Good afternoon. My name is Julian Bell and I'll be your conference facilitator for today. At this time, I would like to welcome everyone to Manhattan Associates Q4 2024 Earnings 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. As a reminder, ladies and gentlemen, this call is being recorded today, January 28, 2025. I would now like to introduce you to our host, Mr. Michael Bauer, Head of Invest Relations of Manhattan Associates. Mr. Bauer, you may begin your conference.

Great, thank you Julian. Good afternoon everyone. Welcome to Manhattan Associates 2024 fourth 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 of 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 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 year 2023 and the risk factor discussion in that report, as well as any risk factor updates we provide on subsequent Form 10-Qs. We note the turbulent global macro environment could impact our performance and cause the actual results to differ materially from our projections. We're 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.

Thanks, Mike. And good afternoon, everybody. Before we start, I'll just note that I've got a little bit of a sore throat, so I apologize if my voice is a bit croaky. But thank you for joining us as we review our results for the fourth quarter and full year 2024, as well as our outlook for 2025. So 2024 was another very successful year for Manhattan. We surpassed the $1 billion total revenue milestone and achieved new records in RPO, total revenue, operating profit, free cash flow, and earnings per share. I'm also pleased to share with you that our Q4 RPO performance exceeded our expectations. Now we're entering 2025 with strong business momentum and we're optimistic about the growing market opportunity. We do remain cautious on the global economy though, which has become more acute. Near-term headwinds for our services business have surfaced as about 10% of our customers with in-flight implementations reduced their planned services work for the upcoming calendar and fiscal year. And we've adjusted our outlook accordingly. Now services continue to be very important to Manhattan - firstly, because that team ensures our customers' success, and secondly, it keeps us close to our customers. And these tight partnerships help us provide clarity on our customers' needs, which in turn allows us to incorporate that into our future waves of innovation, helping us drive future subscription growth. Now, in 2025, we'll have a record number of customer implementations, and those customers will continue to spend significantly on Manhattan Services, albeit a little less than we had previously planned. So to summarize, this shift in professional services work for future periods, some deal pushes that we highlighted throughout 2024 and to a lesser extent, reduced customization and higher part utilization will cause services revenue to trough in the first quarter of 2025. With new service implementation projects steadily increasing throughout 2025, we anticipate solid sequential services revenue growth in the middle of the year before returning to year-over-year growth in Q4. Importantly though, our business fundamentals are solid and we have a large opportunity in front of us. And just like Q4, Q1 is off to a great start from a new software bookings perspective. And we entered 2025 with the benefit of several growth drivers, which include the acquisition of new customers, conversions of on-premise customers to the cloud, and cross-selling into our growing unified product portfolio. These growth drivers, along with our strong pipeline, provide us confidence that we'll achieve over 20% cloud subscription revenue growth over the next several years, with cloud subscription revenue surpassing services revenue likely by the end of 2026. Now let's pivot to our quarterly results just for a moment. Q4 was a record quarter that exceeded expectations. Revenue increased 7% as reported to $256 million, highlighted by 26% growth in cloud, and adjusted earnings per diluted share increased 14% to $1.17. RPO or remaining performance obligation increased 25% to $1.8 billion. And if foreign exchange headwind impacts are removed, RPO exceeded $1.8 billion in prior outlook. In Q4, customer satisfaction levels remained high. Win rates were strong, at about 70%. And demand for our client solutions was solid across our product portfolio. From a vertical perspective, retail, manufacturing, and wholesale continue to drive more than 80% of our bookings in the quarter. And across our solutions, the sub-verticals are pretty diverse. Some of the cloud deals that we won this quarter include a global multi-brand specialty retailer, a diversified healthcare services company, a global home furnishings company, a supermarket chain, a global life sciences company, and a global designer, retailer and distributor of outdoor products, among many others. In Q4, about one quarter of our new bookings was generated from net new logos, and we continue to have a healthy mix of conversions, upsells, and cross-sells. We believe this demonstrates the many and varied opportunities for sustainable future growth. Our pipeline continues to be strong with solid demand across