Dennis Story - CEO Eddie Capel - CFO.

Terry Tillman - Raymond James Mark Schappel - The Benchmark Company, LLC, Research Division Yun Kim - B. Riley & Company.

Good afternoon. My name is Rachel, and I will be your conference facilitator today. At this time, I would like to welcome everyone to the Manhattan Associates First Quarter 2014 Earnings Conference Call. (Operator Instructions) As a reminder, ladies and gentlemen, this call is being recorded today, April 22, 2014 at 4:30 P.M., Eastern time.

I would now like to introduce Mr. Dennis Story, CFO of Manhattan Associates. Mr. Story, you may begin your conference..

Thank you, Rachel, and good afternoon, everyone. Welcome to Manhattan Associates 2014 first quarter earnings call. IU 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 future financial performance of Manhattan Associates.

You are cautioned that these forward-looking statements involve risk and uncertainties, are not guarantees of future performance and that actual results may differ materially from projections contained in our forward-looking statements.

I refer you to the reports Manhattan Associates files with the SEC for important factors that could cause actual results to differ materially from those in our projections, particularly our annual report on Form 10-K for fiscal 2013 and the risk-factor discussion in that report. We are under no obligation to update these statements.

In addition, our comments include certain non-GAAP financial measures in an effort to provide additional information to our investors. All non-GAAP measures have been reconciled to the related GAAP measures in accordance with SEC rules.

You will find reconciliation schedules in the Form 8-K we submitted to the SEC earlier today, and on our website manh.com. Now I'll turn the call over to Eddie..

Good afternoon, everyone. We are off to a solid start in 2014, extending the progress we made exiting 2013, with customers continuing to move forward with their investments in supply chain commerce initiatives. We posted record results across essentially all financial metrics in the first quarter.

Our competitive position continues to improve and our customer satisfaction continues to increase across the globe. Overall we posted record Q1 total revenues of 113.6 million increasing 18% all of which is organic and record adjusted earnings per share of $0.26, increasing 37% over Q1 2013.

With a strong start to 2014, we are optimistic about the prospects for the full-year and we’re raising our revenue and earnings per share guidance for 2014. And Dennis will take you through those details in a moment. We posted our second consecutive $17 million plus software license quarter recording 17.1 million in Q1, up 20% versus Q1 2013.

We closed four $1 million plus license deals in the quarter, all with existing customers; one of the large deals was in Europe, two in U.S., and one in Latin America. More four deals were led by omni-Channel initiatives and three of the four deals included our platform based warehouse management system.

Even though all four large deals were in our existing customer base, in two of the four deals, we were successful head-to-head against some very strong competition. Our sales team across the globe executed well and our competitive win rates in head-to-head sales cycles against our major competitors remain strong at about 75% for the quarter.

But overall for the quarter 30% of our license revenue was from net new customers. And while the ratio of net new customers can fluctuate somewhat from quarter-to-quarter, we’re quite pleased with our new customer acquisition performance.

We continue to expand our product footprint within our large retail customer base leading with investments we’ve made in organic product innovation. Q1's license mix was new to existing customer was directly influenced by the $1 million plus deals closed with our existing customer base. All led by a commerce-ready suite of omni-channel solutions.

Our consulting services business posted record revenue results in Q1 with revenue up 21%. Demand and visibility continues to be quite strong as we added about 75 people to our staff in Q1 and we continue to search for approximately 100 more professional services people to meet the needs of our customers.

As we look forward, we’re well positioned for 2014 and beyond. Overall, with a strong start we’re optimistic but we do remain a little cautious, as we are not expecting the global economy to improve significantly in 2014.

Our pipeline is solid, services business demand is strong, customer satisfaction is good, implementations of our solutions continue to go well and we continue to focus on being the leading pure play technology innovator in a supply chain commerce market, leveraging our platform strategy in investments and research and development to activate, supply-chain commerce for our customers and industry leaders in the new omni-channel world.

And I’ll provide more colour in my business update, following Dennis’s revenue of our financial results..

Thanks, Eddie. I am going to cover our Q1 2014 results and then review our updated 2014 full year guidance. As Eddie noted, we have a solid start to 2014 posting a $130.6 million in total revenue, the highest quarterly result our company’s history, besting our previous record of $107.8 million recorded in Q3, 2013.

