Manhattan Associates, Inc. :MANH-US: Earnings Analysis: Q3, 2016 By the Numbers : October 26, 2016

Manhattan Associates, Inc. reports financial results for the quarter ended September 30, 2016.

We analyze the earnings along side the following peers of Manhattan Associates, Inc. – Descartes Systems Group Inc., Microsoft Corporation and International Business Machines Corporation (DSGX-US, MSFT-US and IBM-US) that have also reported for this period.


  • Summary numbers: Revenues of USD 152.21 million, Net Earnings of USD 33.50 million.
  • Gross margins widened from 57.79% to 57.95% compared to the same period last year, operating (EBITDA) margins now 36.74% from 32.08%.
  • Year-on-year change in operating cash flow of 1.56% is about the same as the change in earnings, likely no significant movement in accruals or reserves.
  • Earnings growth from operating margin improvements as well as one-time items.

The table below shows the preliminary results and recent trends for key metrics such as revenues and net income growth:

2015-09-30 2015-12-31 2016-03-31 2016-06-30 2016-09-30
Relevant Numbers (Quarterly)
Revenues (mil) 142.3 141.44 149.86 154.89 152.21
Revenue Growth (%YOY) 13.29 8.46 12.24 11.35 6.96
Earnings (mil) 27.9 26.37 27.48 33.34 33.5
Earnings Growth (%YOY) 24.87 29.56 18.43 28.21 20.07
Net Margin (%) 19.6 18.64 18.34 21.53 22.01
EPS 0.38 0.36 0.38 0.46 0.47
Return on Equity (%) 59.63 54.67 59.34 76.22 74.02
Return on Assets (%) 35.82 31.93 34.29 44.67 43.93

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Market Share Versus Profits

Revenues History
Earnings History

MANH-US‘s change in revenue this period compared to the same period last year of 6.96% is almost the same as its change in earnings, and is about average among the announced results thus far in its peer group, suggesting that MANH-US is holding onto its market share. Also, for comparison purposes, revenues changed by -1.73% and earnings by 0.46% compared to the immediate last period.

Revenues Growth Versus Earnings Growth

Quadrant label definitions. Hover to know more

Leader, Earnings Focus, Laggard, Revenues Focus

Earnings Growth Analysis

The company’s earnings growth was influenced by year-on-year improvement in gross margins from 57.79% to 57.95% as well as better cost controls. As a result, operating margins (EBITDA margins) rose from 32.08% to 36.74% compared to the same period last year. For comparison, gross margins were 58.18% and EBITDA margins were 35.21% in the last reporting period.

Gross Margin Versus EBITDA Margin

Quadrant label definitions. Hover to know more

Differentiated; Low Cost, Commodity; Low Cost, Commodity; High Cost, Differentiated; High Cost

Gross Margin Trend

Companies sometimes sacrifice improvements in revenues and margins in order to extend friendlier terms to customers and vendors. Capital Cube probes for such activity by comparing the changes in gross margins with any changes in working capital. If the gross margins improved without a worsening of working capital, it is possible that the company’s performance is a result of truly delivering in the marketplace and not simply an accounting prop-up using the balance sheet.

Gross Margin History
Working Capital Days History

MANH-US‘s improvement in gross margin has been accompanied by an improvement in its balance sheet as well. This suggests that gross margin improvements are likely from operating decisions and not accounting gimmicks. Its working capital days have declined to 57.64 days from 70.28 days for the same period last year.

Gross Margin Versus Working Capital Days

Quadrant label definitions. Hover to know more

Customer Financed, Cash Starved, Supplier Financed, Cash Rich

Cash Versus Earnings – Sustainable Performance?

MANH-US‘s change in operating cash flow of 1.56% compared to the same period last year is about the same as its change in earnings this period. Additionally, this change in operating cash flow is about average among its peer group. This suggests that the company did not use accruals or reserves to manage earnings this period, and that, all else being equal, the earnings number is sustainable.

Operating Cash Flow Growth Versus Earnings Growth

Quadrant label definitions. Hover to know more

Cash Flow based Earnings, Likely Non-cash Earnings, Low Cash Flow Base, Likely Undeclared Earnings


The company’s earnings growth has also been influenced by the following factors: (1) Improvements in operating (EBIT) margins from 30.69% to 35.20% and (2) one-time items. The company’s pretax margins are now 35.34% compared to 31.12% for the same period last year.

EBIT Margin Versus PreTax Margin

Quadrant label definitions. Hover to know more

Operation driven Earnings, One-time Favorables, Low Earnings Base, One-time Unfavorables
EBIT Margin History
PreTax Margin History

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Company Profile

Manhattan Associates, Inc. designs, builds and delivers supply chain commerce solutions that drive top line growth by converging front-end sales with back-end supply chain execution and efficiency. It provides software solutions for retailers, wholesalers, manufacturers, governments and other organizations. The company operates through three geographically segmented areas which include The Americas, Europe, Middle East and Africa and Asia Pacific. The company’s solutions consist of software, services and hardware, which coordinate people, workflows, assets, events and tasks holistically across the functions linked in a supply chain from planning through execution. These solutions also help to coordinate the actions, data exchange and communication of participants in supply chain ecosystems, such as manufacturers, suppliers, distributors, trading partners, transportation providers, channels and consumers. The company was founded by Deepak Raghavan in October 1990 and is headquartered in Atlanta, GA.

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