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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 “may,” “expect,” “forecast,” “anticipate,” “intend,” “plan,” “believe,” “could,” “seek,” “project,” “estimate,” 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 Unified Omnichannel Commerce and Digital Supply Chain, inventory and omnichannel 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 POS effectiveness and efficiency for our customers.

We have five principal sources of revenue:

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cloud subscriptions, including software as a service (SaaS) and hosting of software;

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licenses of our software;

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customer support services and software enhancements (collectively, “maintenance”) related to software licenses;

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professional services, including solutions planning and implementation, related consulting, customer training, and reimbursements from customers for out-of-pocket expenses (collectively, “services”); and

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hardware sales.

In 2023, we generated $928.7 million in total revenue, with a revenue mix of: cloud subscriptions 27%; software license 2%; maintenance 15%; services revenue 53%; and hardware 3%.

We have three geographic reportable segments: the Americas, EMEA, and APAC. Geographic revenue is based on the location of the sale. Our international revenue was approximately $301.4 million, $238.4 million, and $196.4 million for the years ended December 31, 2023, 2022 and 2021, respectively, which represents approximately 32%, 31%, and 30% of our total revenue for the years ended December 31, 2023, 2022 and 2021, respectively. International revenue includes all revenue derived from sales to customers outside the United States. At December 31, 2023, we employed approximately 4,580 employees worldwide. We have offices in Australia, Chile, China, France, Germany, India, Italy, Japan, the Netherlands, Singapore, Spain, 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.

Future Expectations

While we remain cautious about the global economy, our results for the full year ended 2023 exceeded our expectations due to solid demand for our cloud solutions. Our solutions are mission critical, supporting complex global supply chains. We believe that favorable secular tailwinds, such as the digital transformation of businesses in manufacturing, wholesale and retail, coupled with our commitment to investing in organic innovation to deliver leading cloud supply chain, inventory and omnichannel commerce solutions is in synergistic alignment with current market demand. We believe this alignment is contributing to our strong financial results, higher demand and strong win rates for our solutions for the period. We remain committed to investing in our business to drive customer success and expand our total addressable market, which we believe will position us well to achieve long-term sustainable growth and earnings.

Going forward, we are investing in our cloud business, including enterprise investments in innovation, and strategic operating expenses to support growth objectives.

For 2024, our five strategic goals continue to be:

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Focus on customer success and drive sustainable long-term growth;

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Invest in innovation to expand our products and total addressable market;

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Expand our Manhattan Active suite of cloud solutions;

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Develop and grow our cloud business and cloud subscription revenue; and

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Expand our global sales and marketing teams.

Cloud Subscription

Under our Manhattan Active® Solutions cloud subscription offering, customers pay a periodic fee for the right to use our software within a cloud environment that we provide and manage over a specified period of time. Adoption of our Manhattan Active® cloud solutions continues to increase nicely, with cloud revenue up 44% over 2022. Cloud revenue now represents about 93% of our total software revenue.

Customers on our legacy perpetual license program can convert their maintenance contracts to cloud subscription contracts.

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 2023, we generated approximately 68% of our total revenue in the United States, 18% in EMEA, and the remaining balance in APAC, Canada, and Latin America. In addition, Gartner Inc.(“Gartner”), an information technology research and advisory company, estimates that over 75% 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 have 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 is often a part of our customers’ and prospects’ much larger capital commitment associated with facilities expansion and business improvement. We believe that, given the mission critical nature of our software, combined with a challenging global macro environment, our current sales cycles for large cloud subscriptions in our target markets could be extended. While demand for our solutions is solid, the current business climate within the United States and geographic regions in which we operate may affect customers’ and prospects’ decisions regarding timing of strategic capital expenditures.

In January 2024, the International Monetary Fund (IMF) provided a World Economic Outlook (WEO) update. The WEO update noted, “global growth is projected at 3.1 percent in 2024 and 3.2 percent in 2025. The forecast for 2024–25 is, however, below the historical (2000–19) average of 3.8 percent, with elevated central bank policy rates to fight inflation, a withdrawal of fiscal support amid high debt weighing on economic activity, and low underlying productivity growth. Inflation is falling faster than expected in most regions, in the midst of unwinding supply-side issues and restrictive monetary policy.”

The WEO update projected that advanced economies, which represent our primary revenue markets, would grow at about 1.5 and 1.8 percent in 2024 and 2025, while the emerging and developing economies would grow at about 4.1 percent in 2024 and 4.2 percent in 2025.

While we are encouraged by our results, we remain cautious regarding the pace of global economic growth. We believe global geopolitical and economic volatility associated with the pandemic likely will continue to shape customers’ and prospects’ enterprise software buying decisions.

Key Performance Metrics

We regularly review metrics to evaluate our business, measure our performance, identify trends affecting our business, formulate financial projections and make strategic decisions. We believe cloud subscriptions revenue growth and remaining performance obligation (RPO) growth are the leading indicators of our business performance, primarily derived from cloud subscription fees that customers pay for our Unified Omnichannel Commerce and Digital Supply Chain solutions.

Cloud Subscriptions Revenue Growth

Our cloud revenue growth provides insight into our ability to maintain and grow our cloud customer base. Total cloud revenue increased from $176.5 million in 2022 to $254.6 million in 2023, representing a 44% year-over-year increase. Total cloud revenue increased from $122.2 million in 2021 to $176.5 million in 2022, representing a 44% year-over-year increase. Cloud revenue growth is being driven by strong demand for our cloud offerings.

Remaining Performance Obligations

Transaction price allocated to RPO represents contracted revenue that has not yet been recognized, which includes deferred revenue and non-cancelable amounts that we expect to invoice and recognize as revenue in future periods. Over 98% of our RPO represent cloud native subscriptions with a non-cancelable term greater than one year. Maintenance contracts typically are for one year and not included in RPO. RPO provides insight into our contracted backlog of future business. As of December 31, 2023, our RPO was approximately $1.4 billion, an increase of 36% over December 31, 2022 on strong demand.

Revenue

Cloud Subscriptions and Software License revenue: In the full year ended 2023, cloud subscriptions revenue was 93% of total cloud and software license revenue. In 2023, cloud subscriptions revenue totaled $254.6 million, or 27% of total revenue. The Americas, EMEA, and APAC segments recognized $205.6 million, $42.2 million and $6.8 million in cloud subscriptions revenue, respectively, in 2023. Cloud subscriptions revenue is recognized over the term of the agreement, typically five years or more. Cloud subscription revenue growth is influenced by the strength of general economic and business conditions and the competitive position of our software products. These revenues generally have long sales cycles. Approximately 34% of the total value of new non-cancelable cloud subscriptions (excluding renewals) signed during 2023 was with new customers and 66% was with existing customers. We define new customers as entities from which we either have never earned revenue or have not recognized revenue in the last five years.

In 2023, license revenue totaled $18.2 million, or 2% of total revenue. The Americas, EMEA, and APAC segments totaled $12.0 million, $2.9 million, and $3.2 million in license revenue, respectively, in 2023.

