MANH - NASDAQ

Good afternoon. My name is Camilla, and I will be your conference facilitator today. At this time, I would like to welcome everyone to the Manhattan Associates Second Quarter 2023 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. [Operator Instructions] As a reminder, ladies and gentlemen, this call is being recorded today, July 25, 2023. I would now like to introduce your host, Mr. Michael Bauer, Head of Investor Relations of Manhattan Associates. Mr. Bauer, you may begin your conference.

Great. Thank you, Camilla, and good afternoon, everyone. Welcome to Manhattan Associates' 2023 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 reports Manhattan Associates filed 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 2022 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 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 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.

Very good. Thanks, Mike. Good afternoon, everyone, and thank you for joining us as we review our second quarter results and discuss our increased full year 2023 outlook. Manhattan delivered record Q2 and first half results. For the quarter, total revenue increased 20% to $231 million and adjusted earnings per share increased 28% to $0.88, both exceeding our expectations. Q2 was our ninth consecutive all-time record revenue quarter. Driving top-line outperformance and earnings leverage was 44% growth in cloud revenue and 23% growth in services revenue. And this encompasses double-digit top-line growth across all our geographies as our global teams continue to execute very well for our customers. While global macro volatility continues to be persistent, Manhattan's business fundamentals are solid. Demand for our solutions are robust, customer satisfaction is high, and investment in research and development and our associates continues to widen our technological leadership across supply chain execution, omnichannel and retail point of sale markets. Now, RPO, the leading indicator of that growth, increased 38% to just over $1.2 billion. Demand for our mission-critical cloud solutions remains strong and resilient across all of our product portfolio. From a vertical perspective, retail, manufacturing and wholesale continued to drive more than 80% of our bookings for the quarter. And across our solutions, the sub verticals are pretty diverse. For example, in the quarter, cloud deals won include a beverage distributor, a luxury brand and specialty retailer, a food distribution services company, an office supply retailer, a technology distributor, and a home furnishing brands and manufacturer, as well as a number of others. Now year-to-date, competitive win rates continue to be pretty solid at about 75%, with 25% of our new cloud bookings being generated from net new logos. Additionally, in Q2, we had a healthy mix of conversions, upsells and cross-sells. While the timing of large deals and bookings mix will certainly vary on a quarterly basis, we believe the breadth across sales categories and products exemplifies our multiple opportunities for sustainable future growth. Foundational to our growth is the combination of our ability to deliver industry-leading solution and service to our customers. Our best-of-breed cloud native platform and solutions provide unmatched access to innovation and are a key component to our customer success, helping our clients strengthen their relationships with their end customers, drive more revenue and improve efficiency. These powerful benefits are translating into a robust solutions pipeline that has new potential customers representing about 35% of our demand. Our solid product activity is also driving our services growth and pipeline. For example, our professional services team completed over 100 go-lives in the quarter and continues to perform superbly for our customers. Now to support our growth, we're making pretty solid progress on a hiring goal of approximately 450 new associates for 2023. In Q2, we added over 150 new team members, bringing our total new hires to over 330 for the first half of the year and over 900 over the past 18 months. And while we remain appropriately cautious regarding the global economy, we continue to invest for growth. This includes strategic investments in industry innovation, further enablement of our customer success and expanding our addressable market. In late May, at our global conference, Momentum, we showcased some of our industry-leading innovation. Our customer attendance trends continue to be strong, with both 2022 and 2023 conferences running above pre-pandemic attendance levels. A part of the explanation for our continued engagement growth of Momentum is the expanded breadth of the customer personas that we serve. And this includes significant participation level increases from both store systems leadership and technologists within our customer base. And this will be the focus of my brief product update today. Now, as you'll recall from prior calls, and it's clearly noted in the recent Forrester Wave for omnichannel order management with a definitive market leader when it comes to providing store capabilities around order fulfillment. In fact, every day, nearly 100,000 store associates