Event
Summary
Manhattan Associates celebrated a record second quarter with license revenues
reaching an all-time high of $5.7 million and services/resale hardware
topping $28.9 million. Total revenue of $34.6 million is an increase of
22% from the first quarter of fiscal 2000 and an increase of 75% from
the second quarter of fiscal 1999. The company extended its positive bottom
line in the second quarter with $4.5 million in net earnings, giving it
four consecutive quarters in the black.
Figure
1.
Manhattan
also announced continued progress on its InfoLink initiatives. InfoLink
is the company's collaboration product for suppliers, retailers, logistics
providers to link Internet trading exchanges. The solution will use Microsoft's
XML schemas and BizTalk framework. The InfoLink Advisory Council, a group
of retailers who will participate in guiding InfoLink's focus and features,
gained as members leading retailers Nordstroms, Inc., The Limited, Inc.,
and Dillard's, Inc.
Other
events of note during the quarter include the signing of customers Staples,
Inc., Ingram Industries, Inc., and Innotrac Corp., as well as repeat business
at ToysRUs.com. The $9 billion Staples will implement Manhattan solutions
for advanced warehouse management, productivity tracking and labor management,
and pickline optimization at multiple fulfillment centers.
Market
Impact
Manhattan Associates has made significant strides in revitalizing its
business, but still has some hurdles to overcome. The second quarter results
demonstrate that the company was able to build on momentum gained in its
first quarter. Manhattan appears to be an efficiently run organization
and enjoys one of the highest gross revenue margins in the SCE market,
facts that help explain its excellent profitability over the last several
years.
Because
they interact closely with the physical characteristics of their environments,
warehouse management systems tend to require a significant level of customization
during their implementation. Manhattan's solutions exemplify this reality,
a fact borne out by the company's large percentage of services revenue,
62% for fiscal 1999. While an out-of-the-box solution may be an impractical
goal for many WMS vendors and clients, Manhattan's usually involve more
customization than most.
Its
strengths aside, Manhattan will need to continue efforts on its InfoLink
and other initiatives in order to spark its license revenue growth lest
it degenerate exclusively into a services organization. Licenses edged
lower as a percentage of total revenue to 16%, continuing a decline begun
in 1998 (see Fig. 2). Clearly, Manhattan's new products to be launched
over the next six to nine months are intended to sustain the recent dollar
growth in license revenues over the last two quarters. A latecomer among
the plethora of collaboration product offerings, InfoLink can greatly
boost new license growth if it is successful in beating out more established
offerings.
Figure
2.
Manhattan
and its fellow WMS vendors were joined recently on Wall Street by EXE
Technologies, a Dallas-based SCE vendor offering WMS linked to Internet
fulfillment. With three times Manhattan's license revenues in the second
quarter of 2000 (TEC estimate), EXE could spell trouble for the rest of
the SCE market, especially with the increased visibility afforded by its
new status as a public company.
User
Recommendations
Users should view Manhattan's recent results as a confirmation of its
ability to execute in its core markets. For companies operating in retail,
apparel, or consumer goods manufacturing who need solid warehousing or
transportation management capabilities only, Manhattan is a logical short
list candidate.
Companies
who are looking for support for e-commerce or marketplace initiatives,
such as e-procurement and Internet fulfillment will want to consider Manhattan,
but only in conjunction with vendors that offer web front-ends and transaction
processing engines (such as CommericalWare), at least until InfoLink is
generally available and has proven itself as a viable B2B platform.