Our Unified Omnichannel Commerce and Digital Supply Chain solutionsare focused on core omnichannel operation (e-commerce, retail store operations and POS), supply chain commerce operations (Warehouse Management, Transportation Management and Labor Management), and Inventory Optimization, which are intensely competitive markets characterized by rapid technological change. We are a market leader in the supply chain management and omnichannel 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 cloud subscriptions and software license revenues faster than our competitors through investment in innovation.

Maintenance Revenue: Our maintenance revenue totaled $143.9 million, or 15% of total revenue. The Americas, EMEA and APAC segments recognized $115.0 million, $19.7 million, and $9.2 million, respectively, in maintenance revenue in 2023. For maintenance, 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.

Maintenance relates to our traditional perpetual license sales. We expect maintenance revenues to decline as we continue to develop our cloud offerings, and be offset by additional cloud revenue, including from customers converting their maintenance contracts to cloud subscriptions. The growth of maintenance revenues is influenced by: (1) new software license revenue growth; (2) annual renewal of support contracts; (3) increase in customers through acquisitions; (4) fluctuations in currency rates. Substantially all of our customers renew their annual support contracts or convert their maintenance contracts to cloud subscriptions. Maintenance revenue is generally paid in advance and recognized over the term of the agreement, typically twelve months. Maintenance renewal revenue is recognized over the renewal period once we have a contract upon payment from the customer.

Services Revenue: In 2023, our services revenue totaled $487.9 million, or 53% of total revenue. The Americas, EMEA, and APAC segments recognized $363.0 million, $101.3 million, and $23.6 million, respectively.

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 implementation of a system or service, the conversion and transfer of the customer’s historical data to the new system or service, and ongoing training, education, and system/service upgrades. We believe our professional services enable customers to implement our software rapidly, ensure the customer’s success with our solutions, 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 cloud sales and customer upgrade cycles, which are 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.

Hardware Revenue: Our hardware revenue, which we recognize net of related costs, totaled $24.1 million in 2023 representing 3% of total revenue. As a convenience for our cloud and software 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.

Product Development

We continue to invest significantly in research and development (R&D) to provide leading Unified Omnichannel Commerce and Digital Supply Chain solutions to enable 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 POS. Our R&D expenses for the years ended December 31, 2023, 2022 and 2021 were $126.8 million, $111.9 million, and $97.6 million, respectively.

We expect to continue to focus our R&D resources on the development and enhancement of our core supply chain, inventory optimization, omnichannel and POS software solutions. We offer what we believe to be the broadest solutions portfolio in the supply chain solutions marketplace, to address all aspects of inventory optimization, transportation management, distribution management, planning, and omnichannel operations including order management, store inventory & fulfillment, call center and POS.

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 in 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 2023, we generated cash flow from operating activities of $246.2 million and have generated a cumulative total of $611.0 million for the three years ended December 31, 2023. Our cash at December 31, 2023 totaled $270.7 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 for funding investments in R&D in our Unified Omnichannel Commerce and Digital Supply Chain solutions to drive revenue and earnings growth. In addition, we repurchased approximately $166.0 million of Manhattan Associates’ outstanding common stock under the share repurchase program approved by our Board of Directors. Our $75.0 million repurchase authority replenished by our Board of Directors in October 2023 remains in effect.

In 2024, our priorities for use of cash will continue to be investments in our Unified Omnichannel Commerce and Digital Supply Chain solutions. We also will prioritize capital allocation in our global teams to fund growth, and accretive share repurchases. We do not anticipate any borrowing requirements in 2024 for general corporate purposes.

Full Year 2023 Financial Summary

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Diluted earnings per share: $2.82 for 2023 compared to $2.03 for 2022;

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Consolidated revenue: $928.7 million for 2023 compared to $767.1 million for 2022;

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Cloud subscription revenue: $254.6 million for 2023 compared to $176.5 million for 2022;

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License revenue: $18.2 million for 2023 compared to $24.8 million for 2022;

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Operating income: $209.9 million for 2023 compared to $152.7 million for 2022;

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Operating margins: 22.6% for 2023 compared to operating margins of 19.9% for 2022;

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Cash flow from operations: $246.2 million for 2023 compared to $179.6 million for 2022;

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Cash paid for income taxes: $67.4 million for 2023 compared to $58.0 million for 2022;

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Cash and investments: $270.7 million at December 31, 2023 compared to $225.5 million at December 31, 2022; and

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Share repurchases: In 2023, we repurchased 1,024,328 shares of Manhattan Associates’ outstanding common stock for approximately $166.0 million under the share repurchase program approved by our Board of Directors. Our $75.0 million repurchase authority replenished by our Board of Directors in October 2023 remains in effect.

Results of Operations

In the following table, we present a selection of certain Statement of Income data for 2023, 2022 and 2021.

Year Ended December 31,

% Change vs. Prior Year

(in thousands)

Revenue:

Costs and expenses:

We have 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 geography-based expenses include costs of personnel, direct sales, marketing expenses, and general and administrative costs to support the business. There are certain corporate expenses included in the Americas segment that we do not charge 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 our operations in India. During 2023, 2022, or 2021, we derived the majority of our revenues from sales to customers within our Americas segment. In the following table, we present a summary of revenue and operating profit by segment:

Year Ended December 31,

% Change vs. Prior Year

Revenue: (in thousands)

Cloud subscriptions

Software license

Maintenance

Services

Hardware

Total Revenue

Operating income:

The consolidated results of our operations for the years ended December 31, 2023, 2022 and 2021 are discussed below.

Revenue

Our revenue consists of fees generated from cloud subscriptions, software licensing, maintenance, professional services, and hardware sales.

Year Ended December 31,

% Change vs. Prior Year % of Total Revenue

(in thousands)

Cloud Subscriptions Revenue

Year 2023 compared with year 2022

Cloud subscriptions revenue increased $78.2 million to $254.6 million in 2023 compared to 2022 on customers demand for our SaaS offerings. Cloud subscriptions revenue increased $56.7 million, $19.2 million and $2.3 million for the Americas, EMEA, and APAC segments, respectively. Cloud subscriptions revenue recognized from first time cloud customers (defined as customers with no prior cloud subscriptions) during the year in which their initial cloud subscription began was approximately 3% and 7% of total cloud revenue in 2023 and 2022, respectively. Our customers contract for multi-year subscriptions which typically increase in scope and price over the term, and thus revenue recognized during the year when the contract is signed tends to be small relative to the total contract value. Revenue recognized in the initial year excludes revenue from additional solutions sold to the customer in future years and could be skewed by the timing of the start date of the subscription during the year.

Year 2022 compared with year 2021

Cloud subscriptions revenue increased $54.3 million to $176.5 million in 2022 compared to 2021. Cloud subscriptions revenue for the Americas, EMEA and APAC segments increased $45.1 million, $7.6 million and $1.6 million, respectively. Revenue recognized from first time cloud customers (defined as customers with no prior cloud subscriptions) during the year in which their initial cloud subscription began was 7% and 12% of total cloud revenue in 2022 and 2021, respectively.