use our cloud native technology to ship orders to customers' homes, get them ready for pickup in curbside, and perform other critical omnichannel retail functions. Additionally, as our customers evolve their consumer experiences, we have cutting--edge advancements waiting to help them. For example, this year, we unveiled native support for RFID within our store applications and we're currently working with several leading retailers to deploy this technology. Support for RFID delivers a dramatic improvement in store inventory accuracy, a metric which has a direct impact on store fulfillment of online orders and the digital consumer experience. RFID can also deliver significant reduction in store associate labor hours. And we've also built RFID supporting that point -- into at point of sale application, so checkouts and returns are faster and easier for the customer. Now speaking of point of sale, we recently closed a new point of sale deal with a leading North American outdoor apparel brand. And this deal was notable for a few reasons, including that our point of sale is the very first application that they're subscribing to from Manhattan. While we believe more strongly than ever in the power of unification within omni channel and supply chain, it's also important to be able to compete successfully on an application by an application basis for a brand new business. Now, turning to another key customer constituency -- a constituent that was present at our Momentum conference, technologists. Ever since the first release of Manhattan Active platform in 2017, we've made it a priority to deliver new capabilities each quarter focused on the technologies within our customer base from unmatched library of API endpoints, extension points and a full extensibility focused application. The focus we have on service -- serving technologists and developers has never been more apparent. Now, it's easier than ever for our customers to tie our APIs into their broader supply chain commerce system landscape. Now, our Manhattan Active platform technology sessions at Momentum this year were frankly standing room only. But our customers weren't just there to hear about the tools for their technologists. Given the modern API-first architecture of the Manhattan Active platform, they also wanted to learn about the possibilities the OpenAI might afford us all. We believe that the combination of best-in-class supply chain commerce solutions, a modern technology architecture and generative AI has strategic and game-changing potential for all of us. But what we wanted to do at Momentum was feature some real-world working generative AI prototypes for our customers. so that we could bring the abstract to life for them. So, I thought I'd share a couple of those proof of concepts that we demonstrated at Momentum with you today. Now, one of the challenges of using best-in-class agile supply chain technology is to run the almost infinite flexibility and configurability that it offers. And whilst machine learning can help with system self-tuning, workflow adaptation and optimization through manual configuration can sometimes be pretty time consuming and sometimes even challenging, and we believe the power of natural language models can help on both fronts, by providing superfast and easy access to key documentation, knowledge bases and explainer videos, but also by giving our customers the ability to configure our application directly from text-based dialogue. Once fully productized, this powerful facility will allow us -- allow for both faster initial implementation of our systems and the ability to quickly adapt configurations to changing business conditions and new innovation. And we've also had some initial success by using large language models to write code. During an implementation, for example, integration to our systems into the broader ecosystem can sometimes be one of the proverbial long poles in the tent. But in our labs, we've seen these LLMs successfully develop integration code across several key endpoints. And whilst progress in this area is very early, it is meaningful and very encouraging nonetheless. And my final example is we're also optimistic about this technology's ability to deliver strategic step change in chatbots, focused on the end consumer. Chatbot technology of the past has certainly successfully automated simple questions and answers around things like order and delivery status, but by and large these capabilities have been confined to a pretty finite and fairly narrow set of capabilities. Using LLMs, we think the range of what chatbots can do can expand enormously. And given our focus on all things customer service related is a real opportunity to deliver next-generation end consumer experiences around chatbot and customer engagement. As you can probably tell, we're pretty excited about the potential opportunities around LLMs, and we'll continue to work and collaborate with our technology partners to progress our strategy into the future. So that concludes my business update. Dennis is going to provide you with an update on the financial performance and our outlook. And then, I'll close our prepared remarks with a very brief summary before we move to Q&A. So, Dennis?

