Manhattan Associates (MANH) Q3 2026 Earnings Call Transcript

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DATE

Tuesday, Oct. 27, 2026

CALL PARTICIPANTS

• VP of Investor Relations - Michael Bauer
• President and Chief Executive Officer - Eric Clark

TAKEAWAYS

• Cloud Revenue -- $134 million, representing 28% year-over-year growth driven by strong execution, upsells, and agentic AI contributions.
• Remaining Performance Obligation (RPO) -- $2.59 billion, increasing 25% year over year and 5% sequentially due to a fourth consecutive quarter of record bookings.
• Total Revenue -- $306 million, growing 11% year over year and exceeding company expectations.
• Non-GAAP EPS -- $1.55, increasing 14% year over year from $1.36 in the third quarter of 2025.
• GAAP EPS -- $1.04, reflecting an 8% increase year over year.
• Services Revenue -- $134 million, up 1% year over year, representing a milestone where cloud revenue reached parity with services revenue.
• Next 24-Month RPO -- 40% of total RPO, up from 39% in the prior quarter, reflecting faster deployment cycles and strong deal volume.
• New Cloud Bookings -- 35% of bookings were from new logos, with a consistent win rate above 70%.
• Operating Margin -- 37.6% on a non-GAAP basis, driven by cloud revenue growth which offset higher go-to-market investments and bonus accruals.
• Operating Cash Flow -- $69 million, with year-over-year performance impacted by the timing of collections.
• Free Cash Flow Margin -- 22.1%, contributing to the company exceeding the Rule of 40 benchmark.
• Share Repurchases -- $50 million in the quarter, totaling a record $325 million year-to-date.
• Cash Position -- $199 million in cash and cash equivalents with zero debt at quarter end.
• Partner-Sourced Deals -- increased more than fourfold year-over-year, reflecting maturity in the partner ecosystem and increased certifications.
• Full-Year 2026 RPO Guidance -- raised to 21% growth, up from the previous range of 18% to 20%.
• Full-Year 2026 Revenue Guidance -- increased to a midpoint of $1.177 billion, representing 9% total growth for the year.
• Full-Year 2026 Non-GAAP EPS Guidance -- raised to a range of $5.54 to $5.56.
• Q4 2026 Guidance -- revenue targeted at approximately $291 million, with cloud revenue expected to reach $136 million.
• 2027 Preliminary Outlook -- management anticipates 20% cloud revenue growth and low single-digit services revenue growth.
• Contract Duration -- averaged between five to six years during the third quarter.
• Short-Term Deferred Revenue -- rose 18% year over year to $348 million.
• Renewals Rate -- expected to be in the mid-20% range of added RPO for the full year of 2026.

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RISKS

• Bauer stated, "turbulent global macro environment could impact our performance and cause actual results to differ materially from our projections," noting the potential for economic volatility.

SUMMARY

Manhattan Associates, Inc. (NASDAQ:MANH) reported record third-quarter results and raised its full-year 2026 outlook across all key financial metrics. Management highlighted the launch of the Additions tiered pricing model and the continued integration of agentic AI into its unified platform as primary growth drivers. The company achieved a milestone as cloud revenue reached parity with services revenue while maintaining a win rate above 70% for new cloud bookings. Management also provided preliminary 2027 guidance that anticipates 20% cloud revenue growth and continued operating margin expansion.

• The new Additions model includes Essentials, Enterprise, and Enterprise Premier tiers designed to capture customers across varying levels of supply chain complexity.
• CEO Clark noted that year-to-date deal volume has already surpassed the total deal volume for the full year of 2025.
• CEO Clark stated, "Our unified cloud native API first architectures enables us to deploy agents with almost no configuration or additional upfront effort."
• The company reported a 100% conversion success rate from AI pilots to paid AI subscriptions, with several customers skipping pilot phases to go straight to subscription.
• A new fulfillment optimization simulation capability was introduced for Active Order, allowing customers to replay order processing scenarios using real production data.
• Management stated that the Enterprise Promise and Fulfill capability within Active Order helped a manufacturer reduce critical order cycle time by more than half and increase first-time fill rates by 50%.
• The company reported success in transitioning customers from Manhattan SCALE to the Active Warehouse Enterprise Edition during the third quarter.

INDUSTRY GLOSSARY

• Remaining Performance Obligation (RPO): The total future revenue currently under contract that has not yet been recognized.
• Additions: A tiered packaging model introduced by Manhattan Associates consisting of Essentials, Enterprise, and Enterprise Premier levels.
• OTIF: An acronym for "On Time In Full," a supply chain metric measuring delivery accuracy and punctuality.
• Agentic AI: Artificial intelligence systems designed to perform tasks autonomously as agents within a software platform.
• Rule of 40: A software industry benchmark where a company's combined revenue growth rate and profit margin exceed 40%.
• EP and F: Enterprise Promise and Fulfill, a capability within Manhattan's order management system used to meet customer delivery goals.
• 4PL: Fourth-party logistics, a model where a provider manages an entire supply chain for a client.