Software License Revenue

Year 2023 compared with year 2022

Software license revenue decreased $6.6 million to $18.2 million in 2023 compared to 2022 as customers continue to purchase our SaaS offerings rather than a traditional perpetual license.License revenue for the Americas and EMEA segments decreased $4.3 million and $3.5 million, respectively, while license revenue for the APAC segment increased $1.1 million in 2023 over 2022. The majority of our software license revenue relates to our warehouse management product group (approximately 85%) for the year ended December 31, 2023.

Year 2022 compared with year 2021

Software license revenue decreased $12.3 million to $24.8 million in 2022 compared to 2021. License revenue for the Americas segment decreased $13.0 million, while license revenue from the EMEA & APAC segments increased $0.6 million and $0.1 million, in 2022 over 2021. The majority of our software license revenue relates to our warehouse management product group (over 85%) for the year ended December 31, 2022.

Maintenance Revenue

Year 2023 compared with year 2022

Maintenance revenue increased by $1.7 million in 2023 compared to 2022. The Americas increased $1.7 million, compared to 2022, while the EMEA and APAC segments remained relatively flat.

Year 2022 compared with year 2021

Maintenance revenue decreased $3.6 million in 2022 compared to 2021. Maintenance revenue for the Americas segments increased $0.1 million, while EMEA and APAC segments decreased $3.3 million and $0.4 million compared to 2021, respectively.

Services Revenue

Year 2023 compared with year 2022

Services revenue increased $93.8 million in 2023 compared to 2022. Service revenue for the Americas, EMEA and APAC segments increased $67.0 million, $21.7 million, and $5.1 million, respectively, compared to 2022. Services revenue was driven by adoption and implementation of our cloud solutions. The percentage of professional services revenue that relates to cloud subscriptions in 2023 and 2022 was approximately 70% and 55%, respectively. The remainder of our professional services revenue relates to implementations, ongoing support, and upgrades of licensed software. Professional services revenue recognized from first time cloud customers (defined as customers with no prior cloud subscriptions) during the year in which their initial cloud subscription began was approximately 8% and 12% of total services revenue in 2023 and 2022, respectively. As with our cloud subscriptions, customers often continue to purchase our professional services beyond their initial implementation to roll out additional locations, implement additional features and functionality, and implement additional products, as well as for general support. Professional services revenue recognized from first time cloud customers excludes those services we provided after the year in which the initial cloud subscription began. Further, the professional services revenue attributable to first time cloud customers could be affected by the timing of the start date of the subscription during the year.

Year 2022 compared with year 2021

Services revenue increased $59.3 million in 2022 compared to 2021. The Americas, EMEA, and APAC segments increased $39.6 million, $13.5 million and $6.2 million, respectively, compared to 2021. Services revenue was driven by adoption and implementation of our cloud solutions. The percentage of professional services revenue that relates to cloud subscriptions in 2022 and 2021 was approximately 55% and 40%, respectively. Professional services revenue recognized from first time cloud customers (defined as customers with no prior cloud subscriptions) during the year in which their initial cloud subscription began was approximately 12% and 14% of total services revenue in 2022 and 2021, respectively.

Hardware Revenue

Hardware revenue, net decreased $5.4 million in 2023 compared to 2022.Hardware revenue, net increased $5.8 million in 2022 compared to 2021. The majority of hardware sales are derived from our Americas segment. Sales of hardware are largely dependent upon customer-specific desires, which fluctuate.

Cost of Revenue

Year Ended December 31,

% Change vs. Prior Year

(in thousands)

Cost of Cloud Subscriptions, Maintenance and Services

Year 2023 compared with year 2022

Cost of cloud subscriptions, maintenance and services consists primarily of salaries and other personnel-related expenses of employees dedicated to cloud subscriptions; maintenance services related to perpetual software licenses; and professional and technical services as well as hosting fees. The $73.2 million increase in 2023 compared to 2022 was principally due to a $52.0 million increase in compensation and other personnel-related expenses, a $6.3 million increase in travel expense, a $8.3 million increase in performance-based compensation expense, a $4.4 million increase in computer infrastructure cost and a $1.1 million increase in facilities expense.

Year 2022 compared with year 2021

The $60.6 million increase in 2022 compared to 2021 was principally due to a $43.7 million increase in compensation and other personnel-related expenses, a $6.2 million increase in travel expense, a $5.1 million increase in performance-based compensation expense, a $3.7 million increase in computer infrastructure cost and a $0.8 million increase in professional expense.

Cost of Software License

Cost of software license consists of the costs associated with software reproduction; media, packaging and delivery; documentation, and other related costs; and royalties on third-party software sold with or as part of our products. In 2023, cost of license decreased by $0.7 million, compared to 2022. In 2022, cost of software license decreased by $0.2 million compared to 2021.

Operating Expenses

Year Ended December 31,

% Change vs. Prior Year

(in thousands)

Research and Development

Our principal research and development (R&D) activities during 2023, 2022 and 2021 focused on the expansion and integration of new products and releases, including cloud solutions, while expanding the product footprint of our Unified Omnichannel Commerce and Digital Supply Chain solutions, including Inventory Optimization and point-of-sale.

For 2023, 2022 and 2021, we did not capitalize any R&D costs as the period between determining technological feasibility was established or that it is probable the software product would be used to perform the function intended were insignificant.

Year 2023 compared with year 2022

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 2023 increased by $14.9 million compared to 2022. This increase is principally due to a $10.9 million increase in compensation and other personnel-related expenses, a $3.1 million increase in performance-based compensation expense, and a $0.6 million increase in computer infrastructure costs.

Year 2022 compared with year 2021

Research and development expenses in 2022 increased by $14.3 million compared to 2021. This increase is principally due to a $12.1 million increase in compensation and other personnel-related expenses and a $1.1 million increase in performance-based compensation expense.

Sales and Marketing

Year 2023 compared with year 2022

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 increased by $10.0 million in 2023 compared to 2022, primarily due to a $4.3 million increase in compensation and other personnel-related expense, a $3.7 million increase in marketing and campaign expenses, a $1.0 million increase in performance-based compensation expense, and a $0.8 million in travel expense.

Year 2022 compared with year 2021

Sales and marketing expenses increased $6.7 million in 2022 compared to 2021, primarily due to a $2.7 million increase in performance-based compensation expense, a $2.1 million increase in compensation and other personnel-related expenses, a $1.1 million increase in travel expense, and a $0.8 million increase in marketing and campaign programs.

General and Administrative

Year 2023 compared with year 2022

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 $8.1 million in 2023 primarily due to a $5.3 million increase in compensation and other personnel-related expenses, a $1.3 million increase in performance-based compensation expense, a $0.6 million increase in professional expenses, and a $0.6 million increase in computer infrastructure costs.

