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Manhattan Associates Inc. Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: May 4, 2012 03:28PM
Manhattan Associates Inc. (MANH) filed Quarterly Report for the period ended 2012-03-31.
Highlight of Business Operations:Services revenue. Our services business consists of professional services (consulting and customer training) and customer support services and software enhancements. Services revenue totaled $70.4 million, or 77% of total revenue, with gross margins of 54.9% for the three months ended March 31, 2012. Professional services accounted for approximately 65% of total services revenue and approximately 50% of total revenue in the three months ended March 31, 2012. Our operating margin profile may be lower than those of various other technology companies due to our large services revenue mix as a percentage of total revenue. While we believe our services margins are very strong, they do lower our overall operating margin as services margins are lower than license revenue margins.
Our CSSE revenues totaled $23.7 million for the three months ended March 31, 2012, representing approximately 35% of services revenue and approximately 25% of total revenue in the three months ended March 31, 2012. The growth of CSSE revenues is influenced by: (i) new license revenue growth, (ii) annual renewal of support contracts, and (iii) fluctuations in currency rates. Substantially all of our customers renew their annual support contracts. Over the last three years, our annual revenue renewal rate of customers subscribing to comprehensive support and enhancements has been greater than 90%. CSSE fees generally are paid in advance, and our CSSE revenue generally is recognized ratably over the term of the agreement, typically twelve months. CSSE renewal revenue is not recognized unless payment is received from the customer.
Services revenue. Services revenue increased $14.3 million, or 25%, in the first quarter of 2012 compared to the same quarter in the prior year due to an $11.4 million increase in professional services revenue and a $2.9 million increase in customer support and software enhancements. The increase in services revenue is primarily due to customer-specific initiatives in conjunction with customer upgrade activity and large license deals signed. Services revenue for the Americas, EMEA, and APAC segments increased $11.3 million, $0.4 million, and $2.6 million, respectively, in the first quarter of 2012 compared to the first quarter of 2011.
Hardware and other. Hardware sales decreased by $2.4 million to $3.1 million in the first quarter of 2012 compared to $5.5 million for the first quarter of 2011. Sales of hardware are largely dependent upon customer-specific desires, which fluctuate from quarter to quarter. Other revenue represents reimbursements for professional service travel expenses that are required to be classified as revenue and are included in hardware and other revenue. Reimbursements by customers for out-of-pocket expenses were approximately $2.5 million and $2.4 million for the quarters ended March 31, 2012 and 2011, respectively.
Operating income for the first quarter of 2012 was $17.9 million compared to $7.6 million for the first quarter of 2011. Operating margins were 19.6% for the first quarter of 2012 versus 10.5% for the first quarter of 2011. Operating income and margins increased primarily due to strong revenue growth and expense management in the current quarter.
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