Okay. Thanks, Eddie. Our Manhattan global teams continue to execute very well in a challenging macro environment. For the quarter, we delivered a strong balanced financial performance across top-line growth, operating margin and cash flow. This includes posting record results across revenue, RPO, adjusted operating margin and earnings per share. On an as reported basis, our Q2 results came in at the Rule of 50, and if our revenue growth is normalized for our cloud transition, which excludes license and maintenance revenue, our results exceeded the Rule of 50. FX really did not have a meaningful impact to RPO or revenue in the quarter. Also in reviewing our strong financial performance, growth rates are on a year-over-year basis unless otherwise stated. Looking at total revenue. Total revenue was $230 million, up 20%. Excluding license and maintenance revenue, which removes the compression driven by our cloud transition, our total revenue was up 27%. Cloud revenue totaled $61 million, up 44%. As Eddie highlighted, we ended the quarter with RPO of $1.2 billion, up 38% compared to the prior year and up 7% sequentially. Our RPO performance was a healthy, healthy mix of sales across our sales categories, including conversions, new logos and upsells, cross-sells, as well as solid results from our Manhattan Active suite of products. We also experienced some larger deals push on a timing combined with a few customers experiencing bankruptcies. While immaterial as a percentage of RPO, without the bankruptcy contraction, our sequential RPO increase would have been roughly in line with Q1 or about $100 million. Also as of June 30, 98% of our RPO represents cloud-native subscriptions. Global services smoked it, delivering record revenue, totaling $125 million, up 23% as cloud sales continue to fuel services revenue growth globally. Adjusted operating profit, we like profit, was $68 million, with adjusted operating margin of 29.6%, up 210 basis points year-over-year. Our performance was driven by strong cloud and services revenue growth, combined with operating leverage as our cloud business scales. Importantly, as Eddie discussed, we continue to also invest for future growth. This resulted in Q2 earnings per share of $0.88, up 28%, and GAAP earnings per share of $0.63, up 29%. We don't take GAAP for granted. Turning to cash. Operating cash flow was a solid $41 million with timing of collections driving the year-over-year change. This resulted in free cash flow margin of 17% for the quarter, with year-to-date free cash flow margin totaling 22%. Year-to-date operating cash flow increased 18% to $99 million, and includes absorbing about $37 million in cash taxes paid in the first half of the year. For the full year 2023, we are on pace to pay approximately $75 million to Uncle Sam in cash taxes. Moving to the balance sheet. Deferred revenue increased 28% to $227 million. We ended the quarter with $153 million in cash and zero debt. Accordingly, we leveraged our strong cash position and invested $67 million in share repurchases in the quarter, resulting in $141 million in buybacks year-to-date. Also, our Board has approved the replenishment of our $75 million share repurchase authority. On to our updated 2023 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. This includes a balanced investment approach to growth and profitability. With our strong first half performance and increasing visibility, we are again raising our 2023 revenue, operating margin and EPS guidance. We are also reiterating our 2023 RPO guidepost range and midpoint of $1.35 billion. Consistent with our recent earnings releases, our guidepost and guidance ranges can be found in today's earnings release, supplemental schedules. All guidance references made on today's call will be the midpoint of their respective ranges. As noted on prior earnings calls, we will be updating our RPO outlook on an annual basis. And lastly, on RPO, as previously noted, 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 non-linear bookings throughout the year. So for full year 2023, we expect total revenue of $890 million, up $30 million or 3% from our prior midpoint of $860 million. Excluding license and maintenance attrition, this represents 24% growth. All in, our target is 16%. For Q3, we expect total revenue of $226 million, with 24% year-over-year growth ex license and maintenance. All in, our target is 14%. And for operating margin, we are increasing our midpoint to 27.5%, up from our prior midpoint of 26.5%. Included in this outlook is a 150-plus basis points headwind from the reduction in license and maintenance revenue. As Eddie highlighted, given the combination of our demand and size of our opportunity, we are continuing to invest in our business. At the midpoint, we are targeting Q3 operating margin of 27% and 24.3% in Q4, which accounts for retail peak seasonality. Our full year adjusted earnings per share outlook is increasing by $0.21 to $3.09, up 7% from our prior midpoint of $2.88. On a quarterly basis, we are targeting Q3 to be $0.77 and $0.65 in Q4, which again accounts for Q4 retail peak seasonality. For GAAP earnings per share, our midpoint increases by $0.17 to $2.20, up 8% from our prior $2.03 midpoint. And for Q3, we are targeting GAAP earnings per share of $0.53. Here are some additional details on our 2023 outlook. We are increasing our cloud revenue midpoint to $247 million, representing 40% growth, and is up 3% from our prior midpoint of $240 million. On a quarterly basis, we are targeting $63 million in Q3 and about $66 million in Q4. For services, we are increasing our forecast of $473 million to $479 million. The $476 million midpoint represents 21% growth, and is up $17 million or 4% from our prior $459 million midpoint. On a quarterly basis, we are targeting Q3 services revenue of $125 million and $110 million in Q4, which accounts for retail peak seasonality. For maintenance, we are targeting $131.5 million or an 8% decline. On a quarterly basis, we are targeting Q3 at $31 million and Q4 at $29 million. We expect hardware revenue of about $5.5 million per quarter and expect license of $1.5 million per quarter. For consolidation subscription, maintenance and services margin, we continue to target about 54% for the full year. On a quarterly basis, we are targeting approximately 54.5% in Q3 and 53.5% in Q4 on retail peak seasonality. And finally, we expect our tax rate to be 21.5% and our diluted share count to be 62.6 million shares, which assumes no buyback activity. So, in summary, solid execution by the Manhattan global team and a great Q2 and first half performance. Thank you, and back to Eddie.