Year 2022 compared with year 2021

General and administrative expenses increased $5.0 million in 2022 primarily due to a $4.1 million increase in compensation and other personnel-related expenses and a $0.6 million increase in travel expenses.

Depreciation and Amortization

Depreciation and amortization of intangibles and software expense amounted to $5.8 million, $6.7 million, and $7.9 million in 2023, 2022 and 2021, respectively. Amortization of intangibles was immaterial in 2023, 2022 and 2021. We have recorded goodwill and other acquisition-related intangible assets as part of the purchase accounting associated with various acquisitions.

Operating Income

Operating income in 2023 increased $57.2 million to $209.9 million, compared to $152.7 million for 2022. Operating margins were 22.6% for 2023 versus 19.9% for 2022. Operating income and margin increased primarily due to increased cloud subscriptions and services revenues. In 2023, operating income increased by $35.9 million, $16.7 million, and $4.6 million in the Americas, EMEA and APAC segment, respectively.

Operating income in 2022increased $18.4 million to $152.7 million, compared to $134.3 million for 2021. Operating margins were 19.9% for 2022 versus 20.2% for 2021. Operating income increased primarily due to increased cloud subscriptions and services revenues. In 2022, operating income increased by $8.1 million, $5.3 million, and $5.0 million in the Americas, EMEA and APAC segments. Operating margin decreased slightly due to our commitment to strategically invest in the business as a cloud first company focused on delivering long term sustainable growth and earnings leverage.

Other Income and Income Taxes

Year Ended December 31,

% Change vs. Prior Year

Other (Loss) Income, net

Other (loss) income, net primarily includes interest income, foreign currency gains and losses, and other non-operating expenses. Interest income was $5.3 million, $0.6 million and $0.1 million for 2023, 2022 and 2021, respectively. The weighted-average interest rate earned on cash and investments was approximately 2% in 2023 and immaterial for 2022 and 2021. We recorded net foreign currency losses of $1.5 million in 2023, gains of $4.7 million in 2022, and losses of $0.2 million in 2021. 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, Euro, and Indian Rupee.

Income Tax Provision

Our effective income tax rates were 17.4%, 18.4%, and 17.6% in 2023, 2022 and 2021, 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 2023 decreased from 2022 mainly due to a decrease of expense from a favorable tax law change allowing creditability of foreign tax offset by a decrease of net excess tax benefits on restricted stock vesting and adjustments for tax contingencies.

The effective income tax rate in 2022 increased from 2021 mainly due to an increase of expense from an unfavorable tax law change limiting creditability of foreign tax offset by a decrease in expense for tax contingencies.

The income tax provision for 2023, 2022 and 2021 included excess tax benefits of $6.8 million, $7.6 million, and $6.6 million on vesting of restricted stock.

Liquidity and Capital Resources

During 2023, 2022 and 2021, we funded our business through cash generated from operations. Our cash and cash equivalents as of December 31, 2023 included $203.3 million held in the U.S. and $67.4 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, we would no longer be subject to additional U.S. income taxes on such earnings due to the enactment of the Tax Cuts and Jobs Act in December 2017, but we could be subject to additional local withholding taxes.

Cash flow from operating activities totaled $246.2 million, $179.6 million, and $185.2 million in 2023, 2022 and 2021, 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 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 2023 increased $66.6 million compared to 2022 on higher earnings. Cash flow from operating activities for 2022 decreased $5.6 million compared to 2021, which is mainly due to an increase in income tax payments from the 2017 U.S. Tax Cuts and Jobs Act elimination of the expensing of research and development costs as incurred for tax purposes beginning in 2022. Days sales outstanding was 70, 77, and 67 for quarter ending December 31, 2023, 2022 and 2021, respectively, reflecting solid cash collections.

Investing activities used cash of approximately $4.7 million, $6.6 million, and $4.0 million in 2023, 2022 and 2021, respectively. Our investing activities for 2023, 2022 and 2021 consisted of capital spending to support company growth and short-term investing. For 2023, 2022 and 2021, capital expenditure was $4.7 million, $6.6 million, and $4.0 million, respectively.

Financing activities used cash of approximately $196.0 million, $204.5 million, and $120.4 million in 2023, 2022 and 2021, respectively. The principal use of cash for financing activities in 2023, 2022 and 2021 was to purchase our common stock, including shares withheld for taxes due upon vesting of restricted stock. Repurchases of our common stock for 2023, 2022 and 2021 totaled $196.0 million, $204.5 million, and $120.4 million, respectively, including shares withheld for taxes of $30.0 million, $29.1 million, and $20.4 million, respectively. Our $75.0 million repurchase authority replenished by our Board of Directors in October 2023 remains in effect.

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 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 2024, 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 in our business to extend our market leadership. We will 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 2024 for general corporate purposes.

Aggregate Contractual Obligations

Our principal commitments as of December 31, 2023 consist of multiple non-cancellable contracts for cloud infrastructure services and obligations under operating leases. As of December 31, 2023, our cloud infrastructure obligations are approximately $98.5 million over the next 4 years. We also enter into non-cancellable subscriptions in the ordinary course of business for internal software to support our operations. Our obligations, as of December 31, 2023, are approximately $20.0 million over the next 4 years. We expect to fulfill all of these commitments from our working capital.

Lease Commitments

We lease our facilities and some of our equipment under noncancelable operating lease arrangements that expire at various dates through 2029. Rent expense for these leases aggregated$8.1 million,$7.7million, and $7.9 million during 2023, 2022 and 2021, respectively.

In the following table, we present a summary of our contractual commitments as of December 31, 2023 (in thousands):

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 services and products infringe third party 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 services or products 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 services or products, (ii) replace or modify the services or products so that the customer’s use does not infringe, or, if neither of those options is reasonably feasible, terminate that particular services or products and provide, as applicable, a refund of services fees paid for services not received or a refund of the unamortized portion of the license fees paid for the products (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, but they do not cover indirect or consequential damages, such as our customers’ lost revenues or profits. 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 the Financial Accounting Standards Board's 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 indemnification obligations as of December 31, 2023.

Warranties

In general, in our customer contracts for purchase of our cloud SaaS services or license of our on-premises software products, we warrant that our services or software will perform in accordance with our published services or product specifications. Additionally, we may include other warranties such as “no-malware” warranties and warranties that we will perform our SaaS services consistent with generally accepted industry standards or similar standards. In our SaaS services agreements, we also include service level agreements (SLAs) under which we agree to provide service credits to our customers if our services availability drops below certain defined levels. If necessary, we would reserve for the estimated cost of product and service warranties based on specific warranty claims and claims history. However, we have not incurred significant recurring expense under our services or product warranties. As a

result, we believe the estimated fair value of our warranty obligations is nominal and we have no liabilities recorded for them as of December 31, 2023.

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. 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 the 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 policy that reflect our more significant estimates, judgments, and assumptions is Revenue Recognition.

