2 0 1 6 A N N U A L R E P O R T
EXECUTIVE TEAM Eddie Capel President and Chief Executive Officer*Dennis Story Executive Vice President, Chief Financial Officer and Treasurer*Jeff Cashman Senior Vice President, Business DevelopmentTerry Geraghty Senior Vice President and Chief Human Resources OfficerBob Howell Senior Vice President, Americas*Nicole O’RourkeSenior Vice President and Chief Marketing OfficerLinda Pinne Senior Vice President, Global Corporate Controller and Chief Accounting Officer*Bruce Richards Senior Vice President, Chief Legal Officer and Secretary**Executive OfficersBOARD OF DIRECTORS John J. Huntz, Jr. Chairman of the Board of Directors Managing Director, Huntz & Co., LLCEddie Capel Director President and Chief Executive Officer, Manhattan Associates, Inc.Brian J. Cassidy Director Formerly Co-founder and Vice Chairman, Webforia, Inc.Edmond I. Eger IIIDirector Former President and Chief Executive Officer, OANDA CorporationJohn H. HeymanDirectorChief Executive Officer, SnapAVThomas E. Noonan Director Partner, TechOperators LLC Deepak Raghavan, Ph.D.Director Co-founder, Manhattan Associates, Inc. Adjunct Professor, Physics and Astronomy, Georgia State University FELLOW SHAREHOLDERS,2016 marked another year of strong performance for Manhattan Associates, as we delivered our fifth consecutive year of record revenue, operating profit, earnings per share and operating cash flow. Our results continue to showcase that the market is seeking out innovation leaders capable of helping them integrate technology solutions to more successfully navigate the complexity of today’s dynamic business environment. Our growth has come not only from geographic expansion and entry into new market sectors, but also from the ongoing retail paradigm shift, in which virtually every finished goods company is fast becoming a retailer. Brand manufacturers are seeing 20-30% annual growth in their direct-to-consumer channels. Consumer packaged goods companies are acquiring pure-play online brands. B2B ecommerce will be a $1.13 trillion market by 2020 in the US alone, with 72% of the market dominated by large, complex operations. As a result, traditional retailers are adjusting to the realities of disintermediation with their own investments: 62% plan to either improve on or implement ‘buy anywhere, ship anywhere’ capabilities over the next three years to retain and attract customers. As the market leader in enabling retail supply chain transformation, this shift toward direct and digital selling across industries promises significant opportunity for our business. Indeed, we see clients increasingly under pressure to adapt their capabilities and business models to increase capacity, lower costs and improve service—while further optimizing inventory, labor and transportation. As a result, there is a growing need for active technology solutions that are more adaptive and responsive to changing market conditions, while maintaining the ability to optimize large and complex operations. We are well positioned to empower companies across all industries with active solutions to achieve this goal. Our leadership in omni-channel operations and supply chain execution is buttressed by a favorable competitive landscape and our exceptional financial foundation. Our being debt-free coupled with a solid core business allows us to prioritize significant investment in innovation around three areas pivotal to making enterprises more active:• Enterprise Adaptability – To effectively serve their customers while also remaining profitable, companies must be able to scale operations quickly to meet variable demand (as orders and shipments during peak periods can require flexing beyond 10x average daily volumes). Our investments have created more responsive supply chain solutions such as Order Streaming for Warehouse Management and Adaptive Network Fulfillment for Order Management. Our solutions can be run either on premise or in the cloud, and we intend to provide frequent access to the latest product capabilities on an ongoing basis.• Customer Engagement – More than ever, today’s enterprises must leverage a holistic understanding of the consumer, using this knowledge to improve all aspects of selling, service and fulfillment. Manhattan Associates’ Enterprise Order Management solution has fast become a gold standard for omni-channel retail and brand operations. We are intent on extending this position to help revitalize the retail store, where 70+% of transactions still occur, by replacing the legacy Point of Sale with a comprehensive suite of next-generation store systems.• Associate Empowerment – As automation consumes foundational and commoditized tasks in the supply chain, it becomes increasingly incumbent on employees to serve more specialized, higher-level functions. In an environment where workforce turnover and utilization of seasonal labor is high—both in distribution and in the front-end of retail—purpose-built, mobile-first solutions are critical. Our innovation in this area is market leading, with new mobile and task-focused interfaces being introduced within every solution in our portfolio.2016 was a very successful year for Manhattan Associates on many fronts. Your company delivered record financial results, took market share, and expanded our addressable market. We focused on our customers and improved customer satisfaction. We attracted and retained the most talented supply chain and commerce professionals. Most importantly, we are excited about our prospects for 2017 and beyond—as we invest aggressively to help bring about the active future of enterprise technology.Thank you for your continued confidence in Manhattan Associates and your ongoing support.Sincerely, EDDIE CAPELPresident and Chief Executive Officer 10K UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
(cid:59) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2016
OR
(cid:133) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number: 000-23999
Manhattan Associates, Inc.
(Exact name of registrant as specified in its charter)
Georgia
(State or other jurisdiction of
incorporation or organization+ )
2300 Windy Ridge Parkway, Tenth Floor
Atlanta, Georgia
( Address of principal executive offices )
58-2373424
(I.R.S. Employer
Identification No.)
30339
( Zip Code )
Registrant’s telephone number, including area code: (770) 955-7070
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Common Stock, $.01 par value per share
Name of each exchange on which registered
The Nasdaq Stock Market LLC
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes (cid:59) No (cid:133)
Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes (cid:133) No (cid:59)
Note – Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Exchange Act from their
obligations under those Sections.
Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes (cid:59) No (cid:133)
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File
required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such
shorter period that the registrant was required to submit and post such files). Yes (cid:59) No (cid:133)
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to
the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. (cid:59)
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.
See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
(cid:133)
(cid:59)
Large accelerated filer
(cid:133) (Do not check if a smaller reporting company)
Non-accelerated filer
(cid:133)
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes (cid:133) No (cid:59)
The aggregate market value of the voting and non-voting common equity held by non-affiliates of the Registrant as of June 30, 2016 was
$4,591,996,136, which was calculated based upon a closing sales price of $64.13 per share of the Common Stock as reported by the Nasdaq Global
Select Market on the same day. As of January 30, 2017, the Registrant had outstanding 70,398,760 shares of Common Stock.
Accelerated filer
Smaller reporting company
The Registrant’s definitive Proxy Statement for the Annual Meeting of Shareholders to be held May 18, 2017 is incorporated by reference in
Part III of this Form 10-K to the extent stated herein.
DOCUMENTS INCORPORATED BY REFERENCE
MANHATTAN ASSOCIATES, INC.
Annual Report on Form 10-K
For the Fiscal Year Ended December 31, 2016
Table of Contents
Item Description
Page Number
4
11
19
19
19
19
20
21
22
35
37
62
62
62
63
63
63
63
63
64
65
66
Item Number
PART I
Item 1
Item 1A
Item 1B
Item 2
Item 3
Item 4
Business.............................................................................................................................................................
Risk Factors .......................................................................................................................................................
Unresolved Staff Comments .............................................................................................................................
Properties...........................................................................................................................................................
Legal Proceedings .............................................................................................................................................
Mine Safety Disclosures ....................................................................................................................................
PART II
Item 5
Item 6
Item 7
Item 7A
Item 8
Item 9
Item 9A
Item 9B
Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity
Securities ...........................................................................................................................................................
Selected Financial Data .....................................................................................................................................
Management’s Discussion and Analysis of Financial Condition and Results of Operations ............................
Quantitative and Qualitative Disclosures About Market Risk ..........................................................................
Financial Statements and Supplementary Data .................................................................................................
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure ............................
Controls and Procedures ....................................................................................................................................
Other Information ..............................................................................................................................................
PART III
Item 10
Item 11
Item 12
Item 13
Item 14
Directors, Executive Officers and Corporate Governance ................................................................................
Executive Compensation ...................................................................................................................................
Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters ..........
Certain Relationships and Related Transactions, and Director Independence ..................................................
Principal Accountant Fees and Services ............................................................................................................
PART IV
Exhibits, Financial Statement Schedules ...........................................................................................................
Item 15
Signatures .............................................................................................................................................................................
Exhibit Index.........................................................................................................................................................................
Exhibit 21.1 List of Subsidiaries
Exhibit 23.1 Consent of Ernst & Young LLP
Exhibit 31.1 Section 302 Certification of Principal Executive Officer
Exhibit 31.2 Section 302 Certification of Principal Financial Officer
Exhibit 32 Section 906 Certification of CEO and CFO
Exhibit 101
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Forward-Looking Statements
Certain statements contained in this filing are “forward-looking statements” within the meaning of the Private Securities
Litigation Reform Act of 1995, including but not limited to statements related to expectations about global macroeconomic trends and
industry developments, plans for future business development activities, anticipated costs of revenues, product mix and service
revenues, research and development and selling, general and administrative activities, and liquidity and capital needs and resources.
When used in this Annual Report, the words “may,” “expect,” “forecast,” “anticipate,” “intend,” “plan,” “believe,” “could,” “seek,”
“project,” “estimate,” and similar expressions are generally intended to identify forward-looking statements. Undue reliance should
not be placed on these forward-looking statements, which reflect opinions only as of the date of this Annual Report. Such forward-
looking statements are subject to risks, uncertainties, and other factors that could cause actual results to differ materially from future
results expressed or implied by such forward-looking statements. Investors are cautioned that forward-looking statements are not
guarantees of future performance and involve risks and uncertainties, and that actual results may differ materially from those
contemplated by such forward-looking statements.
Some of the factors that could cause actual results to differ materially from the results discussed in forward-looking statements
include:
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economic, political and market conditions;
ability to attract and retain highly skilled employees;
competition;
our dependence on a single line of business;
our dependence on generating license revenue to drive business;
risks associated with large system implementations;
the requirement to maintain high quality professional service capabilities;
possible compromises of our data protection and IT security measures;
the risks of international operations, including foreign currency exchange risk;
the possibility that research and developments investments may not yield sufficient returns;
possible liability to customers if our products fail;
undetected errors or “bugs” in our software;
the long sales cycle associated with our products;
the difficulty of predicting operating results;
the need to continually improve our technology;
risks associated with managing growth;
reliance on third party and open source software;
the need for our products to interoperate with other systems;
the need to protect our intellectual property, and our exposure to intellectual property claims of others;
economic conditions and regulatory changes caused by the United Kingdom’s likely exit from the European Union; and
other risks described under the heading “Risk Factors” in Part I, Item 1A of this Annual Report.
We undertake no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of
unanticipated events or changes in future operating results.
3
Business
Item 1.
Overview
PART I
Manhattan Associates was founded in 1990 in Manhattan Beach, California and incorporated in Georgia in 1998. References in this
filing to the “Company,” “Manhattan,” “Manhattan Associates,” “we,” “our” and “us” refer to Manhattan Associates, Inc., our
predecessors, and our wholly-owned and consolidated subsidiaries. Our principal executive offices are located at 2300 Windy Ridge
Parkway, Tenth Floor, Atlanta, Georgia 30339, and our telephone number is 770-955-7070.
We develop, sell, deploy, service and maintain software solutions designed to manage supply chains, inventory and omni-channel
operations for retailers, wholesalers, manufacturers, logistics providers and other organizations. Our customers include many of the
world’s premier and most profitable brands.
Specifically, Manhattan Associates develops supply chain commerce solutions that help our customers in three distinct areas of
their business:
(cid:120) Supply Chain - Manhattan Associates provides companies the tools needed to manage distribution and optimize
transportation costs throughout their entire commercial network. Manhattan provides shippers the most comprehensive
transportation management solutions in the market. This includes services and software to help them move freight via the
most cost-effective means possible while also meeting service-level expectations. Likewise, Manhattan’s Warehouse
Management solutions are widely regarded as industry-leading systems designed to optimize productivity and throughput
in distribution centers and warehouses around the world.
(cid:120) Omni-Channel - Meeting ever-evolving consumer expectations of service, inventory availability and delivery convenience
is a challenge every retailer must meet head on. Manhattan’s Omni-Channel solutions provide both ‘central’ or corporate
solutions that manage inventory availability across all channels and locations as well as ‘local’ solutions deployed in retail
stores to empower store associates to satisfy the demands of the walk-in shopper and the online customer.
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Inventory - Manhattan solutions provide distributors of any finished goods (apparel, food, auto parts, pharmaceuticals,
etc.) the ability to forecast demand, determine when, where and how much inventory is needed and translate this into a
profitable inventory buying plan. Through the use of advanced science and sophisticated analytics, customer service level
is maximized with the minimum necessary inventory investment. Industry changes driven by omni-channel retail,
pharmaceutical regulations and other trends make this an area of particular need for many retailers and wholesale
distributors.
Manhattan Associates’ Software Solution Portfolios
Our portfolio of solutions takes a platform-based approach to key areas. This approach employs a single, holistic technology
architecture that provides customers with three major benefits:
(cid:120) Cross-Functional Business Solutions - By virtue of shared data, taxonomy and interfaces, platform solutions enable the
organization to tackle business challenges that might otherwise be too technically daunting to achieve. For instance, the
ability to apportion freight, labor, inventory handling and overhead costs across the supply chain to determine an item’s
total cost to serve for an end customer normally requires a massive integration and harmonization effort. With a platform
like Manhattan’s, this is simply another module that taps into a readily available pool of data in the supply chain and
inventory solutions.
(cid:120) Total Cost of Ownership - A single set of tools to administrate security, resource management, system configuration and
integration across all three functional disciplines allows for economies of scale within IT departments. The use of
standard technologies, development tools and languages also ensures needed technical skills are readily available in the
marketplace.
(cid:120) The Power of Shared Components - When an organization has multiple disparate systems, there are frequently costly,
inefficient and redundant capabilities found across the enterprise. Examples include yard management, parcel shipping
and inventory visibility. The consequences of duplicate systems range from the simple confusion brought on by different
naming conventions to the expensive and complex data becoming out of sync, resulting in missed appointments,
chargebacks and other issues.
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Supply Chain Solutions
As previously described, Supply Chain solutions are focused on the distribution and transportation operations of the enterprise.
There are three main components of Manhattan’s Supply Chain Solutions:
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Distribution Management - These applications comprise Manhattan’s Warehouse Management Solutions (WMS) commonly
used to manage the complexity of the modern distribution center. WMS manages the flow of goods and information across
the distribution center. The complete distribution management suite not only includes capabilities focused on execution within
the distribution center, but also on the management of personnel, performance and the overall distribution center layout. All
of these solutions come together to provide the customer the most productive workforce with an operation that can scale to
meet the highest demands during peak season, yet can still operate effectively and profitably throughout the course of the year.
Transportation Management - Organizations today face a complex transportation environment with ever-changing demands
driven by macro-economic trends and governmental regulations. Manhattan’s Transportation Management Solutions (TMS)
are designed to help shippers navigate their way through these demands while meeting customer service expectations at the
lowest possible freight costs. TMS components include procurement and modeling tools to setup a network that can be
successful, along with planning, execution and settlement tools to manage day-to-day transportation requirements. Manhattan
Carrier is a suite of solutions built specifically to help motor carriers optimize load assignments, minimize fuel costs, manage
drivers’ hours of service and accommodate demand fluctuations.
Visibility - Crucial to effective supply chain management is visibility into the movement of goods between locations in the
supply chain and outside the enterprise’s realm of control. Manhattan provides best in class visibility and event management
tools that not only provide alerts to when events occur in the global supply chain, but also when they don’t occur (such as
missing a vessel overseas) that can have a cascading effect on production lines, freight and most importantly, customer
commitments.
Omni-Channel Solutions
As omni-channel retail has placed new demands on organizations, it has also created new software solution needs. These range
from the ability to leverage inventory across the entire network to meet any demand, to providing store associates and call center
representatives the means to take advantage of the available inventory.
(cid:121) Omni-Channel Central Solutions - There is a wide range of new capabilities that must be leveraged at a corporate or
‘central’ level in retail today in order to enable full inventory visibility, direct to client distribution and seamless fulfillment
operations. The goal is to enable an omni-channel commerce platform that can be tapped into by any selling system—
webstore, ERP, point-of-sale, call center, mobile app, etc. in order to more cost-effectively fulfill orders and inventory
demand. Manhattan’s Enterprise Inventory builds out a complete inventory availability picture that can be updated in near-real
time with feeds from the warehouse, the store and the network. Enterprise Order Management merges this inventory
availability data with demand feeds from across the organization to match supply with demand in a way that satisfies customer
delivery expectations while also striving to maximize profitability. Lastly, the Call Center application provides representatives
access to this inventory picture as well as complete customer sales history to satisfy shopper needs, regardless of whether it is
an exchange, a return or a new order.
(cid:121) Omni-Channel Local Solutions - As the consumer enters the store with more information than ever, it is now vital to equip
the sales associate with relevant information and capabilities to satisfy that shopper’s every demand. Local solutions include
mobile Point of Sale to process purchase transactions, Clienteling to provide the associate with a complete picture of the
shopper’s purchase history, and Tablet Retailing to offer a virtual showroom. Manhattan brings all of these solutions together
on a single mobile platform to enable retailers to offer unparalleled service and convenience for the shopper.
Another important part of Local solutions is Store Inventory and Fulfillment. Most retailers are now looking to leverage store
inventory to fulfill ecommerce demand (driving greater sales revenue with less inventory). In order to achieve this, solutions
that can accurately maintain inventory integrity and enable productive, reliable fulfillment are required.
Inventory Solutions
The ability to accurately forecast demand and project inventory needs is heightened by omni-channel retail requirements that
change traditional approaches to inventory management. Manhattan’s Inventory solutions address which products should be carried
and the quantity that will be needed at each location by date.
(cid:121) Inventory Optimization - This set of applications includes sophisticated demand forecasting capabilities that can address the
particularly challenging slow-moving and intermittent products that frequently result in excess inventory due to
unpredictability. Also included is the Replenishment module that can evaluate inventory needs across all locations and
channels. This module can even suggest transferring inventory between locations (warehouses or stores) or ‘protect’
merchandise at a store from online sales in order to save it for walk-in traffic.
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(cid:121) Planning - Manhattan’s Planning solutions provide merchants the tools they need to create channel-, store- or region-specific
assortments. These tools offer channel-specific metrics and methodologies that optimize the planning process and maximize
retailer revenues.
Manhattan SCALETM
SCALE is our portfolio of logistics execution solutions built on Microsoft’s .NET ® platform. Purpose built for rapid development
and a value-based total cost of ownership, it is targeted toward companies with execution-focused supply chain needs that require
speed-to-value, resource-light system configuration and maintenance, and the ability to quickly scale their logistics operations up or
down in response to market fluctuations or business requirement changes. SCALE combines the features of Trading Partner
Management, Yard Management, Optimization, Warehouse Management and Transportation Execution.
Because SCALE leverages a common platform, solutions share common data elements and each user can access all applications
through a single sign-on. Users also can set up “dashboards” that enable easy access to real-time information most relevant to their
jobs. SCALE’s ease of deployment, operation and support make it a popular choice for organizations operating in countries with
emerging and developing economies, and where technical support resources are limited.
Technology Platform
Our solutions operate across Unix, IBM System i, Linux and Microsoft’s .NET computing platforms, as well as on multiple
hardware platforms and systems. Because supply chain solutions necessarily interact with other business operation systems, our
solutions are designed to interoperate with software from other providers as well as with a company’s existing legacy systems. This
interfacing and open system capability enables customers to continue using existing computer resources and to choose among a wide
variety of existing and emerging computer hardware and peripheral technologies. We provide a framework to facilitate rapid and
reliable integration to any Enterprise Resource Planning (ERP) or host business systems (including certified integration to both SAP
and Microsoft Dynamics AX). We also offer certain solutions in either on-premise software or cloud computing models so that
customers can select the option that best meets their requirements for control, flexibility, cost of ownership, and time-to-deployment.
Professional Services
We advise and assist our customers in planning and implementing our solutions through our global Professional Services
Organization. To ensure successful long-term customer relationships, consultants assist customers with the initial deployment of our
systems, the conversion and transfer of the customer’s historical data onto our systems, and ongoing training, education, and system
upgrades. We believe our Professional Services teams enable customers to implement our solutions knowledgeably and in the
appropriate amount of time, help customers achieve expected results from system investments, continuously identify new
opportunities for supply chain advancements and meaningfully add to our industry-specific knowledge base to improve future
implementations and product innovations.
Substantially all of our customers utilize some portion of our Professional Services to implement and support our software
solutions. Professional Services typically are rendered under time and materials contracts, with services billed by the hour.
Professional Services sometimes are rendered under fixed-fee contracts, with payments due on specific dates or milestones. We
believe that increased sales of our software solutions will drive higher demand for our Professional Services.
Our Professional Services team delivers deep supply chain and enterprise commerce domain expertise to our customers through
industry-specific “best-practices” protocols and processes developed through the collective knowledge we have gained from 27 years
of implementing our supply chain solutions worldwide. We also extensively train our consulting personnel on enterprise commerce
operations and on our solutions.
Business consultants, systems analysts, and technical personnel assist customers in all phases of implementing our systems,
including planning and design, customer-specific module configuration, on-site implementation- or conversion from existing systems,
and integration with customer systems such as Enterprise Resource Planning (ERP), web- and mobile-based commerce platforms, and
Material Handling Equipment (MHE) systems. At times, third-party consultants, such as those from major systems integrators, assist
our customers with certain implementations.
Customer Support Services and Software Enhancements
We offer a comprehensive program that provides our customers with software upgrades for additional or improved functionality
and technological advances incorporating emerging supply chain and industry advances. Over the past three years, our annual renewal
rate of customers subscribing to comprehensive support and enhancements has been greater than 90%. We are able to remotely access
customer systems to perform diagnostics, provide online assistance, and facilitate software upgrades. We offer 24-hour customer
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support 365 days in the year, plus software upgrades for an annual fee that is paid in advance and is based on the solutions the
customer has and the service level required. Software upgrades are provided under this program on a when-and-if- available basis.
Training and Change Management Services
We offer training and change management services for new and existing users, enabling our customers to align systems, people
and processes. Services provided by Manhattan training experts cover a wide range of support from the intended design to the front-
line of the customer’s business, including critical end-user adoption with hands-on, live training in a virtualized Manhattan software
environment. These programs are provided at fixed fees per-person, per-class. In addition, computer-based training programs can be
purchased for a fixed fee for use at client sites. Customers can also pursue certification at the Associate or Professional level through
our certification programs for Omni-channel, Supply Chain or Inventory.
Manhattan Training and Change Management Services are offered under six categories: Role-Based Training Paths,
Comprehensive Training Programs, Change Management Services, Individual Product Training Courses, End-User Enablement and
Knowledge Resources.
Hardware Sales
As a convenience for our customers, we resell a variety of hardware developed and manufactured by others, including (but are not
limited to) computer hardware, radio frequency terminal networks, RFID chip readers, bar code printers and scanners, and other
peripherals. We resell all third-party hardware products and related maintenance pursuant to agreements with manufacturers or
through distributor-authorized reseller agreements pursuant to which we are entitled to purchase hardware products and services at
discount prices and to receive technical support in connection with product installations and any subsequent product malfunctions. We
do not maintain hardware inventory as we generally purchase hardware from vendors only after receiving related customer orders.
Strategy
Our objective is to extend our position as the leading global commerce solutions provider for organizations intent on creating and
sustaining market advantages through technology-enabled commerce solutions. Our solutions help global distributors, wholesalers,
retailers, logistics providers and manufacturers successfully manage accelerating and fluctuating market demands, as well as master
the increasing complexity and volatility of their local and global supply chains. We believe our solutions are advanced, highly
functional and highly scalable. They are designed to enable organizations to: create customer experiences consistent with their brand
values; improve relationships with suppliers, customers and logistics providers; leverage investments across supply chain functions;
effectively generate revenue and manage costs; and meet dynamically changing customer requirements. We believe our solutions are
uniquely positioned to holistically optimize the way companies bring together omni-channel, supply chain and inventory management:
Develop and Enhance Software Solutions. We intend to continue to focus our research and development resources on enhancing
our Supply Chain, Omni-Channel Commerce and Inventory Solutions. We offer what we believe to be the broadest and most richly-
featured software portfolio in the marketplace. To continuously expand functionality and value, we plan to continue to provide
enhancements to existing solutions and to introduce new solutions to address evolving industry standards and market needs. We
identify these opportunities through our Product Management, Professional Services, Customer Support and Account Management
organizations, through interactions such as ongoing customer consulting engagements and implementations, sessions with our solution
user groups, association with leading industry analyst and market research firms, and participation on industry standards and research
committees. Our solutions address needs in various vertical markets, including retail, consumer goods, food and grocery, logistics
service providers, industrial and wholesale, high technology and electronics, life sciences and government. We intend to continue to
enhance our solutions to meet the dynamic requirements of these and new vertical markets as business opportunities dictate.
Expand International Presence. Our solutions offer significant benefits to customers in markets outside the United States, and for
organizations with global operations. We have offices in Australia, China, France, India, Japan, the Netherlands, Singapore, and the
United Kingdom, as well as representatives in Mexico and reseller partnerships in Latin America, Eastern Europe, the Middle East,
South Africa, and Asia. Our Europe, Middle East, and Africa (EMEA) operations support sales, implementation services, and
customer support functions for customers in Europe as well as a number of customers across the Middle East, concentrated in
countries we consider politically and economically stable. Our Asia Pacific (APAC) operations service emerging opportunities in
China, Southeast Asia, and India, as well as more established markets in Japan, Australia and New Zealand. Our international strategy
includes leveraging the strength of our relationships with current U.S. and Europe-based customers that also have significant
international operations.
Strategic Alliances and Indirect Sales Channels. We currently sell our products primarily through our direct sales personnel, and
through partnership agreements with a select number of organizations in emerging markets where we do not currently have a direct
sales presence. We have worked on joint projects and joint sales initiatives with industry-leading consultants and software systems
implementers, including most of the large consulting firms specializing in our targeted industries, to supplement our direct sales force
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and professional services organization. We expand our indirect sales channels through reseller agreements, marketing agreements, and
agreements with third-party logistics providers. These alliances extend our market coverage and provide us with new business leads
and access to trained implementation personnel.
Acquire or Invest in Complementary Businesses. We continuously evaluate strategic acquisition opportunities of technologies,
solutions, and businesses that are consistent with our platform-based strategy and enable us to enhance and expand our offerings.
Preferred acquisition targets are those that would be complementary to our existing solutions and technologies, expand our geographic
presence and distribution channels, extend our presence into additional vertical markets with challenges and requirements similar to
those we currently serve, and further solidify our leadership position within the primary components of supply chain planning and
execution.
Sales and Marketing
We employ multi-disciplinary sales teams that consist of professionals with industry experience in sales and technical sales
support. To date, we have generated the majority of our software sales (licensing) revenue through our direct sales force. We plan to
continue to invest in our sales, services, and marketing organizations within the Americas, EMEA, and APAC, and to pursue strategic
marketing partnerships. We conduct comprehensive global marketing programs that include prospect profiling and targeting, lead
generation, public relations, analyst relations, trade show attendance and sponsorships, supply chain conference hosting, online
marketing, joint promotion programs with vendors and consultants, and ongoing customer communication programs.
Our sales cycle typically begins with the generation of a sales lead — through in-house marketing efforts, targeted promotions, web
inquiries, trade show presence, speaking engagements, hosted seminars, or other means of referral — or the receipt of a request for
proposal from a prospective customer. Leads are qualified and opportunities are closed through a process that includes telephone-
based assessments of requirements; responses to requests for proposals, presentations and product demonstrations, site visits and/or
reference calls with organizations already using our supply chain solutions, and contract negotiations. Sales cycles vary substantially
from opportunity to opportunity, but typically require nine to twelve months.