our product suites. Net new potential customers represent about 35% of that demand, and we have significant conversion opportunities. As we enter 2025 with just a little over 80% of our on-premise customers yet to begin their migration to our cloud solutions. A key driver in our strong solutions pipeline is Manhattan's commitment to innovation. In 2024, we invested about $138 million in research and development. This equates to nearly $1 billion of total investment across our supply chain planning, execution, and omni-channel solutions since we began our journey to the cloud. As I stated before, I believe this level of consistent commitment is unmatched in our industry, and our investments are certainly paying off. For example, late in 2024, we launched Manhattan Active Supply Chain Planning. We introduced Iris, our next iteration of Point of Sale, and developed numerous advancements across supply chain execution. And this innovation is expanding our total adjustable market, and interest levels from our customers and prospects are certainly encouraging. In Q4, we signed our first Manhattan Active Supply Chain Planning customer. We closed two significant Point of Sale transactions, widened our leadership position in supply chain execution, and strengthened our already industry-leading levels of customer satisfaction. Turning now to some specifics of our products. On the Point of Sale front, 2024 was a good year for us in terms of successful deployments with leading retail brands. We successfully deployed our Point of Sale systems rapidly in scale with leading retailers such as PacSun and Arc'teryx. Both of these customers were able to roll out cloud-native Point of Sale solutions to their entire store fleet within a matter of weeks. And both of those companies were kind enough to speak on our behalf at the National Retail Federation Conference just a few weeks ago, discussing our solutions at a number of different settings at that conference. At the 2024 holiday peak data, we're finally seeing equilibrium being reached between the percentage of sales transacted online and in-store. As we suspected when we entered the Point of Sale business a few years ago, it's clear that store presence and performance remains a vital ingredient for the vast majority of retailers. We believe that a large-scale store technology replacement cycle is emerging, which is going to decouple hardware from software in the store. In many of those store systems, customers are now running on two operating systems in the store, and sometimes even all three of the major operating systems. Now, nowhere was the renewed interest in Point of Sale more apparent than the National Retail Federation Conference. The customer activity level at our booth around Point of Sale far outpaced anything we'd seen in prior years. This uptick in interest in Point of Sale was undoubtedly driven, at least in part, from our recent terrific showing in the Forrester Wave Point of Sale. For the first time, we were named a leader. We believe this reflects our sustained investment in designing and building a world-class user experience, industry-leading feature depth, and truly differentiated omnichannel capabilities, as well as our unmatched ability to scale during peak periods. Last week, and for the sixth time, we were named a leader in the Forrester omnichannel order management wave. No other software provider has ever received this distinction six times, and certainly no other provider has been named the leader in both Point of Sale and order management. A final note on Point of Sale in Q4, we won what we believe to be one of the most significant Point of Sale opportunities available in the Americas in 2024. We were honored to be selected by a leading tool and equipment retailer to power their next-generation store systems. This represents an important milestone for us, as our leading technology platform and next-generation associate experience allowed us to demonstrate differentiating value outside of our historic sweet spot of the smaller footprint specialty retail stores. Moving on to one of our other newer offerings, as I noted earlier, we signed our first Manhattan Active Supply Chain Planning customer in the quarter, and we anticipate having this pet supplies retailer live with planning by the middle of the year, at which point they'll use Manhattan Active Warehouse Management, transportation management, store fulfillment, and planning. This early adopter certainly shares our belief that the combination of cloud-native technology and unified applications is key to enabling operational excellence. To wrap up our product update, I'll mention that our transportation management business ended the year on a high note. We closed several important and highly competitive deals right at the end of the year, with a few of these being replacements of other Gartner MQ Magic Quadrant Leaders. We believe the power of the unified supply chain execution platform and our leading technology once again made the difference. So that concludes my business update. Dennis is going to provide you with an update on our financial performance and outlook. Then I'll close our prepared remarks with a brief summary before we move to Q&A.