Revenue Recognition

We recognize revenue when we transfer control of the promised products or services to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those products or services. We derive our revenue mainly from cloud subscriptions, software licenses, customer support services and software enhancements (“maintenance”), and implementation services. We exclude sales and usage-based taxes from revenue.

Nature of Products and Services

Cloud subscriptions includes software as a service and arrangements which provide customers with the right to use our software within a cloud environment that we provide and manage where the customer does not have the right to take possession of the software without significant penalty. SaaS and hosting revenues are recognized over the contract period. For contracts that include a perpetual license and hosting services, we generally consider the arrangement as an overall service, recognized over the initial hosting term. The software license fee typically due at the outset of the arrangement is not payable again if the customer renews the hosting services, so that the customer’s option to renew the hosting services is a material right, the revenue from which, if the option is exercised, we will recognize over the applicable renewal period.

Our perpetual software licenses provide the customer with a right to use the software as it exists at the time of purchase. We recognize revenue for distinct software licenses once the license period has begun and we have made the software available to the customer. Our perpetual software licenses are typically sold with maintenance under which we provide a comprehensive 24 hours per day, 365 days per year program that provides customers with software upgrades, when and if available, which include additional or improved functionality and technological advances incorporating emerging supply chain and industry initiatives. Revenue related to maintenance is generally paid in advance and recognized over the term of the agreement, typically twelve months.

Our services revenue consists of fees generated from implementation, training and application managed services, including reimbursements of out-of-pocket expenses in connection with our implementation services. Implementation services include system planning, design, configuration, testing, and other software implementation support, and are typically optional and distinct from our software. Following implementation, customers may purchase application managed services to support and maintain our software. Fees for our services are separately priced and are generally billed on an hourly basis, and revenue is recognized over time as the services are performed. In certain situations, we render professional services under agreements based upon a fixed fee for portions of or all of the engagement. Revenue related to fixed-fee-based services contracts is recognized over time based on the proportion performed.

Significant Judgments

Our customer contracts include the sale of multiple SaaS services or licensed products. Judgment is required to determine whether each service or product sold is a distinct performance obligation that should be accounted for separately. We allocate the transaction price to the distinct performance obligations based on relative standalone selling price (“SSP”). We estimate SSP based on the prices we charge our customers or by using other information such as market conditions and other observable inputs. However, the selling price of our cloud subscriptions and software licenses are highly variable. Thus, we estimate SSP for cloud subscriptions and software licenses using the residual approach, determined based on total transaction price less the SSP of other goods and services promised in the contract.

Contract Balances

Timing of invoicing to customers may differ from timing of revenue recognition. Payment terms for our software licenses vary. We have an established history of collecting under the terms of our software license contracts without providing refunds or concessions to our customers. Cloud subscriptions and maintenance are typically billed annually in advance. We typically bill our professional services monthly as performed. In instances where the timing of revenue recognition differs from the timing of invoicing, we have determined that our contracts generally do not include a significant financing component. The primary purpose of our invoicing terms is to provide customers with predictable ways to purchase our software and services, not to provide or receive financing. Additionally, we are applying the practical expedient to exclude from consideration any contracts with payment terms of one year or less as we rarely offer terms extending beyond one year.

Deferred revenue mainly represents amounts collected prior to having completed performance of maintenance, cloud subscriptions and professional services.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

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. Our international operations currently include business activity out of offices in the Australia, Chile, China, France, Germany, India, Italy, Japan, the Netherlands, Singapore, Spain, and the United Kingdom. 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 foreign exchange losses of $1.5 million in 2023, compared to gains of $4.7 million in 2022, and losses of $0.2 million in and 2021. Foreign exchange rate transaction gains and losses are classified in “Other (loss) income, net” in our Consolidated Statements of Income. A fluctuation of 10% in the period end exchange rates at December 31, 2023 relative to the U.S. dollar would have resulted in a change of approximately $6.7 million in the reported foreign currency loss.

Interest Rates

We currently invest our cash and cash equivalents in a variety of financial instruments, including taxable floating rate obligations in money market funds and certificate of deposits with original maturities of less than three months when purchased. These investments are mainly denominated in U.S. dollars. Cash balances in foreign currencies overseas, except for India, are derived from business operations. Our operations in India are funded by the U.S. operations. At December 31, 2023, our cash and cash equivalents balances totaled $270.7 million, of which all is highly liquid.

Investments in both fixed rate and floating rate interest-earning instruments carry interest rate risks. 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 equivalents and short-term investments was approximately 2% and immaterial for the years ended December 31, 2023 and 2022, respectively. The fair value of cash equivalents held at December 31, 2023 and 2022 was $86.2 million and $106.6 million, respectively. Based on the average cash equivalents and short-term investments outstanding during 2023 and 2022, increases or decreases in the rates of return of 25 basis points would result in increases or decreases to interest income of approximately $0.6 million from the reported interest income for both 2023 and 2022.

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 40

Consolidated Statements of Income 44

Consolidated Statements of Comprehensive Income 45

Consolidated Balance Sheets 46

Consolidated Statements of Cash Flows 47

Consolidated Statements of Shareholders’ Equity 48

Notes to Consolidated Financial Statements 49

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 2023 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, 2023 was effective.

Ernst & Young LLP, the independent registered public accounting firm that audited the Company’s financial statements for the year ended December 31, 2023, has audited the Company’s internal control over financial reporting as of December 31, 2023 and has issued a report regarding the Company’s internal control over financial reporting appearing on page 41, which expresses an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting as of December 31, 2023.

/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

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and the Board of Directors of Manhattan Associates, Inc.

Opinion on Internal Control Over Financial Reporting

We have audited Manhattan Associates, Inc. and subsidiaries’ internal control over financial reporting as of December 31, 2023, 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). In our opinion, Manhattan Associates, Inc. and subsidiaries (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2023, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2023 and 2022, the related consolidated statements of income, comprehensive income, shareholders’ equity and cash flows for each of the three years in the period ended December 31, 2023, and the related notes and our report dated February 5, 2024 expressed an unqualified opinion thereon.

Basis for Opinion

The Company’s 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 are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. 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.

Definition and Limitations of Internal Control Over Financial Reporting

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.

/s/ Ernst & Young LLP

Atlanta, Georgia

February 5, 2024

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and the Board of Directors of Manhattan Associates, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Manhattan Associates, Inc. and subsidiaries (the Company) as of December 31, 2023 and 2022, the related consolidated statements of income, comprehensive income, shareholders’ equity and cash flows for each of the three years in the period ended December 31, 2023, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2023, 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 5, 2024 expressed an unqualified opinion thereon.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the account or disclosure to which it relates.

Revenue Recognition - Identification of Performance Obligations

/s/ Ernst & Young LLP

We have served as the Company’s auditor since 2002.

Atlanta, Georgia

February 5, 2024

MANHATTAN ASSOCIATES, INC. AND SUBSIDIARIES

Consolidated Statements of Income

(in thousands, except per share amounts)

Year Ended December 31,

Revenue:

Costs and expenses:

Diluted earnings per share $ 2.82 $ 2.03 $ 1.72

Weighted average number of shares:

The accompanying notes are an integral part of these Consolidated Statements of Income.