Total revenue increased 18% over the prior year quarter with strong license in services growth. For the quarter, Americas grew total revenue 14%, EMEA grew 37% and APAC grew 22% compared to Q1 of last year. Adjusted earnings per share for the quarter was $0.26 up 37% over prior year on strong revenue growth in productivity.

Apples-to-apples adjusted earnings per share was $0.24 growing 26%, excluding about $0.02 of favourable FX currency impact driven rupee depreciation and a Georgia R&D payroll tax credit election lower in Q1 2014, payroll tax expense.

The bottom line is as we bested the carbon [indiscernible] pistons with some strong organic revenue growth, combined with solid operating expense management, which drove quality earnings leverage in the quarter. Our Q1 2014 GAAP diluted earnings per share was a record $0.24 growing 41% over the $0.17 we posted in Q1 2013.

Our GAAP performance was driven by the strength of adjusted operating results that I am about to cover. For your reference a detail reconciliation of GAAP to non-GAAP adjustments is included in our earnings release today.

The license revenue for the quarter totalled $17.1 million benefitting from the acceleration of a few deals we had forecasted closing Q2. From a regional perspective, Americas posted license revenue of $11.5 million, EMEA $4.4 million and APAC $1.2 million.

Consistent with previous quarters comments, our license performance continues to depend heavily on the number and relative value of large deals we close in any quarter.

We mentioned our last quarter's call, with license revenue essentially flat, the past two years and estimating sales cycles for large deals remaining challenged, our goal for 2014 was to achieve about 6% to 7% license growth rate.

While we remain cautious regarding the lacklustre macro environment with two consecutive quarters of 17 million in license revenue, we are modestly raising our full year license growth build now to seven day percent. Shipping to services, demand continues to be solid. Q1 services revenue totalled $86.9 million, increasing 16% over prior year.

And as you may recall, our services revenue is comprised of two revenue streams, consulting and maintenance. Our consulting revenue for the quarter totalled a record $59.4 million growing 21% over Q1 2013 on strong demand.

With solid visibility into our services global demand outlook, we continue to focus on hiring additional resources to meet our customers’ needs. Maintenance revenue for the quarter totaled $27.5 million increasing 7% over last year.

Solid license revenue growth over the last several quarters, cash collections and retention rates of 90% plus contributed to year over year growth, and as a reminder we recognize maintenance renewal revenue on a cash basis. So the timing of cash collections can cause inter-period lumpiness from quarter to quarter.

Consolidated services margins for the quarter were 56.2% benefiting from very strong productivity and lower attrition than we’ve historically experienced this early in the year.

Additionally about a 160 basis points of our margin performance in the quarter was driven by favorable rupee currency impact and the George R&D payroll tax credit previously mentioned.

We expect our first half (2004) [ph] services margin will likely be in the range of 55.8 to 56% and our full year 2014 services margins to normalize into the 56.2 to 56.4% of range world class.

Turning to operating income and margins, with solid revenue growth and expense management, we delivered record Q1 adjusted operating income of $32.3 million with an operating margin of 28.5%, up from 22.3% in Q1 2013.

Apples to apples, Q1 2014 adjusted operating margin was 26.8% up 450 basis points excluding the favorable rupee currency impact and the George R&D payroll tax credit. With strong Q1 operating results, our goal for 2014 full year margin expansion over 2013 is a 180 to 200 basis points representing an 80 basis point increase over our previous estimate.

We expect our Q2 and Q3 operating margin profile to be similar to Q1 2014’s 28.5%, adjusted for quarterly licensed seasonality. In Q4 operating margin ranged between 26.5 and 27%, adjusted for the impact of lower Q4 services revenue due to the traditional retail season holiday impact.

Below the line other income was a loss of $233,000 in Q1, driven by FX losses of $516,000 in the quarter, partially offset by interest income.

Regarding taxes our adjusted effective income tax rate for Q1 was 37.2% about where we expected and higher than our Q1 effective rate of 32.8% in 2013 due primarily to the expiration of US R&D tax credit legislation January of 2014.

As you may recall in January of 2013, Congress approved both the 2012 and 2013 R&D credit and as a result, our Q1 2013 rate included essentially five quarters of R&D credit significantly impacting year over year comps. For the balance of the year we’re projecting an effective tax rate of 37.1%.