Okay. Thanks, Eddie. As Eddie highlighted, in 2024, we set records in RPO, total revenue, operating profit, free cash flow, and earnings per share. Congratulations to all our team members around the globe for great execution throughout the year in a challenging macro environment. For both the quarter and the year, we delivered a strong balanced financial performance in top-line growth and operating margin. Both our Q4 and full-year results exceeded expectations and compare favorably to the Rule of 40. I'll start with recapping our financial performance for the quarter and year. While FX volatility persists, it did not have a meaningful impact on our Q4 full-year total revenue growth. However, it was a $23 million headwind to full-year RPO growth and a $33 million headwind to sequential RPO growth. FX also had a meaningful impact on our 2025 guidance, which I'll discuss later. Now to our results. All growth rates are on an as-reported year-over-year basis unless otherwise stated. For Q4, total revenue was $256 million, up 7%, and full-year revenue totaled $1.04 billion, up 12%. Excluding license and maintenance revenue, which removes the revenue compression from our cloud transition, Q4 revenue growth was 11% and full-year 16%. Q4 cloud revenue totaled $90 million, up 26%, with full-year revenue totaling $337 million, up 32%. We had record bookings in Q4 as we closed out 2024 with RPO of $1.8 billion growing 25% year-over-year and 6% sequentially. Excluding FX impacts, RPO exceeded the high end of our $1.8 billion outlook by $13 million as we experienced strength from across our Manhattan Active suite of products. Service revenue of $119 million was up slightly compared to the year-ago period and was $2 million below our prior expectations as budgetary constraints were more pronounced for several customers. Our Q4 adjusted operating profit was $90 million with an operating margin of 35.3%, representing over a 300 basis point year-over-year improvement. Full-year adjusted operating profit totaled $362 million with a 34.7% operating margin, which represents a 440 basis point improvement over 2023. Both Q4 and 2024 results were driven by strong cloud revenue growth, combined with solid operating leverage as our cloud business scales. Our Q4 earnings per share increased 14% to $1.17, and GAAP earnings per share declined 1% to $0.77. The GAAP decline includes a nonrecurring $7 million or $0.09 charge from a health insurance claim on behalf of an employee. Excluding this claim, GAAP earnings per share would have increased 10%. This resulted in a full-year adjusted earnings per share increase of 26% to $4.72 and GAAP earnings per share to increase 24% to $3.51. Moving to cash, Q4 operating cash flow increased to 18% to $105 million with a 39.7% free cash flow margin and a 35.9% adjusted EBITDA margin. Our full-year operating cash flow was $295 million while generating a 27.5% free cash flow margin and 35.3% adjusted EBITDA margin. Turning to the balance sheet, deferred revenue increased 17% year-over-year to $279 million. We ended the year with $266 million in cash and zero debt. Accordingly, we leveraged our strong cash position and invested $44 million in share repurchases in the quarter, resulting in $242 million in buybacks in 2024. Given the strength of our balance sheet, solid cash collections, and increasing visibility, our Board increased our share repurchase authority to $100 million, up from the prior customary $75 million. Turning to guidance, our financial objective is to deliver sustainable double-digit top-line growth in top quartile operating margins benchmarked against enterprise software comps. As noted on prior earnings calls, our goal is to update our RPO outlook on an annual basis. Additionally, as previously discussed, 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. All guidance references made on today's call will be at the midpoint of their respective ranges and remind investors that we provide our preliminary parameters using FX rates at the conclusion of Q3. For RPO, we are now targeting $2.11 billion to $2.15 billion with the $2.13 billion midpoint, representing 20% growth. Removing the $33 million FX headwind, our 2025 RPO outlook is $13 million higher than our preliminary parameters. For the full-year 2025 guidance, we now expect total revenue of $1.06 billion to $1.07 billion. The $70 million difference from our preliminary parameters consists of $20 million of FX headwind, and as Eddie highlighted, a reduction in services revenue. This will result in Q1 total revenue of $256 million to $258 million, and we are targeting total revenue of about $266.5 million in Q2, $273 million in Q3, and $269 million in Q4. For 2025 adjusted operating margin, we expect a range of 33% to 33.5% and FX in the range is unchanged from our prior parameters. On a quarterly basis, at the midpoint, adjusted operating margin is expected to be about 31% in Q1, 33.5% in Q2, 34.5% in Q3, and accounting for retail peak seasonality, 34% in Q4. This results in a full-year adjusted EPS guidance range of $4.45 to $4.55 and a GAAP EPS range of $3.05 to $3.15. Included in GAAP are $0.15 of non-recurring charges, predominantly from a health insurance claim. For Q1, we are targeting adjusted earnings per share of $1.01 to $1.03 and GAAP earnings per share of $0.71 to $0.73. For Q2 through Q4, we expect GAAP earnings per share to be about $0.38 lower than adjusted EPS per quarter, with the vast majority accounting for our investment in equity-based compensation. Here are some additional details on our 2025 outlook. For the full year 2025, we expect cloud revenue of $405 million to $410 million. At the midpoint, this represents 21% growth and FX, the midpoint is unchanged from our earlier parameters. On a quarterly basis, this assumes $93.5 million in Q1, $99.5 million in Q2, $105 million in Q3, and $109.5 million in Q4. For services, we now expect a range of $494 million to $500 million and assumes steady growth improvement throughout the year as new service projects ramp. On a quarterly basis, this assumes $117 million in Q1, $127.5 million in Q2, $130.5 million in Q3, and accounting for retail peak seasonality, $122 million in Q4. For maintenance, we expect a range of $118 million to $120 million or a 14% decline at the midpoint on attrition to cloud. On a quarterly basis, we expect Q1 to be $31.5 million, Q2 to be $31 million, Q3 to be $29 million, and Q4 to be $27.5 million. We expect license revenue to be roughly $13.5 million or 1% of 2025 total revenue. For Q1, we expect $8 million of license revenue and then between $1.5 million to $2.5 million per quarter. For hardware, we expect revenue to be between $6.5 million to $7 million per quarter. For consolidated subscription, maintenance, and services margin, we are targeting about a 50 basis point year-over-year improvement for 2025. We expect our effective tax rate to be 21% and our diluted share count to be 62.7 million shares, which assumes no buyback activity. Lastly, as Eddie highlighted, to better assist investors in assessing our future cloud revenue growth, we are providing incremental color on our financial model that will not be updated on a regular cadence. Accounting for our solid RPO visibility, strong pipeline, and multiple growth drivers, we expect to achieve over 20% cloud subscription revenue growth for the next several years, and we'll continue to invest in world-class innovation to drive future growth. So in summary, 2024 was a great year, and we’re tremendously excited for 2025 and beyond.

