Supply chain optimization software maker Manhattan Associates (NASDAQ:MANH) reported Q3 FY2023 results exceeding Wall Street analysts' expectations, with revenue up 20.4% year on year to $238.4 million. Turning to EPS, Manhattan Associates made a GAAP profit of $0.79 per share, improving from its profit of $0.47 per share in the same quarter last year.
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Manhattan Associates (MANH) Q3 FY2023 Highlights:
- Revenue: $238.4 million vs analyst estimates of $226.3 million (5.38% beat)
- EPS (non-GAAP): $1.05 vs analyst estimates of $0.76 (37.4% beat)
- The company lifted its revenue guidance for the full year from $890 million to $914 million at the midpoint, a 2.7% increase
- Free Cash Flow of $57.5 million, up 45.3% from the previous quarter
- Gross Margin (GAAP): 53.3%, up from 51.5% in the same quarter last year
Boasting major consumer staples and pharmaceutical companies as clients, Manhattan Associates (NASDAQ:MANH) offers a software-as-service platform that helps customers manage their supply chains.
Vertical Software Software is eating the world, and while a large number of solutions such as project management or video conferencing software can be useful to a wide array of industries, some have very specific needs. As a result, vertical software, which addresses industry-specific workflows, is growing and fueled by the pressures to improve productivity, whether it be for a life sciences, education, or banking company.
Sales GrowthAs you can see below, Manhattan Associates's revenue growth has been mediocre over the last two years, growing from $169.2 million in Q3 FY2021 to $238.4 million this quarter.
This quarter, Manhattan Associates's quarterly revenue was up a very solid 20.4% year on year, above the company's historical trend. However, its growth did slow down compared to last quarter as the company's revenue increased by just $7.43 million in Q3 compared to $10 million in Q2 2023. While we'd like to see revenue increase by a greater amount each quarter, a one-off fluctuation is usually not concerning.
Looking ahead, analysts covering the company were expecting sales to grow 7.79% over the next 12 months before the earnings results announcement.
Cash Is KingIf you've followed StockStory for a while, you know that we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can't use accounting profits to pay the bills. Manhattan Associates's free cash flow came in at $57.5 million in Q3, up 51.2% year on year.
Manhattan Associates has generated $207.9 million in free cash flow over the last 12 months, an impressive 23.5% of revenue. This high FCF margin stems from its asset-lite business model and strong competitive positioning, giving it the option to return capital to shareholders or reinvest in its business while maintaining a cash cushion.
Key Takeaways from Manhattan Associates's Q3 Results With a market capitalization of $11.4 billion, a $182.3 million cash balance, and positive free cash flow over the last 12 months, we're confident that Manhattan Associates has the resources needed to pursue a high-growth business strategy.
We enjoyed seeing Manhattan Associates exceed analysts' revenue expectations this quarter. We were also glad its full-year revenue and adjusted EPS guidance were both raised and came in higher than Wall Street's estimates. It wasn't a perfect quarter given that gross margin and free cash flow missed, but overall, we think this was a strong quarter that should satisfy most shareholders. The market was potentially expecting more, however, and the stock is down 4.14% after reporting, trading at $181.84 per share.
The author has no position in any of the stocks mentioned in this report.