Transitioning to diluted shares, for the quarter, diluted shares totaled 76.8 million shares down from Q4 2013 shares of $77.3 million. We repurchased 695,000 shares of Manhattan common stock in the quarter totaling $25.5 million against option exercises of a 130,000 shares.

For the balance of 2014 we estimate Q2 for Q4 2014 diluted shares to be 76.6 million and the full year weighted average diluted shares to be about 76.8 million shares.

Our estimate does not assume additional common stock repurchases and depends on a number of variables including stock price, option exercises, forfeitures and share repurchases which can significantly impact estimates. So lastly on shares, last week our Board approved raising our share, our purchase authority limit back to a total of $50 million.

That covers the P&L results, turning to cash flow, for the quarter, cash flow from operations was $19.1 million versus Q1 2013 at $20.1 million, as cash global income taxes paid in Q1 2014 effectively doubled over prior year.

DSOs improved to 53 days versus 61 days in Q4 2013, and capital expenditures were $1.2 million in the quarter and we estimate full year 2014 CapEx to be about $6 to $8 million.

Our balance sheet of course continues to support long term strategic flexibility and stability with zero debt and cash and investments totaling a $126 million at March 31, 2014, compared to a $133 million at the end of Q4 2013. Now we'll update our 2014 guidance and then handoff to Eddie for the business update.

As Eddie mentioned while we remain cautious given the global macro, with the solid start to the year we’re raising total revenue and EPS guidance.

For 2014 revenue, we have increased our guidance for full-year from our original range of $450 million to $455 million to a new range of $460 million to $465 million representing 11% to 12% growth over 2013 versus previous guidance of 9% to 10% growth.

We expect our full-year total revenue percentage (lift) [ph] first-half versus second half to be about 49% to 51%. With our full year license growth goal of 7% to 8%, consistent with 2013, we expect Q3 2014 to be our peak total revenue quarter driven by strong services revenue performance.

For Q4, with the holiday season as in prior years, we are modeling a sequential decline in services revenue thus lowering total revenue of about 2.5% to 3% from Q3 2014 to Q4 2014. So that covers revenue.

For 2014 adjusted diluted earnings per share, we’re raising our range $0.05 to $1.06 to $1.08 representing 15% to 17% growth over 2013 adjusted EPS of $0.92. Our previous guidance was 10% to 12% growth. We expect our full-year EPS split to be roughly a 50-50 percentage split between the first half and the second half.

For 2014, GAAP diluted earnings per share; we expect to deliver $0.99 to $1.01, representing 15% to 17% growth over 2013 GAAP EPS of $0.86. The $0.07 full year EPS difference between GAAP and non-GAAP adjusted EPS represents the impact of stock-based compensation. We expect the EPS impact to be spread relatively evenly throughout the year.

That’s a wrap on the financial update including guidance. Now I’ll turn the call back to Eddie for the business update..

Thanks, Dennis. Well, first, let me provide a little more detail in the deals we closed in Q4. As I discussed at the beginning of the call, we recognized four large deals in the quarter, three in retail, and one in grocery.

All four deals were driven by strategic technology modernization programs, with three of the deals specifically driven by omni-channel initiatives. The other large deal was driven by distribution management legacy system replacement program leveraging platform-based Warehouse Management system.

And as I mentioned on our last earnings call and not surprisingly, we're seeing some additional omni-channel interest in the grocery vertical following Amazon’s moves into that market.

We continue to see solid progress in our core verticals led by retail, fuelled by the digital commerce revolution and the way in which retailers wish to engage and service their customers.

A meaningful portion of our WMS and non-WMS license and services revenue activity continues to be driven by existing and new customer omni-channel initiatives and reinventing their supply chains for the New World that we all live in. We're certainly very pleased with the successes we have achieved over the past 12 months in this particular arena.

Our Q1 license fee mix was consistent with Q4 of 2013, with Warehouse Management solutions making up 60% and 40% representing our other solutions. The retail, consumer goods and grocery verticals were our strongest license fee contributors, making up more than half of our license revenue in Q1 2014.

Our software, platform technology and experience help our customers adapt to the challenges of the omni-channel marketplace, and our efforts are bearing fruit and our net new customer win rate and the loyalty rewarded to us by our customer base.