MANHATTAN ASSOCIATES, INC. AND SUBSIDIARIES

Consolidated Statements of Comprehensive Income

(in thousands)

Year Ended December 31,

Foreign currency translation adjustment, net of tax 494 (7,704 ) (1,566 )

The accompanying notes are an integral part of these Consolidated Statements of Comprehensive Income.

MANHATTAN ASSOCIATES, INC. AND SUBSIDIARIES

Consolidated Balance Sheets

(in thousands, except share and per share data)

December 31,

ASSETS

Current Assets:

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:

Operating lease liabilities, long-term 17,694 14,065

Commitments and contingencies (Note 5)

Shareholders' equity:

Accumulated other comprehensive loss (27,038 ) (27,532 )

Total liabilities and shareholders' equity $ 673,353 $ 570,178

The accompanying notes are an integral part of these Consolidated Balance Sheets.

MANHATTAN ASSOCIATES, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(in thousands)

Year Ended December 31,

Operating activities:

Loss (gain) on disposal of equipment 57 (89 ) 7

Unrealized foreign currency loss (gain) 1,280 (1,515 ) (493 )

Changes in operating assets and liabilities:

Investing activities:

Purchases of property and equipment (4,730 ) (6,587 ) (4,016 )

Net cash used in investing activities (4,730 ) (6,587 ) (4,016 )

Financing activities:

Foreign currency impact on cash (163 ) (6,826 ) (1,748 )

$ - $ - $ -

Supplemental disclosures of cash flow information:

The accompanying notes are an integral part of these Consolidated Statements of Cash Flows.

MANHATTAN ASSOCIATES, INC. AND SUBSIDIARIES

Consolidated Statements of Shareholders’ Equity

(in thousands, except share data)

Accumulated

Additional Other Total

Common Stock Paid-In Retained Comprehensive Shareholders'

Shares Amount Capital Earnings Income (Loss) Equity

Restricted stock units issuance 515,090 5 (5 ) - - -

Foreign currency translation adjustment - - - - (1,566 ) (1,566 )

Restricted stock units issuance 606,607 6 (6 ) - - -

Foreign currency translation adjustment - - - - (7,704 ) (7,704 )

Restricted stock units issuance 620,698 6 (6 ) - - -

Excise tax accrued - - (1,108 ) - - (1,108 )

Foreign currency translation adjustment - - - - 494 494

The accompanying notes are an integral part of these Consolidated Statements of Shareholders’ Equity.

MANHATTAN ASSOCIATES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2023, 2022 and 2021

1. Organization, Consolidation and Summary of Significant Accounting Policies

Organization and Business

Manhattan Associates, Inc. (“Manhattan”, the “Company”, “we”, “our”, or “us”) is a developer and provider of supply chain commerce solutions that help organizations optimize the effectiveness, efficiency, and strategic advantages of their supply chains. Our 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.

Our operations are in North and South America (the “Americas"), Europe (EMEA), and the Asia/Pacific (APAC) region. The Americas operation are conducted through the Parent Company, Manhattan Associates, Inc., and its wholly-owned subsidiary, Manhattan Associates Chile Spa. Our European and Asia Pacific operations are conducted through wholly owned subsidiaries within their respective geographies. We occasionally sell our products and services in other countries, such as countries in Latin America, Eastern Europe, Middle East, and Asia, through our direct sales channel as well as various reseller channels.

Risks Associated with Single Business Line, Technological Advances, and Foreign Operations

We currently derive a substantial portion of our revenues from sales of cloud solutions and related services. 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, our position in these markets could be eroded rapidly by unforeseen changes in customer requirements for application features, functions, and technologies.

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. We recognized foreign exchange losses of $1.5 million in 2023, compared to gains of $4.7 million in 2022, and losses of $0.2 million in 2021. Foreign exchange rate transaction gains and losses are classified in “Other (loss) income, net” on the Consolidated Statements of Income.

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 expenses in India. Fluctuations in the value of other currencies, particularly the Indian Rupee, could significantly affect our revenues, expenses, operating profit and net income.

Principles of Consolidation and Foreign Currency Translation

The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All 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 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.

Summary of Significant Accounting Policies

Cash and Cash Equivalents

We consider 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 us to significant concentrations of credit risk consist principally of cash and cash equivalents and accounts receivable. We maintain cash and cash equivalents with various financial institutions. Amounts held are above the federally insured limit.

Our sales are primarily to companies located in the United States, Europe and Asia. We perform periodic credit evaluations of our customers’ financial condition and do 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, 2023 for the Americas, EMEA, and APAC segments were $137.2 million, $34.6 million, and $9.4 million, respectively. Accounts receivable, net as of December 31, 2022 for the Americas, EMEA, and APAC segments were $133.6 million, $28.1 million, and $5.0 million, respectively. Our top five customers in aggregate accounted for 11%, 11%, and 12% of total revenue recognized for each of the years ended December 31, 2023 (“2023”), the year ended December 31, 2022 (“2022”), and the year ended December 31, 2021 (“2021”), respectively. No single customer accounted for more than 10% of revenue in 2023, 2022 and 2021, or more than 10% of accounts receivable as of December 31, 2023 and 2022.

Fair Value Measurement

We measure our 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:

•

Level 1–Quoted prices in active markets for identical instruments.

•

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.

•

Level 3–Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.

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, 2023, the Company’s cash and cash equivalents were $184.5 million and $86.2 million, respectively. Cash equivalents consist of highly liquid money market funds of $79.7 million and certificates of deposit of $6.5 million. For money market funds, we use quoted prices from active markets that are classified as Level 1, the highest level of observable input in the disclosure hierarchy framework. The Company had no investments at December 31, 2023.

The carrying values of cash and cash equivalents, short-term investments, accounts receivable, and accounts payable included in the accompanying Consolidated Balance Sheets approximate their fair values principally due to the short-term maturities of these instruments.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP 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 credit losses, which is based upon an evaluation of historical amounts written-off, the customers’ ability to pay, and general economic conditions; self-insurance accruals; impairment testing of goodwill; and our effective income tax rate (including the impact of unrecognized tax benefits) and deferred tax assets, which are based upon our expectations of future taxable income, allowable deductions, and projected tax credits. Actual results will differ from these estimates.

Revenue Recognition

We recognize revenue when we transfer control of the promised products or services to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those products or services. We derive our revenue from cloud subscriptions, software licenses, customer support services and software enhancements (“maintenance”) for software licenses, implementation and training services, and sales of hardware. We exclude sales and usage-based taxes from revenue.