Full Conference Call Transcript

Operator: Good afternoon. My name is Sachi, and I will be your conference facilitator today. At this time, I would like to welcome everyone to the Manhattan Associates Q3 Q2 2020 Earnings Conference Call. All lines have been placed on mute. If you would like to ask a question during this time, simply press Ladies and gentlemen, this call is being recorded today, 10/27/2026. I would now like to introduce your host Mr. Michael Bauer, VP of Investor Relations of Manhattan Associates. Mr. Bauer, you may begin your conference.

Michael Bauer: Thank you, Sachi, and good afternoon, everyone. Welcome to Manhattan Associates 26 third quarter earnings call. I will review our cautionary language and then turn the call over to our President and Chief Executive Officer, Eric Clark. During the call, including the Q and A session, we may make forward looking statements regarding future events, or our future financial performance. We caution you that these forward looking statements involve risks and uncertainties are not guarantees of future performance, and actual results may differ materially from the projections contained in our forward looking statements.

I refer you to Manhattan's SEC reports for important factors that could cause actual results to differ materially from those in our projections, particularly our annual report on Form 10-K for fiscal year 2025 and the risk factor discussion in that report and any risk factor updates we provide in our subsequent Form 10-Qs. Please note that turbulent global macro environment could impact our performance and cause actual results to differ materially from our projections. We are under no obligation to update these statements. In addition, our comments include certain non GAAP financial measures to provide additional information to investors. We have reconciled all non GAAP measures to the related GAAP measures in accordance with SEC rules.

You will find reconciliation schedules in the Form 8-K we filed with the SEC earlier today and on our website at manh.com. Now I will turn the call over to Eric.

Eric Clark: Thank you, Mike. Good afternoon, everyone, and thank you for joining us as we review our third quarter results, discuss our increased full-year 2026 outlook, and provide some color on 2027. Manhattan delivered record Q3 and year to date results. Our performance was highlighted by 28% cloud revenue growth, RPO increasing 25% to $2.6 billion and our fourth consecutive quarter of record bookings. We also achieved 2 milestones with cloud revenue surpassing services revenue and total quarterly revenue exceeding the $300 million watermark as total revenue growth of 11% was better than expected. The steady acceleration of our business momentum continues to be powered by 2 primary drivers.

First, Manhattan's commitment to innovation driving speed and simplicity across our best in class supply chain solutions. And second, the strategic investments in sales and marketing that are unlocking a growing number of opportunities across our large and expanding addressable market.

As we have previously communicated, these investments include building product focused sales specialist teams to drive new logo growth and cross sells, a dedicated conversion team to move on prem customers to the cloud, a dedicated renewal team to focus on expansion, maturing our partner ecosystem to create additional pipeline channels, building seamless agentic AI capabilities driven by Manhattan forward-deployed engineers and most recently the introduction of additions to make the Manhattan Active platform available to customers of all sizes. These investments have contributed to the acceleration of our year to date bookings growth as our year to date deal volume has already surpassed our total deal volume for the full year of 2025.

In addition to strong Q3 deal volume, which included both Enterprise and Essentials additions transactions, We also experienced healthy growth in new logos, upsells and renewals. Specifically, new logos were about 35% of New Cloud bookings and our win rate metric remained consistent at above 70%. Our AI offerings which are built directly into our active platform continue to be a meaningful differentiator contributing to our Q3 deal flow including an AI upsell through the Google marketplace as well as new pipeline growth. In summary, we continue to experience strong and diversified bookings momentum for the quarter and year to date.

Our fourth consecutive record bookings quarter was a key contributor to our growth acceleration in cloud revenue, total revenue, RPO and next 24 month RPO. From a vertical sales perspective, our end markets are diverse and we have healthy established footprints across numerous sub sectors which include retail, grocery, distribution, life sciences, industrial, technology, airlines, third party logistics and more. For example, Q3 deals included a multinational home improvement retailer that increased their existing active order deployment and expanded to become an active warehouse active transportation, and active AI customer.

A leading US grocer became a new logo Active Warehouse and Active AI customer a global medical technology developer and manufacturer is converting from on prem to active warehouse, 1 of the largest consumer cooperatives renewed their Active Warehouse subscription and expanded to become an active transportation and active AI customer, A lifestyle and fashion brand that is an existing Active order customer expanded to become an active warehouse and active AI customer and an energy transmission and distribution company became a new logo Active Warehouse and active transportation customer. In addition to several other impressive Q3 deals, we continue to make solid progress on monetizing our AI opportunity.