Software license wins with new customers that have permitted us to share their names included DCG Fulfillment, Dunham’s Sports, Floor and Decor Outlets of America, Hastings Deering, ICA Sweden, LifeShield, Norix, Ulta, Vente-Privee, and West Coast Distribution.

Expanding relationships with existing customers included The Apparel Group, C&J Clark International, Cabela’s, Donaldson Europe, Federal-Mogul, GENCO Holdings, The Harvard Drug Group, Knight Transportation, Movianto, Nassau Candy, Nordstrom, Northern Tool & Equipment, Samsung India Electronics, Sodimac Colombia, Speed Global Services, Stella & Dot, and Thai Beverage Logistics.

Our professional services business around the globe continues to perform very well and we received high marks of customer satisfaction. As you might expect, our global services team are in full swing with retail omni-channel supply chain commerce enablement initiatives with about 80 systems [indiscernible] in the quarter and a very busy Q2 on deck.

As an example in Q1 one of our large home improvement retail customers went live in its first of its three new direct fulfilments centres, each facility is expected to have a capacity to hold as many as 1,000 SKU’s for direct ship to their customers while expanding our customers capability to ship most orders the same day that they received.

It continues to be a strong focus on store execution solutions and multi-product platform based implementations over the last few quarters and we expect this trend to continue. On the innovation front, we continue to be the leading innovator in supply chain technology.

For the quarter, we invested $12 million in research and development with about 650 people dedicated to R&D. Our innovation team has been very busy with new product releases. Most of our products released on an annual cycle and many of them typically do so in the spring.

In the last two months, we’ve had 10 major product releases, these range from our flagship WMS to transportation and inventory optimization. And here are just a few of the selected highlights.

Mobile technology and its application for supply chain commerce has been a focus for us in the latest set of product releases and accordingly our 2014 supply chain process platform includes a new mobile framework that we called touch talk.

The framework can be used by all of our applications and being, it includes all of the major compliance needed for mobile application such as security, configurable user interface and device connectivity. Late last year we released our first true mobile app, focused on store inventory and fulfilment.

In this spring we released two additional mobile capabilities for labour management and proof of delivery. Our latest version of labour management includes a purpose built tablet application designed to help supervise, it’s changed the way that they manage their teams.

No longer confined behind their desk three quarters of the day, managers now have all of the personnel productivity information and actions they need on a tablet device. This enables supervisors to spend the day on the floor with their workforce completely un-tethered.

Likewise, spring 2014 marked the very first release of our mobile proof of delivery application. In the age of same day delivery, retailers and wholesalers alike are leveraging careers and private fleets more than ever to do their own -- to own the entire customer interaction in a short complete satisfaction.

And that proof of delivery that helps guide drivers through the delivery process all the way to signature capture providing end-to-end visibility to the entire transaction for any customer service rep who's engaged with the client.

On the transportation life cycle management front, connectivity is always vital and with limited freight capacity creating challenges, the pendulum of control is swung toward the carriers. And more and more shippers are looking for ways to more effectively manage volatile transportation networks.

Our latest release of PLM delivers new innovative tools to help shippers drive, ranging from new transportation network modelling capabilities that’s factoring in real time traffic information into planning, fleet dispatch and monitor. As you can tell that the core of our success continues to be our strategy to grow through investment and innovation.

Our supply chain process platform based suite of solutions, including our omni-channel solutions, distinguishes us from all other competitors. Our R&D team continues to do an excellent job of driving innovation in all product areas and we continue to deliver more robust and more efficient solutions to the markets we serve.

Regarding our global associates, we ended Q1 with about 2,570 employees, up nearly 160 over Q1 2013 and more than 95% of our head count growth is in professional services, on strong demand to support top line growth and customer satisfaction.

We finished the quarter with 69 people in sales and sales management, with 61 quarter carrying reps, up two heads from last quarter. We continue to look to add about a half a dozen additional sales professionals, the majority of which would be in the Americas. Next month, we’ll host our Annual User Conference, Momentum 2014 in Hollywood Florida.

Every May about 1,000 of the best and brightest supply chain professionals come together and I am fortunate enough to have the opportunity to share with them, Manhattan's go forward strategy and progress. We'll be showcasing and use flexible fulfilment capabilities at Momentum.

