Good afternoon. My name is Jesse, and I'll be your conference facilitator. As a reminder, ladies and gentlemen, this call is being recorded today, April 21, 2020. I'd now like to introduce Eddie Capel, CEO; Dennis Story, CFO; and Matt Humphries, Senior Director of Investor Relations. Mr. Humphries, you may begin your conference.

Thank you, Jesse, and good afternoon, everyone. Welcome to Manhattan Associates’ First Quarter 2020 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 and 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 the fiscal year 2019 and the risk factor discussion in that report, as well as any risk factor updates we provide in our subsequent Form 10-Q. We note in particular that uncertainty regarding the impact of the COVID-19 pandemic on our performance could 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 in an effort to provide additional information to investors. All non-GAAP measures have been reconciled 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. I’d like to turn the call now over to Eddie.

All right. Thank you, Matt. Well, good afternoon everyone. Before I begin my comments related to Manhattan Associates, I want to take this opportunity to recognize and thank some of the heroes of our COVID-19 world. The healthcare workers and first responders are appropriately receiving great commendations, respect, and thanks from every corner of the world, and we at Manhattan Associates join in thanking them for their amazing dedication and the personal sacrifices that they're making to keep us healthy and also care for those who are unwell. So thank you. But I can tell you from firsthand experience, both personally and professionally, there are hundreds of thousands, maybe millions of supply chain heroes working every day all around the globe to maintain the flow of life-sustaining products, food, beverages, pharmaceuticals, and yes, toilet paper, into the communities that they serve and we live in. These heroes are putting themselves at risk every single day to keep critical supply chains moving. So thank you. Thank you to the truck drivers, the warehouse operators, the retail associates, and all of the supply chain professionals around the world. We're humbled and proud to be working alongside you. So thanks again for everything that you do. Back to Manhattan Associates and thank you again for joining us as we review our first quarter 2020 results, and cover in some detail the actions that we've taken and the innovative approaches that we've employed to adapt to today's circumstances. Additionally, we're going to be providing updates to our financial guidance, bearing in mind the impact that COVID-19 is having on our business globally. Manhattan reported another record revenue quarter despite business activities slowing in the last few weeks of March. Specifically, we reported total revenue of $154 million, which is up 4% year-over-year and adjusted earnings per diluted share of $0.40. Our cloud and license businesses combined with expense management drove our outperformance in the period. Now we’ve typically cautioned investors about the impacts of global macro volatility and the effects that they may have on our business. And that is certainly a fitting disclaimer in the light of events occurring as a result of COVID-19. And as such, we reflected our expectations in this most uncertain time into our full year guidance. Then Dennis will go into that in much more detail in a moment. But we're taking what we feel is an appropriate level of conservatism into our forecast for the remainder of the year. Reflecting what we know today, as well as the visibility we have into our business for the remainder of the year. Although it has to be said, recovery timing certainly remains the wildcard. As we outlined a few weeks ago, we've taken proactive steps to position that business in the face of today's uncertainty. These steps are precautionary in nature, enabling us to shoulder any near-term disruptions, while further investing in our business as we continue to pivot to becoming a cloud-first company. We view the actions we've taken as prudent, and we're approaching each and every day with a long-term perspective in mind. Furthermore, we've also taken swift steps to ensure the health and safety of our employees globally while considering the needs and demands for our customers, especially those on the front lines of delivering such needed supplies to local communities. Our daily execution has evolved into a largely virtual model, and we continue to find innovative ways to engage with customers and prospects, ensuring that they are fully supported as they navigate their way through this period. But we're still ensuring to continue our focus on cash flow generation and profitable execution. I would like to review some of these specific actions that will allow us to manage through this volatile period while also ensuring we're positioned to capitalize on market opportunities when we return to a more normal operating environment. Specifically, we reduced our Board of Directors’ fees and the Chief Executive Officer’s salaries by 25%, our Chief Financial Officer’s salary by 15%, and the salaries of our other named executive officers, certain global leaders, and all U.S. employees by 10%. We suspended our 401(k) match program here in the U.S. and for the time being, we suspended our share repurchase program. We have instituted a hiring freeze but only for non-critical roles across the organization. We've reduced planned outlays for discretionary spending across the organization. As a natural expansion, we've reduced travel and marketing spending as appropriate. These actions should allow us the flexibility in the near term to remain focused on the long-term opportunities ahead. The steps we're taking enable us to preserve our global workforce in order to remain agile while meeting customer demands as it returns. Importantly, our market-leading product innovation also remains a priority. Despite global economic headwinds, we're still expecting to invest $72 million to $74 million in research and development this year. Our global pipelines for customer opportunities remain healthy across both cloud and license, with notable trends in our cloud pipeline specifically and this is due to organic demand and a continued shift from our legacy license business, with the appetite for WMS and the cloud continuing to build. Given current market volatility, we are seeing some shifts in pipeline opportunities from Q2 into Q3 and Q4. This, I have to say, though different from past challenging environments, where demand for software simply disappeared. The challenge now is one of timing. In fact, the rest of our year pipeline is over 20% higher than it was when we spoke last quarter, which of course is notably positive, specifically for our cloud business. In terms of opportunities, we continue to see over 50% of our deal opportunities represented by net new logos. Now turning to our services business. We're active