As a reminder, our active AI offering consists of 2 primary elements. A set of base agents ready to be active. Activated immediately and then our agent foundry, which enables our customers to quickly build and deploy their own agents. And because we build all of these agents directly into the Active platform, our customers do not need to implement costly and complex external data lakes. Our unified cloud native API first architectures enables us to deploy agents with almost no configuration or additional upfront effort. Embedding AI agents directly into the workflow. No data lakes, no latency, deployed in minutes not months and maximizing value and ROI in real time.

This is driving impressive market-leading adoption of our agents from our installed base. And while it remains early, we are maintaining our 100% conversion success from AI pilot to AI subscription. To help demonstrate the broad use cases and the operational benefits provided by our Active Agent, I will provide 3 brief customer use cases from the quarter. First, a 3PL with multiple agents deployed at several of their sites reduced wave planning by 50%. Agents also lowered appointment booking clerical time by 80% and way failure investigation time by almost 70%. These are labor intensive processes that require highly specialized resources. Together on an annualized basis these efficiency gains will return thousands of man hours back to the business.

These agents also increased on time departures with 1 site experiencing approximately a 20% increase. Next, a retailer that is also deploying multiple agents was able to reduce invoice write-offs by almost 20% and cut invoice resolution time by over 70% increasing the company's revenue and cash flow. And finally, a manufacturer with multiple agents live is using an order fill agent that automatically fills order from inventory available from other sales channels when their specific channels inventory is depleted. This prevents lost sales lowers freight overspend and improves vendor status with key sales channels. Once these agents are implemented across all sites, this customer is forecasting to achieve 7 figures worth of increased sales and cost savings.

Now we are excited about the growing use cases and the increased number of new and existing active customers that are finding great value in their agentic journey with Manhattan. But now I am going to turn to some product updates. During last quarter's call, I described the upcoming launch of a new way to buy active products called additions. We launched Editions in Q3 to make our market leading technology available to a much wider array of customers. And starting in Q3, our sales team started engaging with prospects using our new additions based packaging.

The Essentials edition for the lowest complexity supply chains, the Enterprise Premier Edition for those customers with the most complex and sophisticated supply chain needs and the enterprise edition for those in between. As a reminder, additions is an important program for both Manhattan and our customers. Because it ensures that all customers are able to use Manhattan solutions built on our market leading active platform. And by bringing customers of all sizes and complexities onto the same platform, we can make solution unification, extensibility, and agentic AI available across our entire customer base. And we are off to a solid start with additions. In Q3, we closed a number of deals on Active Warehouse Enterprise Edition.

Historically, we would have sold and deployed active scale to these customers. Now with additions, these customers will have the opportunity to take advantage of our leading embedded AI capabilities access adjacent Manhattan solutions like active transportation and Active Order and Active AI and we will be able to easily move to Enterprise Premier Edition when they are ready for our most advanced capabilities. Our sales teams have transitioned seamlessly to additions even converting opportunities that we originally pursued with active scale into active warehouse enterprise edition wins within Q3. We also closed our first Essentials edition of Active Warehouse. This opportunity was not even in the pipeline at the beginning of Q3.

This customer reached out to us when we announced additions and we closed the deal within the quarter. Both Essentials and Enterprise Editions will unlock an expanded addressable market faster deal cycle times opportunities for partners to drive more deal flow to Manhattan. And, speaking of partners, last quarter I mentioned the increased deal flow coming from our partner community. That momentum has continued in Q3 and our year to date partner source deals are up more than 4x over last year. 1 of our core strengths at Manhattan has always been innovation. We continue our strong innovation focus across all of our active products.

Within Active Order, we continue to enhance our market leading position by introducing features that customers can only get from Manhattan. For example, we recently introduced a new fulfillment optimization simulation capability in active order. Using this breakthrough feature customers can experiment with new fulfillment network models inventory positioning strategies, labor plans and algorithm configurations. What makes this new capability so interesting is that we allow our customers to replay entire day or even an entire week of order processing against these potential changes. We can show them concrete terms how this alternate reality will affect their customer service levels and fulfillment costs. All within the simulation sandbox using their real production data.

Many of our larger active order customers are now beginning to use this new capability in the initial findings have been eye opening. As these customers begin putting their findings into production, I look forward to sharing the measurable operational improvements they achieve. Now switching gears to our B2B customers. 1 of the most critical operational KPIs in supply chain and logistics is OTIF or OTIF. It stands for On Time In Full. It measures whether a customer receives the exact order, in the exact quantity at the correct location and within the agreed upon time window.

If you are shipping to a customer with any size and scale, it is safe to assume they will be measuring and holding you accountable to a published OTIF goal. Failure to meet these goals often results in chargebacks running into the tens of millions of dollars for larger shippers. The Enterprise Promise and Fulfill or EP and F capability within Active Order helps our customers comfortably meet their OTIF goals. For example, a leading global manufacturer recently activated EP and F and was able to reduce their critical order cycle time by more than half increase their first time fill rates by 50% and shift 25% of their customers from manual ordering to digital ordering.