In addition to new customer sales, we plan to continue to leverage our existing customer base to drive revenue from system
upgrades, sales of additional licenses of purchased solutions, and sales of new or add-on solutions. To efficiently penetrate emerging
global markets, we leverage indirect sales channels, including sales through reseller agreements, marketing agreements, and
agreements with third-party logistics providers. To extend our market coverage, generate new business leads, and provide access to
trained implementation personnel, we leverage strategic alliances with systems integrators skilled at implementing our solutions.
Business referrals and leads are positively influenced by systems integrators, which include most of the large consulting firms and
other systems consulting firms specializing in our targeted industries.
Our Manhattan Value Partner (Manhattan MVP™) and Manhattan GeoPartner™ programs foster joint sales and marketing with
other organizations. Manhattan Value Partners are proven software and hardware providers, trusted third-party integrators and
consultants who bring added value to customer engagements through vertical industry knowledge or technical specialization.
Manhattan MVPs support and complement our supply chain solutions so we can provide customers with a comprehensive approach
that is suited to their business requirements. This collaborative program is designed to benefit both Manhattan and our partners
through tailored joint marketing, sales and, in some cases, co-development efforts. Among others, Manhattan MVPs include IBM,
Deloitte, Kurt Salmon part of Accenture Strategy, Microsoft, Cap Gemini and Intel. Manhattan GeoPartners represent a select group
of companies that sell and implement our solutions in specific geographies around the world, each providing valuable localized
expertise to meet customer needs in areas such as Western Europe, Eastern Europe, Russia, the Middle East, Latin America, Africa,
and the Asia Pacific region.
Customers
To date, our customers have been suppliers, manufacturers, distributors, retailers, and logistics providers in a variety of industries.
Our top five customers (new or pre-existing) in the aggregate accounted for 12%, 8%, and 10% of total revenue for the years ended
December 31, 2016, 2015 and 2014, respectively. No single customer accounted for more than 10% of our total revenue in 2016, 2015
and 2014.
Product Development
We focus our development efforts on new product innovation and on adding new functionality to existing solutions; integrating our
various solution offerings; enhancing the operability of our solutions across our Process Platform and across distributed and
alternative hardware platforms, operating systems, and database systems. We believe that our future success depends, in part, on our
ability to continue to enhance existing solutions, to respond to dynamically changing customer requirements, and to develop new or
enhanced solutions that incorporate new technological developments and emerging supply chain and industry standards. To that end,
development frequently focuses on base system enhancements and incorporating new user requirements and features into our
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solutions. As a result, we deliver packaged, highly configurable solutions with increasingly rich functionality rather than custom-
developed software. We also deliver interface toolkits for many major ERP systems to enhance communication and improve data
flows between our core solutions and our clients’ host systems.
We leverage internal and external scientific advisors to inform our solution strategies and research and development approaches
with the most advanced thinking on supply chain opportunities, challenges, and technologies. Our internal research team is comprised
of Ph.D.-credentialed math and science experts who work on creating and solving algorithms and other constructs that advance the
optimization capabilities and other aspects of our solutions. We also regularly communicate with and are advised by experts from
leading educational institutions known for their supply chain disciplines, and practitioners from organizations deploying supply chain
technology in innovative and market-advancing ways. Together, our research team and external advisors inform both the practical
business approaches and the mathematical and scientific inventiveness of our solutions.
We conduct most research and development internally in the U.S. and India to retain domain knowledge and to promote
programming continuity standards. However, we may periodically outsource some projects that can be performed separately and/or
that require special skills. We also use third-party translation companies to localize our application software into various languages
such as, but not limited to, Chinese, French, Japanese, and Spanish.
Our research and development expenses for the years ended December 31, 2016, 2015 and 2014 were $54.7 million, $53.9 million,
and $49.0 million, respectively. We intend to continue to invest significantly in product development.
Competition
Our solutions are solely focused on enterprise commerce capabilities, which have been consolidating rapidly, are intensely
competitive, and are characterized by rapid technological change. The principal competitive factors affecting the markets for our
solutions include: industry expertise; company and solution reputation; company viability; compliance with industry standards;
solution architecture; solution functionality and features; integration experience, particularly with ERP providers and material
handling equipment providers; ease and speed of implementation; proven return on investment; historical and current solution quality
and performance; total cost of ownership; solution price; and ongoing solution support structure. We believe we compete favorably
with respect to each of these factors.
Our competitors are diverse and offer a variety of solutions directed at various aspects of enterprise commerce. Existing
competitors include:
(cid:121) Corporate information technology departments of current or potential customers capable of internally developing solutions;
(cid:121) ERP vendors, including Oracle, SAP, and Infor, among others;
(cid:121) Supply chain execution and planning vendors, including JDA Software Group, Inc. (JDA), HighJump Software Inc., SAS
Institute Inc., and the Sterling Commerce division of IBM, among others;
(cid:121) Point of sale vendors, including Aptos, Inc., Salesforce.com, NCR Corporation, among others; and
(cid:121) Smaller independent companies that have developed or are attempting to develop supply chain execution solutions and/or
planning solutions that apply in specific countries and/or globally.
We anticipate increased competition from ERP and supply chain management (SCM) applications vendors and from business
application software vendors that may broaden their solution offerings by internally developing or by acquiring or partnering with
independent developers of supply chain planning and execution software. Some of these ERP and other potential competitors have
longer operating histories; significantly more financial, technical, marketing and other resources; greater name recognition; broader
solutions; and larger installed bases of customers than us. To the extent that ERP and SCM vendors or other large competitors develop
or acquire systems with functionality comparable or superior to ours, their larger customer bases, long-standing customer
relationships, and ability to offer broader solutions outside the scope of supply chain could create significant competitive advantage
for them. It also is possible that new competitors or alliances among current and/or new competitors could emerge to win significant
market share. Increased competition could result in price reductions, fewer customer orders, reduced earnings and margins and loss of
market share. In turn, this could have a material adverse effect on our business, results of operations, cash flow, and financial
condition.
We believe we have established meaningful competitive differentiation through our supply chain and omni-channel commerce
expertise; our platform-based solution approach; our track record of continuous supply chain commerce innovation and investment;
our strong and endorsing customer relationships; our significant success in deploying and supporting supply chain, inventory and
omni-channel solutions for market-leading companies; our success in helping our clients address the enterprise impacts of digital
commerce; and our ability to out-execute others in identifying sales opportunities and demonstrating expertise throughout the sales
cycle. However, to further our market success, we must continue to respond promptly and effectively to technological change and
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competitors’ innovations. Consequently, we cannot assure that we will not be required to make substantial additional investments in
research, development, marketing, sales and customer service efforts in order to meet any competitive threat, or that we will be able to
compete successfully in the future.
International Operations: Segments
We have three reporting segments based on geographic location: the Americas; Europe, Middle East and Africa (“EMEA”); and
Asia Pacific (“APAC”). For further information on our segments, see Note 7 to our Consolidated Financial Statements. Our
international revenue was approximately $144.8 million, $131.3 million, and $134.6 million for the years ended December 31, 2016,
2015 and 2014, respectively, which represents approximately 24%, 24%, and 27% of our total revenue for the years ended
December 31, 2016, 2015 and 2014, respectively. International revenue includes all revenue derived from sales to customers outside
the United States. At December 31, 2016, we employed approximately 1,550 employees in our international operations.
Proprietary Rights
We rely on a combination of copyright, patent, trade secret, trademark, and trade dress laws, confidentiality procedures, and
contractual provisions to protect our proprietary rights in our products, processes and technology. We have registered trademarks for
Manhattan Associates and the Manhattan Associates logo, as well as a number of our products and features. Generally, we enter into
confidentiality and assignment-of-rights agreements with our employees, consultants, customers and potential customers and limit
access to, and distribution of, our proprietary information. We license our proprietary products to our customers under license
agreements that we believe contain appropriate use and other restrictions in order to try to best protect our ownership of our products
and our proprietary rights in them, and to protect our revenue potential from our products. However, despite our efforts to safeguard
and maintain our proprietary rights, we cannot ensure that we will successfully deter misappropriation, unintended disclosure or
independent third-party development of our technology or our proprietary rights or information. Policing unauthorized use of our
products is difficult, and, while we are unable to determine the extent to which piracy of our software solutions exists, as is the case
with any software company, piracy could become a problem. Further, to the extent that we enter into transactions in countries where
intellectual property laws are not well developed or are poorly enforced, our efforts to protect our proprietary rights may be
ineffective. Whether we seek to enforce our proprietary rights in the U.S. or abroad, our efforts, including litigation to enforce our
rights, can result in substantial costs and diversion of resources, and such efforts, or our failure to succeed in such efforts, could have a
material adverse effect on our business, financial condition, results of operations or cash flows, regardless of the final outcome.
As the number of supply chain management solutions available in the marketplace increases and solution functionality continues to
overlap, supply chain software may increasingly become subject to claims of infringement or other misappropriation of intellectual
property. Third parties may assert infringement or misappropriation claims against us relating to our products, processes or
technology. Such claims, whether or not they have merit, generally are time-consuming and may result in costly litigation, divert
management’s attention or cause product shipment delays or require us to enter into royalty or licensing arrangements. Defense of
infringement or other misappropriation claims, entering into royalty or licensing agreements, the unavailability of such agreements, or
adverse determinations in proprietary rights litigation could have a material adverse effect on our business, results of operations, cash
flow and financial condition.
Employees
At December 31, 2016, we employed approximately 3,020 employees worldwide, of which 1,470 are based in the Americas, 210 in
EMEA, and 1,340 in APAC (including India).
Available Information
We file annual, quarterly and current reports and other information with the Securities and Exchange Commission (the “SEC” or
the “Commission”). These materials can be inspected and copied at the SEC’s Public Reference Room at 100 F Street, N.E.,
Washington, D.C. 20549. Copies of these materials may also be obtained by mail at prescribed rates from the SEC’s Public Reference
Room at the above address. Information about the Public Reference Room can be obtained by calling the SEC at 1-800-SEC-0330.
The SEC also maintains a website at www.sec.gov that contains reports, proxy and information statements, and other information
regarding issuers that file electronically with the SEC.
On our website, www.manh.com, we provide free of charge our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q,
Current Reports on Form 8-K, and any amendments thereto, as soon as reasonably practicable after they have been electronically filed
or furnished to the SEC. Information contained on our website is not part of this Form 10-K or our other filings with the SEC.
Additionally, our code of business conduct and ethics and the charters of the Audit, Compensation, and Nomination and
Governance Committees of the Board of Directors are available on our website.
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Item 1A.
Risk Factors
You should consider the following and other risk factors in evaluating our business or an investment in our common stock. The
occurrence of adverse events described in the following risk factors or other adverse events not described in the following risk factors
could have a material adverse effect on our business, results of operations, cash flow and financial condition, and could cause the
trading price of our common stock to decline.
Economic, political and market conditions can adversely affect our business, results of operations, cash flow and financial
condition, including our revenue growth and profitability, which in turn could adversely affect our stock price. Our business is
influenced by a range of factors that are beyond our control and that we have no comparative advantage in forecasting. These include:
(cid:121) general economic and business conditions;
(cid:121) overall demand for enterprise software and services;
(cid:121) governmental policy, budgetary constraints or shifts in government spending priorities;
(cid:121) general geo-political developments; and
(cid:121) currency exchange rate fluctuations.
Macroeconomic developments like the continued slow pace of economic recovery in the United States and Europe and in parts of
Asia and South America could negatively affect our business, operating results, financial condition and outlook, which, in turn, could
adversely affect our stock price. Any general weakening of, and related declining corporate confidence in, the global economy or the
curtailment in government or corporate spending could cause current or potential customers to reduce or eliminate their information
technology budgets and spending, which could cause customers to delay, decrease or cancel purchases of our products and services or
cause customers not to pay us or to delay paying us for previously purchased products and services.
In addition, political unrest in places like Ukraine, Syria and Iraq and the related potential impact on global stability, terrorist
attacks and the potential for other hostilities in various parts of the world, potential public health crises and natural disasters continue
to contribute to a climate of economic and political uncertainty that could adversely affect our results of operations and financial
condition, including our revenue growth and profitability.
Our inability to attract, integrate, and retain management and other personnel could adversely impact our business, results
of operations, cash flow, and financial condition. Our success greatly depends on the continued service of our executives, as well as
our other key senior management, technical personnel, and sales personnel. Our success will depend on the ability of our executive
officers to work together as a team. The loss of any of our senior management or other key professional services, research and
development, sales and marketing personnel—particularly if they are lost to competitors—could impair our ability to grow our
business. We do not maintain key man life insurance on any of our executive officers.
Our future success will depend in large part upon our ability to attract, retain, and motivate highly skilled employees. We face
significant competition for individuals with the skills required to perform the services we offer, and thus we may encounter increased
compensation costs that are not offset by increased revenue. In the broader technology industry in which we compete for talented
hires, there is substantial and continuous competition for engineers with high levels of experience in designing, developing and
managing software, as well as competition for sales executives and operations personnel. We cannot guarantee that we will be able to
attract and retain sufficient numbers of these highly skilled employees or motivate them. Because of the complexity of the supply
chain market, we may experience a significant time lag between the date on which technical and sales personnel are hired and the time
at which these persons become fully productive.
We may not be able to continue to successfully compete with other companies. We compete in markets that are intensely
competitive and are expected to become more competitive as current competitors expand their product offerings. Our current
competitors come from many segments of the software industry and offer a variety of solutions directed at various aspects of the
extended supply chain, as well as the enterprise as a whole. We face competition for product sales from:
(cid:121) corporate information technology departments of current or potential customers capable of internally developing solutions;
(cid:121) ERP vendors, including Oracle, SAP, and Infor, among others;
(cid:121) supply chain execution and planning vendors, including JDA Software Group, Inc. (JDA), HighJump Software Inc., SAS
Institute Inc., and the Sterling Commerce division of IBM, among others;
(cid:121) Point of sale vendors, including Aptos, Inc., Salesforce.com, NCR Corporation, among others; and
(cid:121) smaller independent companies that have developed or are attempting to develop supply chain execution solutions and/or supply
chain planning solutions that apply in specific countries and/or globally.
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We anticipate facing increased competition from ERP and supply chain management (SCM) applications vendors and business
application software vendors that may broaden their solution offerings by internally developing or by acquiring or partnering with
independent developers of supply chain planning and execution software. Some of these ERP and other potential competitors have
longer operating histories, significantly more financial, technical, marketing, and other resources, greater name recognition, broader
solutions, and larger installed bases of customers than do we. To the extent that ERP and SCM vendors or other large competitors
develop or acquire systems with functionality comparable or superior to ours, their larger customer bases, long-standing customer
relationships, and ability to offer broader solutions outside the scope of supply chain could create significant competitive advantage
for them. It also is possible that new competitors or alliances among current and/or new competitors could emerge to win significant
market share. Increased competition could result in price reductions, fewer customer orders, reduced earnings and margins, and loss of
market share. In turn, this could have a material adverse effect on our business, results of operations, cash flow, and financial
condition.
We believe the domain expertise required to continuously innovate supply chain technology in our target markets, effectively and
efficiently implement solutions, identify and attract sales opportunities, and compete successfully in the sales cycle provides us with a
competitive advantage and is a significant barrier to market entry. However, in order to be successful in the future, we must continue
to respond promptly and effectively to technological change and competitors’ innovations, and consequently we cannot assure you
that we will not be required to make substantial additional investments in connection with our research, development, marketing,
sales, and customer service efforts in order to meet any competitive threat, or that we will be able to compete successfully in the
future. Some of our competitors have significant resources at their disposal, and the degree to which we will compete with their new
innovative products in the marketplace is undetermined.
Our pricing models may need to be modified due to price competition. The competitive markets in which we operate may
oblige us to reduce our prices in order to contend with the pricing models of our competitors. If our competitors discount certain
products or services, we may have to lower prices on certain products or services in order to attract or retain customers. Any such
price modifications would likely reduce margins and could adversely affect our business, results of operations, cash flow, and
financial condition.
Our operating results are substantially dependent on one line of business. We continue to derive our revenues from sales of
our supply chain commerce solutions software and related services and hardware. Any factor adversely affecting the markets for
supply chain solutions could have an adverse effect on our business, results of operations, cash flow, and financial condition.
Accordingly, our future operating results will depend on the demand for our supply chain commerce products and related services and
hardware by our customers, including new and enhanced releases that we subsequently introduce. We cannot guarantee that the
market will continue to demand our current products or we will be successful in marketing any new or enhanced products. If our
competitors release new products that are superior to our products in performance or price, demand for our products may decline. A
decline in demand for our products as a result of competition, technological change, or other factors would reduce our total revenues
and harm our ability to maintain profitability.
Our future revenue is dependent on continuing license sales, which in turn drive sales of post-contract support and
professional services. We are dependent on our new customers as well as our large installed customer base to purchase additional
software licenses, post-contract support, and professional services from us. Our post-contract support agreements are generally for a
one-year term and our professional services agreements generally only cover a particular engagement. In future periods customers
may not license additional products, and in turn may not renew post-contract support agreements or purchase additional professional
services from us. If our customers decide not to license or purchase these products and services from us, or if they reduce the scope of
their post-contract support or hosting or professional services agreements, our revenue could decrease significantly, and that could
have a material adverse effect on our business, results of operations, cash flow and financial condition.
In addition, many of our customers are using older versions of our products for which we are no longer developing any further
upgrades or enhancements. While we intend to migrate our customers who are using these versions to newer versions or products,
there can be no assurance that these customers will do so. If customers using older versions of our products decide not to license our
current software products, or decide to discontinue the use of our products and associated post-contract support services, our revenue
could decrease and our operating results could be materially adversely affected.
Delays in implementing our products could adversely impact our business, results of operations, cash flow, and financial
condition. Due to the size and complexity of most of our software implementations, our implementation cycle can be lengthy and may
result in delays. Our products may require modification or customization and must integrate with many existing computer systems and
software programs of our customers. This can be time-consuming and expensive for customers and can result in implementation and
deployment delays of our products. Additional delays could result if we fail to attract, train, and retain services personnel, or if our
alliance companies fail to commit sufficient resources towards implementing our software. These delays and resulting customer
dissatisfaction could limit our future sales opportunities, impact revenue, and harm our reputation.
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Our ability to license our software is highly dependent on the quality of our services offerings, and our failure to offer high
quality services could adversely impact our business, results of operations, cash flow, and financial condition. Most of our
customers rely to some extent on our professional services to aid in the implementation of our software solutions. Once our software
has been installed and deployed, our customers may depend on us to provide them with ongoing support and resolution of issues
relating to our software. Therefore, a high level of service is critical for the continued marketing and sale of our solutions. If we or our
partners do not efficiently and effectively install and deploy our software products, or succeed in helping our customers quickly
resolve post-deployment issues, our ability to sell software products to these customers would be adversely affected and our reputation
in the marketplace with potential customers could suffer.
If our data protection or other security measures are compromised and as a result our data, our customers’ data or our IT
systems are accessed improperly, made unavailable, or improperly modified, our products and services may be perceived as
vulnerable, our brand and reputation could be damaged, the IT services we provide to our customers could be disrupted, and
customers may stop using our products and services, all of which could reduce our revenue and earnings, increase our
expenses and expose us to legal claims and regulatory actions. Our products and services can store, retrieve, manipulate and
manage our customers’ information and data as well as our own. We have a reputation for secure and reliable software products and
services and invest time and resources in protecting the integrity and security of our products, services and internal and external data
that we manage.
Nevertheless, we encounter attempts by third parties to penetrate or bypass our data protection and other security measures and
gain unauthorized access to our networks, systems and data or compromise the confidential information or data of our customers. Data
may also be accessed or modified improperly as a result of employee or supplier error or malfeasance and third parties may attempt to
fraudulently induce employees or customers into disclosing sensitive information such as user names, passwords or other information.
These risks are persistent and likely will increase as we continue to grow our cloud offerings and services and store and process
increasingly large amounts of our customers’ confidential information and data. We also may acquire companies, products, services
and technologies and inherit such risks when we integrate these acquisitions within Manhattan.
If a cyber-attack or other security incident described above were to occur, we could suffer damage to our brand and reputation,
which could reduce our revenue and earnings, increase our expenses to address and fix the incidents as well as expose us to legal
claims and regulatory actions.
Further, as regulatory focus on privacy issues continues to increase and become more complex, these potential risks to our business
will intensify. Changes in laws or regulations associated with the enhanced protection of certain types of sensitive data could greatly
increase our cost of providing our products and services.
Our international operations have many associated risks. We continue to strategically manage our presence in international
markets, and these efforts require significant management attention and financial resources. We may not be able to successfully
penetrate international markets, or, if we do, there can be no assurance that we will grow our business in these markets at the same rate
as in North America. Because of these inherent complexities and challenges, lack of success in international markets could adversely
affect our business, results of operations, cash flow, and financial condition.
We have international offices in Europe: the United Kingdom, the Netherlands, and France; and in Asia: China, Japan, Singapore,
and India; and Australia. We have committed resources to maintaining and further expanding, where appropriate, our sales offices and
sales and support channels in key international markets. However, our efforts may not be successful. International sales are subject to
many risks and difficulties, including those arising from the following: building and maintaining a competitive presence in new
markets; staffing and managing foreign operations; managing international systems integrators; complying with a variety of foreign
laws; producing localized versions of our products; import and export restrictions and tariffs; enforcing contracts and collecting
accounts receivable; unexpected changes in regulatory requirements; reduced protection for intellectual property rights in some
countries; potential adverse tax treatment; less stringent adherence to ethical and legal standards by prospective customers in some
countries; language and cultural barriers; currency fluctuations; political and economic instability abroad; and seasonal fluctuations.
Our operating results may include foreign currency gains and losses. Due to our international operations, we conduct a portion
of our business in currencies other than the United States dollar. Our revenues, expenses, operating profit and net income are affected
when the dollar weakens or strengthens in relation to other currencies. In addition, we have a large development center in Bangalore,
India, that does not have a natural in-market revenue hedge to mitigate currency risk to our operating expense in India. Fluctuations in
the value of other currencies, particularly the Indian rupee, could materially impact our revenues, expenses, operating profit and net
income.
Our research and development activities may not generate significant returns. Our product development activities are costly,
and recovering our investment in product development may take a significant amount of time, if it occurs at all. We anticipate
continuing to make significant investments in software research and development and related product opportunities because we
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believe that we must continue to allocate a significant amount of resources to our research and development activities in order to
compete successfully. We cannot estimate with any certainty when we will, if ever, receive significant revenues from these
investments.
Our liability to clients may be substantial if our systems fail, which could adversely impact our business, results of
operations, cash flow, and financial condition. Our products are often critical to the operations of our customers’ businesses and
provide benefits that may be difficult to quantify. If our products fail to function as required, we may be subject to claims for
substantial damages. Courts may not enforce provisions in our contracts that would limit our liability or otherwise protect us from
liability for damages. Defending a lawsuit, regardless of its merit, could be costly and divert management’s time and attention.
Although we maintain general liability insurance and error and omissions coverage, these coverages may not continue to be available
on reasonable terms or in sufficient amounts to cover claims against us. In addition, our insurer may disclaim coverage as to any future
claim. If claims exceeding the available insurance coverage are successfully asserted against us, or our insurer imposes premium
increases or large deductibles or co-insurance requirements on us, then our business, results of operations, cash flow, and financial
condition could be adversely affected.
Our software may contain undetected errors or “bugs” resulting in harm to our reputation which could adversely impact
our business, results of operations, cash flow, and financial condition. Software products as complex as those offered by us might
contain undetected errors or failures when first introduced or when new versions are released. Despite testing, we cannot ensure that
errors will not be found in new products or product enhancements after commercial release. Any errors could cause substantial harm
to our reputation, result in additional unplanned expenses to remedy any defects, delay the introduction of new products, result in the
loss of existing or potential customers, or cause a loss in revenue. Further, such errors could subject us to claims from our customers
for significant damages, and we cannot assure you that courts would enforce the provisions in our customer agreements that limit our
liability for damages. In turn, our business, results of operations, cash flow, and financial condition could be materially adversely
affected.
We may encounter long sales cycles, particularly with our larger customers, which could have an adverse effect on the
amount, timing, and predictability of our revenue, adversely affecting our business, results of operations, cash flow, and
financial condition. Our products have lengthy sales cycles, which typically extend from nine to twelve months and may take up to
several years. Potential and existing customers, particularly larger enterprise customers, often commit significant resources to an
evaluation of available solutions and services and require us to expend substantial time and resources in connection with our sales
efforts. The length of our sales cycles also varies depending on the type of customer to which we are selling, the product being sold,
and customer requirements. We may incur substantial sales and marketing expenses and expend significant management effort during
this time, regardless of whether we make a sale. Many of the key risks relating to sales processes are beyond our control, including:
our customers’ budgetary and scheduling constraints; the timing of our customers’ budget cycles and approval processes; our
customers’ willingness to replace their currently deployed software solutions; and general economic conditions.
As a result of these lengthy and uncertain sales cycles of our products and services, it is difficult for us to predict when customers
may purchase products or services from us, thereby affecting when we can recognize the associated revenue, and our operating results
may vary significantly and may be adversely affected. The length of our sales cycle makes us susceptible to having pending
transactions delayed or terminated by our customers if they decide to delay or withdraw funding for IT projects. Our customers may
decide to delay or withdraw funding for IT projects for various reasons, including, but not limited to, global economic cycles and
capital market fluctuations.
Our operating results are difficult to predict and could cause our stock price to fall. Our quarterly revenue and operating
results are difficult to predict and can fluctuate significantly from quarter to quarter. If our quarterly revenue or operating results fall
below the expectations of investors or public market analysts, the price of our common stock could fall substantially. Our quarterly
revenue is difficult to forecast for several reasons, including the following: global macro-economic disruptions; credit and equity
market disruptions, which can significantly impact capital availability and spend timing of customers or potential customers; the
varying sales cycle for our products and services from customer to customer, including multiple levels of authorization required by
some customers; the varying demand for our products; customers’ budgeting and purchasing cycles; potential deferral of license
revenue well after entering into a license agreement due to extended payment terms, including, although infrequent, payment terms in
a contract extending beyond twelve months, significant software modifications, future software functionality deliverables not on a
stand-alone basis, or other negotiated terms that preclude software revenue recognition under U.S. general accepted accounting
principles; delays in our implementations at customer sites; timing of hiring new services employees and the rate at which these
employees become productive; timing of introduction of new products; development and performance of our distribution channels;
and timing of any acquisitions and related costs.
As a result of these and other factors, our license revenue is difficult to predict. Because our revenue from services is largely
correlated to our license revenue, a decline in license revenue could also cause a decline in our services revenue in the same quarter or
in subsequent quarters. In addition, an increase or decrease in hardware sales, which provide us with lower gross margins than sales of
software licenses or services, may cause variations in our quarterly operating results.
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Most of our expenses, including employee compensation and rent, are relatively fixed. In addition, our expense levels are based, in
part, on our expectations regarding future revenue increases. As a result, any shortfall in revenue in relation to our expectations could
cause significant changes in our operating results from quarter to quarter and could result in quarterly losses. As a result of these
factors, we believe that period-to-period comparisons of our revenue levels and operating results are not necessarily meaningful.
Historical growth rates and historical quarterly revenue and operating results may not be a good indicator of future operating results
and reliance on historical results should not be used to predict our future performance.
Our technology must be advanced if we are to remain competitive. The market for our products is characterized by rapid
technological change, frequent new product introductions and enhancements, changes in customer demands, and evolving industry
standards. Our existing products could be rendered obsolete if we fail to continue to advance our technology. We have also found that
the technological life cycles of our products are difficult to estimate, partially because of changing demands of other participants in the
supply chain. We believe that our future success will depend in large part upon our ability to continue to enhance our current product
line while we concurrently develop and introduce new products that keep pace with competitive and technological developments.