Very good. Thank you, Dennis. Well, 2024 was a very successful year for Manhattan. In Q4, we achieved record bookings. As I mentioned before, Q1 is off to a great start as well, so we are entering 2025 with a very strong software selling motion for sure. While there's considerable FX noise and continued macro challenges are causing some near-term services headwinds, structurally, Manhattan's business fundamentals are very solid. We are excited about our growing market opportunity as we enter 2025. We're the industry leader with world-class technology. Record levels of R&D investment that are increasing our total addressable market and contributing to our 70%-plus win rates. We've got industry-leading levels of customer satisfaction and a strong pipeline with numerous drivers for durable growth. In closing, thanks everybody for joining the call, and thank you to our global team for all the great work that they do for our customers, and that concludes our prepared remarks. So Julian, we'd be happy to take any questions at this point.

Thank you. We will now be conducting a question-and-answer session. And our first question comes from Terry Tillman, Truist Securities.

Yeah. Thanks for taking my questions. Good afternoon, Eddie, Dennis, and Mike. I may have a sore throat too, here, Eddie. I have two or three questions. The first question is just related to the $127 million constant currency RPO. I think the last high watermark was way back in 4Q '21. That seemed like a solid print. But I'm curious, though, you said you got a strong start here in the first quarter. I've been asking repeatedly in the past whether you're starting to see seasonal effects, maybe where 4Q and 1Q are the strongest. Any more you could shed light on regarding 1Q activity and just confidence and visibility around near-term strength in cloud bookings during the first quarter.

