority.
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Key Q&A
Q:Can you show any progress reports on cloud migrations for WMS and fast renewals, and their potential impact on the model in '26?
A:Eric Clark mentioned that the company started the effort mid-2025 and saw early success. The pipeline is building, and some deals have already closed in Q1. They added 100 services headcount in January, reflecting confidence in the book of business. They are bullish on opportunities around forward-deployed engineers to drive AI efforts.
Q:Where are you in progress efforts for faster implementation times and fast time to value?
A:Eric Clark stated they are making good progress, accelerating multiyear deployments, and closing conversions as fixed fee, fixed timeline deals. Ramped ARR grew 23% year-over-year, driven by faster deal closures and revenue ramp.
Q:Can you share commentary on cash taxes or the relationship of free cash flow to EBIT or EBITDA in '26?
A:Dennis Story provided limited commentary, stating it is similar from cash taxes.
Q:What drove the strong RPO number in Q4, particularly on the net new side?
A:Eric Clark explained that the strength came from a variety of products and deal types across the product suite. The company is confident in the pipeline for next year and introduced ramped ARR to complement RPO for growth measurement.
Q:What is the mix of the RPO target for renewals in 2026?
A:Dennis Story confirmed that 18% to 20% of RPO bookings are from renewals in 2026. Eric Clark added that renewing some deals at 3 years instead of 5 years allows for earlier price increases.
Q:Is there conservatism baked into the 18%-20% RPO bookings from renewals in 2026?
A:Eric Clark acknowledged conservatism on duration and stated that renewing deals at 3 years instead of 5 years provides an opportunity for earlier price increases.
Q:What underpins confidence in the services business growth for 2026?
A:Eric Clark cited strong bookings growth in Q4, conversion programs, and opportunities with Agentic AI. The company sees its services team as a competitive advantage due to domain expertise and forward-deployed engineers.
Q:What is driving the new bookings component for 2026?
A:Eric Clark highlighted new logos, expansion within existing accounts, and on-prem to cloud conversions. The company is focused on cross-selling and taking market share.
Q:What is the outlook for services growth in the medium and long term?
A:Eric Clark expects mid-single-digit growth for services, driven by domain-specific expertise and opportunities like Agentic AI. The focus remains on growing the cloud business at 20%+.
Q:What is the status of in-flight implementations that were pushed out last year?
A:Eric Clark stated that none of the implementations stopped, and they are all back on track. Some are ahead of schedule, and the company is offering fixed fee conversions to accelerate progress.
Q:Are there any incremental subscription bookings from active agent subscriptions in the RPO guidance for 2026?
A:Eric Clark confirmed that anything related to AI is incremental to the current guidance.
Q:What drove the Q4 bookings strength?
A:Eric Clark stated that while Q3 bookings were below expectations, the company exceeded full-year guidance by $40 million, indicating overperformance by the team.
Q:What is the CIO sentiment regarding large WMS and TMS conversion projects?
A:Eric Clark noted that sentiment has not changed significantly. Customers value speed and simplicity for ROI. The company continues to see strong win rates and a healthy pipeline.
Q:What is the mix of new logos, conversions, and cross-sells in Q4, and how will it evolve?
A:Eric Clark mentioned that 55% of bookings in 2025 came from new logos, exceeding the typical 1/3 rule. He expects the mix to normalize over time but sees opportunities in all categories.
Q:What drives upsell opportunities in services after cloud conversion?
A:Eric Clark explained that quarterly updates provide new features and functions, creating steady services opportunities throughout the partnership.
Q:Are there specific verticals showing more traction in new business?
A:Eric Clark stated that the traction is diverse, with strength beyond retail, indicating dominance in multiple verticals.
Q:Review of Unclear Management Responses
A:Management avoided providing detailed commentary on cash taxes and the relationship of free cash flow to EBIT or EBITDA in '26, offering only a brief and vague response.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
AI agent
Active Agent
Active Omni
Active Point
Agent offering
Agentic AI
Agents
Chief
Officer
Point Sale
RPO investor
Sale application
agent Agent
agent platform
assessment today
attrition midpoint
base agent
cloud booking
cloud visibility
color renewal
conclusion ARR
engineer
feature
fulfillment
home
improvement
insight
license maintenance
logo Active
maintenance attrition
peak seasonality
pricing
program
record
service margin
simulation
subscription
week
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The earnings call indicates strong financial performance with significant cash flow growth and improved margins. Product development is optimistic, especially with AI integration. The Q&A highlights confidence in cloud migrations and services growth, with bullish sentiment on AI efforts. While some responses were vague, the overall outlook is positive, with strong bookings and a robust pipeline. The predicted positive stock price movement is based on strong earnings, optimistic guidance, and potential growth in new business verticals.
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