These developments require us to continue to make substantial product development investments. Although we are presently
developing a number of product enhancements to our product sets, we cannot assure you that these enhancements will be completed
on a timely basis or gain customer acceptance.
Our failure to manage the growth of our operations may adversely affect our business, results of operations, cash flow, and
financial condition. We plan to continue to increase the scope of our operations domestically and internationally. This growth may
place a significant strain on our management systems and resources. We may further expand domestically or internationally through
internal growth or through acquisitions of related companies and technologies. If we fail to maintain continuity in our executive
officers; develop the management skills of our managers and supervisors; attract, retain, train, and motivate our employees; improve
our operational, financial, and management controls; and maintain adequate reporting systems and procedures and our management
and information control systems, our business, results of operations, and cash flow could be negatively impacted.
We incorporate third-party software in our solutions, the failure or unavailability of which could adversely affect our
ability to sell, support, and service our products. We incorporate and include third-party software into and with certain of our
products and solutions and expect to continue to do so. The operation of our products could be impaired if there are defects in that
third-party software. It may be difficult for us to correct any defects in third-party software because the development and maintenance
of the software is not within our control. Such defects could adversely affect our business.
In addition, there can be no assurance that these third parties will continue to make their software available to us on acceptable
terms, or at all; not make their products available to our competitors on more favorable terms; invest the appropriate levels of
resources in their products and services to maintain and enhance the capabilities of their software; or remain in business. Any
impairment in our relationship with these third parties or our ability to license or otherwise use their software could have a material
adverse effect on our business, results of operations, cash flow, and financial condition.
The use of open source software in our products may expose us to additional risks and harm our intellectual property,
which could adversely impact our business, results of operations, cash flow, and financial condition. Some of our products use or
incorporate software that is subject to one or more open source licenses. Open source software is typically freely accessible, usable
and modifiable. Certain open source software licenses require a user who intends to distribute the open source software as a
component of the user’s software to disclose publicly part or all of the source code to the user’s software. In addition, certain open
source software licenses require the user of such software to make any derivative works of the open source code available to others on
unfavorable terms or at no cost. This can subject previously proprietary software to open source license terms.
While we monitor the use of all open source software in our products, processes, and technology and try to ensure that no open
source software is used in such a way as to require us to disclose the source code to the related product or solution, such use could
inadvertently occur. Additionally, if a third-party software provider has incorporated open source software into software we license
from them for use in our products and solutions, we could, under certain circumstances, be required to disclose the source code to our
products and solutions. This could harm our intellectual property position and have a material adverse effect on our business, results of
operations, cash flow, and financial condition.
If we are unable to develop software applications that interoperate with computing platforms developed by others, our
business, results of operations, cash flow, and financial condition may be adversely affected. We develop software applications
that interoperate with operating systems, database platforms, and hardware devices developed by others, which we refer to collectively
as computing platforms. If the developers of these computing platforms do not cooperate with us or we are unable to devote the
necessary resources so that our applications interoperate with those computing platforms, our software development efforts may be
delayed and our business and results of operations may be adversely affected. When new or updated versions of these computing
platforms are introduced, it is often necessary for us to develop updated versions of our software applications so that they interoperate
properly with these computing platforms. We may not accomplish these development efforts quickly or cost-effectively, and it is
difficult to predict what the relative growth rates of adoption of these computing platforms will be. These development efforts require
15
substantial investment, the devotion of substantial employee resources, and the cooperation of the developers of the computing
platforms. For some computing platforms, we must obtain some proprietary application program interfaces from the owner in order to
develop software applications that interoperate with the computing platforms. Computing platform providers have no obligation to
assist in these development efforts. If they do not provide us with assistance or the necessary proprietary application program
interfaces on a timely basis, we may experience delays or be unable to expand our software applications into other areas.
The computing platforms we use may not continue to be available to us on commercially reasonable terms. Any loss of the right to
use any of these systems could result in delays in the provision of our products and services, and our results of operations may be
adversely affected. Defects in computing platforms could result in errors or failure of our products, which could harm our business.
Our liability for intellectual property claims can be costly and result in the loss of significant rights, which could adversely
impact our business, results of operations, cash flow, and financial condition. It is possible that third parties will claim that we
have infringed their current or future products, inventions, or other intellectual property. We expect that supply chain software
developers like us will increasingly be subject to infringement claims as the number of products grows. Any claims, with or without
merit, could be time-consuming, result in costly litigation, cause product shipment delays, or require us to pay monetary damages or to
enter into royalty or licensing agreements, any of which could negatively impact our operating results. There are no assurances that
these royalty or licensing agreements, if required, would be available on terms acceptable to us, if at all. We also may be required to
indemnify our customers for damages they suffer as a result of such infringement. There are no assurances that legal action claiming
patent infringement will not be commenced against us, or that we would prevail in litigation given the complex technical issues and
inherent uncertainties in patent litigation. If a patent claim against us were successful and we could not obtain a license on acceptable
terms or license a substitute technology or redesign the product or feature to avoid infringement, we may be prevented from
distributing our software or required to incur significant expense and delay in developing non-infringing software. Any of these events
could seriously harm our business, results of operations, cash flow, and financial condition.
We may have exposure to additional tax liabilities. As a multinational corporation, we are subject to income taxes in the U.S.
and various foreign jurisdictions. Significant judgment is required in determining our global provision for income taxes and other tax
liabilities. In the ordinary course of a global business, there are many intercompany transactions and calculations where the ultimate
tax determination is uncertain. Our income tax returns are routinely subject to audits by tax authorities. Although we regularly assess
the likelihood of adverse outcomes resulting from these examinations to determine our tax estimates, a final determination of tax
audits or tax disputes could have an adverse effect on our financial condition, results of operations and cash flows. Also, the earnings
of our foreign subsidiaries are considered to be indefinitely reinvested. If our plans change in the future or if we elect to repatriate the
unremitted earnings of our foreign subsidiaries in the form of dividends or otherwise, we would be subject to additional income taxes
which would result in a higher effective tax rate.
In addition, the United States government and other governments are considering and may adopt tax reform measures that could
impact future effective tax rates favorably or unfavorably affected by changes in tax rates, changes in the valuation of our deferred tax
assets or liabilities, or changes in tax laws or their interpretation. Such changes could have a material adverse impact on our financial
results.
We are also subject to non-income taxes, such as payroll, sales, use, value-added, net worth, property and goods and services taxes
in the U.S. and various foreign jurisdictions. We are regularly under audit by tax authorities with respect to these non-income taxes
and may have exposure to additional non-income tax liabilities, which could have an adverse effect on our results of operations,
financial condition and cash flows.
Fluctuations in our hardware sales may adversely impact our business, results of operations, cash flow, and financial
condition. A portion of our revenue in any period is from the resale of a variety of third-party hardware products to purchasers of our
software. However, our customers may purchase these hardware products directly from manufacturers or distributors rather than from
us. We view sales of hardware as non-strategic. We perform this service to our customers seeking a single source for their supply
chain needs. Hardware sales are difficult to forecast and fluctuate from quarter to quarter, leading to unusual comparisons of total
revenue and fluctuations in profits. If we are unable to maintain or grow our hardware revenue, our business, results of operations,
cash flow, and financial condition may be adversely affected.
Our growth is dependent upon the successful development of our direct and indirect sales channel mix. We believe that our
future growth also will depend on further developing and maintaining a successful direct sales force and strategic relationships with
systems integrators and other technology companies. We invest significant resources to maintain and develop our sales channels. Our
investment could adversely affect our operating results if these efforts do not generate license and service revenue necessary to offset
the investment. Also, our inability to partner with other technology companies and qualified systems integrators could adversely affect
our results of operations. Because lower unit prices are typically charged on sales made through indirect channels, a disproportionate
increase in indirect sales could reduce our average selling prices and result in lower gross margins. In addition, sales of our products
through indirect channels typically do not generate consulting services revenue for us at the same levels as direct sales, as the third-
party systems integrators generally provide these services. Similarly, indirect sales typically do not generate the same levels of direct
16
contact between our associates and those of our customer, and we may have more difficulty accurately forecasting sales, evaluating
customer satisfaction, and recognizing emerging customer requirements. In addition, these systems integrators and third-party
software providers may develop, acquire, or market products competitive with our products.
Our strategy of marketing our products directly to customers and indirectly through systems integrators and other technology
companies may result in distribution channel conflicts. Our direct sales efforts may compete with those of our indirect channels and, to
the extent different systems integrators target the same customers, systems integrators may also come into conflict with each other.
Any channel conflicts that develop may have a material adverse effect on our relationships with systems integrators or harm our
ability to attract new systems integrators.
Our employee retention and hiring may be hindered by immigration restrictions, which could adversely impact our
business, results of operations, cash flow, and financial condition. Foreign nationals who are not U.S. citizens or permanent
residents constitute a significant part of our professional U.S. workforce. Our ability to hire and retain these workers, and their ability
to remain and work in the U.S. are impacted by laws and regulations as well as by processing procedures of various government
agencies. Changes in laws, regulations, or procedures may adversely affect our ability to hire or retain such workers and may affect
our costs of doing business and/or our ability to deliver services.
Our failure to adequately protect our proprietary rights could adversely impact our business, results of operations, cash
flow, and financial condition. Our success and ability to compete is dependent in part upon our proprietary technology. There are no
assurances that we will be able to protect our proprietary rights against unauthorized disclosure or third-party copying or use. We rely
on a combination of copyright, patent, trademark, and trade secret laws, as well as confidentiality agreements, licensing arrangements,
and contractual commitments, to establish and protect our proprietary rights. Despite our efforts to protect our proprietary rights,
existing copyright, patent, trademark, and trade secret laws afford only limited protection. In addition, the laws of certain foreign
countries do not protect our rights to the same extent as do the laws of the United States. Attempts may be made to copy or reverse
engineer aspects of our products or to obtain and use information that we regard as proprietary. Any infringement of our proprietary
rights could negatively impact our future operating results. Furthermore, policing the unauthorized use of our products is difficult, and
litigation may be necessary in the future to enforce our intellectual property rights, to protect our trade secrets, or to determine the
validity and scope of the proprietary rights of others. Litigation could result in substantial costs and diversion of resources. In turn, our
business, results of operations, cash flow, and financial condition could be materially adversely affected.
Mergers or other strategic transactions involving our competitors could weaken our competitive position or reduce our
revenue. Our competitors have been consolidating, which may make them more formidable competitors to us. Competing with
stronger companies may cause us to experience pricing pressure and loss of market share, either of which could have a material
adverse effect on our business, results of operations, cash flow, and financial condition. Our competitors may establish or strengthen
their cooperative relationships with vendors, systems integrators, third-party consulting firms, or other parties. Established companies
may not only develop their own products but may also acquire or partner with our current competitors. If any of these events occur,
our revenue and profitability could significantly decline.
Our business, results of operations, cash flow, and financial condition may be adversely affected if we cannot integrate
acquired companies or manage joint ventures. We may from time to time acquire companies with complementary products and
services. These acquisitions will expose us to increased risks and costs, including those arising from the following: assimilating new
operations and personnel; diverting financial and management resources from existing operations; and integrating acquired
technologies. We may not be able to generate sufficient revenue from any of these acquisitions to offset the associated acquisition
costs.
We will also be required to maintain uniform standards of quality and service, controls, procedures, and policies. Our failure to
achieve any of these standards may hurt relationships with customers, employees, and new management personnel. In addition, future
acquisitions may result in additional issuances of stock that could be dilutive to our shareholders.
Many acquisition candidates have significant intangible assets, and an acquisition of these businesses would likely result in
significant amounts of goodwill and other intangible assets. Goodwill and certain other intangible assets are not amortized to income,
but are subject to at least annual impairment reviews. If the acquisitions do not perform as planned, future charges to income arising
from such impairment reviews could be significant. Likewise, future quarterly and annual earnings could be significantly adversely
affected. In addition, these acquisitions could involve acquisition-related charges, such as one-time acquired research and development
charges.
We may also evaluate joint venture relationships with complementary businesses. Any joint venture we enter into would involve
many of the same risks posed by acquisitions, particularly the following: risks associated with the diversion of resources; the inability
to generate sufficient revenue; the management of relationships with third parties; and potential additional expenses.
17
Our business may require additional capital. We may require additional capital to finance our growth or to fund acquisitions or
investments in complementary businesses, technologies or product lines. Our capital requirements may be impacted by many factors,
including: demand for our products; the timing of and extent to which we invest in new technology; the timing of and extent to which
we acquire other companies; the level and timing of revenue; the expenses of sales and marketing and new product development; the
success and related expense of increasing our brand awareness; the cost of facilities to accommodate a growing workforce; the extent
to which competitors are successful in developing new products and increasing their market share; and the costs involved in
maintaining and enforcing intellectual property rights.
To the extent that our resources are insufficient to fund our future activities, we may need to raise additional funds through public
or private financing. However, additional funding, if needed, may not be available on terms attractive to us, or at all. In addition, since
we have historically financed our growth through cash flow from operations and available cash, our relative inexperience in accessing
the credit or capital markets may impair our ability to do so if the need arises. Our inability to raise capital when needed could have a
material adverse effect on our business, results of operations, cash flow and financial condition. If additional funds are raised through
the issuance of equity securities, the percentage ownership of our company held by our current shareholders would be diluted.
Fires or other catastrophic events at our principal facilities could cripple our business. Fires, natural disasters or other
catastrophic events, particularly those effecting our Atlanta headquarters or India research and development center, may cause damage
or disruption to our operations, and thus could have a strong negative effect on us. Our business operations are subject to interruption
by natural disasters, fire, power shortages, pandemics and other events beyond our control. Although we maintain crisis management
and disaster response plans, such events could make it difficult or impossible for us to deliver our services to our customers.
Our ability to maintain and develop our brand is critical for our continued success. The brand identity we have developed has
significantly contributed to the continued success of our business. Our ability to maintain and develop our brand is critical in
expanding our base of customers, partners and employees. Our brand will depend largely on our ability to remain a technology leader
and continue to provide high-quality innovative products, services, and features. Significant investments may be required in order to
maintain and develop our brand. However, the investments may later be proven to be unsuccessful. If we fail to maintain and develop
our brand, or if we incur excessive expenses in our efforts to do so, our business, operating results and financial condition may be
materially and adversely affected.
Adverse litigation results could affect our business. From time to time, we may be involved in litigation relating to claims
arising out of our ordinary course of business, and occasionally legal proceeding not in the ordinary course. Litigation can be lengthy,
expensive and disruptive to our operations, and can divert our management’s attention away from running our core business. The
results of any litigation also cannot be predicted with certainty. An adverse decision could result in monetary damages or injunctive
relief that could affect our business, operating results or financial condition. Additional information regarding legal matters in which
we are involved can be found in Note 5 of the Notes to our Consolidated Financial Statements.
Our stock price has been highly volatile. The trading price of our common stock has fluctuated significantly since our initial
public offering in April 1998. In addition, the trading price of our common stock could be subject to wide fluctuations in response to
various factors, including: global macro-economic contraction impacting demand for supply chain solutions; quarterly variations in
operating results; announcements of technological innovations or new products by us or our competitors; developments with respect to
patents or proprietary rights; changes in financial estimates by securities analysts; and mergers, acquisitions, and combinations
involving our competitors or us.
Our articles of incorporation and bylaws and Georgia law may inhibit a takeover of our company. Our basic corporate
documents and Georgia law contain provisions that might enable our management to resist a takeover of our company. These
provisions might discourage, delay, or prevent a change in the control of our company or a change in our management. These
provisions could also discourage proxy contests and make it more difficult for you and other shareholders to elect directors and take
other corporate actions. The existence of these provisions could also limit the price that investors might be willing to pay in the future
for shares of our common stock.
Economic conditions and regulatory changes caused by the United Kingdom’s likely exit from the European Union could
adversely affect our business. In June 2016, the United Kingdom (the “U.K”) held a referendum in which voters approved an exit
from the European Union (“E.U.”), commonly referred to as Brexit. It is expected that the U.K. government will initiate a process to
withdraw from the E.U. and begin negotiating the terms of its separation. The announcement of Brexit has resulted in significant
volatility in global stock market and currency exchange rate fluctuations that resulted in strengthening of the U.S. dollar relative to
other foreign currencies in which we conduct business. The announcement of Brexit and likely withdrawal of the U.K. from the E.U.
may also create global economic uncertainty, which may cause our customers to closely monitor their costs and reduce their spending
budgets. This could adversely affect our business, financial condition, operating results and cash flows. Our EMEA operations
represented approximately 11% and 13% of our total revenue for the year ended December 31, 2016 and 2015, respectively.
18
Changes in, or interpretation of, accounting principles could result in unfavorable accounting changes. Our Consolidated
Financial Statements are prepared in conformity with U.S. generally accepted accounting principles and accompanying accounting
pronouncements, implementation guidelines, and interpretations. These rules are subject to interpretation by the SEC and various
bodies formed to interpret and create appropriate accounting principles. Changes in these rules or their interpretation could
significantly change our reported results and may even retroactively affect previously reported transactions. Our accounting principles
that may be affected by changes in accounting principles include, but are not limited to revenue recognition and leases. For example,
the Financial Accounting Standards Board has issued new accounting standards for revenue recognition and leases. We are continuing
to evaluate the impact that the adoption of these standards will have on our Consolidated Financial Statements. Changes resulting
from these new accounting standards or the adoption of other new or revised accounting principles may result in materially different
financial results and may require that we make changes to our systems, processes and controls.
Item 1B.
Unresolved Staff Comments
As of December 31, 2016, we do not have any unresolved SEC staff comments.
Item 2.
Properties
Our principal administrative, sales, marketing, support, and research and development facility is located in approximately 221,000
square feet of modern office space in Atlanta, Georgia. Substantially all of this space is leased to us through September 30, 2025. We
have additional offices under multi-year agreements in New Jersey. We also occupy facilities outside of the United States under multi-
year agreements in the United Kingdom, the Netherlands, France, China, Japan, Singapore, India, and Australia. We also occupy
offices under short-term agreements in other geographical regions. We believe our office space is adequate to meet our immediate
needs; however, we may expand into additional facilities in the future.
Item 3.
Legal Proceedings
From time to time, we may be a party to legal proceedings arising in the ordinary course of business, and we could be a party to
legal proceedings not in the ordinary course of business. The Company is not currently a party to any legal proceeding the result of
which it believes could have a material adverse impact upon its business, financial position, results of operations, or cash flows.
Many of our installations involve products that are critical to the operations of our clients’ businesses. Any failure in our products
could result in a claim for substantial damages against us, regardless of our responsibility for such failure. Although we attempt to
contractually limit our liability for damages arising from product failures or negligent acts or omissions, there can be no assurance that
the limitations of liability set forth in our contracts will be enforceable in all instances.
Item 4.
Mine Safety Disclosures
Not applicable.
19
PART II
Market for Registrant’s Common Equity, Related Shareholder Matters, and Issuer Purchases of Equity Securities
Item 5.
Market for Common Stock
Our common stock is traded on the Nasdaq Global Select Market under the symbol “MANH”. The following table sets forth the
high and low closing sales prices of the common stock as reported by the Nasdaq Global Select Market for the periods indicated:
Fiscal Period
2016
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
2015
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
High Price
Low Price
$64.68
68.16
67.29
59.01
$55.11
61.23
68.19
76.96
$45.82
55.40
57.62
49.97
$38.53
50.80
56.96
62.68
On January 30, 2017, the last reported sales price of our common stock on the Nasdaq Global Select Market was $51.23 per share.
The number of registered shareholders of record of our common stock as of January 30, 2017 was approximately 14. The number of
record holders does not include persons who held our common stock in nominee or “street name” accounts through brokers.
We do not intend to declare or pay cash dividends in the foreseeable future. Our management anticipates that all earnings and other
cash resources, if any, will be retained for investment in our business.
Equity Compensation Plan Information
The following table provides information regarding our current equity compensation plans as of December 31, 2016:
Number of
securities to
be issued upon
exercise of
outstanding
options and
rights
Weighted-
average
exercise price
of outstanding
options and
rights
Number of
securities
remaining
available for
future
issuance under
equity
compensation
plans
1,029,230
$0.00
11,333,600
-
1,029,230
-
$0.00
-
11,333,600
Plan Category
Equity compensation plans
approved by security holders
Equity compensation plans
not approved by security holders
Total
Additional information regarding our equity compensation plans can be found in Note 2 of the Notes to our Consolidated Financial
Statements.
Purchase of Equity Securities
The following table provides information regarding our common stock repurchases under our publicly-announced share repurchase
program and shares withheld for taxes due upon vesting of restricted stock for the quarter ended December 31, 2016. All repurchases
related to the share repurchase program were made on the open market.
20
Total
Number of
Shares
Purchased
as Part of
Publicly
Announced
Plans or
Programs
Average
Price
Paid per
Share
$52.15
51.91
52.37
124,500
463,390
369,580
957,470
Maximum
Number (or
Approximate
Dollar Value)
of Shares that
May Yet Be
Purchased
Under the
Plans or
Programs
$43,507,134
19,454,170
98,984
Total
Number
of Shares
Purchased
124,500
463,390
369,580
957,470
Period
October 1 - October 31, 2016
November 1 - November 30, 2016
December 1 - December 31, 2016
Total
During the year ended December 31, 2016, we repurchased a total of 2,821,488 shares at an average price per share of $56.14
under our publicly-announced share repurchase program. In January 2017, our Board of Directors authorized the Company to
repurchase up to an aggregate of $50 million of the Company’s common stock.
Item 6.
Selected Financial Data
You should read the following selected consolidated financial data in conjunction with our Consolidated Financial Statements and
related Notes thereto and with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included
elsewhere in this Form 10-K. The statement of income and cash flow data for the years ended December 31, 2016, 2015 and 2014, and
the balance sheet data as of December 31, 2016 and 2015, are derived from, and are qualified by reference to, the audited financial
statements included elsewhere in this Form 10-K. The statement of income and cash flow data for the years ended December 31, 2013
and 2012 and the balance sheet data as of December 31, 2014, 2013, and 2012 are derived from audited financial statements not
included herein. Historical results are not necessarily indicative of results to be expected in the future.
2012
2013
Year Ended December 31,
2014
(in thousands, except per share data)
2015
2016
Statement of Income Data:
Software license
Total revenue
Operating income
Net income
Earnings per diluted share
Balance Sheet Data:
Cash, cash equivalents and investments
Total assets
Debt
Shareholders' equity
$
$
$
$
$
61,494
376,248
80,073
51,853
0.64
$
$
$
$
$
62,416
414,518
101,287
67,296
0.86
$
$
$
$
$
71,583
492,104
127,124
82,000
1.08
$
$
$
$
$
78,615 $
556,371 $
161,446 $
103,475 $
1.40 $
84,996
604,557
194,307
124,234
1.72
2012
2013
December 31,
2014
(in thousands)
2015
2016
$
$
$
$
103,047
261,813
-
161,509
$
$
$
$
132,956
297,828
-
181,586
$
$
$
$
124,438
318,170
-
182,023
$
$
$
$
128,760 $
337,913 $
- $
195,492 $
95,615
297,140
-
169,366
2012
2013
2015
2016
Year Ended December 31,
2014
(in thousands)
Statement of Cash Flow Data:
Operating cash flow
$
75,271 $
89,387
$
94,162
$
120,153 $
139,346
21
Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
All statements, trend analyses, and other information contained in the following discussion relative to markets for our products and
trends in revenue, gross margins, and anticipated expense levels, as well as other statements including words such as “anticipate,”
“believe,” “plan,” “estimate,” “expect,” and “intend” and other similar expressions constitute forward-looking statements. These
forward-looking statements are subject to business and economic risks and uncertainties, including those discussed under the caption
“Risk Factors” in Item 1A of this Form 10-K, and our actual results of operations may differ materially from those contained in the
forward-looking statements.
Business Overview
We develop, sell, deploy, service and maintain software solutions designed to manage supply chains, inventory and omni-channel
operations for retailers, wholesalers, manufacturers, logistics providers and other organizations. Our customers include many of the
world’s most premier and profitable brands.
Our business model is singularly focused on the development and implementation of complex commerce enablement software
solutions that are designed to optimize supply chains, and retail store operations including point of sale effectiveness and efficiency
for our customers. We have three principal sources of revenue:
(cid:121) licenses of our software;
(cid:121) professional services, including solutions planning and implementation, related consulting, customer training, and customer
support services and software enhancements (collectively, “services”); and
(cid:121) hardware sales and other revenue.
In 2016, we generated $604.6 million in total revenue, with a revenue mix of: license revenue 14%; services revenue 77%; and
hardware and other revenue 9%.
The Company has three geographic reportable segments: the Americas, EMEA, and APAC. Geographic revenue is based on the
location of the sale. Our international revenue was approximately $144.8 million, $131.3 million and $134.6 million for the years
ended December 31, 2016, 2015 and 2014, respectively, which represents approximately 24%, 24% and 27% of our total revenue for
the years ended December 31, 2016, 2015 and 2014, respectively. International revenue includes all revenue derived from sales to
customers outside the United States. At December 31, 2016, we employed approximately 3,020 employees worldwide, of which 1,470
employees are based in the Americas, 210 employees in EMEA, and 1,340 employees in APAC (including India). We have offices in
Australia, China, France, India, Japan, the Netherlands, Singapore, and the United Kingdom, as well as representatives in Mexico and
reseller partnerships in Latin America, Eastern Europe, the Middle East, South Africa, and Asia.
Global Economic Trends and Industry Factors
Global macro-economic trends, technology spending, and supply chain management market growth are important barometers for
our business. In 2016, approximately 76% of our total revenue was generated in the United States, 11% in EMEA, and the remaining
balance in APAC, Canada, and Latin America. In addition, Gartner Inc., an information technology research and advisory company,
estimates that nearly 80% of every supply chain software solutions dollar invested is spent in North America and Western Europe;
consequently, the health of the U.S. and the Western European economies has a meaningful impact on our financial results.
We sell technology-based solutions with total pricing, including software and services, in many cases exceeding $1.0 million. Our
software often is a part of our customers’ and prospects’ much larger capital commitment associated with facilities expansion and
business improvement. We believe that, given the lingering uncertainty in the global macro environment, the current sales cycles for
large license sales of $1.0 million or greater in our target markets have been extended. The current business climate within the United
States and geographic regions in which we operate continues to affect customers’ and prospects’ decisions regarding timing of
strategic capital expenditures. Delays with respect to such decisions can have a material adverse impact on our business, and may
further intensify competition in our already highly competitive markets.
In January 2017, the International Monetary Fund (IMF) provided a World Economic Outlook (WEO) update maintaining its
previous 2017 world economic growth forecast issued in October 2016 at 3.4 percent. The WEO update noted “After a lackluster
outturn in 2016, economic activity is projected to pick up pace in 2017 and 2018, especially in emerging market and developing
economies. However, there is a wide dispersion of possible outcomes around the projections, given uncertainty surrounding the policy
stance of the incoming U.S. administration and its global ramifications.”
22
The WEO update projected that advanced economies, which represent our primary revenue markets, would grow at about 1.9
percent in 2017 and 2.0 percent in 2018, while the emerging and developing economies would grow at about 4.5 percent in 2017 and
4.8 percent in 2018.
During the past three years, the overall trend has been steady for our large license sales, with recognized license revenue of $1.0
million or greater on 18, 21 and 15 new contracts for 2016, 2015 and 2014, respectively. While we are encouraged by our 2016 and
2015 results, we, along with many of our customers, still remain cautious regarding the pace of global economic growth. We believe
global economic volatility likely will continue to shape customers’ and prospects’ enterprise software buying decisions, making it
challenging to forecast sales cycles for our products and the timing of large enterprise software license sales.