Nature of Products and Services

Cloud subscriptions includes software as a service (“SaaS”) and arrangements which provide customers with the right to use our software within a cloud environment that we provide and manage where the customer does not have the right to take possession of the software without significant penalty. SaaS and hosting revenues are recognized over the contract period. For contracts that include a perpetual license and hosting services, we generally consider the arrangement as an overall service, recognized over the initial hosting term. The software license fee typically due at the outset of the arrangement is not payable again if the customer renews the hosting services, so that the customer’s option to renew the hosting services is a material right, the revenue from which, if the option is exercised, we will recognize over the applicable renewal period.

Our services revenue consists of fees generated from implementation, training and application managed services, including reimbursements of out-pocket expenses in connection with our implementation services. Implementation services include system planning, design, configuration, testing, and other software implementation support, and are typically optional and distinct from our software. Following implementation, customers may purchase application managed services to support and maintain our software. Fees for our services are separately priced and are generally billed on an hourly basis, and revenue is recognized over time as the services are performed. In certain situations, we render professional services under agreements based upon a fixed fee for portions of or all of the engagement. Revenue related to fixed-fee-based services contracts is recognized over time based on the proportion performed.

As part of a complete solution, our customers periodically purchase hardware products developed and manufactured by third parties from us for use with the software licenses purchased from us. These products include computer hardware, radio frequency terminal networks, radio frequency identification (RFID) chip readers, bar code printers and scanners, and other peripherals. As we do not physically control the hardware that we sell, we are acting as an agent in the transaction and recognize our hardware revenue net of related cost. We recognize hardware revenue when control is transferred to the customer upon shipment.

Significant Judgments

Our contracts with customers typically contain promises to transfer multiple products and services to a customer. Judgment is required to determine whether each product and service is considered to be a distinct performance obligation that should be accounted for separately under the contract. We allocate the transaction price to the distinct performance obligations based on relative standalone selling price (“SSP”). We estimate SSP based on the prices charged to customers, or by using information such as market conditions and other observable inputs. However, the selling price of our cloud subscriptions and software licenses are highly variable. Thus, we estimate SSP for our cloud subscriptions and software licenses using the residual approach, determined based on total transaction price less the SSP of other goods and services promised in the contract.

Contract Balances

Cloud subscriptions and maintenance for perpetual software licenses are typically billed annually in advance.Timing of invoicing to customers may differ from timing of revenue recognition. Payment terms for our software licenses vary. We have an established history of collecting under the terms of our software license contracts without providing refunds or concessions to our customers. Services are typically billed monthly as performed. In instances where the timing of revenue recognition differs from the timing of invoicing, we have determined that our contracts generally do not include a significant financing component. The primary purpose of our invoicing terms is to provide customers with predictable ways to purchase our software and services, not to provide or receive financing. Additionally, we are applying the practical expedient to exclude from consideration any contracts with payment terms of one year or less as we rarely offer terms extending beyond one year.

Deferred revenue mainly represents amounts collected prior to having completed performance of cloud subscriptions, maintenance and professional services. $200.3million of revenue that was included in the deferred revenue balance as of December 31, 2022 was recognized in 2023.

No revenue was recognized in 2023 from performance obligations that were satisfied in prior periods.

Remaining Performance Obligations

As of December 31, 2023, approximately $1.4 billion of revenue is expected to be recognized from remaining performance obligations. Over 98% of our reported performance obligations represent cloud native subscriptions with a non-cancelable term greater than one year (including cloud-deferred revenue as well as amounts we will invoice and recognize as revenue from our performance of cloud services in future periods). Maintenance contracts for perpetual software licenses are typically one year in duration and are not included in the remaining performance obligations. We expect to recognize revenue on approximately 40% of these remaining performance obligations over the next 24 months with the majority of the remaining balance recognized over the following 36 months. We have elected not to provide disclosures regarding remaining performance obligations for contracts with a term of 1 year or less.

Returns and Allowances

We have not experienced significant returns or warranty claims to date and, as a result, have not recorded a provision for the cost of returns and product warranty claims.

We record an allowance for credit losses utilizing a model of internal historical losses data. In estimating the allowance for credit losses, we considered our historical write-offs, the historical creditworthiness of the customer, and other factors. We also analyzed expected credit losses given future risks in projected economic conditions and future risks of customer collection. Should any of these factors change, the estimates made by us will also change accordingly, which could affect the level of our future allowances. Additions to the allowance for credit losses are recorded in general and administrative expense and were immaterial in all periods presented. Our credit loss reserve was $0.9 million and $0.6 million as of December 31, 2023 and 2022, respectively.

We also reduce accounts receivable with a corresponding reduction in services revenue for the most likely amount of potential service revenue adjustments based on a detailed assessment of accounts receivable. The total amount recorded to services revenue was $4.9 million, $5.4 million, and $2.5 million for the years ended December 31, 2023, 2022, and 2021, respectively. As of December 31, 2023 and 2022, we have reduced our accounts receivable balance by $4.4 million and $5.4 million, respectively, for these potential adjustments.

Deferred Commissions

We consider sales commissions to be incremental costs of obtaining a contract with a customer. We defer and recognize an asset for sales commissions related to performance obligations with an expected period of benefit of more than one year. We amortize these amounts over the expected benefit period which we estimate by considering several factors, including the rate of technological change and duration of our customer contracts. Sales commissions for renewal contracts are amortized over the related contractual renewal period. We apply the practical expedient to expense sales commissions when the amortization period would have been one year or less. Deferred commissions were $39.6 million as of December 31, 2023, of which $29.6 million is included in other assets and $10.0 million is included in prepaid expenses.Deferred commissions were $29.9 million as of December 31, 2022, of which $21.9 million is included in other assets and $8.0 million is included in prepaid expenses. Sales commission expense is included in Sales and Marketing expense in the accompanying consolidated statement of operations. Amortization of sales commissions in 2023, 2022 and 2021 was $9.8 million, $7.5 million, and $5.2 million respectively. No impairment losses were recognized during2023, 2022 and 2021.

Property and Equipment

Property and equipment is recorded at cost and consists of furniture, computers, other office equipment, and leasehold improvements. We depreciate the cost of furniture, computers, and other office equipment on a straight-line basis over their estimated useful lives (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 and amortization expense for 2023, 2022 and 2021 was approximately $5.8 million, $6.7 million, and $7.9 million, respectively, and was included in “Depreciation and amortization” in the Consolidated Statements of Income. Amortization expense on intangible assets in 2023, 2022 and 2021 was immaterial.

Property and equipment, at cost, consist of the following (in thousands):

December 31,

Software Development Costs

Software may be for internal use or for resale. Costs related to certain software, which is for resale, are capitalized in accordance with Accounting Standards Codification (“ASC”) 985-20, Costs of Software to be Sold, Leased, or Marketed. Under this guidance, computer software development costs are charged to research and development (R&D) expense until technological feasibility is established, after which remaining software production costs are capitalized. We have defined technological feasibility as the point in time at which we have 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.

We do not typically capitalize costs related to software for resale as technological feasibility generally coincides with general availability of the software. We capitalize the costs of software developed or obtained for internal use in accordance with ASC 350-40, Internal Use Software. We expense all costs incurred during the preliminary project stage of our development and capitalizes the costs incurred during the application development stage once it is probable that development will be completed and the software will be used to perform the function intended. These costs are typically insignificant. All other costs, primarily related to maintenance and minor software fixes as well as research and development, are expensed as incurred.