Very good. Thank you, Dennis. Well, we're pleased. We're pleased with our second quarter and our first half results. And while we certainly continue to be appropriately cautious on the volatile macro conditions, Manhattan's business momentum remains positive. And we're just very optimistic about our long-term market opportunity. So, thank you, everybody, for joining the call, and thank you to our global team for all of the really terrific work that you're doing for our customers out there. Well, that concludes our prepared remarks. And Camilla, we'd be happy to take any questions.

Thank you. We'll now be conducting a question-and-answer session. [Operator Instructions] Thank you. And our first question comes from Terry Tillman with Truist Securities. Please proceed with your question.

Hey, good afternoon, Eddie, Dennis and Mike. Great GAAP earnings performance, by the way, in the quarter. Maybe, Eddie, I got a question for you and then, Dennis, I had a two-parter for you. I guess first question for you, Eddie. I mean it's a really important event every year, you all put a lot of effort into it in terms of Momentum. The kind of the theme around Unified Commerce, I think, is intriguing. How does that resonate with some of the interactions and maybe even some of the prospects there at the conference? Because what I'm getting at is they're using a lot of tools probably to do buy online, pick up in store, but it's a lot of point solutions. Do you all see an opportunity, whether it's like that POS win or with your OMS or your other store-level technologies to almost start to be able to create a vendor consolidation play and actually win net new business that way versus just like a WMS deal?

Yes. I mean, that's certainly part of the strategy, Terry. And the good news is that across our OMS and store systems customer base, we're leading with different capabilities, frankly, and then gradually rolling out more and more capabilities as those customers need them. And certainly, you can feel some of the vendor consolidation play, as you call it, coming into play and certainly part of the strategy and seems to be taking hold.

That's good to hear. And I guess, maybe, Dennis, a follow-up question, the two-parter. The first part is, you definitely handily beat my RPO addition estimate, but I think you did call out a couple of things and puts and takes. I'm curious around a couple of maybe larger deals slipping in the quarter. Is that something that you think timing-wise can be made up in the second half of the year? Or just how do you think about that going forward? And then, the second part -- and I can repeat all this because I'm long-winded. The second part is just we're getting further and further along through this transformation, both in the business model and the financial model. I'm curious about the visibility as you look into '24 and '25. And just how it's shaping up, both on subscription revenue and services? Thank you.

Yes. Well, I'll take just that front-end piece of lumpiness and kind of deals moving around. Terry, that hasn't changed in the -- frankly, in the 23 years or so that I've been here, you used the expression puts and takes, and that's what it is. And it's always going to be a little lumpy. We feel like we had a pretty solid Q2 actually. And, hey, there's always seems like there's a couple that got away, but we'll pick those up at the down the river a little bit.

Yes. Just the final point, Terry, is visibility is great. We've got a super pipeline in front of us. We've got to execute, obviously, but real happy with the visibility.

Okay. Thank you.

Very good. Thank you, Terry.

Thank you. And our next question is from Brian Peterson with Raymond James. Please proceed with your question.

Hi, guys. Thanks for taking the questions. So, Eddie, maybe just starting with you, you spent some time on generative AI in your prepared remarks. I'm curious to think about the magnitude of what that could do for you guys internally. I know that's early. And as you guys have kind of built this microservices cloud architecture, what does that do to the monetization potential of the business longer term?

Well, certainly, we think it's got a ton of potential, for sure. There is -- a little aside, I think all of us are wondering exactly how much this is going to cost. So, we've got to figure -- as we move forward with the practicalities of implementing generative AI, we've got to make sure that we keep our eye on the return on investment, both for internal usage and for our customers. But there is no question that we are, what can only be described, as fortunate. When we designed and architected API-first micro services architecture a number of years ago, we did know that generative AI was on sort of the horizon. But the fact of the matter is, in order to be able to really benefit from the implementation of generative AI, you need an API-first architecture. It's pretty hard to banks generative AI up against the monolithic architecture, because it really doesn't have very good years and doesn't have a matter to speak back. So, we feel very fortunate about that. As I mentioned, we're in the early stages, but whether it be from a knowledge-based perspective, a navigation perspective, a configuration perspective and a code generation perspective, I sort of highlighted all of those just a little bit today, we are doing real work and creating real proof of concepts, so that as the technology hardens and becomes more regularly available, we are right on the forefront of being able to, a, use the capability to increase our internal efficiency, but also be able to offer a differentiated capability to our customers.