with our customers, and we’ve conducted about a hundred customer go-lives in Q1. That's about typical of our run rate. But we've taken proactive steps to ensure a large amount of services work continues virtually from project kick-offs and designs, including initial build and implementation preparation. The go-live aspect of our services work is being shifted to a remote strategy for the most part, although we are performing limited onsite work in certain controlled situations. We've seen project delays due to customers who are either so consumed by the high levels of business activities, such as grocers and distributors, or those who are focused on managing their own business through this difficult time period. With regard specifically to our retail end markets, approximately 20% of our near-term to medium-term services revenue has been impacted, and we've updated our financial guidance to reflect this. We haven't seen any notable project cancellations; however, we would expect to see demand push back for some of these impacted projects. The proactive steps we've taken thus far will allow us to continue moving forward with the majority of our services engagement, and we'll continue to improvise and adapt to our changing environment to meet customer needs and market demand. On the sales and marketing front, our competitive win rates remain strong at 70% plus against head-to-head competition, with nearly 30% of our licensing cloud deals coming from either net new customers or net new products into the existing customer base. Verticals driving more than 50% of our cloud and license revenue for the quarter were pretty diverse, including retail, consumer goods, government, food, beverage, grocery, and life sciences. Now, turning to some of our long-term opportunities, I mentioned earlier, what these recent events have brought to light, not in an environment that we would have wished to have seen. But nonetheless, it is something that we felt and worked toward for years. Supply chain is a more strategic part of our customers’ business than ever before. The software that we offer is mission-critical to their success, whether in the normal course of business or in a highly volatile period, such as we see today. We've got countless examples of our customers who were able to quickly adapt their sales, service, and fulfillment approaches in response to the changing landscape that we’re all living in. These solutions go beyond streamlining and optimizing the supply chain but are actively generating revenue and saving order volume through modern adaptive concepts. Let's walk through a few of those. Firstly, let's start with demand forecasting and inventory optimization. Our application in this area is deployed across a wide variety of industries, from pharmaceutical distribution to grocery to specialty retail. Our customers can model the types of demand shocks that they're seeing from COVID-19 quickly and easily. Their inventory planning process responds immediately to these new forecast models and does so without damaging their underlying base forecasts. This has been exceptionally important for many of our pharmaceutical and grocery distributors, as they are seeing surging demand for certain product categories. This type of AI and ML-driven forecasting and ordering solutions will certainly pay dividends as we move through this uncertain period and trend back towards normal forecasts and ordering patterns. As we turn to our supply chain solution, when it comes to WMS, for example, the two areas we're hearing our customers take particular advantage of are adaptability and scalability. As you already know, WMS is the best in the industry, scaling out to support the exceptionally high fulfillment volumes that typically come along with e-commerce flash sales and peak holiday seasons. What we've seen in the last month or so is that scalability being employed by businesses that typically never experienced these types of demand spikes, whether they be pharmaceutical companies, grocers, or medical equipment companies. The Manhattan WMS has been helping these customers ship first, two, three, and four times their daily average volumes. Channel shift has been very prevalent. We actually saw one customer, a well-known retailer, transform their entire DC operation from retail replenishment to direct-to-consumer all in a span of six days, saving 80% of their order volume that they otherwise would have lost. Normally, we see our customers use retail replenishment and direct-to-consumer capabilities in tandem, but this is the first time that we've seen this type of channel flip to direct-to-consumer in such a short timeframe. On the supply chain front, we're hearing interesting stories about the adaptability and power of our transportation management solution as well. Many of our customers are rapidly reconfiguring their supply network and store hours. Our transportation optimization engine is helping many of our customers increase their shipment volumes to their stores by between 50% and 250%, while also incorporating changes to the operating environment, like hours of service and actual weight limitation changes that have been relaxed by the Department of Transportation. Timing is a long way from perfect, but Gartner recently published its Magic Quadrant for transportation management system providers, and we were thrilled to be recognized as a leader and notably improve our position within the leaders’ quadrant. We believe our ongoing investment in the solution's success and expanding its adoption globally, along with the terrific customer satisfaction scores we received, have helped us improve our position this year. Closing my product remarks, there will be some anecdotes about how we're seeing our omnichannel solutions leveraged in innovative ways to put forth entirely new fulfillment methods and processes, all in a matter of days. A particular note is the expanded use of our store fulfillment solutions. While most brick-and-mortar stores remain closed at the moment, many of the same stores are fulfilling ten times their normal volume of e-commerce orders. The desire to monetize the inventory that's in those stores, the need to alleviate workload from the distribution center, and the ambition to improve the speed of delivery for customers are driving expanded use of store fulfillment solutions. We even saw one customer activate and roll out the entire solution to all of their stores in less than a week. Next month, we'll be hosting our annual user conference, Momentum. This year, it's going to be in a digital format. While we'll miss seeing all of our customers, our partners, and our analysts in person, we still plan some significant product announcements that will continue advancing our vision of unified commerce. So that covers the broader business update. Dennis is going to provide you with an update on our financial performance and discuss our 2020 full-year guidance in further detail. I'll close our prepared remarks with a brief summary.