And they did all of this while exceeding their inventory turn targets. For third party logistics providers looking to expand their offerings and become so called 4PLs, Active Order is proving to be a vital tool. Working together, Order and Active Warehouse are helping 1 of the world's largest 3PLs provide 4PL services to many leading brands increasing their strategic competitiveness and driving customer satisfaction for end customers. The growing importance of B2B capabilities also reflected in the current Gartner and Forrester Order Management system evaluations. Both of which place significant emphasis on B2B requirements. Finally, earlier this month we held our European Customer Conference in Dylan. During the event, we showcased our latest advancements with active agents.

During the keynote, we demonstrated how our active agents can continuously monitor whether any shipments are tracking to depart behind schedule or with insufficient fulfillment levels. These agents not only detect the issue, they also proactively remediate the process and data issues that put the shipment at risk. The agents resolve some issues autonomously while bringing others to a human for review and final decision making. We also showcased a number of other key agentic capabilities through our active order and active transportation applications. Similar to what we have done in the distribution center, our order and transportation agents live in the workflows that our contact center, fulfillment analysts, and transportation planners use every day.

We remain committed to delivering agentic AI capabilities right to our users, making it easy for them to benefit in real and measurable operational terms. Now I will hand it over to Linda to report on our financial performance and outlook and then I will close our prepared remarks before we open it up to Q&A. So Linda, over to you.

Linda C. Pinne: Thanks, Eric. Our Manhattan global teams continue to execute well in a challenging macro environment. For the quarter, we delivered better than expected financial performance on the top and bottom lines. This includes strong performance across RPO bookings, cloud revenue growth, and growth and operating margin expansion. All contributing to our Q3 and year to date results exceeding the Rule of 40. FX did not have an impact to year over year total revenue growth for the quarter. It was also less than $1 million headwind to sequential RPO growth and was an $8 million headwind to year over year RPO growth. Now to our results. Our growth rates are reported on a year over year basis unless otherwise stated.

For the quarter, total revenue was $306 million up 11% Excluding license and maintenance revenue, which removes the compression driven by our cloud transition, our total revenue was up 12%. Cloud revenue increased 28% to $134 million. Our better than expected performance was driven by the combination of strong execution, upsells and AI. Services revenue increased 1% to $134 million and was a bit better than expected. We ended Q3 with RPO of $2.59 billion up 25% compared to the prior year and 5% sequentially.

Year to date, we are tracking ahead of the bookings plan we communicated on our Q4 call for both new bookings and renewals, and we now expect renewals to be in the mid-20 percent range of our added RPO for full year 2026. Contract duration in the quarter was between 5 and 6 years. At the end of Q3, we expect 40% of RPO to be recognized as revenue in the next 24 months, which is up from 39% at the end of Q2 and 38% at the end of Q1. This reflects the combination of strong deal volume and faster deployments. Q3 adjusted operating profit was $115 million with an operating margin of 37.6%.

Our better than expected performance was driven by strong cloud revenue growth which offset the increased go to market investments and higher bonus accruals. Turning to EPS. We delivered better than expected adjusted earnings per share of $1.55 up 14%. GAAP EPS of $1.04 was up 8%. Moving to cash. Operating cash flow was $69 million with the timing of collections driving the year over year change. This resulted in 22.1% free cash flow margin, and 38.2% adjusted EBITDA margin. Regarding the balance sheet, short term deferred revenue increased 18% year over year to $348 million We ended the quarter with $199 million in cash and 0 debt.

Accordingly, we leveraged our strong cash position and invested $50 million in share repurchases in the quarter, resulting in a record $325 million in buybacks year to date. As such, we have $175 million remaining in the share repurchase authority that we announced in March. Moving to our 2026 guidance. As we have previously highlighted, our long term and long standing financial objective is to deliver sustainable double digit top line growth and top quartile operating margins benchmarked against enterprise software comps. These are drivers to our best in class return on invested capital as we maintain a balanced investment approach to growth and profitability.

And, as noted on prior earnings calls, our goal is to update our RPO outlook on an annual basis. Also as previously discussed, our bookings performance is impacted by the number and relative value of large deals we close in any quarter which can potentially cause nonlinear bookings throughout the year. With all that said and acknowledging the volatile macro environment, given our strong year to date performance and solid pipeline, we are increasing our RPO outlook to 21% year-over-year growth. Up from our prior target range of 18% to 20% growth. Moving to the P and L. We are raising our full year total revenue operating margin and EPS outlook. This guidance is also provided in today's earnings release.