Consumers now expect unlimited choices of selection, of location and of convenience. Hence the market need for flexible fulfilment and focuses on helping retailers enable every point of inventory, distribution centre of stores, supplier or fulfilment hub become a point of direct customer order fulfilment.

Working to maximize supply chain and inventory investments that deliver exceptional service to the customer.

We'll also be presenting our four phased framework that helps our customers establish a roadmap for success in the commerce revolution, and during the event we’ll be debuting all of our new product releases and we hope that they’ll generate the kind of excitement deserving of these new innovations.

And in addition to our main stage content and presentations, we’ll also be having roughly 60 breakout sessions featuring more than 30 customer speakers including Sysco Foods, Staples, Cardinal Healthcare and the Home Depot. So let me close my prepared remarks with a brief summary. We’re certainly very pleased with a solid start to 2014.

We remain focused on our customers, seizing every opportunity and never settling. We work hard to make today better than yesterday and tomorrow better than today.

Our relative competitive position continues to be strong and improving while we continue to invest in innovation to extend our market leadership and differentiation in supply chain commerce enablement.

With the world’s most talented supply chain employees, the best software solutions and with great market momentum, we’re well positioned for 2014 and beyond. So Rachel, we’d now be happy to take any questions. .

(Operator Instructions) Your first question is from the line of Terry Tillman with Raymond James, your line is open..

Hey, first the obligatory great job on the quarter. This is one of the strongest first quarters I’ve seen in a long time, so nice job.

I guess my first question just relates to, you're used to the company complaining about deals delaying or extending into another quarter and hopefully they’ll close then, but could you repeat what you had said or maybe it was what you said Dennis in terms of there were a couple deals that maybe you had assumed would close in 2Q, but they ended up closing in 1Q, I’d love to hear a little bit more color on that..

I’ll take that question, Terry. I don’t know that we complained, it’s just an observation that we share with our investors and the community but regardless, we did see a couple of deals that we had originally forecast to be Q2 deals, actually closed in Q1.

I can’t say for sure, but it does seem that first of all there’s certainly some momentum around omni-channel initiatives and of course not in every case, but most retail end of year is, fits right in the middle of our Q1, so whether there was a little bit of a budget flesh in retail can’t really tell but we certainly saw some things pull forward and then as noted by Dennis, we had some very strong momentum in our, both of our international theatres, APAC and EMEA as well..

Okay and I guess there’s a follow up too on the license business you all, it’s good to see increasing the range of growth you’re expected to license for the year.

You know if you had to think about what would be the most important driver of the increase, is it just more pipeline, is it better close rate assumptions or is it something at the margin that feels like it’s a little bit of a kind of the wave occurring around the omni channel or something else that I just didn’t say..

Eddie Capel:.

No, no I think it would just be a little bit of a strengthening [indiscernible] of that pipeline Terry, to be perfectly honest with you I don’t think there are any particular, other particular momentum movers, you know we’ve talked about the things that are driving general growth forward for us but a little bit of the strengthening of the pipeline..

Dennis Story:.

Plus a little tailwind on the macro, Terry..

Yes, okay, okay, and on the idea that maybe the activity levels are a little bit better, you know is it -- where does omni-channel fit in the actual kind of go forward pipeline.

I mean you articulated well on how helpful it was on some of the larger deals in the quarter, but that was stuff that had been kind of percolating for some time, so as you look out to some of that maybe longer data pipeline, is there a notable difference in terms of how much has exposure to that theme of omni-channel versus just pay, we’ve got an old WMS we need to upgrade or we got an old t-mux we need to upgrade it..

Dennis Story:.

It’s a little bit of both Terry, as we’ve talked about omni-channel now for frankly for a couple of years as you know and we’ve always indicated that it’s not a hockey stick, but we’re continuing to see forward momentum in that area, there is certainly a little bit of a blurring of the lines I would say between -- is this a legacy WMS replacement or is this an omni-channel initiative, those are -- that’s certainly a little bit of a grey area, but I think we’re certainly seeing some nice pipeline in both areas.

.