Thanks, Eddie. First quarter total revenue was $153.9 million, up 4% organically over the prior year, driven by our cloud and license revenue performance. Our total revenue estimate for the second quarter is a range of $122.5 million to $132.5 million. Adjusted earnings per share for Q1 was $0.40. GAAP earnings per share was $0.35, with stock-based compensation accounting for the difference between adjusted and GAAP EPS. Our adjusted earnings per share estimate for the second quarter is a range of $0.33 to $0.37. License revenue for Q1 was $9.7 million, above our expectations but down year-over-year as anticipated. We signed three $1 million plus deals in the quarter, with roughly one-third of all license deals coming from new customers. For the second quarter, we are expecting approximately $4 million in license revenue as the license revenue mix continues to transition to cloud subscriptions. For the full year, we estimate licensed revenue will be between $23 million to $25 million. Cloud revenue was a record $17.3 million in the quarter, up 120% year-over-year and 10% sequentially, driven by continued customer demand for our cloud solutions across all of the verticals we serve. Of note, we closed our largest Manhattan Active Omni order volume deal in the quarter. Additionally, we continue to see strong demand for WMS in the cloud solutions with over 70% of our deals in the quarter coming from WMS, and nearly 30% of our bookings coming from either net new customers or net new product sales into our existing install base. For the second quarter, we are estimating our cloud revenue to be $18 million to $18.5 million, and for the full year, we estimate our cloud revenue to be in the range of $74 million to $78 million. We estimate our cloud and license software mix to be approximately 75% cloud to 25% license for the full year, with software performance totaling $97 million to $103 million, which would be a record for total software despite a 51% decline in license revenue versus 2019. Turning to bookings, as we have discussed, remaining performance obligations, or RPO, is the leading proxy of our cloud bookings performance and represents the value of contractual obligations required to be performed, otherwise referred to as unearned revenue or bookings. Our RPO for the quarter totaled $203 million, up 102% over the prior year and 18% sequentially. We continue to estimate that our year-end RPO will fall within the range of $265 million to $275 million. For Manhattan, this disclosed value represents our cloud bookings value of unearned revenue under non-cancelable contracts greater than one year. Contracts with a non-cancelable term of one year or less are excluded from this reported amount. One last point on license and cloud. Our performance continues to depend on the number and relative value of large deals we close in any quarter. While large license deals historically have been important, our markets continue to shift towards subscription models. This is positive, but deal sizes may be slightly smaller as subscription revenue is recognized over time. Moreover, some customers have longer implementation cycles associated with large distribution footprints requiring a ramp subscription model, which can impact sequential and year-over-year revenue growth. We also retain appropriate caution around slow decision-making by some clients and prospects, particularly retailers in light of ongoing macro events related to COVID-19. Shifting to maintenance, revenue for the quarter totaled $35.7 million, roughly flat versus the prior year. As you would expect in this environment, we are purposely focused on ensuring our clients have the support they need to navigate current market uncertainty. Our customer retention rates remain strong at greater than 95%. For the second quarter, we estimate our maintenance revenue to be between $34 million and $35 million. Our full-year maintenance revenue is estimated to be $143 million to $144 million. Turning to services, consulting revenue for the quarter totaled $87.4 million, down 1% year-over-year. Services revenue trends in the near-term will be dictated by the pace and degree of the normalization of business activities impacted by COVID-19. Our estimate for second quarter services revenue is between $65 million