For total revenue, we expect $1.176 billion to $1.178 billion with the $1.177 billion midpoint, comparing favorably to our prior outlook and representing 12% growth excluding license and maintenance attrition or 9% all in. For Q4, which accounts for retail peak seasonality, we are targeting total revenue to be about $291 million as we now target cloud revenue of $136 million, services revenue of $122 million, maintenance revenue of $26 million and hardware revenue of $6 million. For full-year adjusted operating margin, we are increasing the midpoint to 35.3%, up from 35.1%. Accounting for retail peak seasonality, we are targeting 36.1% for Q4. Our full-year adjusted EPS is increasing to $5.54 to $5.56. For Q4, we are targeting $1.38.

Our GAAP EPS midpoint is increasing to $3.63, and we are targeting Q4 GAAP EPS of $0.92. Now moving to our preliminary commentary on 2027. While the global macro environment remains volatile, and we are in the early stages of our 2027 budget cycle, given our solid business momentum and visibility, we believe the consensus 2027 estimates are generally appropriate for RPO and the P and L. This includes 20% cloud revenue growth, low single digit services revenue growth and continued operating margin expansion, while we simultaneously invest in the business to drive future growth. We intend to provide our initial annual guidance that will continue to include all of the familiar line item transparency on our Q4 call.

In summary, solid year to date execution by the Manhattan team and we are looking forward to ending the year strong. Thank you, and back to Eric for some closing remarks.

Eric Clark: Great. Thank you, Linda. And before we move to Q&A, I would like to start by welcoming Juan Perez to the Manhattan board. For those that do not know Juan, he has tremendous and relevant experience. Most recently, he was the EVP and CIO of Salesforce. Prior to Salesforce, Juan had a 30 plus year career at UPS where he was the chief information and engineering officer. Looking forward to Juan's future contributions to Manhattan as he joins the board effective January 28th. With that, we are very pleased with our strong year to date results and our continued business momentum.

Manhattan's business fundamentals are very solid as our team remains focused on delivering market leading innovation and exceptional results to our customers. These are key drivers to our 4 consecutive quarters of record bookings and acceleration in cloud revenue growth, total revenue growth, RPO growth, and current RPO growth. So thank you to everyone for joining the call, and thank you to our global team for the continued execution. That concludes our prepared remarks and we would be happy to take any questions. Thank you.

Operator: We will now be conducting a question and answer session. The first question is from Terry Tillman from Truist Securities. Please go ahead.

Terry Tillman: Eric, Linda and Mike Thanks for taking my questions. And it is great to see the strong bookings when thought it is supposed to be a seasonally slower quarter. But anyways, it was a great job there. My first question is on agent uptake. Eric, you gave some examples and some of the returns being seen. But then Linda, you actually mentioned as part of like the third quarter cloud subscription revenue execution. I do not recall hearing that actually in that line item before. I was hoping to get a little bit of perspective on how this is starting to kind of in the actual revenue and thoughts into 4Q or just generally, going forward on materiality? Thank you.

Linda C. Pinne: Yes. So as far, Terry, as the P and L for the quarter, we do not at this point intend on breaking out revenue by product on a quarterly basis. But AI did definitely contribute to our results this quarter. And we will provide more color on that when we get into our discussion on 2027 on the Q4 call.

Terry Tillman: Okay. Got it. And maybe just a follow-up question. You all did kind of change the typical methodology, and you did raise full year RPO. I think you said 21% year over year growth, if I am not mistaken. Last year in the 4Q. I know last year, there was a couple quarters that maybe there was a little bit more kind of movement quarter to quarter or variability. But the 4Q was especially large. I guess based on your assumption for ending RPO, are you assuming a little bit more of a measured kind of budget flush or seasonal strength in bookings? Or just what is informing that 4Q RPO add?

Eric Clark: Terry, we have got a strong pipeline for Q4 and I think the pattern that we have seen throughout this year with increased deal volume and strength in bookings in every quarter, Our policy here, we always try to under promise and over deliver. But, typically, we do not update RPO at all during the year. But since it was pretty evident that we were going to exceed the range, we felt like we needed to say something about it.

Terry Tillman: Got it. Thank you.

Operator: The next question is from George Michael Kurosawa from Citi. Please go ahead.

George Michael Kurosawa: Okay, great. Thanks for taking the questions here. I wanted to start on the renewal side. You mentioned it is trending ahead of expectations. Maybe if we could just unpack that what exactly is doing better than your initial assumptions under the hood? Is it on the cross sell side, attach rates or pricing or anything else? How much would you attribute to the dedicated renewals team?

Eric Clark: Yes. So it is all of those things. it is the cross sells, the upsells, the pricing, all of those things that we are doing at the time of renewals I give a lot of credit to that dedicated renewals team, just the and the structure that they put into all of these conversations. And, you know, I will point to some of the examples that I gave of Q3 deals. You heard several examples of multiproduct deals and several examples of adding at the time of renewal.