Yes. I'm going to answer probably the same way I have previously, Terry. There doesn't seem to be really any seasonality other than sometimes in the middle of the year, it slows down a bit due to vacations, particularly internationally. But yes, Q4 was a record for us, and we are off to a strong start in Q1. So we are excited about that. The balance across the product portfolio, existing customers versus new customers, and across different geographies was certainly encouraging as well.

Yes. And just a follow-up question, maybe a bit of a tale of two cities. It sounds like software is actually quite resilient demand-wise; however, services are seeing some sluggishness. I'm curious about services, and maybe it's too early to tell, but part of this is a whole different model with the cloud, and you have three plus versions each year. And so I'm just curious where you think we are on cyclicality versus maybe structural dynamics with services going forward? Then I have a last question.

Yes. There's no question that we are becoming much more efficient at implementing our software, and that's having some impact. Being the unequivocal leader in the space, there are more Tier 1 partners that are implementing our software, so that's influencing our revenue as well. But there is no question we've seen pressure on budgets. As our customers went into their budgeting cycle, around August, September, October of last year, they were more bullish about how much they wanted to get completed in calendar year 2025. We've got a cadre of fabulous Tier 1 companies that will continue to implement our software during 2025 and spend significant services dollars with us, just not quite as much as their teams anticipated when they originally budgeted in the fall of last year. So I think they had their budgets pulled back a little bit, and that trickles down to us.

Got it. And just thanks for that Eddie. And Dennis, just another question in terms of free cash flow. I know you don't typically guide to like a hard range or a number for free cash flow or free cash flow margin, but I'm just curious if there are any kind of non-operating items that might impact cash flow or maybe they don't. But just anything you could share about the relationship of free cash flow to either operating profit or EBITDA or anything related to one-time items we should think about for free cash flow. Thank you.

Yes. I would say just in terms of cash flow through 2025, Terry, we are going to be at a run rate of about $300 million a quarter roughly and expect to close out with about $1.2 billion on a full-year cash collection basis.

Thank you, Terry.

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

Great, thanks for taking my questions. SAP on their earnings call overnight touched on the dynamic where large customers are also making cloud commitments. Initially, maybe it's only one-third of the potential scope, and then the expectation is these customers come back one or two years later with another contract. Is this dynamic happening with your WMS engagements? I know it's typically you might not capture the full warehouse footprint, and that just represents room for future expansion. Is any of that happening in kind of the changes and service intentions you are noting here?

Not really, Joe. That's happened quite a lot for several years now. Often, our customers may have 10 or 15 distribution centers and commit to one, two, or three. That is not a new dynamic for us, we've seen it for several years and expect that to continue. It's not having any near-term impact.

Okay, thank you for that. Could you maybe provide an update on your year-end RPO mix? I think in the past, you've given a breakout of WMS Active on the TMS. I'm wondering if you got some big wins and Point of Sales at year-end. Is that product mix shifting, and does that actually contribute to a shift in kind of services intensity around what needs to happen, which factors into kind of your go-forward ‘rightsized headcounts’?

Yes. Great questions. In reverse sequence, the answer is not really. There is not a big difference across the portfolio in terms of services attach rate. Whether it be planning, Point of Sale, WMS, TMS, or OMS, the attach rate is directionally similar. As for the breakdown of RPO, we don't provide a detailed breakdown. The preponderance certainly comes from WMS, followed by OMS and TMS, and then the others.There is no question. It is slow. There's nobody more impatient about this than I am. But Point of Sale, implementation activity, subscription activity, and sales activity definitely seem to be picking up. So we are encouraged by that, for sure.

Great. I’ll leave it there. Thank you.

Great. Thank you, Joe.

Our next question comes from Brian Peterson with Raymond James. Please proceed.

Thanks. Maybe just following up on Joe's question. Eddie, I think in the past, you've mentioned some stats on the number of active WM customers that are signed or live. Just as we think about the progress that you've made as we have about 20% of the transition, any help on maybe giving a little more specifics on where we stand entering that transition in '25.

Yes. In terms of the number of live customers, we are a little more than 150 live customers, about 600 facilities around the world. We are just a tick below 80% of our customers still on-premise. So the inverse of that is not quite 20% have migrated.