to $72 million at the midpoint of $68 million. This represents a sequential decline of 22% over Q1 2020. We estimate our full-year services revenue to be $289 million to $306 million. Our consolidated subscription, maintenance and services margin for the quarter was 48.7%, largely driven by continued investment in cloud and consulting services, as well as slightly lower services revenue. Our second quarter estimate is for a range of 51.6% to 52.4%, approximately 80 basis points higher than 2019. Our full-year estimate is approximately 51.3%, up around 40 basis points versus 2019. Turning to operating income and margin, Q1 adjusted operating income totaled $31.9 million with an adjusted operating margin of 20.7%. For the second quarter, we estimate our adjusted operating margin to fall within a range of 22.2% to 23.2%, another tight range. Our Q4 adjusted effective income tax rate was 23.1%. We estimate our second quarter and full year tax rate to be approximately 24%. Regarding our capital structure, in Q1 2020, we repurchased approximately 337,000 shares worth $25 million. While we suspended our share repurchase activity for the time being, last week our Board of Directors did approve replenishing our repurchase authority limit to $50 million. As such, we will assess ongoing market conditions and internal financial performance in determining when to reinstate our share repurchase program. This program remains a core part of our capital allocation strategy. For the second quarter and full year, we estimate our diluted shares outstanding to be approximately 64 million shares. Turning to cash, we closed the quarter with cash and investments of $75.3 million and zero debt. Our current deferred revenue balance totaled $105.5 million, 12% sequentially on maintenance and cloud billings. Q1 cash flow from operations totaled $12 million, primarily due to performance-based compensation stemming from our 2019 financial performance. Finally, capital expenditures totaled $1.2 million in Q1. We estimate full-year CapEx to be about $5 million. That closes the book on Q1 2020. Turning to our updated annual guidance, we've run multiple scenarios in order to build out the appropriate framework for giving investors the best possible forward-looking view of the business as we know it today. However, as a caveat, we acknowledge that the assumptions we're making are subject to future actions taken by local, state, federal, and international governments, as well as the broader impacts of COVID-19 that may or may not affect the global economy. We've revised our 2020 full-year revenue outlook, lowering our total revenue forecast to a midpoint of $553 million, down 10.5% over 2019, driven by a 17% decline in our services revenue forecast. We feel our services revenue forecast has an appropriate and prudent amount of conservatism built into our outlook. Considering all of these exogenous factors, as Eddie mentioned earlier, we've taken aggressive expense reduction measures to protect earnings without materially impairing our ability to make key investments in R&D to further extend our competitive positioning. With our strong track record of managing expenses from the midpoint of our annual guidance, we've reduced total expenses by about $45 million for the balance of 2020. In terms of quarterly progression, we view Q2 as likely being our weakest quarter of the year, which sequentially from Q1 2020 reflects a $24 million or 20% reduction in total expense run rate, with Q3 and Q4 showing some incremental revenue improvement as we move into a more normal business environment. Specifically for annual guidance, our full-year revenue range is now expected to be within the range of $541 million to $565 million. Our full-year adjusted operating margin is expected to fall within a range of 22.9% to 23.1%, up about 300 basis points from our previous guidance of 20% to 20.5%. Our full-year adjusted earnings per diluted share range is expected to be between $1.50 to $1.58 with a midpoint of $1.54 compared to our previous guidance midpoint of $1.57. Our full-year GAAP earnings per diluted share range is expected to be $1.16 to $1.24 with a midpoint of $1.20 versus a $1.16 previous guidance. Thank you. That covers the financial update. Back to Eddie for some closing comments.