So that is just becoming a structural change that is becoming a very well exercised muscle for our team to have those conversations and really explain the value of the unification multiproduct and adding AI at time of renewal.

George Michael Kurosawa: Okay. Great. And then I was really interested in that customer example that was landed in the quarter on the essentials edition. Maybe if you could give some detail on maybe that customer's profile. Was it something outside of the norm of what you would typically see, you know, if we consider a scale customer, for example, and how prescriptive might this type of motion be going forward?

Eric Clark: Yeah. So it. And maybe I will start with, you mentioned scale and I said in the prepared remarks, that we had several deals closed that came into the quarter as scale opportunities. But by the end of the quarter, we had moved them to Enterprise Edition and closed them as Enterprise Edition. And that is pretty much what we intended. We thought, you know, Enterprise Edition would be a good fit for our scale customers and Essentials was really created for the customers that are not quite even at that level. And in the past, maybe they were buying products that were far inferior to the cloud products that we offer.

And now they have got the opportunity to get directly onto the active platform and just, you know, move up subscriptions as they grow. So that is kind of exactly what that customer recognized, and it was a customer that was aware of Manhattan, but never thought they could afford or fit into Manhattan. And when we announced additions, they made a quick decision, and we closed the deal.

George Michael Kurosawa: Great. Thanks for taking the questions. Yep.

Operator: Thank you. The next question is from Brian Peterson from Raymond James. Please go ahead.

Brian Peterson: Congrats on the really strong quarter. So Eric, if I look at the third quarter numbers over the last few years, we definitely did see a little bit more seasonality I know there is a lot of things you guys are doing from a product and a go to market perspective. And clearly, that is that is working to kind of offset that. But if you had to stack rank those factors, like, what do you think were kind of the biggest factors for you to kinda that seasonal softness in the third quarter?

Eric Clark: Yes, yes, great question. And I think, I am not throwing out seasonality. I think Q3 is a seasonally tougher quarter, but I think the things that we have done over the past year plus to increase that deal volume And not only that, but we have increased that deal volume in all of our regions. So, you know, that was another important factor in our results and our bookings in Q3. We had great participation from every region.

And I think that discipline that we have put in the sales team, I mentioned last quarter, our sales team has found a new gear in the way that they are operating and the way that they are finding opportunities and closing opportunities. And we had a lot to work within Q3, and the team executed at a very high level.

Brian Peterson: Understood. And, Linda, maybe 1 for you. I think you mentioned that the next 24-month RPO needs to expand up to 40%. Given that we are seeing accelerated implementations and we have some, I guess, lower price point products coming in line. Like how should we think about that number over the next year or 2? Should that increase stay the same? Any color on that? Thanks, guys.

Linda C. Pinne: Yeah. And again, we are not going to really provide formal guidance on that percentage. But if we think about it logically, as we mentioned, our deal length was around 5 to 6 years, probably closer to 5. So just given that metric, you would think somewhere around the 40% ballpark would be a reasonable place for it to stay. And then, again, what is driving it, though, is in addition to the duration, you know, being maybe just a little bit shorter is also just the volume of deals increasing. Increasing.

Eric Clark: And maybe I will I will add 1 thing to that because it kind of ties into this. You know, I have I have talked in a couple of different forums about, you know, as our mentality on the sales team a couple of years ago, we were very well positioned to win all the big deals in the market that maybe were not as well set up to win some of the midsize and smaller deals. Now that we are positioned to win all of those deals, if you think about if you compare a $150 million deal to $51 million deals, both have the same impact in. On RPO and both have the same impact on ramped ARR.

But the $51 million deals, each 1 of those can ramp a whole lot faster than that 1 big 1. So that drives a whole lot more current RPO. That next 24 month RPO. So this focus on more deals and more deals of all sizes is giving us a whole lot more momentum in the near term.

Brian Peterson: Great. Thank you.

Operator: The next question is from Joe Vruwink from Baird. Please go ahead.

Joseph Vruwink: Great. Thank you. Hopefully, you can hear me okay. I want to go back to this idea of 3Q seasonality, and I guess is the migration pipeline just gonna end up changing the seasonality of migrations are accelerating. Should we start to maybe think about a different cadence for the time being? And maybe there, and can you give us a few updates on migrations like what it represented as a share of bookings this quarter?

And then is some of the recent success really followed through from all the hard work over the past year or so, you know, thinking about, the 2066 timeline packages or even the new product tiering and moving the scale customers, like, is that all contributing to this higher migration activity?

Eric Clark: Yeah. So thanks for that. So as you correctly said, all of our focus, including, you know, fixed fee conversions, all of that is driven more activity and more pipeline around that conversion. I would not point to that as the reason that we were able to get past Q3 seasonality. But all of these things contribute to it. Think, you know, again, I talked about additions over time. it is only been in the market for 1 quarter now. But over time, I think that will also unlock more of those, you know, migration conversion opportunities because we have got a lot of companies that have been on prem products for decades.