Revenue
License revenue: License revenue, a leading indicator of our business performance, is primarily derived from software license fees
customers pay for supply chain solutions. In 2016, license revenue totaled $85.0 million, or 14% of total revenue, with gross margins
of 87.3%. For the year ended December 31, 2016, Americas, EMEA, and APAC recognized $71.1 million, $9.2 million, and $4.7
million in license revenue, respectively. For the year ended December 31, 2016, the percentage mix of new to existing customers was
approximately 35/65.
License revenue growth is influenced by the strength of general economic and business conditions and the competitive position of
our software products. Our license revenue generally has long sales cycles. In addition, the timing of the closing of a few large license
transactions can have a material impact on our license revenues, operating profit, operating margins and earnings per share. For
example, $1.1 million of license revenue in 2016 equates to approximately one cent of diluted earnings per share impact.
Our software solutions are focused on core supply chain commerce operations (Warehouse Management, Transportation
Management, Labor Management), Inventory optimization and Omni-channel operations (e-commerce, retail store operations and
point of sale), which are intensely competitive markets characterized by rapid technological change. We are a market leader in the
supply chain management software solutions market as defined by industry analysts such as ARC Advisory Group and Gartner. Our
goal is to extend our position as a leading global supply chain solutions provider by growing our license revenues faster than our
competitors through investment in innovation. We expect to continue to face increased competition from Enterprise Resource
Planning (ERP) and Supply Chain Management applications vendors and business application software vendors that may broaden
their solution offerings by internally developing, or by acquiring or partnering with independent developers of supply chain planning
and execution software. Increased competition could result in price reductions, fewer customer orders, reduced gross margins, and loss
of market share.
Services revenue: Our services business consists of professional services (consulting and customer training) and customer support
services and software enhancements (“CSSE”). In 2016, our services revenue totaled $467.3 million, or 77% of total revenue, with
gross margins of 57.7%. The Americas, EMEA, and APAC recognized $392.7 million, $55.2 million, and $19.4 million, respectively,
in services revenue for the year ended December 31, 2016. Professional services totaled $333.4 million in 2016, accounted for
approximately 71% of total services revenue and approximately 55% of total revenue. Our consolidated 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 profile as services margins are
inherently lower than license revenue margins.
At December 31, 2016, our professional services organization totaled approximately 2,010 employees, accounting for 67% of our
total employees worldwide. Our professional services organization provides our customers with expertise and assistance in planning
and implementing our solutions. To ensure a successful product implementation, consultants assist customers with the initial
installation of a system, the conversion and transfer of the customer’s historical data onto our system, and ongoing training, education,
and system upgrades. We believe our professional services enable customers to implement our software rapidly, ensure the customer’s
success with our solution, strengthen our customer relationships, and add to our industry-specific knowledge base for use in future
implementations and product innovations.
Although our professional services are optional, the majority of our customers use at least some portion of these services for their
planning, implementation, or related needs. Professional services are typically rendered under time and materials-based contracts with
services typically billed on an hourly basis. Professional services are sometimes rendered under fixed-fee based contracts with
payments due on specific dates or milestones.
Services revenue growth is contingent upon license revenue and customer upgrade cycles, which is influenced by the strength of
general economic and business conditions and the competitive position of our software products. In addition, our professional services
business has competitive exposure to offshore providers and other consulting companies. All of these factors potentially create the risk
of pricing pressure, fewer customer orders, reduced gross margins, and loss of market share.
23
For CSSE, we offer a comprehensive 24 hours per day, 365 days per year program that provides our customers with software
upgrades, when and if available, which include additional or improved functionality and technological advances incorporating
emerging supply chain and industry initiatives. Our CSSE revenues totaled $133.9 million in 2016, representing approximately 29%
of services revenue and approximately 22% of total revenue, respectively. The growth of CSSE revenues is influenced by: (1) new
license revenue growth; (2) annual renewal of support contracts; (3) increase in customers through acquisitions; and (4) 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 revenue is
generally paid in advance and recognized ratably over the term of the agreement, typically twelve months. CSSE renewal revenue is
recognized over the renewal period and recognition is not initiated until payment is received from the customer.
Hardware and other revenue: Our hardware and other revenue totaled $52.3 million in 2016 representing 9% of total revenue with
gross margins of 20.5%. In conjunction with the licensing of our software, and as a convenience for our customers, we resell a variety
of hardware products developed and manufactured by third parties. These products include computer hardware, radio frequency
terminal networks, RFID chip readers, bar code printers and scanners, and other peripherals. We resell all third-party hardware
products and related maintenance pursuant to agreements with manufacturers or through distributor-authorized reseller agreements
pursuant to which we are entitled to purchase hardware products and services at discount prices. We generally purchase hardware
from our vendors only after receiving an order from a customer. As a result, we do not maintain hardware inventory.
Other revenue represents amounts associated with reimbursements from customers for out-of-pocket expenses. The total amount of
expense reimbursement recorded to hardware and other revenue was $18.3 million, $20.2 million, and $18.9 million for 2016, 2015
and 2014, respectively.
Product Development
We continue to invest significantly in research and development (R&D) to provide leading solutions that help global retailers,
manufacturers, wholesalers, distributors and logistics providers successfully manage accelerating and fluctuating demands as well as
the increasing complexity and volatility of their local and global supply chains, retail store operations and point of sale. Our research
and development expenses for the years ended December 31, 2016, 2015 and 2014 were $54.7 million, $53.9 million, and $49.0
million, respectively. At December 31, 2016, our R&D organization totaled approximately 680 employees, located in the U.S. and
India.
We expect to continue to focus our R&D resources on the development and enhancement of our core supply chain, inventory
optimization, omni-channel and point of sale software solutions. We offer what we believe to be the broadest solution portfolio in the
supply chain solutions marketplace, to address all aspects of inventory optimization, transportation management, distribution
management, planning, and omni-channel operations including order management, store inventory & fulfillment, call center and point
of sale.
We also plan to continue to enhance our existing solutions and to introduce new solutions to address evolving industry standards
and market needs. We identify opportunities to further enhance our solutions and to develop and provide new solutions through our
customer support organization, as well as through ongoing customer consulting engagements and implementations, interactions with
our user groups, association with leading industry analysts and market research firms, and participation on industry standards and
research committees. Our solutions address the needs of customers in various vertical markets, including retail, consumer goods, food
and grocery logistics service providers, industrial and wholesale, high technology and electronics, life sciences, and government.
Cash Flow and Financial Condition
For 2016, we generated cash flow from operating activities of $139.3 million and have generated a cumulative total of $353.7
million for the three years ended December 31, 2016. Our cash and investments at December 31, 2016 totaled $95.6 million, with no
debt on our balance sheet. We currently have no credit facilities. During the past three years, our primary uses of cash have been
funding investment in R&D and operations to drive earnings growth and repurchases of common stock.
During 2016, we repurchased approximately $158.4 million of Manhattan Associates’ outstanding common stock under the share
repurchase program approved by our Board of Directors throughout the year.
In 2017, we anticipate that our priorities for use of cash will be in hiring, developing sales and services resources and continued
investment in product development to extend our market leadership. We will continue to evaluate acquisition opportunities that are
complementary to our product footprint and technology direction. We will also continue to weigh our share repurchase options against
cash for acquisitions and investing in the business. We do not anticipate any borrowing requirements in 2017 for general corporate
purposes.
24
Full Year 2016 Financial Summary
(cid:121) Diluted earnings per share for the twelve months ended December 31, 2016 was $1.72, compared to $1.40 for the twelve months
ended December 31, 2015;
(cid:121) Consolidated revenue for the twelve months ended December 31, 2016 was $604.6 million, compared to $556.4 million for the
twelve months ended December 31, 2015. License revenue was $85.0 million for the twelve months ended December 31, 2016,
compared to $78.6 million for the twelve months ended December 31, 2015;
(cid:121) Operating income was $194.3 million for the twelve months ended December 31, 2016, compared to $161.4 million for the
twelve months ended December 31, 2015;
(cid:121) Operating margins for 2016 were 32.1% compared to operating margins of 29.0% in 2015;
(cid:121) Cash flow from operations totaled $139.3 million for the full year 2016 compared to $120.2 million in 2015;
(cid:121) Cash and investments on hand at December 31, 2016 was $95.6 million compared to $128.8 million at December 31, 2015;
(cid:121) During the twelve months ended December 31, 2016, the Company repurchased approximately 2.8 million shares of Manhattan
Associates common stock, reducing common shares outstanding by 3%, under the share repurchase program authorized by our
Board of Directors, for a total investment of $158.4 million; and
(cid:121) In January 2017, our Board of Directors authorized the Company to repurchase up to an aggregate of $50 million of the
Company’s common stock.
Results of Operations
The following table summarizes selected Statement of Income data for the years ended December 31, 2016, 2015 and 2014.
Revenue:
Software license
Services
Hardware and other
Total revenue
Costs and expenses:
Cost of license
Cost of services
Cost of hardware and other
Research and development
Sales and marketing
General and administrative
Depreciation and amortization
Total costs and expenses
Income from operations
Operating margin
Year Ended December 31,
2016
2015
(in thousands)
% Change vs. Prior Year
2014
2016
2015
$
$
84,996
467,286
52,275
604,557
10,820
197,475
41,584
54,736
48,223
48,322
9,090
410,250
194,307
32.1%
$
$
78,615
428,078
49,678
556,371
9,938
184,349
41,141
53,859
48,615
49,259
7,764
394,925
161,446
29.0%
$
$
71,583
376,023
44,498
492,104
7,110
169,140
36,328
48,953
52,617
44,455
6,377
364,980
127,124
25.8%
8%
9%
5%
9%
9%
7%
1%
2%
-1%
-2%
17%
4%
20%
10%
14%
12%
13%
40%
9%
13%
10%
-8%
11%
22%
8%
27%
25
The Company has three geographic reportable segments: the Americas, EMEA, and APAC. Geographic revenue information is
based on the location of sale. The revenues represented below are from external customers only. The geographical-based expenses
include costs of personnel, direct sales, and marketing expenses, and general and administrative costs to support the business. There
are certain corporate expenses included in the Americas segment that are not charged to the other segments including research and
development, certain marketing and general and administrative costs that support the global organization, and the amortization of
acquired developed technology. Included in the Americas costs are all research and development costs, including the costs associated
with the Company’s India operations. During 2016, 2015, or 2014, we derived the majority of our revenues from sales to customers
within our Americas segment. The following table summarizes revenue and operating profit by segment:
Revenue:
Software license
Americas
EMEA
APAC
Total software license
Services
Americas
EMEA
APAC
Total services
Hardware and Other
Americas
EMEA
APAC
Total hardware and other
Total Revenue
Americas
EMEA
APAC
Total revenue
Operating income:
Americas
EMEA
APAC
Total operating income
Year Ended December 31,
2016
2015
(in thousands)
% Change vs. Prior Year
2014
2016
2015
$
$
71,134
9,187
4,675
84,996
$
65,307
9,566
3,742
78,615
59,502
7,505
4,576
71,583
392,675
55,240
19,371
467,286
49,775
1,855
645
52,275
513,584
66,282
24,691
604,557
164,947
22,060
7,300
194,307
$
$
$
352,665
58,030
17,383
428,078
46,504
2,480
694
49,678
464,476
70,076
21,819
556,371
133,823
22,310
5,313
161,446
$
$
$
301,025
51,440
23,558
376,023
41,437
1,910
1,151
44,498
401,964
60,855
29,285
492,104
101,936
15,313
9,875
127,124
$
$
$
9%
-4%
25%
8%
11%
-5%
11%
9%
7%
-25%
-7%
5%
11%
-5%
13%
9%
23%
-1%
37%
20%
10%
27%
-18%
10%
17%
13%
-26%
14%
12%
30%
-40%
12%
16%
15%
-25%
13%
31%
46%
-46%
27%
The consolidated results of our operations for the years ended December 31, 2016, 2015 and 2014 are discussed below.
26
Revenue
Our revenue consists of fees generated from the licensing and hosting of software; fees from professional services, customer
support services and software enhancements; hardware sales of complementary radio frequency and computer equipment; and other
revenue representing amounts associated with reimbursements from customers for out-of-pocket expenses.
Year Ended December 31,
% Change vs. Prior
Year
% of Total Revenue
2016
2015
2014
2016
2015
2016
2015
2014
Software license
Services
Hardware and other
Total revenue
(in thousands)
$ 84,996 $ 78,615 $ 71,583
467,286 428,078 376,023
52,275 49,678 44,498
$ 604,557 $ 556,371 $ 492,104
8 %
9 %
5 %
9 %
10 %
14 %
12 %
13 %
14 %
77 %
9 %
100 %
14 %
77 %
9 %
100 %
15 %
76 %
9 %
100 %
License revenue
Year 2016 compared with year 2015
License revenue increased $6.4 million, or 8%, to $85.0 million in 2016 compared to 2015. We completed eighteen and twenty-one
large new deals greater than $1.0 million in 2016 and 2015, respectively. Our Americas and APAC license revenue increased $5.8
million and $0.9 million, respectively, while EMEA license revenue decreased $0.3 million over 2015.
The license sales percentage mix across our product suite in 2016 was approximately 60% warehouse management solutions and
40% non-warehouse management solutions. Our warehouse management solutions decreased $1.8 million, or 4%, in 2016 compared
to 2015, and non-warehouse management solutions increased $8.2 million, or 29%, in 2016 over 2015.
Year 2015 compared with year 2014
License revenue increased $7.0 million, or 10%, to $78.6 million in 2015 compared to 2014. We completed twenty-one and fifteen
large new deals greater than $1.0 million in 2015 and 2014, respectively. Our Americas and EMEA license revenue increased $5.8
million and $2.0 million, respectively, while APAC license revenue decreased $0.8 million over 2014.
The license sales percentage mix across our product suite in 2015 was approximately 65% warehouse management solutions and
35% non-warehouse management solutions. Our warehouse management solutions increased $10.0 million, or 25%, in 2015
compared to 2014, and non-warehouse management solutions decreased $3.0 million, or 9%, in 2015 over 2014.
Services revenue
Year 2016 compared with year 2015
Services revenue increased $39.2 million, or 9%, in 2016 compared to 2015 due to a $28.8 million, or 9%, increase in professional
services revenue and a $10.4 million, or 8%, increase in CSSE revenue. The Americas and APAC segments increased $40.0 million
and $2.0 million, respectively, while the EMEA segment decreased $2.8 million, compared to 2015. The increase in services revenue
is primarily due to a combination of license deals signed and customer-specific initiatives in conjunction with customer upgrade
activity.
Year 2015 compared with year 2014
Services revenue increased $52.1 million, or 14%, in 2015 compared to 2014 due to a $44.6 million, or 17%, increase in
professional services revenue and a $7.5 million, or 6%, increase in CSSE revenue. The Americas and EMEA segments increased
$51.6 million and $6.6 million, respectively, while the APAC segment decreased $6.1 million, compared to 2014. The increase in
services revenue is primarily due to a combination of license deals signed and customer-specific initiatives in conjunction with
customer upgrade activity.
27
Hardware and other
Sales of hardware increased $4.5 million to $34.0 million in 2016 compared to $29.5 million in 2015. Sales of hardware increased
$3.9 million to $29.5 million in 2015 compared to $25.6 million in 2014. The majority of hardware sales are derived from our
Americas segment. Sales of hardware are largely dependent upon customer-specific desires, which fluctuate. 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 $18.3 million, $20.2 million, and $18.9
million for 2016, 2015 and 2014, respectively.
Cost of Revenue
Cost of software license
Cost of services
Cost of hardware and other
Total cost of revenue
Cost of License
Year Ended December 31,
% Change vs. Prior
Year
2016
2015
2014
2016
2015
(in thousands)
$ 10,820
197,475
41,584
$ 249,879
$
9,938
184,349
41,141
$ 235,428
$
7,110
169,140
36,328
$ 212,578
9%
7%
1%
6%
40%
9%
13%
11%
Cost of license consists of the costs associated with software reproduction; hosting services; media, packaging and delivery,
documentation, and other related costs; and royalties on third-party software sold with or as part of our products. In 2016, cost of
license increased by $0.9 million, or 9% compared to 2015 principally due to a $1.2 million increase in cost of hosting offset by a $0.6
million decrease in cost of royalties over the prior year. In 2015, cost of license increased by $2.8 million, or 40% compared to 2014
principally due to a $1.7 million increase in cost of third-party software license fees and a $0.7 million increase in cost of hosting over
the prior year.
Cost of Services
Year 2016 compared with year 2015
Cost of services consists primarily of salaries and other personnel-related expenses of employees dedicated to professional and
technical services and customer support services. The $13.1 million, or 7%, increase in cost of services in 2016 compared to 2015 was
principally due increased headcount to support business growth resulting in a $15.1 million increase in compensation, other personnel-
related and travel expenses. These personnel and other services operating expense increases were offset by a $3.3 million decrease in
performance-based compensation expense.
Year 2015 compared with year 2014
Cost of services consists primarily of salaries and other personnel-related expenses of employees dedicated to professional and
technical services and customer support services. The $15.2 million, or 9%, increase in cost of services in 2015 compared to 2014 was
principally due increased headcount to support business growth resulting in a $13.5 million increase in compensation, other personnel-
related and travel expenses as well as a $1.0 million increase in performance-based compensation expense.
Cost of Hardware and other
In 2016, cost of hardware increased $2.2 million to $23.4 million from $21.2 million in 2015 on increased sales of hardware. In
2015, cost of hardware increased $3.5 million to $21.2 million from $17.7 million in 2014 on increased sales of hardware. Cost of
hardware and other includes professional services billed travel expenses reimbursed by customers of approximately $18.2 million,
$19.9 million, and $18.6 million for 2016, 2015 and 2014, respectively.
28
Operating Expenses
Research and development
Sales and marketing
General and administrative
Depreciation and amortization
Operating expenses
Research and Development
Year Ended December 31,
% Change vs. Prior
Year
2016
2015
2014
2016
2015
(in thousands)
$ 54,736
48,223
48,322
9,090
$ 160,371
$ 53,859
48,615
49,259
7,764
$ 159,497
$ 48,953
52,617
44,455
6,377
$ 152,402
2%
-1%
-2%
17%
1%
10%
-8%
11%
22%
5%
Our principal research and development (R&D) activities during 2016, 2015 and 2014 focused on the expansion and integration of
new products and releases, while expanding the product footprint of our software solution suites in Supply Chain, Inventory
Optimization and Omni-Channel including point-of-sale and tablet retailing.
For the years ended December 31, 2016, 2015 and 2014, we did not capitalize any R&D costs because the costs incurred following
the attainment of technological feasibility for the related software product through the date of general release were insignificant.
Year 2016 compared with year 2015
R&D expenses primarily consist of salaries and other personnel-related costs for personnel involved in our research and
development activities. Research and development expenses in 2016 increased by $0.9 million, or 2%, compared to 2015. This
increase is primarily due to a $2.1 million increase in compensation and other personnel-related expenses. The personnel and other
R&D operating expenses were offset by a $1.8 million decrease in performance-based compensation expense.
Year 2015 compared with year 2014
R&D expenses primarily consist of salaries and other personnel-related costs for personnel involved in our research and
development activities. Research and development expenses in 2015 increased by $4.9 million, or 10%, compared to 2014. This
increase is primarily due to a $3.4 million increase in compensation and other personnel-related expenses, a $0.6 million increase in
temporary contracted personnel, and a $0.6 million increase in performance-based bonus expense.
Sales and Marketing
Year 2016 compared with year 2015
Sales and marketing expenses include salaries, commissions, travel and other personnel-related costs and the costs of our marketing
and alliance programs and related activities. Sales and marketing expenses decreased by $0.4 million, or 1%, in 2016 compared to
2015.
Year 2015 compared with year 2014
Sales and marketing expenses include salaries, commissions, travel and other personnel-related costs and the costs of our marketing
and alliance programs and related activities. Sales and marketing expenses decreased by $4.0 million, or 8%, in 2015 compared to
2014. This decrease was mainly attributable to the decrease in performance-based compensation expense of $3.7 million.
General and Administrative
Year 2016 compared with year 2015
General and administrative expenses consist primarily of salaries and other personnel-related costs of executive, financial, human
resources, information technology, and administrative personnel, as well as facilities, legal, insurance, accounting, and other
29
administrative expenses. General and administrative expenses decreased $0.9 million, or 2%, in 2016 primarily attributable to a $1.0
million decrease in performance-based compensation expense.
Year 2015 compared with year 2014
General and administrative expenses consist primarily of salaries and other personnel-related costs of executive, financial, human
resources, information technology, and administrative personnel, as well as facilities, legal, insurance, accounting, and other
administrative expenses. General and administrative expenses increased $4.8 million, or 11%, in 2015 primarily attributable to an
increase of $3.6 million in compensation and other personnel-related expenses, and an increase of $1.1 million in professional fees.
Depreciation and Amortization
Depreciation expense amounted to $8.7 million, $7.3 million, and $6.2 million 2016, 2015 and 2014, respectively. Amortization of
intangibles was immaterial in 2016, 2015 and 2014. We have recorded goodwill and other acquisition-related intangible assets as part
of the purchase accounting associated with various acquisitions.
Operating Income
Operating income for the year ended December 31, 2016 increased $32.9 million to $194.3 million, compared to $161.4 million for
the year ended December 31, 2015. Operating margins were 32.1% for 2016 versus 29.0% for 2015. Operating income and margin
increased primarily due to strong revenue growth and expense discipline during the year ended December 31, 2016. The foreign
currency translation effect for the year ended December 31, 2016 is immaterial. In 2016, operating income in the Americas and APAC
segments increased by $31.1 million and $2.0 million, respectively, but decreased in the EMEA segment by $0.2 million.
Operating income for the year ended December 31, 2015 increased $34.3 million to $161.4 million, compared to $127.1 million for
the year ended December 31, 2014. Operating margins were 29.0% for 2015 versus 25.8% for 2014. Operating income and margin
increased primarily due to strong revenue growth and expense discipline during the year even though disadvantaged from unfavorable
foreign currency translation effect of $2.1 million for the year ended December 31, 2015. The unfavorable foreign currency translation
effect is primarily due to the weakening of the euro and British pound sterling versus the U.S. dollar during the year ended
December 31, 2015. In 2015, operating income in the Americas and EMEA segments increased by $31.9 million and $7.0 million,
respectively, but decreased in the APAC segment by $4.6 million.
Other Income and Income Taxes
Other income, net
Income tax provision
Other Income, net
Year Ended December 31,
% Change vs. Prior
Year
2016
2015
2014
2016
2015
1,800 $
$
874 29%
1,395 $
71,873 59,366 45,998 21%
60%
29%
Other income, net primarily includes interest income, foreign currency gains and losses, and other non-operating expenses. Interest
income was $1.2 million for the year ended December 31, 2016, and $1.3 million for both the years ended December 31, 2015 and
2014. The weighted-average interest rate earned on cash and investments was approximately 1% for the years ended December 31,
2016, 2015 and 2014. We recorded a net foreign currency gain of $0.6 million in 2016, and net foreign currency losses of $0.1 million
and $0.4 million in 2015 and 2014, respectively. The foreign currency gains and losses mainly resulted from gains or losses on
intercompany transactions denominated in foreign currencies with subsidiaries due to the fluctuation of the U.S. dollar relative to other
foreign currencies, primarily the British Pound sterling, Indian Rupee and Japanese Yen.
Income Tax Provision
Our effective income tax rates were 36.6%, 36.5%, and 35.9% in 2016, 2015 and 2014, respectively. Our effective income tax rate
takes into account the source of taxable income, domestically by state and internationally by country, and available income tax credits.
The effective tax rate in 2015 increased from 2014 mainly due to increases in reserves for uncertain tax positions, partially offset
by increases in estimated utilization of state tax credit carryforwards.
30
Liquidity and Capital Resources
During 2016, 2015 and 2014, we funded our business through cash generated from operations. Our cash and investments as of
December 31, 2016 included $47.7 million held in the U.S. and $47.9 million held by our foreign subsidiaries. We believe that our
cash balances in the U.S. are sufficient to fund our U.S. operations. In the future, if we elect to repatriate the unremitted earnings of
our foreign subsidiaries in the form of dividends or otherwise, we would be subject to additional U.S. income taxes which would result
in a higher effective tax rate. However, our intent is to indefinitely reinvest these funds outside of the U.S. and we do not have a
current cash requirement need to repatriate cash to the U.S.
Our cash flow from operating activities totaled $139.3 million, $120.2 million, and $94.2 million in 2016, 2015 and 2014,
respectively. Typical factors affecting our cash provided by operating activities include our level of revenue and earnings for the
period, the timing and amount of employee bonus payments and income tax payments, and the timing of cash collections from our
customers which is our primary source of operating cash flow. Cash flow from operating activities for 2016 increased $19.1 million
compared to 2015 primarily attributable to higher revenue and net earnings. Cash flow from operating activities for 2015 increased
$26.0 million compared to 2014 primarily attributable to higher revenue and net earnings. Days sales outstanding was 63, 63 and 61 at
December 31, 2016, 2015 and 2014, respectively, reflecting solid cash collections.
Our cash flow from investing activities totaled $3.4 million in 2016. Our investing activities used cash of $13.5 million and $12.7
million in 2015 and 2014, respectively. The cash flow from investing activities for the year ended December 31, 2016 was primarily
attributable to net maturities of investments of $10.2 million offset by capital expenditures of $6.8 million to support company growth.
The use of cash for investing activities for the year ended December 31, 2015 was for capital expenditures of $11.5 million to support
company growth and net purchases of $2.0 million in investments. The use of cash for investing activities for the year ended
December 31, 2014 was for capital expenditures of $9.4 million, $2.8 million payment in connection with the asset acquisition of
Global Bay Mobile Technologies, and net purchases of $0.5 million in investments.
Our financing activities used cash of approximately $162.7 million, $102.3 million, and $89.1 million in 2016, 2015 and 2014,
respectively. The principal use of cash for financing activities for the year ended December 31, 2016 was to purchase approximately
$167.9 million of our common stock, including $9.5 million for shares withheld for taxes due upon vesting of restricted stock,
partially offset by a $5.2 million excess tax benefit related to the exercise of stock options and vesting of restricted stock awards. The
principal use of cash for financing activities for the year ended December 31, 2015 was to purchase approximately $112.1 million of
our common stock, including $10.5 million for shares withheld for taxes due upon vesting of restricted stock, partially offset by
proceeds generated from options exercised of $0.7 million and a $9.1 million excess tax benefit related to the exercise of stock options
and vesting of restricted stock awards. The principal use of cash for financing activities for the year ended December 31, 2014 was to
purchase approximately $99.2 million of our common stock, including $8.1 million for shares withheld for taxes due upon vesting of
restricted stock, partially offset by proceeds generated from options exercised of $1.6 million and a $8.6 million excess tax benefit
related to the exercise of stock options and vesting of restricted stock awards. In January 2017, our Board of Directors authorized the
Company to repurchase up to an aggregate of $50 million of the Company’s common stock.
Periodically, opportunities may arise to grow our business through the acquisition of complementary products, and technologies.
Any material acquisition could result in a decrease to our working capital depending on the amount, timing, and nature of the
consideration to be paid. We believe that our existing cash and investments will be sufficient to meet our working capital and capital
expenditure needs at least for the next twelve months, although there can be no assurance that this will be the case. In 2017, we
anticipate that our priorities for use of cash will be similar to prior years, with our first priority being continued investment in product
development and profitably growing our business to extend our market leadership. We will continue to evaluate acquisition
opportunities that are complementary to our product footprint and technology direction. We will also continue to weigh our share
repurchase options against cash for acquisitions and investing in the business. At this time, we do not anticipate any borrowing
requirements in 2017 for general corporate purposes.