Okay. Thanks, Dennis. Now to close out today's call, I want to step back just for a moment and let everybody know that despite the global uncertainty that we're all experiencing, we're acutely focused on the things that we can control. We're taking innovative and proactive approaches to customer engagements while continuing to invest significantly in innovation so that we can expand our total addressable market and drive long-term sustainable growth. Our sales and services team remain engaged in all kinds of stages of business and project development, and as we look forward to returning to the normal course of business in the future. These actions that we've taken will set us up for continued success as we move through this choppy period. As we exit, we would expect to see solid demand for our mission-critical supply chain and omnichannel commerce products all around the globe. We're ensuring that we're positioned to capitalize on these opportunities. While the world moves rapidly around us, I can tell you we're not sitting still. We continue to push forward as we move our vision of unified commerce forward. Thank you. Thank you to all of our employees, customers, partners, and shareholders globally. We realize that this is an extraordinarily difficult time for many, and we want to continue to emphasize that we're doing our part to rise to the occasion and meet these challenges head-on. Jesse, we're now ready to take any questions.

Thank you. The first question comes from Terry Tillman from SunTrust. Your line is open.

So I'll start off with my preamble. There's a lot of insight and color, so I appreciate all that. It's great to see how you guys are helping to drive through these critical supply chains, and I will miss seeing you all day at the conference. My first question just relates to conservatism. As we think about services projects kind of pushing out, what happened to in terms of timing of you need to get those projects going before we get into this critical window of holiday season? We've already seen some holiday season activity from this transaction volume. Are you assuming that the window is still narrow that there's a fair amount of that retail-oriented kind of holiday stuff you've got to get up and running? Actually just moves into next year because we just won't have enough time to install? That's the first question.

Yes, it's a mix of both, Terry. So we're still moving a lot of projects forward. I talked about a hundred go-lives in Q1, which is around our typical run rate. We've got about the same number of go-lives planned for Q2. They’ve moved to a lot of remote support and so forth. There are many go-lives still moving forward; a lot of the strategic projects are also continuing. There are some, the non-essential projects that are likely to push post-peak. But we're still planning and our customers are still telling us that there is criticality around getting our systems live before the retail peak.

It’s interesting because it seems like back during the global financial crisis in '09, you'll have like a $4 million license quarter, and I know you don’t want everyone remembering that, but you did. In Q2 you’re all talking about over $20 million worth of total software revenue, including subscription. So I just wanted to point that out. But what's interesting is you're talking about a 20% increase in pipeline. You also talked about the business feeling a lot different than in past cycles. I'm just curious about that pipeline build. What is driving that other than like the digital kind of transformation stuff, the omnichannel or just the diverse customer activity than maybe in the last crisis, which was in '08, '09? Thank you.

Yes, I think it's a mixture of all of those things. Obviously, we feel like the innovation that we're driving into the field has generated a lot of interest in WMS and the cloud. Manhattan Active Omni is a large portion of that, as is our continued vertical expansion. As I mentioned, the challenge here is one of timing regarding when we see those things come to fruition. But from an overall outlook and strategic perspective, obviously, we're encouraged by pipeline growth.

And maybe just one last question for Dennis. I think from a cash flow perspective, I don't know if you said anything for the full year. But is there any kind of guidepost to think about cash flow maybe in relation to net income or operating profit? Or just any kind of puts and takes to think about as we look at our cash flows? Thank you.