And not every 1 of those companies was gonna go to Enterprise Premier. But now we have multiple paths for all of those companies. So we see big opportunity to continue to increase the deal volume with additions. And I think all of this just plays together And, again, you know, put partners in the mix as well as we have continued to mature that partner ecosystem. All of these things are driving increased deal volume and driving more opportunities in the pipeline. And from a mix perspective, you know, we always say that over you know, an elongated period of time, it is going to kind of go to thirds.

You know, 1 third new logo 1 third conversions, and 1 third expansion. We are we are. If you look at year to date, we are pretty close to that. New logos is still the largest but we are getting meaningful contribution from all 3.

Joseph Vruwink: that is great. Thank you. And then on the in period upside in cloud subs, just focusing on the upsell piece. Is that taking sites live faster and ahead of schedule? And if so, is that related to like, AI also and AI tooling helping customers roll out the So yes and yes.

Eric Clark: that is exactly it. As we deploy faster, people are getting the ROI faster, but they are also getting into higher tiers and ramping their subscriptions faster. And a and a key way that we are able to do that is by leveraging AI in that deployment cycle. So, yes, that is exactly right.

Joseph Vruwink: Thank you.

Operator: The next question is from Christopher Guintero from Morgan Stanley. Please go ahead.

Analyst: Hi, can you hear me? Yes. Hi. This is Beatrice on for Christopher Quintero. Congrats on the quarter by the way. 1 of the key pieces of feedback we received from investors following our recent upgrade was around the sustainability of the recent cloud. This Q3 acceleration is a great proof point for that sustainability, but how much of that outperformance do you think reflects structural improvements and bookings and faster implementations and how sustainable are those benefits going forward in fiscal 2027 and beyond?

Linda C. Pinne: Yeah. I mean, I think as far as the quarter goes, like, if we think about it, probably about half of the beat with within the quarter was tied to the upsells that we have mentioned, which are directly attributable like you said to, a, we have more customers and b, with our focus on speed and simplicity and helping them to deploy faster, that is helping them to pull their ramps forward. So that is a big part of the outperformance.

But we think about our forecast and our guidance for Q4 and beyond, we typically do not include a significant amount of upsells in those numbers just because they do tend to vary both in terms of timing and amount. So we usually take a conservative position on those. So that is why, you know, you are seeing what we projected so far for Q4.

Analyst: Okay. Got it. And then maybe just 1 more question. You mentioned a customer purchasing 1 of the new additions offerings despite not even being in the pipeline. Given the potential for shorter sales cycles and faster deployments how should we think about the timing of when additions momentum shows up in cloud revenue versus RPO? And what do you think the TAM is for Editions?

Eric Clark: Yeah. So I think of as we stated when we launched this a quarter ago, I think it takes a year to really build it up. When we announced some of the structural changes in investments around sales and marketing, in July of last year, it took 3 or 4 quarters to really see all of those come to fruition. I think the same will be similar for additions. Now that being said, I think we will start to see some additional wins in Q4 and Q1, etcetera. But look to the second half to really have the material impact coming from additions.

Analyst: Okay. Great. Thank you so much.

Operator: The next question is from Dylan Becker from William Blair. Please go ahead.

Dylan Becker: Eric, Linda, Mike, appreciate it. And really nice job here. Maybe a question on agents. Really helpful use cases and kind of value ROI you have called out. across a kind of multitude of the agentic base. I wonder if. Are you seeing or to what extent are you seeing any shift in kind of that proof of concept momentum as that ROI becomes more explicit and tangible, are customers or appetite maybe skipping that POC stage and maybe what are the broader implications We talked about accelerating deal volume. But on land sizes as maybe they are more willing to take agents upfront without kind of the 90 day POC period?

Eric Clark: Yeah, we are seeing more of that and that started in Q2, continued in Q3. So we have got a meaningful number of customers that have skipped the pilot phase and gone straight to subscription. Now, of course, when they do that, you know, we still spend time with them and take up many of the steps that would be in the pilot in terms of training them on how to use the base agents and how to build the custom agents. But, yeah, that has been an effective way to grow the AI business as well.

Dylan Becker: Got it. Okay.

Eric Clark: And I mentioned some of those in the prepared remarks on some of those deals I mentioned. You could tell those were straight to subscription deals.

Dylan Becker: Right. Okay. Okay. Perfect. Thank you.

Eric Clark: And then I think you did call out 4x year-over-year growth in the partner channel. I know it is been more of a kind of direct emphasis, as well, too. But what are you seeing and hearing there from an opportunity perspective and how those partners are allocating capital and deploying and building teams as a kind of contribution to that ramped partner motion?

