There's been a lot of demand for companies trying to take advantage of the cloud computing revolution, and the demand for innovative cloud solutions has led many companies to seek to offer platforms that can meet their clients' needs. Manhattan Associates (NASDAQ: MANH) has worked hard to integrate supply chain management tools into a user-friendly cloud format, and over the long run, that's been an important key to the company's long-term growth prospects.
Coming into Tuesday's fourth-quarter financial report, investors were prepared to deal with some less-than-stellar financial results as the company continued to make its transformation toward becoming fully in line with developments in cloud computing. Yet sales and earnings dipped from year-ago levels, forcing investors to be patient once more. Let's take a closer look at Manhattan Associates and what's ahead for the supply chain specialist.
Image source: Manhattan Associates.
Manhattan Associates faces headwinds
Manhattan Associates' fourth-quarter results showed some of the same difficulties that the company has faced in recent quarters. Revenue was down 2.4% to $144.1 million, which was a bit worse than most of those following the stock had expected to see. Net income was down a steeper 18%, and even after accounting for one-time issues, adjusted earnings of $0.45 per share were still down from year-earlier levels and just matched the consensus forecast among investors.
Tax reform had a net negative impact in the immediate term. The company took a $2.8 million net charge in the quarter, with the charged blamed on both taxes on foreign earnings and the revaluation of deferred tax assets.
There was a tug-of-war among Manhattan Associates' various revenue sources. Cloud subscription revenue more than doubled from the year-ago quarter, but it still made up just a puny 2% of total sales. Maintenance and hardware-based revenue were also higher compared to the prior year's quarter. But huge declines in software licensing revenue showed the impact that can come from moving toward a recurring revenue model, and a sizable drop in services-based revenue also hurt Manhattan's top line.
Manhattan Associates kept seeing weakness concentrated close to home. In Europe, the Middle East, and Africa, sales gains amounted to almost 25%, and operating income jumped more than a third. The Asia-Pacific segment saw smaller but still marked progress from year-ago levels. But performance in the Americas was weak, with a 7% drop in segment sales translating to 8% lower profits.