I wanted to follow up on Point of Sale. I attended NRF as well and I agree that there was definitely interest. Considering the various product and macroeconomic cycles we’ve witnessed in the past, I would like to hear your thoughts on customer optimism regarding the upcoming cloud-based Point of Sale refresh, and what kind of momentum you anticipate for 2025. Thank you, Eddie.

Yes, I don't know if I can quantify exactly how much momentum, Brian, I would love to be able to do that. I'm trying to stay away from the specifics. But in terms of the enthusiasm for replacement cycles, we've been talking about this for a little while. I think there is enthusiasm around upgrading technology, store system technology. Some of it is driven by the hardware aging out in stores. There is a lot of enthusiasm and interest around the upgrade. We certainly saw a lot of, frankly unsolicited inbound interest at the conference, which was encouraging.

Great to hear. Thanks Eddie.

Thank you, Brian.

Our next question comes from Quinton Gabrielli with Piper Sandler. Please proceed.

Hi guys. Thanks for taking our questions here. Maybe first, it would be helpful to understand the magnitude of deal pushouts that we talked about in Q2 and Q3 and how much that impacted the strong constant currency Q4 bookings. Is it fair to assume that all of those prior push deals closed in the quarter, or is there incremental opportunity in Q1 and Q2 for those to catch up?

No. They have not all closed. We're obviously not going to give detailed specifics around that. But some of them have closed and some haven't. The good news is of all of those deals across the last 12 months, that we have been in the pipeline that haven't closed just yet, we haven't lost them, right? There are certainly circumstances where a company will enter into a buying cycle, and as they get towards the end of it, they decide they're going to push out a full year of the budgetary cycle. So not we don’t like it, but it's not an uncommon phenomenon.

Got it. That's helpful. I understand. And then maybe on the services line, obviously, it is creating some messiness here in 2025. I understand there is some FX that's out of your control, but does this accelerate the company's desire or decision to focus more on leveraging large partners and accelerating your cloud transition first and kind of pushing the services aside? How do you balance that decision of pushing services while also accelerating that cloud growth? Thanks.

That's a great question, Quinton. As I said in my prepared remarks, and we've been frankly saying this for a very long time, in 2026 we expect software revenue to exceed services revenue, okay? Obviously, with the growth of over 20% on the software line, that makes perfect sense. That trajectory will be continue in '27, '28, and beyond. Software is continuing to grow at a faster rate than services. That being said, services are still very important to us, as we have to ensure that our clients gain success from that software. Our customers are an essential part of our innovation source. Staying very close to them is also crucial to understand the market trends we should be meeting with innovation. So, again, we have no intentions of moving away from the services business. We expect software revenue to continue to grow faster, with that line crossing in 2026.

Hi Quinton, it's Dennis Story. I just need to want to apologize. On the 2025 free cash flow target should be $300 million with an end-of-year full year, $1.2 billion in cash collections.

Got it. Thank you both.

Thank you. Our next question comes from Mark Schappel with Loop Capital Markets. Please proceed.

Hi, thanks for taking my question. Eddie, starting with you, what's the sentiment from CIOs that you're seeing out there on moving forward with big WMS or even TMS upgrades or expansions? Are you seeing these initiatives being crowded out by other priorities?

From our perspective, we have a much more diverse customer base than just retail. But if we think about the concentration of conversations that you are able to have in one place at NRF, which is obviously retail, my view would be that the tone was much more enthusiastic than it was 12 months prior.

Great. Thank you. Switching gears a little bit here. With respect to the new supply chain planning solutions, I was wondering if you could provide some additional color or comments on the reference customers that you've built up during the quarter.

Yes. We signed our first customer in the quarter, which was somewhat of a surprise. When you launch mission-critical applications like supply chain planning, our prior call estimated we would close our first customer around mid-year 2025. We couldn't be more excited that just 65 days after launch, we closed our first deal. We continue to see a ton of enthusiasm around bringing supply chain planning and supply chain execution together on a unified platform. However, it typically takes a while for that enthusiasm to translate into deals closing. To have our first visionary and early adopter customer after such a short period gives us reason for enthusiasm.

Great. Thank you.

