MANHATTAN ASSOCIATES INC

In the three and six months ended June 30, 2018, we generated $141.9 million and $272.4 million in total revenue, respectively. The revenue mix for the three months ended June 30, 2018 was: license revenue 9%; cloud subscription revenue 4%; maintenance revenue 26%; services revenue 58%; and hardware revenue 3%. For the six months ended June 30, 2018, the revenue mix was: license revenue 7%; cloud subscription revenue 4%; maintenance revenue 27%, services revenue 59%; and hardware 3% for the six months ended June 30, 2018.

Restructuring Charge.  During the second quarter of 2017, we recorded a restructuring charge of approximately $3.0 million pretax ($1.9 million after-tax or $0.03 per fully diluted share) due to the elimination of about 100 positions due to retail sector headwinds, aligning services capacity with demand. The charge primarily consists of employee severance, employee transition cost and outplacement services. The charge is classified in “Restructuring charge” in the Company’s Consolidated Statements of Income.

Services revenue.  Services revenue decreased $4.1 million, or 2%, in the six months ended June 30, 2018 compared to the same period in the prior year. Services revenue for the Americas and APAC segments decreased $4.0 million and $3.0 million in the six months ended June 30, 2018 compared with the six months ended June 30, 2017, respectively, and increased $2.9 million in our EMEA segment. The decline in services revenue in the Americas and APAC segments was primarily due to lower license revenue for the Americas segment, some retail customers delaying project implementations and upgrades, combined with our Services teams operating at high efficiency improving the speed of implementations. The increase in services revenue in the EMEA segment is primarily due to solid license deal activity in 2017 and customer-specific initiatives in conjunction with customer upgrade activity.

Our investing activities for both the six months ended June 30, 2018 and 2017 consisted of investment purchases and capital spending. For the six months ended June 30, 2018, we used $9.3 million in investing activities, of which $5.2 million was used in net-purchases of short-term investments, while the remainder was used for capital expenditure to support company growth. For the year ended June 30, 2017, we used $12.2 million in investing activities, of which $9.5 million was used in net purchases of short-term investments while the remainder was used for capital spending.

Our largest market, retail, is experiencing significant business disruption and transformation, primarily driven by digital commerce.  We believe that disruption is causing many traditional retailers to assess the challenges of the transformation and evaluate their store networks and costs, as they face increasing competitive pressures from ecommerce retailers. Since our solutions often require our customers to make significant capital investments, traditional retailers may be delaying purchase decisions on our products.  While this disruption may present significant opportunity for our company, we believe extended sales cycles for large license sales and cloud subscriptions could have a material adverse effect on our revenues and results of operations.

In addition, we believe the retail business transformation from retail brick-and-mortar to technology-enabled omni-channel commerce models will be a multi-year trend.  Consequently, we cannot predict when the repercussions from the disruption in retail may moderate or end.