Nothing different than we've put out there before, Terry, probably a ratio of about 1.1 to 1.2 of net income.

First, Eddie, I wanted to extrapolate a little more on those comments about the current situation that you're seeing being different than what you've experienced during past slowdowns when demand dissipated. Can you expand on what factors you believe are driving this situation to be different than past slowdowns? Is it possible we're just in a situation where it's too early to tell if demand will drop off?

There is uncertainty; there's no question about that, and the depth and size of the crystal ball is certainly in everybody's hands, yours as well as mine. The commentary just from the conversations we're having and the feel that we have is that we've got a shorter runway to recovery or an attempt to return to normal business. So the investments being made or plans are being developed, we can still see the finish line for those, for both us and our customers. We can see the finish line of when these initiatives get executed, versus in prior situations, whether it be 2001 or '08, '09, I don't think the finish line could be seen there. The other thing that I think is different for us is we've laid a lot of groundwork building demand for our cloud solutions, and that is continuing to pay off. About 50% of our pipeline is coming from net new logos, which is representative of the type of innovation we're bringing to the marketplace and the new operating models that will be required. And finally, compared with certainly 2001, but even 2008 and 2009, we have both a broader product footprint and a greater global reach. Those are the major elements that I think are different this time around.

And then just longer term coming out of this, it seems like your product portfolio is pretty well aligned with the direction that the market needs to go or adapt to. Any changes in terms of how you guys are thinking about future investment priorities within your product portfolio or what areas you expect to be robust coming out of this?

That's a great question, Matt. Look, I think I mentioned in my comments, I do think that, a little bit selfishly, we've wondered for a couple of decades why supply chain wasn't as popular a conversation in the C-suite and boardroom as we always thought it should have been. But I think it's front and center in all conversations today. The strategic nature of supply chain when we come out of this will be front and center for sure. It is recognized that supply chain and supply chain systems are absolutely mission-critical. We're well-positioned to drive innovation into the marketplace. There will be a notable focus on supply chain resilience that will need to be built into systems moving forward. As we think about shifts, we're seeing during this time a greater move towards direct-to-consumer. Our products are on point, whether it be WMS, TMS, Manhattan Active Omni, and demand forecasting and inventory optimization solutions. In terms of product strategy, not much has changed; however, we will be making adjustments, particularly around newer trends like curbside pickup, which has become very popular. We'll introduce some innovative solutions that will give our retail customers opportunities to execute on cross-sell, upsell even in a curbside environment. We can do that because our solutions are cloud-native and versionless. Overall, however, our product strategy remains intact.

So, Dennis, I think recurring gross margins, you had that up a bit for the full year. Given what we're seeing on the services side, I am a little surprised that margins wouldn't come down a bit as well. I know there's some other moving parts here, but any color that you can add on what's helping the margins? I'm also curious how the shift towards virtual services deployments impacts the overall margin structure.

The reason the overall margin profile is going up, Brian, is, one, the significant haircut on revenue and the aggressive expense management actions that we took. So we've taken about $45 million in expenses out of the business over the last three quarters, and obviously services is a large component of that.

From a virtual perspective, I have to say the teams are executing very well. The customer organizations are adapting incredibly well. There are all kinds of creative solutions being employed. There's very little falloff in productivity and efficiency.

I think I heard this right; you were able to pivot with one customer in terms of their e-commerce functionality in six days. As we think about customers adjusting in real-time to their supply chain needs, are you able to really move that services capacity around and help them within days and months as they struggle with this dynamic?

Yes, we are. We've seen amazing adaptability. That six-day pivot was with a distribution center that switched from retail replenishment to direct-to-consumer. We had another customer that was impacted because their distribution center was closed by the local government. We suggested that they start shipping from their stores, and they were able to adapt and put staff in the store to fulfill orders, rolling out the Manhattan Active Omni solution to ship products directly from their stores—all in a span of six days. It's pretty amazing.

Hi, Eddie and Dennis. Eddie, I have a quick question in reference to your comment about the 20% improvement in your sales pipeline. Just curious how much of that pipeline improvement did you see after the first week of March?