Great. Thanks for the perspective, Eddie. And maybe just one on hiring, very good progress this quarter. I'm just curious, has the hiring environment eased at all? And given what you've seen in RPO, was there a temptation to kind of raise that hiring target for the year? Thanks, guys.

Yes. Look, we've got a pretty healthy target. We did 550 or so last year. 450 is the target for this year. We're on track for that. And no, hiring hasn't got any easier. Now bear in mind, we're after the top technical talent on the planet and nothing has waned in terms of that demand profile. But we're still at it. And we think that if there are folks out there that are looking for a place to invest their career than a market-leading company using forward and modern technology like ours is a really terrific place.

Pretty solid operating margin adding that headcount, Brian.

Yes.

Yes, it is. Good. Nice job, guys.

Thank you, Brian.

Thank you. Our next question is from Joe Vruwink with Baird. Please proceed with your question.

Great. Hi, everyone. Maybe just a discussion on point of sale and how big that business could become over time, and maybe one way to tackle the question, so if I just think about the size of the order management business and appreciating how long Active Omni has been in market, do you think that's maybe a relevant starting point for how big point of sale could be? And could point-of-sale approach that size over a similar point in its life cycle? I guess, what are kind of the puts and takes as you think about forecasting that business, because it's obviously a much larger TAM but also comparably newer offering from Manhattan?

Yes. Good question, Joe. I think the opportunity for point of sale is -- for us, is at least as big as our warehouse management system business. Now that is sort of on a go-forward basis, right? I mean, we're not going to pick up 30 years of WMS revenue and everything that goes along with that in a short period of time. But if you were to damn that up, start the clock over, over time, I think the opportunity for us is point of sale can be as big as WMS. So in other words, bigger than OMS.

Okay. Very good. And then, just following up on RPO. So good bookings quarter, some big deals slipped, but good bookings, nonetheless. Is kind of the read here that if big deals slipped a bit, then this quarter just had a standout volume of deals and the volume of transactions made up the difference? And I guess if that's true, and we are looking at a higher volume of transactions, does that suggest anything about maybe underlying market health or just how you think about handicapping pipeline conversion? Because it sounds like the pipeline is also in a good spot.

No, I don't think there's really anything to read, Joe, to be perfectly honest into one quarter. And I know we frankly get a little boring with how frequently we repeat that there is opportunity for lumpiness in all kinds of different ways, whether it be big deals, new logo acquisition, customer migrations, all those kinds of things. And they do. They bounce around every quarter. And there was nothing really particularly different. When you look across multiple quarters, there was nothing particularly different about this quarter than any other. It was a little different to last quarter, but next quarter will be a little bit different to the one that we've just concluded. So, I really don't think there's anything to read into one 90-day period in that regard.

Okay. Thank you very much.

Our pleasure, Joe. Thank you.

Thank you. Our next question is from Matt Pfau with William Blair. Please proceed with your question.

Great. Thanks for taking my question. Wanted to first ask on the commentary around bankruptcies. I think you said it would have been closer to $100 million in sequential RPO added, if it weren't for those, basically implying a $15 million impact. Was that all driven by one customer, or were there multiple customers in that number?

A small handful of customers.

Okay. Got it. And then I wanted to follow up on the commentary around the point of sale customer that you added and that, that was the first product that they elected to go with Manhattan. Maybe just a little bit more detail on how that came about? And do they have a roadmap to add additional products from you?

Yes, I think -- look, it's -- there's no guarantee there. We've got to execute well on the work in front of us to be able to garner more business from this customer. But this was a full-on RFP-driven multi-vendor selection process for a standalone point of sale system. Nothing else alongside it, and really nothing else being considered. And that's really why we called it out. As you know, we're very high on the opportunity around whether it be commerce or supply chain unification. But our ability to be able to, frankly, beat the best of the best in the point of sale industry on the merits of that particular product alone was encouraging.

Great. Thanks. Appreciate it, guys.

Okay. Our pleasure, Matt. Thank you.

Thank you. And our next question is from Mark Schappel with Loop Capital Markets. Please proceed with your question.