Okay and then just my last question, and I don’t know if it’s for you Dennis or Eddie whoever, but in terms of the service revenue, if we just carve out just the pro-services, which is you know really strong and I think it was over 20% growth, if we look at the headcount growth, it’s not near that kind of growth, and I think you all talked about really hiring about 100 heads, and you know you came up a little short there and you had about 75, I'll be curious on the strength of your revenue in comparison to not hiring at the same clip; is the capacity utilization or what about pricing.

Could you maybe talk about both capacity utilization and the strength there or, what you’re seeing there as opposed to a pricing lever for your pro-services business and again, nice job on the quarter, thanks..

Pricing hasn’t changed a great deal. We aimed to be very competitive and provide great value to our customers Terry, so we haven’t seen -- we haven’t made any major pricing moves or anything there.

In terms of the efficiency and effectiveness of the team which has just been really outstanding; I would attribute most of that to frankly the team's effort level, number one. And number two the terrific training programs that we put in place for our staff.

We hired quite a few people, and we've invested a lot in personnel training programs and that’s allowed them to become a good bit more productive, a little bit sooner than we had originally anticipated..

Yes, Terry, the other thing is, we believe it gives us a competitive advantage there. It’s really the stability of the leadership team and their domain expertise that they bring to the table. We've got great continuity at the leadership level and great talent. Obviously we’re probably biased, but we think the best in the space, in the industry.

And I think the margins bore that out. .

Your next question is from the line of Mark Schappel with Benchmark, your line is open. .

Just a couple of questions, Eddie, just diving down a little bit deeper in the omni-channel initiatives that are out there, I was wondering if you just kind of go through with us in a little bit more detail about how the complexity of omni-channel retailing is really becoming a demand driver for the supply chain execution space. .

Yes, sure. I will try and be as brief as I can, Mark. But the summary would be, if we cast their minds back to, shall we say 10 years ago, when e-Commerce really got off the ground; two things, one, it tended to be a very small part of retailers business. So they tended to operate independently, sometimes even outsourced.

And as we look today, e-commerce and omni-channel mix shifts could range anywhere from 4% to even as much as 15% of total revenues in some particular, in some circumstances. So it’s become a mainstream part of the business, number one; and number two, it's been recognized that online omni-channel shoppers are tend to be the most profitable shoppers.

So integrating them into the mainstream of the retailers business is very-very important.

The upshot of all that is that the need for integrated back-end systems, particularly supply chain systems that provide, number one, a single view of the customer across all channels that they are shopping, number one; and number two a single view of inventory that is available for all of those shoppers across the channel and bringing those consumers together with that inventory in a very profitable way.

And what that requires, as I say is, often times an upgrade of IT infrastructure and back-end systems that tends to be overseeing here. .

Okay, great, thanks. Eddie, it’s also been several years since the company has, let’s just say re-engaged the M&A fund. I was just wondering if you could just remind us of what is the company’s strategy or corporate strategy is right now with respect to making purchases….

Yes, sure so I think Dennis has some information to share with you, but I would say, at the high-level, our strategy is, number one, not to buy more of what we already have.

Number two, to provide -- to look at companies that have technology alignment with us; and then number three which is sort of an obvious one based upon number one, to fill strategic white space for our customers.

We are anxious to do more M&A but we will not be goaded into acquiring companies that, again have more of the same aged technology and don’t provide value add for our customers..

Mark, so I can just piggy back on that, our stated strategy has been very consistent, will be a strategic acquirer not a serial acquirer of overlapping assets as Eddie talked about.

So when we look at our cash, in our priorities for cash, our number one growth objective is to be the leading innovator in this space and organically invest in delivery innovation into the marketplace, so that’s the number one priority of cash, number two we’ll look at M&A opportunities and as Eddie said they have to one, win a line with our tech stack and also be a product that we feel we can generate significant ROI as demanded by our customers and absent any potential M&A opportunities which we’re active in terms of looking but absent those opportunities, we execute the share buyback program because we think that’s an efficient return of capital to shareholders..

Okay, great, thanks and just one final question, Dennis for you, just to make sure I heard things right.

You had a $0.02 benefit for foreign currency and the Georgia R&D payroll tax credit that helped you out in the quarter, is that correct?.

Dennis Story:.

That’s correct..

Okay thanks, that’s all for me..

Eddie Capel:.

Thanks Mark..