It was pretty consistent across the quarter, Yun, actually. I know it might be surprising, but I can't fully explain why, but it was spread pretty equally across the quarter. One hypothesis could be that some businesses are sort of idling and taking the opportunity to focus on strategic projects, which may be one reason for the steady pipeline.

Can you talk about some of the trends you're seeing amidst COVID-19? I know you mentioned it in your prepared remarks, but isn't there a greater motivation for customers to move to the cloud sooner than later? I know you said that the cloud deployments tend to be more gradual. But are you seeing customers perhaps thinking about accelerating their deployment cycles once the spending environment returns to normal?

I would say that trend is true independent of the COVID situation. Over the last 12 to 24 months, we haven't seen any major shifts or acceleration of that type. There hasn't been enough time, frankly; businesses have been focused on managing high volumes and adapting strategies to keep moving forward, not shifting infrastructure deployments. We expect the longer-term trend towards cloud adoption to continue, but the immediate impacts haven't shifted significantly.

We're not splitting out the services margin profile, Yun. We could see a revenue uplift if demand just stamps back, but it seems businesses will open gradually, regionally, and state-specific, so I'm not sure there will be a rapid snapback. However, we are operating effectively in a virtual environment, which might dull that immediate recovery a bit, since we're already managing reasonably well.

Eddie, starting with you. In your prepared remarks, you mentioned that you're seeing what you referred to as a tail shift becoming more important to some of your customers. Can you provide a deeper explanation, perhaps with respect to some examples?

Certainly, Mark. Simply put, it's a move away from any brick-and-mortar selling to direct-to-consumer. That’s with the exception of some central businesses that remain open. Most other sectors have been forced to shift to direct-to-consumer operations. Customers with seasonal products are also adopting aggressive online sales strategies to avoid being stuck with unsold inventory. This shift is translating into high volumes of direct-to-consumer business.

Supply chain solutions require very significant commitments in terms of higher amounts from customers. It often requires face-to-face meetings to close deals. I'm wondering how the company is managing through the current disruptions without on-site pilots or face-to-face meetings?

Suffice to say, there are no face-to-face sales meetings, product demonstrations, or any of that happening; all meetings are conducted virtually. I have to say our tech infrastructure for our 3,500 employees worldwide has not only held up but has performed flawlessly. We've implemented special support programs for those shipping essential commodities to ensure they have 24/7 support for high volumes. As for sales and marketing, all these meetings are happening virtually. The world is becoming more comfortable with virtual meetings, whether it's through video conferencing tools like Webex, Teams, or Zoom. While we'd prefer to meet our customers and prospects in person, our technology allows us to remain close to our clients.

I wanted to go back to the idea of Manhattan as a net beneficiary coming out of this. About the 20% sequential increase in the pipeline, is that a result that’s actually better than seasonally it might be the case for this point in the year? Are you already starting to see lead generation uplift due to the current environment?

No, not really, Joe. To be perfectly honest with you. During the first part of the year, we were seeing really no impact from the COVID situation. It was only towards the latter part of the quarter that we started to see some effects. So I don't think the increase in the pipeline is significantly driven by the pandemic. However, we are seeing a disproportionately high level of interest in our cloud solutions and supply chain capabilities. A broader product footprint and our geographic expansion are also contributing factors to the pipeline growth.

As demand for WMS in the cloud pipeline has been a bit of an accelerant. We continue to see the pipeline strengthen on the WMS side.

Eddie speaking here. Just to clarify, in my prepared remarks, I mentioned that approximately 20% of our near-term to medium-term services revenue has been impacted by retail verticals. That was not just a coincidence that matches our full-year services guidance reduction; we've seen disproportionate impacts from the specialty retail and department store sectors. In contrast, life sciences, grocery, and the 3PL sectors are moving up a little bit.

There are no further questions at this time.

Okay. Very good. Thank you, Jesse, and thank you everybody for joining the call. Thank you, as always, for your support of Manhattan Associates. We'll look forward to speaking with you again in about 90 days, and we certainly hope that everybody out there is safe, remains safe, and that we're all in a better spot 90 days from now. Good afternoon.

This concludes today's conference...