New Accounting Pronouncements
Revenue Recognition
In May 2014, the FASB issued ASU 2014-09, Revenue Recognition – Revenue from Contracts with Customers (Topic 606), which
will replace substantially all current revenue recognition guidance once it becomes effective. The new standard provides accounting
guidance for all revenue arising from contracts with customers and affects all entities that enter into contracts to provide goods or
services to their customers unless the contracts are in the scope of other standards. The new standard is less prescriptive and may
require software entities to use more judgment and estimates in the revenue recognition process than are required under existing
revenue guidance.
In March 2016, the FASB issued ASU 2016-08, Revenue from Contracts with Customers (Topic 606) – Principal versus Agent
Considerations, which clarifies the implementation guidance for principal versus agent considerations in ASU 2014-09. In April 2016,
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the FASB issued ASU 2016-10, Revenue from Contracts with Customers (Topic 606) – Identifying Performance Obligations and
Licensing, which amends the guidance in ASU 2014-09 related to identifying performance obligations and accounting for licenses of
intellectual property. In May 2016, the FASB issued ASU 2016-12, Revenue from Contracts with Customers (Topic 606) – Narrow-
Scope Improvements and Practical Expedients, which clarifies the following aspects in ASU 2014-09: collectability, presentation of
sales taxes and other similar taxes collected from customers, noncash considerations, contract modifications at transition, completed
contracts at transition, and technical correction. We must adopt ASU 2016-08, ASU 2016-10 and ASU 2016-12 with ASU 2014-09,
which is effective for annual and interim periods beginning after December 15, 2017.
The new revenue standard may be applied using either of the following transition methods: (1) a full retrospective approach
reflecting the application of the standard in each prior reporting period with the option to elect certain practical expedients, or (2) a
modified retrospective approach with the cumulative effect of initially adopting the standard recognized at the date of adoption (which
includes additional footnote disclosures). We will adopt the standard in the first quarter of 2018 and preliminarily expect to use the
modified prospective method. However, we are continuing to evaluate the impact of the standard, and our adoption method is subject
to change. Currently, we are in the process of reviewing our historical contracts to quantify the impact that the adoption of the
standard will have on specific performance obligations. We are also continuing to evaluate the impact of the standard on our
recognition of costs related to obtaining customer contracts (namely sales commissions).
Balance Sheet Classification of Deferred Taxes
In November 2015, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2015-17,
Balance Sheet Classification of Deferred Taxes, to simplify the presentation of deferred income taxes. The ASU requires that all
deferred tax assets and liabilities, along with any related valuation allowance, be classified as noncurrent on the balance sheet. The
guidance does not change the existing requirement that only permits offsetting within a tax-paying component of an entity. This
guidance is effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods, but may
be adopted earlier, and may be applied either prospectively or retrospectively. We adopted this guidance in the first three months
ended March 31, 2016 reporting on a retrospective basis. Accordingly, we reclassified current deferred taxes to noncurrent on our
December 31, 2015 consolidated balance sheet, which increased noncurrent deferred tax assets $4.6 million and decreased noncurrent
deferred tax liabilities $5.7 million.
Leases
In February 2016, the FASB issued ASU 2016-02, Leases, to increase transparency and comparability among organizations by
recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. Under
the new guidance, a lessee will be required to recognize assets and liabilities for leases with lease terms of more than 12 months.
Consistent with current GAAP, the recognition, measurement, and presentation of expenses and cash flows arising from a lease by a
lessee primarily will depend on its classification as a finance or operating lease. However, unlike current GAAP—which requires only
capital leases to be recognized on the balance sheet—the new ASU will require both types of leases to be recognized on the balance
sheet. The ASU also will require disclosures to help investors and other financial statement users better understand the amount,
timing, and uncertainty of cash flows arising from leases. These disclosures include qualitative and quantitative requirements,
providing additional information about the amounts recorded in the financial statements. For public companies, this guidance is
effective for annual periods beginning after December 15, 2018, and interim periods within those annual periods, but may be adopted
earlier. We are currently evaluating the impact that the adoption of this standard will have on our Consolidated Financial Statements.
Stock Compensation
In March 2016, the FASB issued ASU 2016-09, Compensation – Stock Compensation: Improvements to Employee Share-Based
Payment Accounting, to improve the accounting for employee share-based payments. Under the new guidance, companies will no
longer record excess tax benefits and certain tax deficiencies in additional paid-in capital. Instead, all excess tax benefits and tax
deficiencies should be recognized as income tax expense or benefit in the income statement, and additional paid-in capital pools will
be eliminated. The guidance requires companies to present excess tax benefits as an operating activity on the statement of cash flows
rather than as a financing activity. It also will allow an employer to repurchase more of an employee’s shares than it can today for tax
withholding purposes without triggering liability accounting and to make a policy election to account for forfeitures as they occur. The
new guidance will require an employer to classify the cash paid to a tax authority when shares are withheld to satisfy its statutory
income tax withholding obligation as a financing activity on its statement of cash flows. Companies will have to elect whether to
account for forfeitures of share-based payments by (1) recognizing forfeitures of awards as they occur (e.g., when an award does not
vest because the employee leaves the company) or (2) estimating the number of awards expected to be forfeited and adjusting the
estimate when it is likely to change, as is currently required. For public companies, this guidance is effective for annual periods
beginning after December 15, 2016, and interim periods within those annual periods, but may be adopted earlier. We are adopting this
ASU in the first quarter of 2017. We plan to account for forfeitures as incurred upon adoption of this guidance. In each of the years
32
ended December 31, 2016, 2015 and 2014, we have recorded excess tax benefits of $5.2 million, $9.1 million, and $8.6 million as a
component of additional paid in capital. In accordance with this ASU, comparable amounts for future periods related to the difference
between the fair value of a restricted stock unit (RSU) on the grant date and the fair value of a RSU on the vest date will be recorded
as a discrete benefit or expense to the current income tax provision in the period in which the RSU vests. A majority of the future
amounts to be recorded would likely occur during the first quarter consistent with the vesting of a majority of RSU grants.
Going Concern
In August 2014, the FASB issued ASU 2014-15, Presentation of Financial Statements – Going Concern. The new guidance
requires management to evaluate whether there are conditions and events that raise substantial doubt about an entity’s ability to
continue as a going concern within one year after the financial statements are issued (or available to be issued when applicable).
Management will be required to make this evaluation for both annual and interim reporting periods. When management identifies
events or conditions that indicate that it is probable that the entity will be unable to meet its obligations as they become due, the
standard allows management to consider the mitigating effect of its plans to determine whether substantial doubt is alleviated.
Management will have to make certain disclosures if it concludes that substantial doubt exists or when its plans alleviate substantial
doubt about the entity’s ability to continue as a going concern. This guidance is effective for annual periods ending after December 15,
2016, and for annual periods and interim periods thereafter, but may be adopted earlier. We adopted this guidance during the three
months period ended December 31, 2016. The adoption did not impact our financial statements.
Off-Balance Sheet Arrangements and Aggregate Contractual Obligations
Our principal commitments as of December 31, 2016 consist of obligations under operating leases. We expect to fulfill all of the
following commitments from our working capital. We have no off-balance sheet arrangements within the meaning of SEC rules.
Lease Commitments
We lease our facilities and some of our equipment under noncancelable operating lease arrangements that expire at various dates
through 2025. Rent expense for these leases aggregated $6.8 million, $6.3 million, and $6.3 million during 2016, 2015 and 2014,
respectively.
The following table summarizes our contractual commitments as of December 31, 2016 (in thousands):
Total
2017
2018
2019
2020
2021
Thereafter
$
45,888 $
7,756 $
6,856 $
5,416 $
4,707 $
4,647 $
16,506
Operating Lease
Obligations
Indemnities
Our customer contracts generally contain infringement indemnity provisions. Under those provisions, we generally agree, subject
to certain exceptions, to indemnify, defend, and hold harmless the customer in connection with third party claims against the customer
alleging that the customer’s use of our software products in compliance with their license infringe the third party’s patent, copyright,
or other intellectual property rights. Conditions to our obligations generally include that we are provided the right to control the
defense of the claims and, in general, to control settlement negotiations. Those provisions generally provide also that, if the customer
is prevented from using our software because of a third party infringement claim, our sole obligation (in addition to the
indemnification, defense, and hold harmless obligation referred to above) is to, at our expense, (i) procure for the customer the right to
continue to use the software, (ii) to replace or modify the product so that its use by the customer does not infringe, or, if either of the
foregoing are not reasonably feasible, to terminate the customer contract and provide a refund of the unamortized portion of the
customer’s license fee (based on a five year amortization period). Our customer contracts sometimes also require us to indemnify,
defend, and hold harmless the customer in connection with death, personal injury, or property damage claims made by third parties
with respect to actions of our personnel or contractors. The indemnity obligations contained in our customer contracts generally have
no specified expiration date and no specified monetary limitation on liability. We have not previously incurred costs to settle claims or
pay awards under these indemnification obligations. We account for these indemnity obligations in accordance with FASB guidance
on accounting for contingencies, and record a liability for these obligations when a loss is probable and reasonably estimable. We have
not recorded any liabilities for these contracts as of December 31, 2016.
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Warranties
In general, in our customer contracts we warrant to our customers that our software products will perform in all material respects in
accordance with our standard published specifications in effect at the time of delivery of the licensed products to the customer for six
months after first use of the licensed products, but no more than 24 months after execution of the license agreement. Additionally, we
warrant to our customers that our services will be performed consistent with generally accepted industry standards or specific service
levels through completion of the agreed upon services. If necessary, we would provide for the estimated cost of product and service
warranties based on specific warranty claims and claim history. However, we have not incurred significant recurring expense under
our product or service warranties. As a result, we believe the estimated fair value of these agreements is nominal. Accordingly, we
have no liabilities recorded for these agreements as of December 31, 2016.
Application of Critical Accounting Policies and Estimates
The SEC defines “critical accounting policies” as those that require application of management’s most difficult, subjective, or
complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain and may
change in subsequent periods.
Our Consolidated Financial Statements are prepared in accordance with U.S. generally accepted accounting principles (GAAP).
The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions in certain
circumstances that affect amounts reported in the accompanying consolidated financial statements and related footnotes. We believe
that estimates, judgments, and assumptions upon which we rely are reasonable based on information available to us at the time that
these estimates, judgments, and assumptions are made. To the extent there are material differences between those estimates,
judgments, or assumptions and actual results, our financial statements will be affected. The accounting policies that reflect our more
significant estimates, judgments, and assumptions are: Revenue Recognition and Accounting for Income Taxes.
Revenue Recognition
The Company’s revenue consists of fees from the licensing and hosting of software (collectively included in “Software license”
revenue in the Consolidated Statements of Income), fees from implementation and training services (collectively, “professional
services”) and customer support services and software enhancements (collectively with professional services revenue included in
“Services” revenue in the Consolidated Statements of Income), and sales of hardware and other revenue, which consists of
reimbursements of out-of-pocket expenses incurred in connection with our professional services (collectively included in “Hardware
and other” revenue in the Consolidated Statements of Income). All revenue is recognized net of any related sales taxes.
The Company recognizes license revenue when the following criteria are met: (1) a signed contract is obtained covering all
elements of the arrangement, (2) delivery of the product has occurred, (3) the license fee is fixed or determinable, and (4) collection is
probable. Revenue recognition for software with multiple-element arrangements requires recognition of revenue using the “residual
method” when (a) there is vendor-specific objective evidence (VSOE) of the fair values of all undelivered elements in a multiple-
element arrangement that is not accounted for using long-term contract accounting, (b) VSOE of fair value does not exist for one or
more of the delivered elements in the arrangement, and (c) all other applicable revenue-recognition criteria for software revenue
recognition are satisfied. For those contracts that contain significant customization or modifications, license revenue is recognized
using contract accounting.
The Company allocates revenue to customer support services and software enhancements and any other undelivered elements of
the arrangement based on VSOE of fair value of each element, and such amounts are deferred until the applicable delivery criteria and
other revenue recognition criteria have been met. The balance of the revenue, net of any discounts inherent in the arrangement, is
recognized at the outset of the arrangement using the residual method as the product licenses are delivered. If the Company cannot
objectively determine the fair value of each undelivered element based on the VSOE of fair value, the Company defers revenue
recognition until all elements are delivered, all services have been performed, or until fair value can be objectively determined. The
Company must apply judgment in determining all elements of the arrangement and in determining the VSOE of fair value for each
element, considering the price charged for each product on a stand-alone basis or applicable renewal rates. For arrangements that
include future software functionality deliverables, the Company accounts for these deliverables as a separate element of the
arrangement. Because the Company does not sell these deliverables on a standalone basis, the Company is not able to establish VSOE
of fair value of these deliverables. As a result, the Company defers all revenue under the arrangement until the future functionality has
been delivered to the customer.
Payment terms for the Company’s software licenses vary. Each contract is evaluated individually to determine whether the fees in
the contract are fixed or determinable and whether collectability is probable. Judgment is required in assessing the probability of
collection, which is generally based on evaluation of customer-specific information, historical collection experience, and economic
market conditions. If market conditions decline, or if the financial conditions of customers deteriorate, the Company may be unable to
34
determine that collectability is probable, and the Company could be required to defer the recognition of revenue until the Company
receives customer payments. The Company has an established history of collecting under the terms of its software license contracts
without providing refunds or concessions to its customers. Therefore, the Company has determined that the presence of payment terms
that extend beyond contract execution in a particular contract do not preclude the conclusion that the fees in the contract are fixed or
determinable. Although infrequent, when payment terms in a contract extend beyond our standard terms or twelve months, the
Company has determined that such fees are not fixed or determinable and recognizes revenue as payments become due provided that
all other conditions for revenue recognition have been met.
The Company’s services revenue consists of fees generated from professional services and customer support and software
enhancements related to the Company’s software products. Professional services include system planning, design, configuration,
testing, and other software implementation support, and are not typically essential to the functionality of the software. Fees from
professional services performed by the Company are separately priced and are generally billed on an hourly basis, and revenue is
recognized as the services are performed. In certain situations, professional services are rendered under agreements in which billings
are limited to contractual maximums or based upon a fixed fee for portions of or all of the engagement. Revenue related to fixed-fee-
based contracts is recognized on a proportional performance basis based on the hours incurred on discrete projects within an overall
services arrangement. The Company has determined that output measures, or services delivered, approximate the input measures
associated with fixed-fee services arrangements. Project losses are provided for in their entirety in the period in which they become
known. Revenue related to customer support services and software enhancements is generally paid in advance and recognized ratably
over the term of the agreement, typically twelve months.
Hardware and other revenue is generated from the resale of a variety of hardware products, developed and manufactured by third
parties, that are integrated with and complementary to the Company’s software solutions. As part of a complete solution, the
Company’s customers periodically purchase hardware from the Company for use with the software licenses purchased from the
Company. These products include computer hardware, radio frequency terminal networks, radio frequency identification (RFID) chip
readers, bar code printers and scanners, and other peripherals. Hardware revenue is recognized upon shipment to the customer when
title passes. The Company generally purchases hardware from the Company’s vendors only after receiving an order from a customer.
As a result, the Company generally does not maintain hardware inventory.
In accordance with the other presentation matters within the Revenue Recognition Topic of the ASC, the Company recognizes
amounts associated with reimbursements from customers for out-of-pocket expenses as revenue. Such amounts have been included in
“Hardware and other” revenue in the Condensed Consolidated Statements of Income. The total amount of expense reimbursement
recorded to revenue was $18.3 million, $20.2 million, and $18.9 million for 2016, 2015 and 2014, respectively.
Accounting for Income Taxes
We provide for the effect of income taxes on our financial position and results of operations in accordance with the Income Taxes
Topic of the ASC. Under this accounting pronouncement, income tax expense is recognized for the amount of income taxes payable or
refundable for the current year and for the change in net deferred tax assets or liabilities resulting from events that are recorded for
financial reporting purposes in a different reporting period than recorded in the tax return. Management must make significant
assumptions, judgments, and estimates to determine our current provision for income taxes and also our deferred tax assets and
liabilities and any valuation allowance to be recorded against our net deferred tax asset.
Our judgments, assumptions, and estimates relative to the current provision for income tax take into account current tax laws, our
interpretation of current tax laws, allowable deductions, projected tax credits, and possible outcomes of current and future audits
conducted by foreign and domestic tax authorities. We do not recognize a tax benefit unless we conclude that it is more likely than not
that the benefit will be sustained on audit by the taxing authority based solely on the technical merits of the associated tax position. If
the recognition threshold is met, we recognize a tax benefit measured at the largest amount of the tax benefit that, in our judgment, is
greater than 50 percent likely to be realized. Changes in tax law or our interpretation of tax laws and the resolution of current and
future tax audits could significantly impact the amounts provided for income taxes in our financial position and results of operations.
Our assumptions, judgments, and estimates relative to the value of our net deferred tax asset take into account predictions of the
amount and category of future taxable income. Actual operating results and the underlying amount and category of income in future
years could render our current assumptions, judgments, and estimates of recoverable net deferred taxes inaccurate, thus materially
impacting our financial position and results of operations.
Quantitative and Qualitative Disclosures About Market Risk
Item 7A.
Foreign Business
Our international business is subject to risks typical of an international business, including, but not limited to differing economic
conditions, changes in political climate, differing tax structures, other regulations and restrictions, and foreign exchange rate volatility.
35
Our international operations currently include business activity out of offices in the United Kingdom, the Netherlands, France,
Australia, China, Japan, Singapore, and India. When the U.S. dollar strengthens against a foreign currency, the value of our sales and
expenses in that currency converted to U.S. dollars decreases. When the U.S. dollar weakens, the value of our sales and expenses in
that currency converted to U.S. dollars increases. We recognized a foreign exchange gain of $0.6 million in 2016, and foreign
exchange losses of $0.1 million and $0.4 million in 2015 and 2014, respectively. Foreign exchange rate transaction gains and losses
are classified in “Other income (loss), net” in our Consolidated Statements of Income. A fluctuation of 10% in the period end
exchange rates at December 31, 2016 relative to the U.S. dollar would result in a change of approximately $0.3 million in the reported
foreign currency gain. A fluctuation of 10% in the period end exchange rates at December 31, 2015 relative to the U.S. dollar would
result in a change of approximately $0.2 million in the reported foreign currency loss.
Interest Rates
We currently invest our cash in a variety of financial instruments, including taxable floating rate obligations in money market funds
and certificate of deposits. These investments are mainly denominated in U.S. dollars. Cash balances in foreign currencies overseas,
except for India, are derived from business operations. India operations are funded by the U.S. At December 31, 2016, our cash, cash
equivalents, and investment balances totaled $95.6 million, of which all is highly liquid. Our cash equivalents balance at
December 31, 2016 was $44.2 million. Cash equivalents consist of highly-liquid money market funds and certificates of deposits with
maturities of less than three months when purchased.
Investments in both fixed rate and floating rate interest-earning instruments carry interest rate risk. Fixed rate securities may have
their fair market value adversely impacted due to a rise in interest rates, while floating rate securities may produce less income than
expected if interest rates fall. Due in part to these factors, our future investment income may fall short of expectations due to changes
in interest rates, or we may suffer losses in principal if forced to sell securities that have seen a decline in market value due to changes
in interest rates. The weighted-average interest rate of return on cash and investment securities was approximately 1% for the years
ended December 31, 2016 and 2015. The fair value of cash equivalents and investments held at December 31, 2016 and 2015 was
$44.2 million and $50.0 million, respectively. Based on the average investments outstanding during 2016 and 2015, increases or
decreases in the rates of return of 25 basis points would result in increases or decreases to interest income of approximately $0.3
million for both years from the reported interest income.
36
Item 8.
Financial Statements and Supplementary Data
Financial Statements
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
Management’s Annual Report on Internal Control over Financial Reporting .................................................................................. 38
Report of Independent Registered Public Accounting Firm on Internal Control over Financial Reporting ..................................... 39
Report of Independent Registered Public Accounting Firm on the Consolidated Financial Statements .......................................... 40
Consolidated Statements of Income .................................................................................................................................................. 41
Consolidated Statements of Comprehensive Income ........................................................................................................................ 42
Consolidated Balance Sheets ............................................................................................................................................................ 43
Consolidated Statements of Cash Flows ........................................................................................................................................... 44
Consolidated Statements of Shareholders’ Equity ............................................................................................................................ 45
Notes to Consolidated Financial Statements ..................................................................................................................................... 46
37
MANAGEMENT’S ANNUAL REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Management of Manhattan Associates, Inc. is responsible for establishing and maintaining adequate internal control over financial
reporting. The Company’s internal control over financial reporting is a process designed under the supervision of the Company’s
principal executive and principal financial officers to provide reasonable assurance regarding the reliability of financial reporting and
the preparation of the Company’s financial statements for external purposes in accordance with U.S. generally accepted accounting
principles.
The Company’s internal control over financial reporting includes policies and procedures that pertain to the maintenance of records
that, in reasonable detail, accurately and fairly reflect transactions and dispositions of assets; provide reasonable assurance that
transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. generally accepted
accounting principles, and that receipts and expenditures are being made only in accordance with authorizations of management and
the directors of the Company; and provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition,
use, or disposition of the Company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections
of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in
conditions, or that the degree of compliance with the policies or procedures may deteriorate.
As of the end of the Company’s 2016 fiscal year, management conducted an assessment of the Company’s internal control over
financial reporting based on the framework established in Internal Control—Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission (2013 Framework) (COSO). Based on this assessment, management has
determined that the Company’s internal control over financial reporting as of December 31, 2016 was effective.
Ernst & Young LLP, the independent registered public accounting firm that audited the Company’s financial statements for the year
ended December 31, 2016, has audited the Company’s internal control over financial reporting as of December 31, 2016 and has
issued a report regarding the Company’s internal control over financial reporting appearing on page 39, which expresses an
unqualified opinion on the effectiveness of the Company’s internal control over financial reporting as of December 31, 2016.
/s/ Eddie Capel
Eddie Capel
President and Chief Executive Officer
February 3, 2017
/s/ Dennis B. Story
Dennis B. Story
Executive Vice President, Chief Financial
Officer, and Treasurer
February 3, 2017
38
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
ON INTERNAL CONTROL OVER FINANCIAL REPORTING
The Board of Directors and Shareholders
Manhattan Associates, Inc. and Subsidiaries
We have audited Manhattan Associates, Inc. and subsidiaries’ internal control over financial reporting as of December 31, 2016, based
on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission (2013 Framework) (the COSO criteria). Manhattan Associates, Inc. and subsidiaries’ management is
responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal
control over financial reporting included in the accompanying Management’s Annual Report on Internal Control Over Financial
Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over
financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over
financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of
internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances.
We believe that our audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the
maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the
company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in
accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect
on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections
of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in
conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, Manhattan Associates, Inc. and subsidiaries maintained, in all material respects, effective internal control over
financial reporting as of December 31, 2016, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the
consolidated balance sheets of Manhattan Associates, Inc. and subsidiaries as of December 31, 2016 and 2015, and the related
consolidated statements of income, comprehensive income, cash flows, and shareholders’ equity for each of the three years in the
period ended December 31, 2016 of Manhattan Associates, Inc. and subsidiaries, and our report dated February 3, 2017 expressed an
unqualified opinion thereon.
/s/ Ernst & Young LLP
Atlanta, Georgia
February 3, 2017
39
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
ON THE CONSOLIDATED FINANCIAL STATEMENTS
The Board of Directors and Shareholders
Manhattan Associates, Inc. and Subsidiaries
We have audited the accompanying consolidated balance sheets of Manhattan Associates, Inc. and subsidiaries as of December 31,
2016 and 2015, and the related consolidated statements of income, comprehensive income, cash flows, and shareholders’ equity for
each of the three years in the period ended December 31, 2016. Our audits also included the financial statement schedule listed in the
Index at Item 15(a). These financial statements and schedule are the responsibility of the Company’s management. Our responsibility
is to express an opinion on these financial statements and schedule based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial
position of Manhattan Associates, Inc. and subsidiaries at December 31, 2016 and 2015, and the consolidated results of their
operations and their cash flows for each of the three years in the period ended December 31, 2016, in conformity with U.S. generally
accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic
financial statements taken as a whole, presents fairly in all material respects the information set forth therein.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States),
Manhattan Associates, Inc. and subsidiaries’ internal control over financial reporting as of December 31, 2016, based on criteria
established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission (2013 Framework), and our report dated February 3, 2017 expressed an unqualified opinion thereon.
/s/ Ernst & Young LLP
Atlanta, Georgia
February 3, 2017
40
MANHATTAN ASSOCIATES, INC. AND SUBSIDIARIES
Consolidated Statements of Income
(in thousands, except per share amounts)
2016
Year Ended December 31,
2015
2014
Revenue:
Software license
Services
Hardware and other
Total revenue
Costs and expenses:
Cost of license
Cost of services
Cost of hardware and other
Research and development
Sales and marketing
General and administrative
Depreciation and amortization
Total costs and expenses
Operating income
Interest income
Other income (loss), net
Income before income taxes
Income tax provision
Net income
Basic earnings per share
Diluted earnings per share
Weighted average number of shares:
Basic
Diluted
$
$
$
$
$
84,996
467,286
52,275
604,557
10,820
197,475
41,584
54,736
48,223
48,322
9,090
410,250
194,307
1,161
639
196,107
71,873
124,234 $
1.73 $
1.72 $
$
78,615
428,078
49,678
556,371
9,938
184,349
41,141
53,859
48,615
49,259
7,764
394,925
161,446
1,331
64
162,841
59,366
103,475 $
1.41 $
1.40 $
71,674
72,060
73,443
74,038
71,583
376,023
44,498
492,104
7,110
169,140
36,328
48,953
52,617
44,455
6,377
364,980
127,124
1,268
(394 )
127,998
45,998
82,000
1.09
1.08
74,995
75,841
The accompanying notes are an integral part of these Consolidated Statements of Income.
41
MANHATTAN ASSOCIATES, INC. AND SUBSIDIARIES
Consolidated Statements of Comprehensive Income
(in thousands)
2016
Year Ended December 31,
2015
2014
Net income
Foreign currency translation adjustment
Comprehensive income
$
$
124,234 $
(3,588 )
120,646 $
103,475 $
(2,283 )
101,192 $
82,000
(2,241 )
79,759
The accompanying notes are an integral part of these Consolidated Statements of Comprehensive Income.
42
MANHATTAN ASSOCIATES, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(in thousands, except share and per share data)
Current Assets:
ASSETS
Cash and cash equivalents
Short-term investments
Accounts receivable, net of allowance of $3,595 and $7,031 in 2016 and 2015,
respectively
Prepaid expenses
Other current assets
Total current assets
Property and equipment, net
Goodwill, net
Deferred income taxes
Other assets
Total assets
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable
Accrued compensation and benefits
Accrued and other liabilities
Deferred revenue
Income taxes payable
Total current liabilities
Deferred rent, long-term
Deferred income taxes
Other non-current liabilities
Shareholders' equity:
$
$
$
December 31,
2016
2015
95,615 $
-
100,285
10,181
937
207,018
19,019
62,228
2,867
6,008
297,140 $
12,052 $
20,700
12,510
63,457
8,924
117,643
2,932
53
7,146
118,416
10,344
97,379
9,224
1,548
236,911
21,176
62,233
4,648
7,275
332,243
11,219
29,284
13,853
68,757
4,072
127,185
3,811
35
5,720
Preferred stock, no par value; 20,000,000 shares authorized, no shares issued or
outstanding in 2016 and 2015
Common stock, $.01 par value; 200,000,000 shares authorized; 70,233,955 and
72,766,383 shares issued and outstanding at December 31, 2016 and
December 31, 2015, respectively
Retained earnings
Accumulated other comprehensive loss
Total shareholders' equity
Total liabilities and shareholders' equity
-
-
702
184,558
(15,894 )
169,366
297,140 $
728
207,070
(12,306 )
195,492
332,243
$
The accompanying notes are an integral part of these Consolidated Balance Sheets.