Still a very strong quarter in terms of quality of earnings..

(Operator Instructions) Your next question is from the line of Yun Kim B. Riley & Company, your line is open. .

So following up on Terry’s question regarding the strength in the professional services business, obviously the revenue was not very strong sequentially while the margin improved more than what I was expecting and then I think Eddie you mentioned that the new hires are ramping up faster than before, but just wondering are there other things start kicking in there maybe outsourcing some other consulting work to lower cost areas or any other creative things that you may be doing or and where do you see that particular business, the margin potential over the next two to five years, do you expect that margin to be able to show an incremental improvement from the current level or do you see that you’re running at a peak margin..

Dennis Story:.

So I’ll, I think I’ll take some of those and I’ll probably be a little sloppy in so Eddie can clam me up but first off, nothing that’s impacting the mix, it’s good old fashioned domain expertise and sweat equity with our customers in terms of productivity through the services organization and then in terms of margin, we don’t give a forecast and we’re still waiting to see the whites of the eyes in terms of the tailwind from a macro point of view, so we’ll focus our efforts on -- in your operating margin which we talked about 180-200 basis point improvement over last year and that’s obviously we have multiple levers.

Do I think there’s room for margin expansion in services? Absolutely that’s one of the levers, license is a lever, international growth is a lever, new products on our platform is a lever, sales and G&A, expense management is a lever, we’ve got lots of levers to manage here, so we definitely have some runway with respect to margin expansion. .

Okay great and then a....

Dennis Story:.

I’m not going to give you a three to five year margin expectation on services or operating margin at this stage. When the economy is running at about a 5% GDP growth rate, I might be in the mood. .

All right, but don’t forget that you guys have executed 12 quarters in a row, so I thought you guys have a better visibility to give that out today, which is maybe couple of years ago, but kidding aside, real quick so with the omni-channel this question is for you Eddie, the omni-channel investment, obviously providing a very strong secular growth driver for your business, shouldn’t that translate into higher number of seven figure deals closing, obviously you had, you guys had a pretty strong quarter in terms of seven figure deals in the quarter for the closing, but it seems like if you look at over the past couple of years the number of large deals have been somewhat stuck at about two year quarter, do you see the number of large deals eventually picking up as more and more omni-channels spending increases out there..

Eddie Capel:.

You know it’s possible, Yun.

I think we’ve got some growth targets that we put out there for license revenue this year, we’ve increased some as Dennis indicated in the call just this quarter in terms of the forecast so we are optimistic about our -- about the opportunity but in terms of seeing a real shift to many-many-many more double (comma) [ph] deals in a quarter, I don’t see a big shift there but as we also indicated, there is a blurring of the lines between the traditional transportation and WMS legacy replacement deals and omni-channel initiatives and so I think we will see a little bit of a shift and we’ll probably be identifying more of our double (comma) [ph] deals related to omni-channel, but part of that is because there’s a blurring of the lines.

.

Okay, great and then last question from me, it’s been a while but can we revisit what your growth strategy, investment strategy is regarding Europe, obviously we saw a pretty big jump in Europe in the quarter, I mean just kind of, revisit what's your strategy there, as of today? Thanks..

Yes, sure. We have a direct presence in the most popular markets for us in Europe, and we use a partner network, a very strong partner network in some of the slightly more far flung markets for us.

We still do not offer every single product in every geography even in Europe but as we gain greater foothold, get more experience and employee based growth in Europe, we continue to open up product portfolios.

So as Dennis says, it’s certainly is one of the growth levers we continue to dial up and have growth expectations for that market for sure over the coming years..

Yes, keep in mind that almost 80% of packaged supply chain software is in the U.S. and Western Europe, so at this stage emerging markets all start to grow as they mature more, but here probably accounts for about 25% of that overall 80% spin. So it’s pretty simple, steady revenue growth and earnings expansion off of that in those markets..

Okay. Great. Thank you so much. And again, congratulations on a strong quarter..

Thanks, Yun..

Thank you, Yun. Well with that we’ll conclude the questions portion for the day. Thanks everybody for their continued support of Manhattan Associates. And we’ll look forward to speaking to you in about 90 days or so. Thanks and good afternoon..

Ladies and gentlemen, that concludes today’s conference call. And you may now disconnect..