Hi. Thank you for taking my question and nice job on the quarter. Eddie, starting with you, with respect to the new Active Yard Management solution that you introduced at the user conference. I was wondering if -- I know it's still early, but I was wondering if you could just add some additional insight in maybe some of the interest you're seeing around the solution and what type of customers are giving you the most interest?

Yes. We're excited about it, Mark. And look, it's not the biggest product that we've ever released, of course, but it's sort of an important one. Yard Management is, as you know, the physical intersection and unification, the physical unification of WMS and TMS is where those things kind of come together. And so, we're excited to get out in the field. We're seeing good early interest. And currently, the plan is to have the first live customer in the fall of this year. So pretty good early adoption, frankly.

Okay. Great. And then kind of building on that question. Product-wise, at the user conference, you mentioned that the company is kind of focused on filling in the white space between the solutions. And I think Yard Management is one of those white spaces. I was wondering if you could just give us some insights maybe what some of the other white spaces might look like?

Yes. Obviously, without getting into the specifics, which I'd get my wrist slapped by all kinds of people if I got into the specifics, Mark, but there's a healthy amount of white space still in the supply chain execution area. So, in the -- still inside the four walls of the distribution center, certainly, the extended execution portfolio, and also around the commerce space. There is, frankly, still a lot to be done. And there's a lot of changes shaping up in the commerce space. Whereas there used to be a very strong powerful e-commerce platforms, such names as WebSphere Commerce, Hybris, ATG and the like. We're certainly seeing those channels truly starting to collapse from a technology perspective now and certainly more headless approaches to bringing those physical stores and e-commerce stores together. And of course, we're right in the middle of all of that. So a lot of opportunities still in front of us and a lot of places for us to deploy our 1,000-plus research and development engineers.

Great. Thanks. That's all from me.

Our pleasure, Mark. Thank you very much for your time.

Thank you. And our final question is from Blair Abernethy with Rosenblatt Securities. Please proceed with your question.

Thanks. Great quarter, gentlemen. Just wanted to ask, for starters, more of a macro question. I noticed the EMEA region kind of grew 29% this quarter. It seems to be doing fairly well in what I perceive as a slightly more difficult macro environment there. I'm just wondering if you can give us your sense of how the geographies are looking comparably. And maybe back to sort of at the beginning of this year when you set your guidance for 2023, are we trending about the same generally from your perspective, or are things getting worse or better?

About the same from a geographic performance perspective. There are a couple of spots I don't want to overstate them because -- but they have moved on us a little bit. The U.K. is frankly pretty flat. We had thought there might be a little more supply chain expansion as a function of Brexit and the movement of goods across borders not being quite so straightforward. So that's a little flatter than maybe than we expected. We thought China might bounce back a little faster, particularly on the luxury side of the world than it has. So there are a couple of spots that deviated from our original plan, but as part of the reason we have a multi-geography business here, so we can absorb those ups and downs. And again, I don't want to make a big deal of either of those, I'm just giving you a couple of examples. Sure, there's a few things that are moved around on us a little bit. We put what we thought was a perfect plan together, and guess what, it's changed along the way. And my guess is it will change just a little bit even between now and the end of the year, probably.

Okay. Great. Thanks, Eddie. And then just back on the product side for a moment, your commentary and some of the things you were talking about at Momentum, what would you say sitting back here with a crystal ball? What do you think are going to be the most impactful areas for Manhattan Associates with leveraging some of this new technology?

Well, look, we've got a market-leading position with next-generation warehouse management. And I think that the continued need for distribution -- advanced distribution capability is going to continue for as far as we can see. Our order management suite of solutions is market-leading as well. And certainly, there's the continued evolution of the commerce side of the world. Bringing together transportation management, warehouse management, inventory management, commerce solutions and a unified suite of solutions has a great deal of promise and upside for us. If you were to ask me what has got the greatest CAGR opportunity, it would be our point of sale solution, simply because we are so early to the game in a market that is being disrupted. So maybe if the question is where do we maybe get the most -- the single most leverage, it may be there because the potential for CAGR is greatest.

Great. Thanks very much, guys.

Our pleasure, Blair. Thank you.

Thank you. And with that, this concludes our question-and-answer session. I would like to turn the floor back over to CEO and President, Eddie Capel, for closing comments.

Terrific. Thank you, Camilla. Well, I'll just say thank you very much for your time, your support and your diligence. We would appreciate getting on these calls and sharing our results and listening to the feedback. And we look forward to doing the same again about 90 days from now. Thanks a lot. Bye-bye.