43
MANHATTAN ASSOCIATES, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(in thousands)
Operating activities:
Net income
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization
Equity-based compensation
Loss (Gain) on disposal of equipment
Tax benefit of stock awards exercised/vested
Excess tax benefits from equity-based compensation
Deferred income taxes
Unrealized foreign currency (gain) loss
Changes in operating assets and liabilities:
Accounts receivable, net
Other assets
Accounts payable, accrued and other liabilities
Income taxes
Deferred revenue
Net cash provided by operating activities
Investing activities:
Purchases of property and equipment
Purchases of short-term investments
Maturities of short-term investments
Payment in connection with acquisition
Net cash provided by (used in) investing activities
Year Ended December 31,
2015
2014
2016
$
124,234 $
103,475 $
82,000
9,090
15,934
30
5,209
(5,214 )
1,797
(393 )
(4,358 )
299
(9,261 )
6,129
(4,150 )
139,346
(6,843 )
-
10,201
-
3,358
7,764
14,528
(30 )
9,170
(9,147 )
1,532
49
(12,223 )
(1,427 )
(1,592 )
(2,271 )
10,325
120,153
(11,492 )
(15,385 )
13,334
-
(13,543 )
6,377
9,671
(13 )
8,640
(8,562 )
(1,705 )
(624 )
(16,758 )
(5,198 )
13,519
338
6,477
94,162
(9,415 )
(14,644 )
14,165
(2,773 )
(12,667 )
(99,204 )
1,571
8,562
(89,071 )
Financing activities:
Purchase of common stock
Proceeds from issuance of common stock from options exercised
Excess tax benefits from equity-based compensation
Net cash used in financing activities
(167,933 )
18
5,214
(162,701 )
(112,138 )
717
9,147
(102,274 )
Foreign currency impact on cash
(2,804 )
(1,628 )
(1,091 )
Net change in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
Supplemental disclosures of cash flow information:
Cash paid for taxes
(22,801 )
118,416
95,615 $
2,708
115,708
118,416 $
(8,667 )
124,375
115,708
$
$
58,684 $
50,902 $
38,674
The accompanying notes are an integral part of these Consolidated Statements of Cash Flows.
44
MANHATTAN ASSOCIATES, INC. AND SUBSIDIARIES
Consolidated Statements of Shareholders’ Equity
(in thousands, except share data)
Balance, December 31, 2013
Repurchase of common stock
Stock option exercises
Restricted stock units issuance/shares
cancelation
Equity-based compensation
Tax effects of equity-based
compensation
Foreign currency translation
adjustment
Net income
Balance, December 31, 2014
Repurchase of common stock
Stock option exercises
Restricted stock shares/units issuance
Equity-based compensation
Tax effects of equity-based
compensation
Foreign currency translation
adjustment
Net income
Balance, December 31, 2015
Repurchase of common stock
Stock option exercises
Restricted stock units issuance
Equity-based compensation
Tax effects of equity-based
compensation
Foreign currency translation
adjustment
Net income
Balance, December 31, 2016
Common Stock
Additional
Paid-In
Amount Capital
764 $
(29 )
3
(19,876 )
1,568
Accumulated
Other
Retained Comprehensive Shareholders'
Earnings Income (Loss) Equity
- $ 188,604 $
(79,299 )
-
(7,782 ) $
-
-
181,586
(99,204 )
1,571
Total
Shares
76,374,180 $
(2,868,630 )
286,456
312,058
-
3
-
(3 )
9,671
-
-
8,640
-
-
-
-
-
74,104,064
(1,947,432 )
150,154
459,597
-
-
-
741
(19 )
2
4
-
-
-
-
(24,409 )
715
(4 )
14,528
-
82,000
191,305
(87,710 )
-
-
-
-
-
-
(2,241 )
-
(10,023 )
-
-
-
-
-
9,671
8,640
(2,241 )
82,000
182,023
(112,138 )
717
-
14,528
-
-
9,170
-
-
9,170
-
-
72,766,383
(2,988,627 )
3,610
452,589
-
-
-
-
728
(30 )
-
4
-
-
-
(21,157 )
-
103,475
207,070
(146,746 )
(2,283 )
-
(12,306 )
18
(4 )
15,934
5,209
-
-
70,233,955 $
-
702 $
-
124,234
- $ 184,558 $
(3,588 )
-
(15,894 ) $
(2,283 )
103,475
195,492
(167,933 )
18
-
15,934
5,209
(3,588 )
124,234
169,366
The accompanying notes are an integral part of these Consolidated Statements of Shareholders’ Equity.
45
MANHATTAN ASSOCIATES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2016, 2015 and 2014
1. Organization, Consolidation and Summary of Significant Accounting Policies
Organization and Business
Manhattan Associates, Inc. (“Manhattan” or the “Company”) is a developer and provider of supply chain commerce solutions that
help organizations optimize the effectiveness, efficiency, and strategic advantages of their supply chains. The Company’s solutions
consist of software, services, and hardware, which coordinate people, workflows, assets, events, and tasks holistically across the
functions linked in a supply chain from planning through execution. These solutions also help coordinate the actions, data exchange,
and communication of participants in supply chain ecosystems, such as manufacturers, suppliers, distributors, trading partners,
transportation providers, channels (such as catalogers, store retailers, and Web outlets), and consumers.
The Company’s operations are in North America, Europe (EMEA), and the Asia/Pacific (APAC) region. The European operations
are conducted through the Company’s wholly-owned subsidiaries, Manhattan Associates Limited, Manhattan Associates Europe B.V.,
Manhattan France SARL, and Manhattan Associates GmbH, in the United Kingdom, the Netherlands, France, and Germany,
respectively. The Company’s Asia/Pacific operations are conducted through its wholly-owned subsidiaries, Manhattan Associates Pty
Ltd., Manhattan Associates KK, Manhattan Associates Software (Shanghai), Co. Ltd., Manhattan Associates Software Pte Ltd., and
Manhattan Associates (India) Development Centre Private Limited in Australia, Japan, China, Singapore, and India, respectively. The
Company occasionally sells its products and services in other countries, such as countries in Latin America, Eastern Europe, Middle
East, and Asia, through its direct sales channel as well as various reseller channels.
Risks Associated with Single Business Line, Technological Advances, and Foreign Operations
The Company currently derives a substantial portion of its revenues from sales of its software and related services and hardware.
The markets for supply chain commerce solutions are highly competitive, subject to rapid technological change, changing customer
needs, frequent new product introductions, and evolving industry standards that may render existing products and services obsolete.
As a result, the Company’s position in these markets could be eroded rapidly by unforeseen changes in customer requirements for
application features, functions, and technologies. The Company’s growth and future operating results will depend, in part, upon its
ability to enhance existing applications and develop and introduce new applications that meet changing customer requirements that
respond to competitive products and that achieve market acceptance. Any factor adversely affecting the markets for supply chain
commerce solutions could have an adverse effect on the Company’s business, financial condition, results of operations and operating
cash flows.
The Company’s international business is subject to risks typical of an international business, including, but not limited to, differing
economic conditions, changes in political climate, differing tax structures, other regulations and restrictions, and foreign exchange rate
volatility. In addition, we have a large development center in Bangalore, India, that does not have a natural in-market revenue hedge to
mitigate currency risk to our operating expense in India. Fluctuations in the value of other currencies, particularly the Indian rupee,
could significantly affect our revenues, expenses, operating profit and net income. The Company recognized a foreign exchange gain
of $0.6 million in 2016, and foreign exchange losses of $0.1 million and $0.4 million in 2015 and 2014, respectively. Foreign
exchange rate transaction gains and losses are classified in “Other income (loss), net” on the Consolidated Statements of Income.
Increase of the Authorized Number of Shares of Common Stock
On May 15, 2014, the shareholders of the Company approved an amendment to the Company’s articles of incorporation to increase
the authorized number of shares of common stock from 100,000,000 to 200,000,000. The amendment was effective on May 15, 2014.
The Company retained the current par value of $0.01 per share for all shares of common stock.
Principles of Consolidation and Foreign Currency Translation
The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All
significant intercompany balances and transactions have been eliminated in consolidation.
The financial statements of foreign subsidiaries have been translated into United States dollars in accordance with the foreign
currency matters topic in the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (the
“Codification”). Revenues and expenses from international operations were denominated in the respective local currencies and
translated using the average monthly exchange rates for the year. All balance sheet accounts have been translated using the exchange
46
rates in effect at the balance sheet date and the effect of changes in exchange rates from year to year are disclosed as a separate
component of shareholders’ equity and comprehensive income.
New Accounting Pronouncements
Revenue Recognition
In May 2014, the FASB issued ASU 2014-09, Revenue Recognition – Revenue from Contracts with Customers (Topic 606), which
will replace substantially all current revenue recognition guidance once it becomes effective. The new standard provides accounting
guidance for all revenue arising from contracts with customers and affects all entities that enter into contracts to provide goods or
services to their customers unless the contracts are in the scope of other standards. The new standard is less prescriptive and may
require software entities to use more judgment and estimates in the revenue recognition process than are required under existing
revenue guidance.
In March 2016, the FASB issued ASU 2016-08, Revenue from Contracts with Customers (Topic 606) – Principal versus Agent
Considerations, which clarifies the implementation guidance for principal versus agent considerations in ASU 2014-09. In April 2016,
the FASB issued ASU 2016-10, Revenue from Contracts with Customers (Topic 606) – Identifying Performance Obligations and
Licensing, which amends the guidance in ASU 2014-09 related to identifying performance obligations and accounting for licenses of
intellectual property. In May 2016, the FASB issued ASU 2016-12, Revenue from Contracts with Customers (Topic 606) – Narrow-
Scope Improvements and Practical Expedients, which clarifies the following aspects in ASU 2014-09: collectability, presentation of
sales taxes and other similar taxes collected from customers, noncash considerations, contract modifications at transition, completed
contracts at transition, and technical correction. We must adopt ASU 2016-08, ASU 2016-10 and ASU 2016-12 with ASU 2014-09,
which is effective for annual and interim periods beginning after December 15, 2017.
The new revenue standard may be applied using either of the following transition methods: (1) a full retrospective approach
reflecting the application of the standard in each prior reporting period with the option to elect certain practical expedients, or (2) a
modified retrospective approach with the cumulative effect of initially adopting the standard recognized at the date of adoption (which
includes additional footnote disclosures). We will adopt the standard in the first quarter of 2018 and preliminarily expect to use the
modified prospective method. However, we are continuing to evaluate the impact of the standard, and our adoption method is subject
to change. Currently, we are in the process of reviewing our historical contracts to quantify the impact that the adoption of the
standard will have on specific performance obligations. We are also continuing to evaluate the impact of the standard on our
recognition of costs related to obtaining customer contracts (namely sales commissions).
Balance Sheet Classification of Deferred Taxes
In November 2015, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2015-17,
Balance Sheet Classification of Deferred Taxes, to simplify the presentation of deferred income taxes. The ASU requires that all
deferred tax assets and liabilities, along with any related valuation allowance, be classified as noncurrent on the balance sheet. The
guidance does not change the existing requirement that only permits offsetting within a tax-paying component of an entity. This
guidance is effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods, but may
be adopted earlier, and may be applied either prospectively or retrospectively. We adopted this guidance in the first three months
ended March 31, 2016 reporting on a retrospective basis. Accordingly, we reclassified current deferred taxes to noncurrent on our
December 31, 2015 consolidated balance sheet, which increased noncurrent deferred tax assets $4.6 million and decreased noncurrent
deferred tax liabilities $5.7 million.
Leases
In February 2016, the FASB issued ASU 2016-02, Leases, to increase transparency and comparability among organizations by
recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. Under
the new guidance, a lessee will be required to recognize assets and liabilities for leases with lease terms of more than 12 months.
Consistent with current GAAP, the recognition, measurement, and presentation of expenses and cash flows arising from a lease by a
lessee primarily will depend on its classification as a finance or operating lease. However, unlike current GAAP—which requires only
capital leases to be recognized on the balance sheet—the new ASU will require both types of leases to be recognized on the balance
sheet. The ASU also will require disclosures to help investors and other financial statement users better understand the amount,
timing, and uncertainty of cash flows arising from leases. These disclosures include qualitative and quantitative requirements,
providing additional information about the amounts recorded in the financial statements. For public companies, this guidance is
effective for annual periods beginning after December 15, 2018, and interim periods within those annual periods, but may be adopted
earlier. We are currently evaluating the impact that the adoption of this standard will have on our Consolidated Financial Statements.
47
Stock Compensation
In March 2016, the FASB issued ASU 2016-09, Compensation – Stock Compensation: Improvements to Employee Share-Based
Payment Accounting, to improve the accounting for employee share-based payments. Under the new guidance, companies will no
longer record excess tax benefits and certain tax deficiencies in additional paid-in capital. Instead, all excess tax benefits and tax
deficiencies should be recognized as income tax expense or benefit in the income statement, and additional paid-in capital pools will
be eliminated. The guidance requires companies to present excess tax benefits as an operating activity on the statement of cash flows
rather than as a financing activity. It also will allow an employer to repurchase more of an employee’s shares than it can today for tax
withholding purposes without triggering liability accounting and to make a policy election to account for forfeitures as they occur. The
new guidance will require an employer to classify the cash paid to a tax authority when shares are withheld to satisfy its statutory
income tax withholding obligation as a financing activity on its statement of cash flows. Companies will have to elect whether to
account for forfeitures of share-based payments by (1) recognizing forfeitures of awards as they occur (e.g., when an award does not
vest because the employee leaves the company) or (2) estimating the number of awards expected to be forfeited and adjusting the
estimate when it is likely to change, as is currently required. For public companies, this guidance is effective for annual periods
beginning after December 15, 2016, and interim periods within those annual periods, but may be adopted earlier. We are adopting this
ASU in the first quarter of 2017. We plan to account for forfeitures as incurred upon adoption of this guidance. In each of the years
ended December 31, 2016, 2015 and 2014, we have recorded excess tax benefits of $5.2 million, $9.1 million, and $8.6 million as a
component of additional paid in capital. In accordance with this ASU, comparable amounts for future periods related to the difference
between the fair value of a restricted stock unit (RSU) on the grant date and the fair value of a RSU on the vest date will be recorded
as a discrete benefit or expense to the current income tax provision in the period in which the RSU vests. A majority of the future
amounts to be recorded would likely occur during the first quarter consistent with the vesting of a majority of RSU grants.
Going Concern
In August 2014, the FASB issued ASU 2014-15, Presentation of Financial Statements – Going Concern. The new guidance
requires management to evaluate whether there are conditions and events that raise substantial doubt about an entity’s ability to
continue as a going concern within one year after the financial statements are issued (or available to be issued when applicable).
Management will be required to make this evaluation for both annual and interim reporting periods. When management identifies
events or conditions that indicate that it is probable that the entity will be unable to meet its obligations as they become due, the
standard allows management to consider the mitigating effect of its plans to determine whether substantial doubt is alleviated.
Management will have to make certain disclosures if it concludes that substantial doubt exists or when its plans alleviate substantial
doubt about the entity’s ability to continue as a going concern. This guidance is effective for annual periods ending after December 15,
2016, and for annual periods and interim periods thereafter, but may be adopted earlier. We adopted this guidance during the three
months period ended December 31, 2016. The adoption did not impact our financial statements.
Summary of Significant Accounting Policies
Cash and Cash Equivalents
The Company considers all highly liquid investments purchased with original maturities of three months or less to be cash or cash
equivalents.
Concentrations of Credit Risk
Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of cash
and cash equivalents, short- and long-term investments and accounts receivable. The Company maintains cash and cash equivalents
and short- and long-term investments with various financial institutions. Amounts held are above the federally insured limit.
The Company’s sales are primarily to companies located in the United States, Europe and Asia. The Company performs periodic
credit evaluations of its customers’ financial condition and does not require collateral. Accounts receivable are due principally from
large U.S., European and Asia Pacific companies under stated contract terms. Accounts receivable, net as of December 31, 2016 for
the Americas, EMEA, and APAC companies were $81.5 million, $15.0 million, and $3.8 million, respectively. Accounts receivable,
net as of December 31, 2015 for the Americas, EMEA, and APAC companies were $79.5 million, $12.7 million, and $5.2 million,
respectively. The Company’s top five customers in aggregate accounted for 12%, 8%, and 10% of total revenue recognized for each of
the years ended December 31, 2016, 2015 and 2014, respectively. No single customer accounted for more than 10% of revenue in the
years ended December 31, 2016, 2015 and 2014 or for more than 10% of accounts receivable as of December 31, 2016 and 2015.
48
Fair Value Measurement
The Company measures its investments based on a fair value hierarchy disclosure framework that prioritizes and ranks the level of
market price observability used in measuring assets and liabilities at fair value. Market price observability is affected by a number of
factors, including the type of asset or liability and their characteristics. This hierarchy prioritizes the inputs into three broad levels as
follows:
(cid:121) Level 1–Quoted prices in active markets for identical instruments.
(cid:121) Level 2–Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets
that are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable in
active markets.
(cid:121) Level 3–Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are
unobservable.
The Company’s investments are categorized as available-for-sale securities and recorded at fair market value. Investments with
maturities of 90 days or less from the date of purchase are classified as cash equivalents; investments with maturities of greater than
90 days from the date of purchase but less than one year are generally classified as short-term investments; and investments with
maturities of one year or greater from the date of purchase are generally classified as long-term investments. Unrealized holding gains
and losses are reflected as a net amount in a separate component of shareholders’ equity until realized. For the purposes of computing
realized gains and losses, cost is determined on a specific identification basis.
At December 31, 2016, the Company’s cash and cash equivalents balances were $51.4 million and $44.2 million, respectively.
Cash equivalents consist of highly liquid money market funds and certificates of deposit. At December 31, 2016, the Company has
$13.9 million in certificates of deposit in India, which are included in cash equivalents. The Company uses quoted prices from active
markets that are classified at Level 1 as a highest level observable input in the disclosure hierarchy framework for all available-for-
sale securities. At December 31, 2016, the Company has $30.3 million in money market funds, which are classified as Level 1 and are
included in cash and cash equivalents on the Consolidated Balance Sheet. The Company has no investments at December 31, 2016.
The carrying values of cash and cash equivalents, accounts receivable, accounts payable, and other financial instruments included
in the accompanying Consolidated Balance Sheets approximate their fair values principally due to the short-term maturities of these
instruments. Unrealized gains and losses on investments are included as a separate component of “Accumulated other comprehensive
loss,” net of any related tax effect, in the Consolidated Balance Sheets.
Use of Estimates
The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities
at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period. Significant
estimates include the allowance for doubtful accounts, which is based upon an evaluation of historical amounts written-off, the
customers’ ability to pay, and general economic conditions; self-insurance accruals; impairment of goodwill; stock based
compensation, which is based on the number of awards ultimately expected to vest; and the Company’s effective income tax rate
(including the impact of unrecognized tax benefits) and deferred tax assets, which are based upon the Company’s expectations of
future taxable income, allowable deductions, and projected tax credits. Actual results will differ from these estimates.
Revenue Recognition
The Company’s revenue consists of fees from the licensing and hosting of software (collectively included in “Software license”
revenue in the Consolidated Statements of Income), fees from implementation and training services (collectively, “professional
services”) and customer support services and software enhancements (collectively with professional services revenue included in
“Services” revenue in the Consolidated Statements of Income), and sales of hardware and other revenue, which consists of
reimbursements of out-of-pocket expenses incurred in connection with our professional services (collectively included in “Hardware
and other” revenue in the Consolidated Statements of Income). All revenue is recognized net of any related sales taxes.
49
The Company recognizes license revenue when the following criteria are met: (1) a signed contract is obtained covering all
elements of the arrangement, (2) delivery of the product has occurred, (3) the license fee is fixed or determinable, and (4) collection is
probable. Revenue recognition for software with multiple-element arrangements requires recognition of revenue using the “residual
method” when (a) there is vendor-specific objective evidence (VSOE) of the fair values of all undelivered elements in a multiple-
element arrangement that is not accounted for using long-term contract accounting, (b) VSOE of fair value does not exist for one or
more of the delivered elements in the arrangement, and (c) all other applicable revenue-recognition criteria for software revenue
recognition are satisfied. For those contracts that contain significant customization or modifications, license revenue is recognized
using contract accounting.
The Company allocates revenue to customer support services and software enhancements and any other undelivered elements of
the arrangement based on VSOE of fair value of each element, and such amounts are deferred until the applicable delivery criteria and
other revenue recognition criteria have been met. The balance of the revenue, net of any discounts inherent in the arrangement, is
recognized at the outset of the arrangement using the residual method as the product licenses are delivered. If the Company cannot
objectively determine the fair value of each undelivered element based on the VSOE of fair value, the Company defers revenue
recognition until all elements are delivered, all services have been performed, or until fair value can be objectively determined. The
Company must apply judgment in determining all elements of the arrangement and in determining the VSOE of fair value for each
element, considering the price charged for each product on a stand-alone basis or applicable renewal rates. For arrangements that
include future software functionality deliverables, the Company accounts for these deliverables as a separate element of the
arrangement. Because the Company does not sell these deliverables on a standalone basis, the Company is not able to establish VSOE
of fair value of these deliverables. As a result, the Company defers all revenue under the arrangement until the future functionality has
been delivered to the customer.
Payment terms for the Company’s software licenses vary. Each contract is evaluated individually to determine whether the fees in
the contract are fixed or determinable and whether collectability is probable. Judgment is required in assessing the probability of
collection, which is generally based on evaluation of customer-specific information, historical collection experience, and economic
market conditions. If market conditions decline, or if the financial conditions of customers deteriorate, the Company may be unable to
determine that collectability is probable, and the Company could be required to defer the recognition of revenue until the Company
receives customer payments. The Company has an established history of collecting under the terms of its software license contracts
without providing refunds or concessions to its customers. Therefore, the Company has determined that the presence of payment terms
that extend beyond contract execution in a particular contract do not preclude the conclusion that the fees in the contract are fixed or
determinable. Although infrequent, when payment terms in a contract extend beyond our standard terms or twelve months, the
Company has determined that such fees are not fixed or determinable and recognizes revenue as payments become due provided that
all other conditions for revenue recognition have been met.
The Company’s services revenue consists of fees generated from professional services and customer support and software
enhancements related to the Company’s software products. Professional services include system planning, design, configuration,
testing, and other software implementation support, and are not typically essential to the functionality of the software. Fees from
professional services performed by the Company are separately priced and are generally billed on an hourly basis, and revenue is
recognized as the services are performed. In certain situations, professional services are rendered under agreements in which billings
are limited to contractual maximums or based upon a fixed fee for portions of or all of the engagement. Revenue related to fixed-fee-
based contracts is recognized on a proportional performance basis based on the hours incurred on discrete projects within an overall
services arrangement. The Company has determined that output measures, or services delivered, approximate the input measures
associated with fixed-fee services arrangements. Project losses are provided for in their entirety in the period in which they become
known. Revenue related to customer support services and software enhancements is generally paid in advance and recognized ratably
over the term of the agreement, typically twelve months.
Hardware and other revenue is generated from the resale of a variety of hardware products, developed and manufactured by third
parties, that are integrated with and complementary to the Company’s software solutions. As part of a complete solution, the
Company’s customers periodically purchase hardware from the Company for use with the software licenses purchased from the
Company. These products include computer hardware, radio frequency terminal networks, radio frequency identification (RFID) chip
readers, bar code printers and scanners, and other peripherals. Hardware revenue is recognized upon shipment to the customer when
title passes. The Company generally purchases hardware from the Company’s vendors only after receiving an order from a customer.
As a result, the Company generally does not maintain hardware inventory.
In accordance with the other presentation matters within the Revenue Recognition Topic of the Financial Accounting Standards
Board’s (FASB) Accounting Standards Codification (ASC), the Company recognizes amounts associated with reimbursements from
customers for out-of-pocket expenses as revenue. Such amounts have been included in “Hardware and other” revenue in the
Consolidated Statements of Income. The total amount of expense reimbursement recorded to revenue was $18.3 million, $20.2
million, and $18.9 million for 2016, 2015 and 2014, respectively.
50
Deferred Revenue
Deferred revenue represents amounts collected prior to having completed performance of professional services, customer support
services and software enhancements, and significant remaining obligations under license agreements. The Company generally expects
to complete such services or obligations within the next twelve months.
Returns and Allowances
The Company has not experienced significant returns or warranty claims to date and, as a result, has not recorded a provision for
the cost of returns and product warranty claims at December 31, 2016 or 2015.
The Company records an allowance for doubtful accounts based on the historical experience of write-offs and a detailed assessment
of accounts receivable. Additions to the allowance for doubtful accounts generally represent a sales allowance on services revenue,
which are recorded to operations as a reduction to services revenue. The total amounts charged to operations were $4.9 million, $7.1
million, and $4.8 million for 2016, 2015 and 2014, respectively. In estimating the allowance for doubtful accounts, management
considers the age of the accounts receivable, the Company’s historical write-offs, and the creditworthiness of the customer, among
other factors. Should any of these factors change, the estimates made by management will also change accordingly, which could affect
the level of the Company’s future allowances. Uncollectible accounts are written off when it is determined that the specific balance is
not collectible.
Property and Equipment
Property and equipment is recorded at cost and consists of furniture, computers, other office equipment, internal use software, and
leasehold improvements. The Company depreciates the cost of furniture, computers, other office equipment, and internal use software
on a straight-line basis over their estimated useful lives (three to five years for computer software, five years for office equipment,
seven years for furniture and fixtures). Leasehold improvements are depreciated over the lesser of their useful lives or the term of the
lease. Depreciation expense for property and equipment for the years ended December 31, 2016, 2015 and 2014 was approximately
$8.7 million, $7.3 million, and $6.2 million, respectively, and was included in “Depreciation and amortization” in the Consolidated
Statements of Income.
Property and equipment, at cost, consist of the following (in thousands):
Office equipment
Computer software
Furniture and fixtures
Leasehold improvement
Property and equipment, gross
Less accumulated depreciation
Property and equipment, net
December 31,
2016
2015
$
$
36,163 $
6,431
4,698
18,453
65,745
(46,726 )
19,019 $
33,912
18,809
4,100
18,119
74,940
(53,764 )
21,176
Software Development Costs
Research and development expenses are charged to expense as incurred. For the years ended December 31, 2016, 2015 and 2014,
the Company did not capitalize any internal research and development costs because the costs incurred between the attainment of
technological feasibility for the related software product through the date when the product was available for general release to
customers have been insignificant.
The Company determines the amount of development costs capitalizable under the provisions of FASB Codification accounting for
costs of computer software to be sold, leased, or marketed. Under this guidance, computer software development costs are charged to
R&D expense until technological feasibility is established, after which remaining software production costs are capitalized. The
Company has defined technological feasibility as the point in time at which the Company has a detailed program design or a working
model of the related product, depending on the type of development efforts, and high-risk development issues have been resolved
through end-to-end system testing.
51
Impairment of Long-Lived Assets
The Company reviews the values assigned to long-lived assets, including property and certain intangible assets, to determine
whether events and circumstances have occurred which indicate that the remaining estimated useful lives may warrant revision or that
the remaining balances may not be recoverable. In such reviews, undiscounted cash flows associated with these assets are compared
with their carrying value to determine if a write-down to fair value is required. During 2016, 2015 and 2014, the Company did not
recognize any impairment charges associated with its long-lived or intangible assets.