Dylan Becker: Yeah, we are seeing a lot of partners really lean in and invest. And invest in terms of hiring talent and training talent. I did not give the stats this quarter on the increase in number of trained and certified professionals, but the on quarter increase this quarter was even higher than last quarter. So we continue to see a very rapid pace of customers truly engaging with us and the way that we are measuring and monitoring them and kind of comparing them to each other is also creating a competition structure where all of them want to be top tier partners. So we are we are seeing a whole lot more activity and investment from all of them.

Eric Clark: Great. Thank you.

Operator: Thank you. Next question is from Mark Schappel from Loop Capital Markets. Please go ahead.

Mark Schappel: Hi, thanks for taking my question and nice job on the quarter. Eric, maybe you could just talk a little bit about how the bookings and pipeline conversion are just comparing across your main product solutions, you know, WMS, TMS, and OMS?

Eric Clark: Yes, I would say, we continue to have strong momentum across all of our product set. It varies quarter to quarter of which ones lead the way. But if you look if you take a multi quarter view, we are getting strong inputs from all of our products. And I would say, as we announced additions, that also has an increase in cross product as well, because it opens up more opportunities for companies that maybe were willing to go in on 1 product, but not multiple, and now they have got the ability to go in on multiple products with Editions. So that pipeline continues to expand across the product set.

Mark Schappel: Okay. Great. Thanks. And then how has the services friction that was discussed in prior quarters kind of evolved here?

Eric Clark: Maybe what evidence are you seeing of just improvements and things like implementation times, customer satisfaction, project ramps, things like that. Yes. So 1 of the things that we have been saying for the past few quarters and it continues to be true is we continue to do services projects faster than we did them a year ago. But we are doing more of them. And that is why our revenue is growing. And we are comfortable that we can continue to have that kind of success with that low single digit revenue growth in service services because we see a healthy pipeline of new deals that are booked and new deals in the pipeline.

Pipeline to have that deal volume continue to grow. But I would say from a customer standpoint, you have got more and more customers in the market that are recognizing the cost of inaction is decreasing. Right? The cost of doing something is decreasing, and AI is driving a lot of So we are able to deploy a whole lot faster and get them to ROI faster. Then they are also recognizing the flip side that, you know, the cost of doing nothing has increased. And those that are doing nothing are getting farther and farther behind.

So we are seeing a lot of activity and a lot of customers that are trying to figure out how to accelerate what they have got going with Manhattan.

Mark Schappel: Thank you.

Operator: Thank you. Our last question will be from Lachlan Brown from Rothschild. Please go ahead.

Lachlan Brown: Hi, Eric, Linda. Congrats on the strong quarter. With the average contract duration close to 5 years now compared to that usual 5.5 to 6 years. I appreciate there are now smaller, shorter deals in there with additions. But are you also seeing some success with customers shortening, terms upon renewal? And if so, if you could just provide some color on the execution here.

Eric Clark: Yes. So and you are correct. Couple of quarters ago, I made a comment that we would start our renewal conversations by talking about 3 year renewals. But I mentioned last quarter, and it is still true this quarter, the bulk of our renewals continue to be 5 years. So we are comfortable with 3 year renewals. We would love to have the opportunity talk every 3 years about expansion and price increases. But you know, we are seeing our customers that really do love to have that 5 year you know, more set duration and protection from price increases. So that continues to be the norm on renewals.

Lachlan Brown: that is helpful. Thanks. And maybe I missed it, but what was cloud conversions as a percent of new cloud bookings in the quarter? And further to that, you have several, I guess, newer catalysts at play here for conversions, you know, Agentic AI driving, you know, incentivizing the transition, dedicated conversion programs, maturing the partner channel, and now you have got additions. And I know it is a combination, but if you had to call 1 out, which of these drivers is currently moving the needle the most for those on premise customers? Thanks.

Eric Clark: Yeah, I would say right now the thing moving the needle the most for those on-prem customer conversions is the fixed price conversation, because we have had that in market for a while now and that is been driving a lot of the conversations But just in the past quarter when we have been able to add to that the additions conversation, it opens up more doors and opens up more opportunities. And I think accelerates some of the timelines. So we do expect that we will see, you know, continued increase in conversion and, you know, we have got a strong pipeline around conversions for, the rest of this year and into next year.

So that is something that we you know, we have always said that, this is something that is gonna take many, many years to convert all these customers, and that is still true but we do see the pace picking up.

Lachlan Brown: Thanks.

Operator: There are no further questions at this time. I would like to turn the floor back over to Eric Clark for closing comments.

Eric Clark: Yes. I want to thank everyone. As I mentioned, we are really pleased with what we accomplished in Q3. And to go through the past 3 quarters like we have had with 24% cloud growth in Q1 and 26% in Q2 and 28% in Q3. The team is really firing on all cylinders and we are proud of where we are and excited about where we are headed. So thank you for joining.

Operator: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

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