Thank you, Mark.

Thank you. Our next question comes from William Jellison with D.A. Davidson. Please proceed.

Hi, thanks for taking my question. The first relates to professional services. I wanted to get an update because in the past, you've spoken about some strong increases in efficiency within that organization, in part because of record low attrition in the services labor force. I was just curious on where we are with those kinds of trends, and in light of the updated expectations for services in 2025, how are you thinking about hiring in that organization?

Yes. Great question. Efficiency continues to grow, and we're certainly seeing that. Our attrition is very low in our professional services organization, driving efficiency further. As for hiring, we've got to balance supply and demand wisely. We've seen a downtick in demand, so we will keep a very close eye on what the hiring profile in services looks like for 2025.

Great. Thanks for taking my question.

My pleasure. Thank you, William.

Our next question comes from Dylan Becker with William Blair. Please proceed.

Hi, gentlemen. Appreciate it here. I don't want to continue hammering on the point of services, but Eddie, any additional color on the types of projects that are being pushed here? You talk about the number of record customers onboarding expected to go live in '25 along with growing enthusiasm. But what's causing lower spending? How can we think about the mix of that $50 million impact between internal efficiency and partnership versus what's being pushed out from a project perspective?

Yes. We won't provide specifics on how that $50 million breaks down. The phenomenon is this: When a customer has a large program, such as WMS rollout across larger states or multiple brands, instead of rolling out in, for example, 10 distribution centers, they may only do 7. No projects have been canceled, but budgets have been clipped, leading to slower rollouts.

Okay. That's really helpful. Maybe one more sticking with you, Eddie here. If we consider the early momentum of adaptive planning and the importance of planning and forecasting here, could you help us understand where the industry sits from a data readiness perspective, particularly regarding that adoption curve? Does this tie into cloud modernization? How does that flow through to their willingness or propensity to get more real-time in that data and how this can accelerate our fuel performer? Thank you.

Yes, the data is ready. The data is available and ready for sure, because they run generally overnight batch jobs. They have all the data queued up and run a large batch job overnight to create a forecast on a plan. We're able to run it in real-time rather than accumulating data and running it overnight, enabling the planning process to catch up with execution because the execution systems have gained pace over the last decade. There is a lot of change management going into moving from a batch-based system to a real-time processing system.

Very helpful. Thanks, Eddie.

Our final question will come from George Kurosawa with Citi. Please proceed.

Hi, thanks for taking the questions. Sorry to start with politics here, but maybe just kind of the current house view on how you are considering the potential impact of tariffs on your business and if there are any changes to your positioning?

Yes, sure. From our perspective, we don't expect tariffs to impact our business. We monitor the situation from a supply chain perspective and any impacts to our customers. Given that we are largely a finished goods supply chain systems provider, most of what we do happens when the goods hit the ports from wherever they come from. So there is likely to be a little impact on Manhattan Associates.

Okay. Makes perfect sense. And then I did want to ask on the margin guide, which perhaps ticked down a tiny bit from your initial target. Intuitively, I would assume that with software being relatively stronger than services, maybe there would be some mix benefit. Are there any OpEx lines that you're looking to invest more in? Just any kind of color on the change there?

We are always going to increase our investment in research and development in 2025. We've been proud to consistently say for the last 15 years that we will spend more in research and development this year than we did last year. In 2025, we will invest more money into sales and marketing, given our broader product portfolio. Of course, we've got the FX noise and some impacts from a top-line revenue decline.

Makes sense. Thanks for taking the questions.

My pleasure George. Thank you.

There are no further questions at this time. I would like to turn the floor back to Eddie Capel for closing remarks.

Thank you, Julian. Thanks, everybody, for your patience with my croaky voice. I mentioned before, while we’ve seen some choppiness and a little downturn in the services business for 2025, our fundamentals are very strong due to our product innovation. We're continuing to innovate, and the demand for that innovation is solid. We're as encouraged as we've ever been about our long-term future, and we look forward to telling you more about that in 90 days or so. Thanks again.

And with that, that does conclude today's teleconference. We thank you for your participation. You may disconnect your lines at this time.