The evaluation of asset impairment requires management to make assumptions about future cash flows over the life of the asset
being evaluated. These assumptions require significant judgment, and actual results may differ from assumed and estimated amounts.
Goodwill and Impairment of Goodwill
Goodwill
Goodwill represents the excess of purchase price over fair value of net identified tangible and intangible assets and liabilities
acquired. The Company does not amortize goodwill, but instead tests goodwill for impairment on at least an annual basis. Goodwill
was $62.2 million at the end of each of the years ended December 31, 2016 and 2015. Approximately $36.0 million of the gross
Goodwill balance is deductible for income tax purposes. To date, there have been no goodwill impairments.
Impairment of Goodwill
The Company evaluates the carrying value of goodwill annually as of December 31 and between annual evaluations if events occur
or circumstances change that would more likely than not reduce the fair value of the reporting unit below its carrying amount. Such
circumstances could include, but are not limited to, (1) a significant adverse change in legal factors or in business climate,
(2) unanticipated competition, or (3) an adverse action or assessment by a regulator.
The Company applied the simplified goodwill impairment test for the fiscal year ended December 31, 2016, that permits companies
to perform a qualitative assessment based on economic, industry and company-specific factors as the initial step in the annual
goodwill impairment test for all or selected reporting units. Based on the results of the qualitative assessment, companies are only
required to perform Step 1 of the annual impairment test for a reporting unit if the company concludes that it is not more likely than
not that the unit’s fair value is less than its carrying amount. To the extent the Company concludes it is more likely than not that a
reporting unit’s estimated fair value is less than its carrying amount, the two-step approach is applied. The first step would require a
comparison of each reporting unit’s fair value to the respective carrying value. If the carrying value exceeds the fair value, a second
step is performed to measure the amount of impairment loss, if any. The Company did not identify any macroeconomic or industry
conditions as of December 31, 2016, that would indicate the fair value of the reporting units were more likely than not to be less than
their respective carrying values. If circumstances change or events occur to indicate it is more likely than not that the fair value of any
reporting units have fallen below their carrying value, the Company would test such reporting unit for impairment. The Company
performed its periodic review of its goodwill for impairment as of December 31, 2016 and 2015, and did not identify any impairment
as a result of the review.
Guarantees and Indemnities
The Company accounts for guarantees in accordance with the guarantee accounting topic in the FASB Codification. Our customer
contracts generally contain infringement indemnity provisions. Under those provisions, we generally agree, subject to certain
exceptions, to indemnify, defend, and hold harmless the customer in connection with third party claims against the customer alleging
that the customer’s use of our software products in compliance with their license infringe the third party’s patent, copyright, or other
intellectual property rights. Conditions to our obligations generally include that we are provided the right to control the defense of the
claims and, in general, to control settlement negotiations. Those provisions generally provide also that, if the customer is prevented
from using our software because of a third party infringement claim, our sole obligation (in addition to the indemnification, defense,
and hold harmless obligation referred to above) is to, at our expense, (i) procure for the customer the right to continue to use the
software, (ii) to replace or modify the product so that its use by the customer does not infringe, or, if either of the foregoing are not
reasonably feasible, to terminate the customer contract and provide a refund of the unamortized portion of the customer’s license fee
(based on a five year amortization period). Our customer contracts sometimes also require us to indemnify, defend, and hold harmless
the customer in connection with death, personal injury, or property damage claims made by third parties with respect to actions of our
personnel or contractors. The indemnity obligations contained in our customer contracts generally have no specified expiration date
and no specified monetary limitation on liability. We have not previously incurred costs to settle claims or pay awards under these
indemnification obligations. We account for these indemnity obligations in accordance with FASB guidance on accounting for
contingencies, and record a liability for these obligations when a loss is probable and reasonably estimable. We have not recorded any
liabilities for these contracts as of December 31, 2016, or 2015.
52
In general, in our customer contracts, the Company warrants to its customers that its software products will perform in all material
respects in accordance with the standard published specifications in effect at the time of delivery of the licensed products to the
customer for six months after first use of the licensed products, but no more than 24 months after execution of the license agreement.
Additionally, the Company warrants to its customers that services will be performed consistent with generally accepted industry
standards or specific service levels through completion of the agreed upon services. If necessary, the Company will provide for the
estimated cost of product and service warranties based on specific warranty claims and claim history. However, the Company has not
incurred significant recurring expense under product or service warranties. As a result, the Company believes the estimated fair value
of these agreements is nominal. Accordingly, the Company has no liabilities recorded for these agreements as of December 31, 2016
and 2015.
Segment Information
The Company has three reportable segments: Americas, EMEA, and APAC as defined by FASB Codification topic for segment
reporting. See Note 7 for discussion of the Company’s reportable segments.
Basic and Diluted Net Income Per Share
Basic net income per share is computed using net income divided by the weighted average number of shares of common stock
outstanding (“Weighted Shares”) for the period presented.
Diluted net income per share is computed using net income divided by Weighted Shares and the treasury stock method effect of
common equivalent shares (“CESs”) outstanding for each period presented. The following is a reconciliation of the shares used in the
computation of net income per share for the years ended December 31, 2016, 2015 and 2014 (in thousands, except per share data):
Net income
Earnings per share:
Basic
Effect of CESs
Diluted
Weighted average number of shares:
Basic
Effect of CESs
Diluted
$
$
$
2016
Year Ended December 31,
2015
(in thousands, except per share data)
2014
124,234 $
103,475 $
82,000
1.73 $
(0.01 )
1.72 $
1.41 $
(0.01 )
1.40 $
71,674
386
72,060
73,443
595
74,038
1.09
(0.01 )
1.08
74,995
846
75,841
The number of anti-dilutive CESs in 2016, 2015 and 2014 was immaterial. See Note 2 for further information on those securities.
Accumulated Other Comprehensive Income
Comprehensive income includes net income and foreign currency translation adjustments that are excluded from net income and
reflected in shareholders’ equity. The entire accumulated other comprehensive income balance as of December 31, 2016 and 2015
represents foreign currency translation adjustments.
Accounting for Income Taxes
We provide for the effect of income taxes on our financial position and results of operations in accordance with the Income Taxes
Topic of the ASC. Under this accounting pronouncement, income tax expense is recognized for the amount of income taxes payable or
refundable for the current year and for the change in net deferred tax assets or liabilities resulting from events that are recorded for
financial reporting purposes in a different reporting period than recorded in the tax return. Management must make significant
assumptions, judgments, and estimates to determine our current provision for income taxes and also our deferred tax assets and
liabilities and any valuation allowance to be recorded against our net deferred tax asset.
Our judgments, assumptions, and estimates relative to the current provision for income tax take into account current tax laws, our
interpretation of current tax laws, allowable deductions, projected tax credits, and possible outcomes of current and future audits
53
conducted by foreign and domestic tax authorities. We do not recognize a tax benefit unless we conclude that it is more likely than not
that the benefit will be sustained on audit by the taxing authority based solely on the technical merits of the associated tax position. If
the recognition threshold is met, we recognize a tax benefit measured at the largest amount of the tax benefit that, in our judgment, is
greater than 50 percent likely to be realized. Changes in tax law or our interpretation of tax laws and the resolution of current and
future tax audits could significantly impact the amounts provided for income taxes in our financial position and results of operations.
Our assumptions, judgments, and estimates relative to the value of our net deferred tax asset take into account predictions of the
amount and category of future taxable income. Actual operating results and the underlying amount and category of income in future
years could render our current assumptions, judgments, and estimates of recoverable net deferred taxes inaccurate, thus materially
impacting our financial position and results of operations.
Equity-Based Compensation
The Company accounts for equity-based compensation in accordance with ASC 718, Compensation – Stock Compensation. See
Note 2 for further information.
2. Equity-Based Compensation
Equity Based Compensation Plans
In May 2007, the Manhattan Associates, Inc. 2007 Stock Incentive Plan (the “2007 Plan”) was approved by the shareholders of the
Company and subsequently amended in May 2009 and May 2011. The 2007 Plan provides for the grant of stock options, restricted
stock, restricted stock units, and stock appreciation rights. Vesting conditions can be service-based or performance-based, or a
combination of both.
As amended, a maximum of 30,000,000 shares are available for grant under the 2007 Plan. Each stock option or stock appreciation
right granted is counted against the maximum share limitation as one share, and each share of restricted stock or restricted stock unit
granted (including those that are service based or performance based) counts against the maximum share limitation as two shares.
Options and stock appreciation rights cannot have a term exceeding seven years. As of December 31, 2016, there were 11,333,600
shares available for issuance under the amended 2007 Plan. The 2007 Plan is administered by the Compensation Committee of the
Board of Directors. The committee has the authority to interpret the provisions thereof.
The restricted stock awards contain vesting provisions that are 50% service based and 50% performance based for employee
awards and 100% service based for non-employee members of the Board of Directors (“Outside Directors”). The employee awards
have a four year vesting period, with the performance portion tied to annual revenue and earnings per share targets. The awards to
Outside Directors have a one year vesting period. The Company recognizes compensation cost for service-based restricted awards
with graded vesting on a straight-line basis over the entire vesting period, with the amount of compensation cost recognized at any
date at least equal to the portion of the grant-date value of the award that is vested at that date. For its performance-based restricted
stock awards with graded vesting, the Company recognizes compensation cost on an accelerated basis applying straight-line expensing
for each separately vesting portion of each award.
In January 2012, in order to simplify equity grant administration, the Company changed its practice of granting restricted stock in
favor of granting restricted stock units, or RSUs, which convert to the Company’s common stock upon vesting. There is no material
difference between the grant of restricted stock and the grant of RSUs to either the Company or the recipients receiving the grants;
however, in contrast to the granting of restricted stock, no stock will actually be issued under the granting of RSUs until the units vest.
The Company does not currently grant stock options.
Restricted Stock Unit Awards
A summary of changes in unvested units of restricted stock for the year ended December 31, 2016 are as follows:
Outstanding at January 1, 2016
Granted
Vested
Forfeited
Outstanding at December 31, 2016
54
Number of
Units
1,205,533
421,250
(471,037)
(126,516)
1,029,230
Grant Date
Fair Value
$34.09
55.35
26.29
42.15
$45.38
The Company recorded equity-based compensation related to restricted stock and RSUs (collectively “restricted stock awards”) of
$15.9 million, $14.5 million, and $9.7 million during the years ended December 31, 2016, 2015 and 2014, respectively. The total fair
value of restricted stock awards vested during the years ended December 31, 2016, 2015 and 2014, based on market value at the
vesting dates was $26.0 million, $31.2 million, and $23.9 million, respectively. As of December 31, 2016, unrecognized compensation
cost related to unvested restricted stock awards totaled $23.6 million and is expected to be recognized over a weighted average period
of approximately 2.5 years.
Included in the RSU grants for the year ended December 31, 2016 are 143,204 units that have performance-based vesting
criteria. As noted above, the performance criteria are tied to the Company’s 2016 financial performance. As of December 31, 2016,
the associated equity-based compensation expense has been recognized for the portion of the award attributable to the 2016
performance criteria.
3. Income Taxes
The Company is subject to future federal, state, and foreign income taxes and has recorded net deferred tax assets on the
Consolidated Balance Sheets at December 31, 2016 and 2015. Deferred tax assets and liabilities are determined based on the
difference between the financial accounting and tax bases of assets and liabilities. Significant components of the Company’s deferred
tax assets and liabilities as of December 31, 2016 and 2015 are as follows (in thousands):
Deferred tax assets:
Accounts receivable
Accrued liabilities
Equity-based compensation
Capitalized costs
Accrued sales taxes
Deferred rent
State tax credits
Foreign subsidiary net operating losses
Valuation allowance
Other
Deferred tax liabilities:
Intangible assets
Depreciation
Net deferred tax assets
$
December 31,
2016
2015
1,034 $
5,747
5,535
861
439
939
4,650
212
(4,031 )
805
16,191
2,455
7,671
4,304
1,207
348
1,344
4,339
386
(4,916 )
695
17,833
11,056
2,321
13,377
2,814 $
10,457
2,763
13,220
4,613
$
The components of income from domestic and foreign operations before income tax expense for the years ended December 31,
2016, 2015 and 2014 are as follows (in thousands):
Year Ended December 31,
2015
152,040 $
10,801
162,841 $
2016
186,234 $
9,873
196,107 $
2014
118,448
9,550
127,998
Domestic
Foreign
Total
$
$
55
The components of the income tax provision for the years ended December 31, 2016, 2015 and 2014 are as follows (in thousands):
Year Ended December 31,
2015
2014
2016
Current:
Federal
State
Foreign
Deferred:
Federal
State
Foreign
Total
$
$
56,053 $
8,204
5,819
70,076
2,086
(268 )
(21 )
1,797
71,873 $
47,195 $
6,308
4,331
57,834
1,252
(300 )
580
1,532
59,366 $
37,076
5,593
5,034
47,703
(1,490 )
(375 )
160
(1,705 )
45,998
The income tax benefits related to the exercise of stock options were approximately $0.1 million, $2.7 million, and $3.1 million for
the years ended December 31, 2016, 2015 and 2014, respectively.
As a result of losses in foreign locations, the Company has net operating loss carry-forwards (“NOLs”) of approximately $0.9
million available to offset future income. Approximately $0.8 million of the NOLs expire in 2018 to 2025 and the remainder does not
expire. The Company has established a valuation allowance for substantially all of these NOLs because the ability to utilize them is
not more likely than not.
The Company has tax credit carry-forwards of approximately $7.2 million available to offset future state tax. These tax credit
carry-forwards expire in 2017 to 2026. These credits represent a deferred tax asset of $4.7 million after consideration of the federal
benefit of state tax deductions. A valuation allowance of $2.6 million has been established for these credits because the ability to use
them is not more likely than not.
Deferred taxes are not provided for temporary differences of approximately $44.0 million, $41.0 million, and $35.7 million as of
December 31, 2016, 2015 and 2014, respectively, representing earnings of non-U.S. subsidiaries that are intended to be permanently
reinvested. Those earnings are considered to be indefinitely reinvested; accordingly, no provision for U.S. federal and state income
taxes has been provided thereon. Upon repatriation of those earnings, in the form of dividends or otherwise, the Company would be
subject to both U.S. income taxes (subject to adjustment for foreign tax credits) and withholding taxes payable to various foreign
countries. It is impractical to calculate the tax impact until such repatriation occurs.
The following is a summary of the items that cause recorded income taxes to differ from taxes computed using the statutory federal
income tax rate for the years ended December 31, 2016, 2015 and 2014:
Year Ended December 31,
2015
2014
2016
Statutory federal income tax rate
Effect of:
State income tax, net of federal benefit
State credit carryforwards
U.S. federal R&D tax credit
Foreign operations
Tax contingencies
Other permanent differences
Change in valuation allowance
Income taxes
35.0 %
35.0 %
35.0 %
2.7
(0.2 )
(0.7 )
(0.2 )
0.6
(0.5 )
(0.1 )
36.6 %
2.5
(0.3 )
(0.7 )
(0.4 )
0.5
(0.1 )
-
36.5 %
2.7
0.1
(0.9 )
(0.4 )
(0.4 )
0.1
(0.3 )
35.9 %
56
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows for the years ended December 31,
2016, 2015 and 2014 (in thousands):
2016
December 31,
2015
2014
Unrecognized tax benefits at January 1,
$
(5,789 ) $
(4,455 ) $
(5,122 )
Gross amount of increases in unrecognized tax benefits as a
result of tax positions taken during a prior period
Gross amount of decreases in unrecognized tax benefits as a
result of tax positions taken during a prior period
Gross amount of increases in unrecognized tax benefits as a
result of tax positions taken during the current period
Reductions to unrecognized tax benefits as a result of a lapse of
the applicable statute of limitations
Unrecognized tax benefits at December 31,
(756 )
(1,687 )
270
292
(18 )
508
(791 )
-
(481 )
128
(6,938 ) $
61
(5,789 ) $
658
(4,455 )
$
The Company’s unrecognized tax benefits totaled $6.9 million and $5.8 million as of December 31, 2016 and 2015, respectively.
Included in these amounts are unrecognized tax benefits totaling $5.1 million and $4.0 million as of December 31, 2016 and 2015,
respectively, which, if recognized, would affect the effective tax rate.
The Company recognizes potential accrued interest and penalties related to unrecognized tax benefits within its global operations in
income tax expense. For the years ended December 31, 2016, 2015 and 2014, the Company recognized $0.3 million, $0.2 million, and
$0.1 million, respectively, of expense for the potential payment of interest and penalties. Accrued interest and penalties were $1.5
million and $1.3 million for the years ended December 31, 2016 and 2015. The Company conducts business globally and, as a result,
files income tax returns in the United State federal jurisdiction and in many state and foreign jurisdictions. The Company is generally
no longer subject to U.S. federal, state, and local, or non-US income tax examinations for the years before 2012. Due to the expiration
of statutes of limitations in multiple jurisdictions globally during 2017, the Company anticipates it is reasonably possible that
unrecognized tax benefits may decrease by $0.6 million.
4. Shareholders’ Equity
During 2016, 2015 and 2014, the Company purchased 2,821,488, 1,721,457, and 2,620,118 shares of the Company’s common
stock for $158.4 million, $101.6 million, and $91.1 million, respectively, through open market transactions as part of a publicly-
announced share repurchase program. In January 2017, our Board of Directors authorized the Company to repurchase up to an
aggregate of $50 million of the Company’s common stock.
5. Commitments and Contingencies
Leases
Rents charged to expense were $6.8 million, $6.3 million, and $6.3 million for the years ended December 31, 2016, 2015 and 2014,
respectively. In 2014, the Company amended its Atlanta headquarters lease to obtain additional space and extend the lease term. As
part of such lease agreement, the Company will receive reimbursement of $1.3 million from the landlord in 2018 for leasehold
improvements. The entire cash rent obligation is being amortized to expense on a straight line basis over the lease term.
Aggregate future minimum lease payments under noncancellable operating leases as of December 31, 2016 are as follows (in
thousands):
Year Ending December 31,
2017
2018
2019
2020
2021
Thereafter
Total minimum payments required
57
$
$
7,756
6,856
5,416
4,707
4,647
16,506
45,888
There are no future minimum lease payments under capital leases as of December 31, 2016.
Legal and Other Matters
From time to time, the Company may be involved in litigation relating to claims arising out of its ordinary course of business, and
occasionally legal proceeding not in the ordinary course. Many of the Company’s installations involve products that are critical to the
operations of its clients’ businesses. Any failure in a Company product could result in a claim for substantial damages against the
Company, regardless of the Company’s responsibility for such failure. Although the Company attempts to limit contractually its
liability for damages arising from product failures or negligent acts or omissions, there can be no assurance that the limitations of
liability set forth in its contracts will be enforceable in all instances. The Company is not currently a party to any ordinary course legal
proceeding or other legal proceedings the result of which it believes is likely to have a material adverse impact upon its business,
financial position, results of operations, or cash flows. The Company expenses legal costs associated with loss contingencies as such
legal costs are incurred.
6. Employee Benefit Plan
The Company sponsors the Manhattan Associates 401(k) Plan and Trust (the “401(k) Plan”), a qualified profit sharing plan with a
401(k) feature covering substantially all employees of the Company. Under the 401(k) Plan’s deferred compensation arrangement,
eligible employees who elect to participate in the 401(k) Plan may contribute up to 60% of eligible compensation up to $18,000, as
defined, to the 401(k) Plan. The Internal Revenue Service sets the eligible compensation limit at $265,000 for 2016. Since 2012, the
Company has provided a 50% matching contribution up to 6% of eligible compensation being contributed after the participant’s first
year of employment. During the years ended December 31, 2016, 2015 and 2014, the Company made matching contributions to the
401(k) Plan of $4.0 million, $4.0 million, and $3.1 million, respectively.
7. Reporting Segments
The Company manages the business by three geographic reportable segments: the Americas, EMEA, and APAC. All segments
derive revenue from the sale and implementation of the Company’s supply chain execution and planning solutions. The individual
products sold by the segments are similar in nature and are all designed to help companies manage the effectiveness and efficiency of
their supply chain. The Company uses the same accounting policies for each reportable segment. The chief executive officer and chief
financial officer evaluate performance based on revenue and operating results for each segment.
The Americas segment charges royalty fees to the other segments based on software licenses sold by those reportable segments.
The royalties, which totaled $3.5 million, $3.3 million, and $3.0 million in 2016, 2015 and 2014, respectively, are included in cost of
revenue for each segment with a corresponding reduction in America’s cost of revenue. The revenues represented below are from
external customers only. The geographical-based costs consist of costs of professional services personnel, direct sales and marketing
expenses, cost of infrastructure to support the employees and customer base, billing and financial systems, management and general
and administrative support. There are certain corporate expenses included in the Americas segment that are not charged to the other
segments, including research and development, certain marketing and general and administrative costs that support the global
organization, and the amortization of acquired developed technology. Included in the Americas’ costs are all research and
development costs including the costs associated with the Company’s India operations.
Amortization expense on intangible assets in 2016, 2015 and 2014 was immaterial.
58
In accordance with the segment reporting topic of the FASB Codification, the Company has included a summary of financial
information by reportable segment. The following table presents the revenues, expenses, and operating income by reportable segment
for the years ended December 31, 2016, 2015 and 2014 (in thousands):
Americas EMEA
2016
APAC
Year Ended December 31,
2015
Consolidated Americas EMEA APAC Consolidated
Revenue:
Software license
Services
Hardware and other
Total revenue
Costs and Expenses:
Cost of revenue
Operating expenses
Depreciation and
amortization
Total costs and
expenses
Operating income
9,187 $
$ 71,134 $
4,675 $
392,675 55,240 19,371
645
49,775
513,584 66,282 24,691
1,855
9,566 $
84,996 $ 65,307 $
3,742 $
467,286 352,665 58,030 17,383
694
52,275 46,504
604,557 464,476 70,076 21,819
2,480
78,615
428,078
49,678
556,371
206,687 30,711 12,481
4,661
133,637 12,983
249,879 190,190 33,483 11,755
4,441
151,281 133,511 13,781
235,428
151,733
8,313
528
249
9,090
6,952
502
310
7,764
348,637
$ 164,947 $ 22,060 $
44,222
17,391
7,300 $
410,250 330,653
194,307 $ 133,823 $ 22,310 $
47,766
16,506
5,313 $
394,925
161,446
Americas
EMEA
APAC
Consolidated
Year Ended December 31, 2014
Revenue:
Software license
Services
Hardware and other
Total revenue
$
Costs and Expenses:
Cost of revenue
Operating expenses
Depreciation and amortization
Total costs and expenses
Operating income
$
$
59,502
301,025
41,437
401,964
167,631
126,570
5,827
300,028
101,936
$
$
7,505
51,440
1,910
60,855
30,694
14,557
291
45,542
15,313
$
$
4,576
23,558
1,151
29,285
14,253
4,898
259
19,410
9,875
$
71,583
376,023
44,498
492,104
212,578
146,025
6,377
364,980
127,124
The following table presents the goodwill, long-lived assets, and total assets by reporting segment as of December 31, 2016 and
2015 (in thousands):
As of December 31, 2016
As of December 31, 2015
Americas EMEA
Goodwill, net
$
54,766 $
Long lived assets
22,488
260,478
Total assets
5,499 $
1,923
27,688
APAC
Consolidated Americas EMEA
APAC
1,963 $
616
8,974
54,766 $
62,228 $
25,027
25,313
297,140 294,738
5,504 $
2,398
28,790
Consolidated
62,233
28,451
332,243
1,963 $
740
8,715
For the years ended December 31, 2016, 2015 and 2014, we derived revenue from sales to customers outside the United States of
approximately $144.8 million, $131.3 million, and $134.6 million, respectively. Our remaining revenue was derived from domestic
sales.
59
License revenues related to our warehouse and non-warehouse product groups for the years ended December 31, 2016, 2015 and
2014, are as follows (in thousands):
Warehouse
Non-Warehouse
Total software license revenue
Year Ended December 31,
2015
2014
2016
$
$
48,311 $
36,685
84,996 $
50,097 $
28,518
78,615 $
40,084
31,499
71,583
Our services revenue consists of fees generated from professional services, customer support services and software enhancements
related to our software products for the years ended December 31, 2016, 2015 and 2014, are as follows (in thousands):
Professional services
Customer support and software enhancements
Total services revenue
$
$
333,438 $
133,848
467,286 $
304,624 $
123,454
428,078 $
260,058
115,965
376,023
Year Ended December 31,
2015
2014
2016
8. Subsequent Events
The Company evaluated all subsequent events that occurred after the date of the accompanying financial statements and
determined that there were no events or transactions during this subsequent event reporting period which require recognition or
disclosure in the Company’s financial statements.
60
9. Quarterly Results of Operations (Unaudited)
Following is the quarterly results of operations of the Company for the years ended December 31, 2016 and 2015. The unaudited
quarterly results have been prepared on substantially the same basis as the audited Consolidated Financial Statements.
Statements of Income Data:
Revenue:
Software license
Services
Hardware and other
Total revenue
Costs and expenses:
Cost of license
Cost of services
Cost of hardware and other
Research and development
Sales and marketing
General and administrative
Depreciation and amortization
Total costs and expenses
Operating income
Other income, net
Income before income taxes
Income tax provision
Net income
Basic earnings per share
Diluted earnings per share
Shares used in computing basic
earnings per share
Shares used in computing diluted
earnings per share
Mar 31,
2015
Jun 30,
2015
Sep 30,
2015
Dec 31,
2015
Mar 31,
2016
Jun 30,
2016
Sep 30,
2016
Dec 31,
2016
(In thousands, except per share data)
Quarter Ended
$ 19,314 $ 19,758 $ 19,130 $ 20,413 $ 20,607 $ 20,631 $ 21,633 $ 22,125
101,203 107,344 112,549 106,982 116,263 119,833 119,267 111,923
13,006 12,007 10,625 14,040 12,990 14,428 11,313 13,544
133,523 139,109 142,304 141,435 149,860 154,892 152,213 147,592
2,137
2,906
2,305
2,590
3,152
2,966
1,898
1,781
2,283
9,757 11,841
9,109 11,322
2,419
44,784 46,464 46,682 46,419 51,904 48,393 49,436 47,742
10,547 10,163
9,276 10,710
13,556 13,257 13,589 13,457 14,706 13,458 13,389 13,183
11,847 11,889 10,904 13,975 12,588 12,015 10,003 13,617
11,238 11,927 14,058 12,036 12,448 12,368 11,225 12,281
2,284
96,659 97,735 98,624 101,907 106,761 102,624 98,629 102,236
36,864 41,374 43,680 39,528 43,099 52,268 53,584 45,356
416
37,126 41,733 44,284 39,698 43,619 52,922 53,794 45,772
13,922 15,729 16,387 13,328 16,139 19,581 20,298 15,855
$ 23,204 $ 26,004 $ 27,897 $ 26,370 $ 27,480 $ 33,341 $ 33,496 $ 29,917
$
0.42
$
0.42
0.36 $
0.36 $
0.46 $
0.46 $
0.38 $
0.38 $
0.31 $
0.31 $
0.35 $
0.35 $
0.38 $
0.38 $
0.47 $
0.47 $
2,108
2,266
1,977
2,334
2,206
170
654
604
262
210
520
359
73,979 73,618 73,259 72,929
72,630
71,880
71,403
70,742
74,607 74,126 73,761 73,555
73,020
72,228
71,743
71,148
61
Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Controls and Procedures
Item 9A.
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures designed to ensure that information required to be disclosed in reports filed under
the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized, and reported within the time periods specified
in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief
Executive Officer and our Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
No system of controls, no matter how well designed and operated, can provide absolute assurance that the objectives of the system
of controls are met, and no evaluation of controls can provide absolute assurance that the system of controls has operated effectively in
all cases. Our disclosure controls and procedures, however, are designed to provide reasonable assurance that the objectives of
disclosure controls and procedures are met.
As of the end of the period covered by this report, our Chief Executive Officer and Chief Financial Officer evaluated, with the
participation of management, the effectiveness of our disclosure controls and procedures. Based on the evaluation, our Chief
Executive Officer and Chief Financial Officer concluded that, as of the end of the period covered by this report, our disclosure
controls and procedures were effective to provide reasonable assurance that the objectives of disclosure controls and procedures are
met.
Management’s Report on Internal Control over Financial Reporting
Management’s assessment of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2016,
and the report of Ernst & Young LLP on the effectiveness of the Company’s internal control over financial reporting are contained on
pages 38 and 39 of this report.
Change in Internal Control over Financial Reporting
During the fourth quarter of 2016, there were no changes in our internal control over financial reporting that have materially
affected, or are reasonably likely to materially affect, our internal control over financial reporting, including any corrective actions
with regard to material weaknesses.
Other Information
Item 9B.
None.
62
PART III
Item 10.
Directors, Executive Officers and Corporate Governance
The information required by this item is incorporated by reference from the information contained in our Proxy Statement for the
Annual Meeting of Shareholders expected to be filed with the SEC on or prior to April 19, 2017, under the captions “Election of
Directors,” “Executive Officers,” “Section 16(a) Beneficial Ownership Reporting Compliance,” “Code of Ethics,” and “Board
Committees.”
Item 11.
Executive Compensation
The information required by this item is incorporated by reference from the relevant information contained in our Proxy Statement
for the Annual Meeting of Shareholders expected to be filed with the SEC on or prior to April 19, 2017, under the captions “Director
Compensation,” “Executive Compensation,” “Compensation Committee Interlocks and Insider Participation,” and “Compensation
Committee Report.”
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters
The information required by this item is incorporated by reference from the relevant information contained in our Proxy Statement
for the Annual Meeting of Shareholders expected to be filed with the SEC on or prior to April 19, 2017, under the caption “Security
Ownership of Certain Beneficial Owners and Management.” The information required by this item with respect to the Company’s
securities authorized for issuance under equity compensation plans is included in Part II, Item 5 of this Annual Report on Form 10-K
and is incorporated by reference herein.
Item 13.
Certain Relationships and Related Transactions, and Director Independence
The information required by this item is incorporated by reference from the relevant information contained in our Proxy Statement
for the Annual Meeting of Shareholders expected to be filed with the SEC on or prior to April 19, 2017, under the captions “Related
Party Transactions” and “Election of Directors.”
Item 14.
Principal Accountant Fees and Services
The information required by this item is incorporated by reference from the relevant information contained in our Proxy Statement
for the Annual Meeting of Shareholders expected to be filed with the SEC on or prior to April 19, 2017, under the caption
“Ratification of Appointment of Independent Registered Public Accounting Firm.”
63
PART IV
Exhibits and Financial Statement Schedules
Item 15.
(a) 1. Financial Statements.
The response to this item is submitted as a separate section of this Form 10-K. See Item 8.
2. Financial Statement Schedule.
The following financial statement schedule is filed as a part of this report:
SCHEDULE II
MANHATTAN ASSOCIATES, INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
(in thousands)
Classification:
Allowance for Doubtful Accounts
For the year ended:
December 31, 2014
December 31, 2015
December 31, 2016
Deferred Tax Asset Valuation Allowance
For the year ended:
December 31, 2014
December 31, 2015
December 31, 2016
Balance at
Beginning
of Period
Additions
Charged
to
Operations
Net
Deductions
Balance at
End of
Period
$
$
$
3,156 $
4,164 $
7,031 $
4,778 $
7,130 $
4,889 $
3,770 (a) $
4,263 (a) $
8,325 (a) $
4,164
7,031
3,595
$
$
$
6,188 $
5,071 $
4,916 $
- $
- $
- $
1,117 (b) $
155 (b) $
885 (b) $
5,071
4,916
4,031
(a) Represents write-offs of accounts, net of recoveries.
(b) Represents current year releases credited to expenses and current year reductions due to decreases in net deferred tax assets.
All other schedules are omitted because they are not required or the required information is shown in the consolidated financial
statements or notes thereto.
3. Exhibits.
See (b) below.
(b) The exhibits listed below under “Exhibit Index” are filed with or incorporated by reference in this Report. Where such filing is
made by incorporation by reference to a previously filed registration statement or report, such registration statement or report is
identified in parentheses.
(c) See Item 15(a)(2).
64
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized.
SIGNATURES
MANHATTAN ASSOCIATES, INC.
By: /s/ Eddie Capel
Eddie Capel
President, Chief Executive Officer, and Director
Date: February 3, 2017
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on
behalf of the Registrant in the capacities and on the dates indicated.
Signature
/s/ John J. Huntz, Jr.
John J. Huntz, Jr.
/s/ Eddie Capel
Eddie Capel
/s/ Dennis B. Story
Dennis B. Story
/s/ Linda C. Pinne
Linda C. Pinne
/s/ Brian J. Cassidy
Brian J. Cassidy
/s/ Edmond I. Eger III
Edmond I. Eger III
/s/ John H. Heyman
John H. Heyman
/s/ Thomas E. Noonan
Thomas E. Noonan
/s/ Deepak Raghavan
Deepak Raghavan
Title
Date
Chairman of the Board
February 3, 2017
President, Chief Executive Officer, and Director
February 3, 2017
(Principal Executive Officer)
Executive Vice President, Chief Financial Officer, and Treasurer
February 3, 2017
(Principal Financial Officer)
Senior Vice President, Global Corporate Controller, and Chief
February 3, 2017
Accounting Officer (Principal Accounting Officer)
February 3, 2017
February 3, 2017
February 3, 2017
February 3, 2017
February 3, 2017
Director
Director
Director
Director
Director
65
The following exhibits are filed with this Report.
EXHIBIT INDEX
Description
Exhibit
Number
3.1
3.2
4.1
4.2
10.1(a)
(b)
(c)
(d)
10.2(a)
(b)
(c)
(d)
(e)
(f)
(g)
Articles of Incorporation of the Registrant dated February 24, 1998 (Incorporated by reference to Exhibit 3.1 to the
Company’s Quarterly Report on Form 10-Q for the period ended June 30, 2014 (File No. 00023999), filed on July 29,
2014).
Amended Bylaws of the Registrant (As Amended Effective October 13, 2010) (Incorporated by reference to
Exhibit 3.2 to the Company’s Form 8-K (File No. 000-23999), filed on October 19, 2010).
Provisions of the Articles of Incorporation and Bylaws of the Registrant defining rights of the holders of common stock
of the Registrant (Incorporated by reference to Exhibit 4.1 to the Company’s Registration Statement on Form S-1 (File
No. 333-47095), filed on February 27, 1998).
Specimen Stock Certificate (Incorporated by reference to Exhibit 4.2 to the Company’s Pre-Effective Amendment
No. 1 to its Registration Statement on Form S-1 (File No. 333-47095), filed on April 2, 1998).
Lease Agreement by and between Wildwood Associates, a Georgia general partnership, and the Registrant dated
September 24, 1997 (Incorporated by reference to Exhibit 10.1 to the Company’s Registration Statement on Form S-1
(File No. 333-47095), filed on February 27, 1998).
First Amendment to Lease between Wildwood Associates, a Georgia general partnership, and the Registrant dated
October 31, 1997 (Incorporated by reference to Exhibit 10.2 to the Company’s Registration Statement on Form S-1
(File No. 333-47095), filed on February 27, 1998).
Second Amendment to Lease Agreement between Wildwood Associates, a Georgia general partnership, and the
Registrant, dated February 27, 1998 (Incorporated by reference to Exhibit 10.8 to the Company’s Pre-Effective
Amendment No. 1 to its Registration Statement on Form S-1 (File No. 333-47095), filed on April 2, 1998).
Third Amendment to Lease Agreement between Wildwood Associates and the Registrant, dated October 24, 2000
(Incorporated by reference to Exhibit 10.9 to the Company’s Annual Report for the period ended December 31, 2000
(File No. 000-23999), filed on April 2, 2001).
Lease Agreement by and between Wildwood Associates, a Georgia general partnership, and the Registrant, dated
June 25, 2001 (Incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report for the period ended
June 30, 2001 (File No. 000-23999), filed August 14, 2001).
First Amendment to Lease Agreement between Wildwood Associates, and the Registrant, dated June 10, 2002
(Incorporated by reference to Exhibit 10.6 to the Company’s Annual Report for the period ended December 31, 2006
(File No. 000-23999), filed on March 14, 2007).
Second Amendment to Lease Agreement between 2300 Windy Ridge Parkway Investors LLC, and the Registrant,
dated February 27, 2007 (Incorporated by reference to Exhibit 10.7 to the Company’s Annual Report for the period
ended December 31, 2006 (File No. 000-23999), filed on March 14, 2007).
Third Amendment to Lease Agreement between 2300 Windy Ridge Parkway Investors LLC, and the Registrant, dated
June 14, 2007 (Incorporated by reference to Exhibit 10.2(d) to the Company’s Annual Report for the period ended
December 31, 2014 (File No. 000-23999), filed on February 5, 2015).
Fourth Amendment to Lease Agreement between SP4 2300 Windy Ridge LP, and the Registrant, dated August 14,
2012 (Incorporated by reference to Exhibit 10.2(e) to the Company’s Annual Report for the period ended December 31,
2014 (File No. 000-23999), filed on February 5, 2015).
Fifth Amendment to Lease Agreement between 2300 Windy Ridge LLC, and the Registrant, dated May 19, 2014
(Incorporated by reference to Exhibit 10.2(f) to the Company’s Annual Report for the period ended December 31, 2014
(File No. 000-23999), filed on February 5, 2015).
Sixth Amendment to Lease Agreement between 2300 Windy Ridge LLC, and the Registrant, dated August 13, 2014
(Incorporated by reference to Exhibit 10.2(g) to the Company’s Annual Report for the period ended December 31,
2014 (File No. 000-23999), filed on February 5, 2015).
66
Exhibit
Number
(h)
10.3
10.4
10.5
10.6*
10.7(a)*
(b)*
(c)*
(d)*
(e)*
(f)*
(g)*
(h)*
10.8*
10.9(a)*
(b)*
10.10*
Description
Seventh Amendment to Lease Agreement between 2300 Windy Ridge LLC and the Registrant, dated April 29, 2015
(Incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K (File No. 000-23999), filed on July 28, 2015).
Agreement to Build and Lease between Orchid Apartments Private Limited and Manhattan Associates India
Development Centre Private Limited, executed on November 19, 2004 (Incorporated by reference to Exhibit 10.8 to the
Company’s Annual Report for the period ended December 31, 2004 (File No. 000-23999), filed on March 16, 2005).
Lease Agreement between IGE Energy Services (UK) Limited, Manhattan Associates Limited and Manhattan
Associates, Inc., dated February 1, 2005 (Incorporated by reference to Exhibit 10.9 to the Company’s Annual Report
for the period ended December 31, 2004 (File No. 000-23999), filed on March 16, 2005).
Form of Director and Officer Indemnification Agreement (Incorporated by reference to Exhibit 10.2 to the Company’s
Form 8-K (File No. 000-23999) filed on April 4, 2014).
Summary Plan Description of the Registrant’s 401(k) Plan and Trust, effective January 1, 1995 (Incorporated by
reference to Exhibit 10.4 to the Company’s Registration Statement on Form S-1 (File No. 333-47095), filed on
February 27, 1998).
Manhattan Associates, Inc. 1998 Stock Incentive Plan (Incorporated by reference to Exhibit 10.10 to the Company’s
Registration Statement on Form S-1 (File No. 333-47095), filed on February 27, 1998).
First Amendment to the Manhattan Associates, Inc. 1998 Stock Incentive Plan (Incorporated by reference to
Exhibit 10.22 to the Company’s Annual Report for the period ended December 31, 1998 (File No. 000-23999), filed on
March 31, 1999).
Second Amendment to the Manhattan Associates, Inc. 1998 Stock Incentive Plan (Incorporated by reference to
Exhibit 10.23 to the Company’s Annual Report for the period ended December 31, 1998 (File No. 000-23999), filed on
March 31, 1999).
Third Amendment to the Manhattan Associates, Inc. 1998 Stock Incentive Plan (Incorporated by reference to
Exhibit 10.24 to the Company’s Annual Report for the period ended December 31, 1998 (File No. 000-23999), filed on
March 31, 1999).
Fourth Amendment to the Manhattan Associates, Inc. 1998 Stock Incentive Plan (Incorporated by reference to
Exhibit 10.25 to the Company’s Annual Report for the period ended December 31, 1999 (File No. 000-23999), filed on
March 30, 2000).
Fifth Amendment to the Manhattan Associates, Inc. 1998 Stock Incentive Plan (Incorporated by reference to
Exhibit 4.8 to the Company’s Form S-8 (File No. 333-68968), filed on September 5, 2001).
Sixth Amendment to the Manhattan Associates, Inc. 1998 Stock Incentive Plan (Incorporated by reference to Annex A
to the Company’s Proxy Statement for its Annual Meeting held May 17, 2002 (File No. 000-23999), filed on April 24,
2002).
Amendment No. 7 to the Manhattan Associates, Inc. 1998 Stock Incentive Plan (Incorporated by reference to
Exhibit 4.10 to the Company’s Form S-8 (File No. 333-105913), filed on June 6, 2003).
Form of Composite Stock Option Agreement (Incorporated by reference to Exhibit 10.1 to the Company’s Quarterly
Report for the period ended March 31, 2006 (File No. 000-23999), filed on May 4, 2006).
Executive Employment Agreement by and between the Registrant and Peter F. Sinisgalli, effective as of February 25,
2004 (Incorporated by reference to Exhibit 10.28 to the Company’s Annual Report for the period ended December 31,
2003 (File No. 000-23999), filed on March 15, 2004).
Modification dated July 19, 2007 by and between the Company and Peter F. Sinisgalli to the Executive Employment
Agreement dated February 25, 2004 (Incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K (File
No. 000-23999), filed on July 24, 2007).
Executive Employment Agreement by and between the Registrant and Peter F. Sinisgalli, effective as of April 13, 2012
(Incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K (File No. 000-23999), filed on December 23,
2011).
67
Exhibit
Number
10.11*
Separation and Non-Competition Agreement by and between the Registrant and Peter F. Sinisgalli, effective as of
February 25, 2004 (Incorporated by reference to Exhibit 10.29 to the Company’s Annual Report for the period ended
December 31, 2003 (File No. 000-23999), filed on March 15, 2004).
Description
10.12(a)*
Form of Executive Employment Agreement (Incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K
(File No. 000-23999) filed on April 4, 2013).
(b)*
Updated Schedule to Form of Executive Employment Agreement of Initial Salaries and Target Bonus Opportunities for
Named Executive Officers (Incorporated by reference to Exhibit 10.1(b) to the Company’s Quarterly Report on Form
10-Q for the period ended June 30, 2013 (File No. 000-23999) filed on July 31, 2013).
10.13*
10.14 *
10.15
Executive Employment Agreement with Steven P. Smith (Incorporated by reference to Exhibit 10.3 to the Company’s
Quarterly Report on Form 10-Q for the period ended June 30, 2013 (File No. 000-23999) filed on July 31, 2013).
Form of Modification Agreement for Terms and Conditions for Stock Options. (Incorporated by reference to Exhibit
10.3 to the Company’s Form 8-K (File No. 000-23999), filed on January 2, 2009).
Form of License Agreement, Software Maintenance Agreement and Consulting Agreement (Incorporated by reference
to Exhibit 10.18 to the Company’s Pre-Effective Amendment No. 1 to its Registration Statement on Form S-1 (File
No. 333-47095), filed on April 2, 1998).
10.16
Form of Software License, Services and Maintenance Agreement (Incorporated by reference to Exhibit 10.21 to the
Company’s Annual Report for the period ended December 31, 1998 (File No. 000-23999), filed on March 31, 1999).
10.17(a)*
2007 Stock Incentive Plan, as amended by the First Amendment thereto (Incorporated by reference to Annex A to the
Company’s Definitive Proxy Statement related to its 2009 Annual Meeting of Shareholders (File No. 000-23999) filed
on April 20, 2009).
(b)*
Second amendment to 2007 Stock Incentive Plan (Incorporated by reference to Annex A to the Company’s Definitive
Proxy Statement related to its 2011 Annual Meeting of Shareholders (File No. 000-23999) filed on April 15, 2011).
10.18*
10.19*
10.20*
10.21*
10.22*
10.23*
10.24*
10.25*
Written Summary of Manhattan Associates, Inc. Annual Cash Incentive Plan (Incorporated by reference to
Exhibit 10.47 to the Company’s Annual Report for the period ended December 31, 2009 (File No. 000-23999), filed on
February 19, 2010).
Form of Manhattan Associates, Inc. Restricted Stock Award Agreement for Employees (Incorporated by reference to
Exhibit 10.48 to the Company’s Annual Report for the period ended December 31, 2009 (File No. 000-23999), filed on
February 19, 2010).
Form of Manhattan Associates, Inc. Restricted Stock Award Agreement for Non-Employee Directors (Incorporated by
reference to Exhibit 10.49 to the Company’s Annual Report for the period ended December 31, 2009 (File No. 000-
23999), filed on February 19, 2010).
Form of Manhattan Associates, Inc. Restricted Stock Unit Award Agreement for Employees (Incorporated by reference
to Exhibit 10.50 to the Company’s Annual Report for the period ended December 31, 2012 (File No. 000-23999), filed
on February 23, 2012).
Form of Manhattan Associates, Inc. Restricted Stock Unit Award Agreement for Non-Employee Directors
(Incorporated by reference to Exhibit 10.51 to the Company’s Annual Report for the period ended December 31, 2012
(File No. 000-23999), filed on February 23, 2012).
Executive Employment Agreement by and between the Registrant and Bruce Richards, effective as of August 1, 2011
(Incorporated by reference to Exhibit 10.51 to the Company’s Annual Report for the period ended December 31, 2012
(File No. 000-23999), filed on February 23, 2012).
Severance and Non-Competition Agreement by and between the Registrant and Bruce Richards, effective as of August
1, 2011 (Incorporated by reference to Exhibit 10.51 to the Company’s Annual Report for the period ended December
31, 2012 (File No. 000-23999), filed on February 23, 2012).
Modification Agreement for Terms and Conditions for Stock Options by and between the Registrant and Eddie Capel,
effective as of June 4, 2007 (Incorporated by reference to Exhibit 10.51 to the Company’s Annual Report for the period
ended December 31, 2012 (File No. 000-23999), filed on February 23, 2012).
68
Exhibit
Number
10.26*
10.27*
10.28
10.29*
10.30*
10.31*
10.32*
21.1
23.1
31.1
31.2
32**
Description
Severance and Non-Competition Agreement by and between the Registrant and Eddie Capel, effective as of March 18,
2010 (Incorporated by reference to Exhibit 10.51 to the Company’s Annual Report for the period ended December 31,
2012 (File No. 000-23999), filed on February 23, 2012).
Settlement Agreement by and between the Registrant and Steven P. Smith, effective as of June 8, 2015 (Incorporated
by reference to Exhibit 10.1 to the Company’s Form 8-K (File No. 000-23999), filed on June 12, 2015).
2016 Annual Cash Bonus Plan (Incorporated by reference from Annex B to the Company’s Definitive Proxy Statement
for its 2016 Annual Meeting of Shareholders filed with the SEC on April 8, 2016 (SEC File No. 000-23999)).
Executive Employment Agreement with Linda C. Pinne (Incorporated by reference to Exhibit 10.2 to the Company’s
Form 10-Q (File No. 000-23999), filed on April 22, 2016).
Indemnification Agreement with Linda C. Pinne (Incorporated by reference to Exhibit 10.3 to the Company’s Form 10-
Q (File No. 000-23999), filed on April 22, 2016).
Consulting Agreement, dated May 12, 2016, by and between the Registrant and Dan Lautenbach (Incorporated by
reference to Exhibit 10.1 to the Company’s Form 8-K (File No. 000-23999), filed on May 13, 2016).
Executive Employment Letter Agreement, dated July 27, 2016, by and between the Registrant and Dennis Story
(Incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K (File No. 000-23999), filed on August 1, 2016).
List of Subsidiaries.
Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm.
Certification of Principal Executive Officer pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302
of the Sarbanes-Oxley Act of 2002
Certification of Principal Financial Officer pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002
Certification of Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS
XBRL Instance Document
101.SCH
XBRL Taxonomy Extension Schema Document
101.CAL
XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF
XBRL Taxonomy Extension Definition Linkbase Document
101.LAB
XBRL Taxonomy Extension Label Linkbase Document
101.PRE
XBRL Taxonomy Extension Presentation Linkbase Document
* Management contract or compensatory plan or agreement.
** In accordance with Item 601(b)(32)(ii) of the SEC’s Regulation S-K, this Exhibit is hereby furnished to the SEC as an
accompanying document and is not deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise
subject to the liabilities of that Section, nor shall it be deemed incorporated by reference into any filing under the Securities Act of
1933.
69
MANHATTAN ASSOCIATES, INC. SUBSIDIARIES
Exhibit 21.1
Subsidiaries
Manhattan Associates Limited
Manhattan Associates Europe B.V.
Manhattan Associates France SARL
Manhattan Associates GmbH
Manhattan Associates KK
Manhattan Associates Software (Shanghai), Co. Ltd.
Manhattan Associates Pty Ltd.
Manhattan Associates Software Pte Ltd.
Manhattan Associates (India) Development Centre Private Limited
Manhattan Associates, S. de R.L. de CV
Manhattan Associates Services, S. de R.L. de CV
Manhattan Associates Supply Chain Software, LLC
Manhattan Associates Chile SpA
Place of Incorporation
United Kingdom
Netherland
France
Germany
Japan
China
Australia
Singapore
India
Mexico
Mexico
Georgia, USA
Chile
70
Exhibit 23.1
Consent of Independent Registered Public Accounting Firm
We consent to the incorporation by reference in the following Registration Statements:
1. Form S-8 No. 333-143611 pertaining to the Manhattan Associates, Inc. 2007 Stock Incentive Plan,
2. Form S-8 No. 333-159852 pertaining to the Manhattan Associates, Inc. 2007 Stock Incentive Plan, and
3. Form S-8 No. 333-174499 pertaining to the Manhattan Associates, Inc. 2007 Stock Incentive Plan;
of our reports dated February 3, 2017, with respect to the consolidated financial statements and schedule of Manhattan Associates, Inc.
and subsidiaries and the effectiveness of internal control over financial reporting of Manhattan Associates, Inc. and subsidiaries
included in this Annual Report (Form 10-K) of Manhattan Associates, Inc. and subsidiaries for the year ended December 31, 2016.
Atlanta, Georgia
February 3, 2017
/s/ Ernst & Young LLP
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
PURSUANT TO RULE 13a-14(a)/15d-14(a), AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 31.1
I, Eddie Capel, certify that:
1. I have reviewed this annual report on Form 10-K of the registrant;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with
respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in
all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods
presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures
(as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange
Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under
our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is
made known to us by others within those entities, particularly during the period in which this annual report is being
prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this
report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the
registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has
materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;
and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial
reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the
equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting
which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial
information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the
registrant’s internal control over financial reporting.
Dated this 3rd day of February, 2017
/s/ Eddie Capel
Eddie Capel, President and Chief Executive Officer
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER
PURSUANT TO RULE 13a-14(a)/15d-14(d), AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 31.2
I, Dennis B. Story, certify that:
1. I have reviewed this annual report on Form 10-K of the registrant;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with
respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in
all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods
presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures
(as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange
Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under
our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is
made known to us by others within those entities, particularly during the period in which this annual report is being
prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this
report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the
registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has
materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;
and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial
reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the
equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting
which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial
information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the
registrant’s internal control over financial reporting.
Dated this 3rd day of February, 2017
/s/ Dennis B. Story
Dennis B. Story, Executive Vice President, Chief Financial
Officer, and Treasurer
Exhibit 32
CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
This Certificate is being delivered pursuant to the requirements of Section 1350 of Chapter 63 (Mail Fraud) of Title 18 (Crimes
and Criminal Procedures) of the United States Code and shall not be relied on by any person for any other purpose.
The undersigned, who are the Chief Executive Officer and Chief Financial Officer, respectively, of Manhattan Associates, Inc. (the
“Company”), hereby each certify that, to the undersigned’s knowledge:
1. the Annual Report on Form 10-K of the Company for the twelve month period ended December 31, 2016 (the “Report”), which
accompanies this Certification, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934;
and
2. all information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of
the Company.
Dated this 3rd day of February, 2017
/s/ Eddie Capel
Eddie Capel, President and Chief Executive Officer
/s/ Dennis B. Story
Dennis B. Story, Executive Vice President, Chief Financial
Officer, and Treasurer
In accordance with SEC Release No. 34-47986, this Exhibit is furnished to the SEC as an accompanying document and is not deemed
“filed” for purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that Section, nor
shall it be deemed incorporated by reference into any filing under the Securities Act of 1933. A signed original of this written
statement required by Section 906 of the Sarbanes-Oxley Act of 2002 has been provided to the registrant and will be retained by the
registrant and furnished to the Securities and Exchange Commission or its staff upon request.
Stock Performance
The line-graph below provides a comparison of the cumulative total shareholder return for Manhattan Associates, Inc. (“Manhattan”)
common stock for the period from December 31, 2011 through December 31, 2016, against the cumulative shareholder return during
such period achieved by The NASDAQ Stock Market (“NASDAQ Composite”) and the NASDAQ Computer and Data Processing In-
dex. The graph assumes that $100 was invested on December 31, 2011 in the Common Stock and in each of the comparison indices
and assumes reinvestment of dividends. No cash dividends have been declared on shares of Manhattan common stock. The data for
the graph was provided to us by Zacks Investment Research, Inc.
Comparison of 5-Year Cumulative Total Return
Assumes Initial Investment of $100
December 31, 2016
800
700
600
500
400
300
200
100
0
2011
2012
2013
2014
2015
2016
Stock performance Graph Data Points for fiscal year ended December 31:
Manhattan Associates, Inc.
NASDAQ Composite
NASDAQ Computer and Data Processing Index
2011
2012
2013
2014
2015
2016
100
100
100
149
117
114
290
165
164
402
189
175
654
202
230
524
220
250
(cid:48)asda(cid:83) (cid:53)ymbol
The Company’s common stock is traded on the Nasdaq Global Select Market under the symbol MANH. Additional copies of this
2016 10-K, filed with the Securities and Exchange Commission, may be obtained by shareholders online at www.manh.com or with-
out charge by writing to Manhattan Associates Investor Relations at the Company’s headquarters.
Registrar and Transfer Agent
First Class/Registered/Certified Mail:
Courier Services:
Computershare Trust Company, NA
Inquiries regarding stock transfers, lost certificates or address
changes should be directed to Computershare.
Auditors
Legal Counsel
P O Box 30170
211 Quality Circle, Suite 210
College Station, TX 77842-3170
College Station, TX 77854
+1.800.568.3476
Ernst & Young LLP
Atlanta, Georgia
Kilpatrick Townsend & Stockton LLP
Atlanta, Georgia
(cid:133) (cid:20)(cid:18)(cid:19)(cid:25) (cid:47)anhattan (cid:35)ssociates, (cid:43)nc.
(cid:35)ll (cid:52)ights (cid:52)eserved.