Impairment of Long-Lived Assets

We review 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 2023, 2022 and 2021, we did not recognize any impairment charges associated with our 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 the consideration transferred over the fair value of net identified tangible and intangible assets and liabilities acquired. We evaluate goodwill for impairment on at least an annual basis. During 2023 and 2022, we did not recognize any impairment charges associated with our goodwill. We do not have any accumulated impairment loses as of 2023. Goodwill was $62.2 million at the end of both years ended December 31, 2023 and 2022.

Impairment of Goodwill

We evaluate 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.

We applied the simplified goodwill impairment test for 2023, 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 we conclude that 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 amount. If the carrying amount exceeds the fair value, a second step is performed to measure the amount of impairment loss, if any. We did not identify any macroeconomic or industry conditions as of December 31, 2023, that would indicate that 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 that it is more likely than not that the fair value of any reporting units have fallen below their carrying amount, we would record an impairment charge based on that difference. We performed our periodic review of goodwill for impairment as of December 31, 2023 and 2022, and did not identify any impairment as a result of the review.

Guarantees and Indemnities

We account 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) 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, (iii) 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, 2023, or 2022.

In general, in our customer contracts for purchase of our cloud SaaS services or license of our on-premises software products, we warrant that our services or software will perform in accordance with our published services or product specifications. Additionally, we may include other warranties such as “no-malware” warranties and warranties that we will perform our SaaS services consistent with generally accepted industry standards or similar standards. We also warrant to our 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, we will provide for the estimated cost of product and service warranties based on specific warranty claims history. However, we have not incurred significant recurring expenses under 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, 2023 and 2022.

Segment Information

We have three reportable segments as defined by the FASB Codification topic for segment reporting: Americas, EMEA, and APAC. See Note 8 for discussion of our 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 (CES) outstanding for each period presented. In the following table, we present a reconciliation of earnings

per share and the shares used in the computation of earnings per share for the years ended December 31, 2023, 2022 and 2021 (in thousands, except per share data):

Year Ended December 31,

(in thousands, except per share data)

Earnings per share:

Weighted average number of shares:

The number of anti-dilutive CESs in 2023, 2022 and 2021 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, 2023 and 2022 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 Codification. 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 statement of financial position and our statements of income. 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

We account for equity-based compensation in accordance with ASC 718,Compensation – Stock Compensation. See Note 2 for further information.

Advertising Costs

We expense advertising costs as incurred. Advertising expense was $2.4 million in 2023, $2.3 million in 2022, and $2.3 million in 2021.

Retirement of Repurchased Shares

We immediately retire shares repurchased pursuant to any share repurchase program. We allocate the share purchase price in excess of par value between additional paid-in capital and retained earnings.

Recent Accounting Pronouncements

In November 2023, the FASB issued Accounting Standards Update (ASU) 2023-07 Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures which expands annual and interim disclosure requirements for reportable segments, primarily through enhanced disclosures about significant segment expenses. We expect to adopt the updated accounting guidance in our Annual Report on Form 10-K for the year ended December 31, 2024. We are currently evaluating the impact the adoption of the new accounting guidance will have on our segment disclosures in Note 8.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The updated accounting guidance, among other things, requires additional disclosure primarily related to the income tax rate reconciliation and income taxes paid. We expect to adopt the updated accounting guidance in our Annual Report on Form 10-K for the year ended December 31, 2025. We are currently evaluating the impact the adoption of the new accounting guidance will have on our income tax disclosures in Note 3.

2. Equity-Based Compensation

Equity Based Compensation Plans

In May 2020, the Manhattan Associates, Inc. 2020 Equity Incentive Plan (the “2020 Plan”) was approved by our shareholders. The 2020 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. The number of shares subject to outstanding awards under the 2007 Stock Incentive Plan (the “2007 Plan”) that are forfeited or canceled or expire after the Effective Date, in accordance with the terms of the 2007 Plan, are counted as one share toward the 2020 Plan.

A maximum of 4,500,000 shares are available for grant under the amended 2020 Plan. Each stock option, stock appreciation right, restricted stock, or restricted stock unit granted is counted against the maximum share limitation as one share. Options and stock appreciation rights cannot have a term exceeding seven years. As of December 31, 2023, there were 2,870,924 shares available for issuance under the 2020 Plan. The 2020 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 unit 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 operating income targets. The awards to Outside Directors have a one year vesting period. We recognize 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 our performance-based restricted stock awards with graded vesting, we recognize compensation cost on an accelerated basis applying straight-line expensing for each separately vesting portion of each award. We utilize the price of our publicly traded shares to determine the fair value of restricted stock units on the grant date.

Restricted Stock Unit Awards

We present below a summary of changes in unvested units of restricted stock during 2023:

Number of Units Grant Date Fair Value

The Company recorded equity-based compensation expense related to restricted stock and RSUs (collectively “restricted stock awards”) of $71.6 million, $59.4 million, and $43.3 million in 2023, 2022 and 2021, respectively. The total fair value of restricted stock awards vested in 2023, 2022 and 2021, based on market value at the vesting dates was $85.2 million, $81.4 million, $59.8 million, respectively. The weighted average grant-date fair value of RSUs granted during fiscal year 2023, 2022 and 2021 was

$127.51, $123.75, and $128.62, respectively. As of December 31, 2023, unrecognized compensation cost related to unvested RSU totaled $102.3 million and is expected to be recognized over a weighted average period of approximately 2.3 years. We recognize forfeitures of equity-based payments as they occur.

Included in RSU grants for the year ended December 31, 2023 are 319,109 units that have performance-based vesting criteria granted at target level for 2023 and performance adjustments above target level for 2022. The performance criteria are tied to our financial performance. As of December 31, 2023, the associated equity-based compensation expense has been recognized for the portion of the award attributable to the 2023 performance criteria.

3. Income Taxes

We are subject to future federal, state, and foreign income taxes and have recorded net deferred tax assets on the Consolidated Balance Sheets at December 31, 2023 and 2022. Deferred tax assets and liabilities are determined based on the difference between the financial accounting and tax bases of assets and liabilities. We present below significant components of our deferred tax assets and liabilities as of December 31, 2023 and 2022 are as follows (in thousands):

December 31,

Deferred tax assets:

Deferred tax liabilities:

Operating lease right-of-use assets 3,030 2,771

We present below income from domestic and foreign operations before income tax expense for the years ended December 31, 2023, 2022 and 2021 are as follows (in thousands):

Year Ended December 31,

The components of our income tax provision for the years ended December 31, 2023, 2022 and 2021 are as follows (in thousands):

Year Ended December 31,

Current:

Deferred:

We currently have a tax holiday in India under the Special Economic Zone Act through March 2029. As a result of this holiday, we had pre-tax income of approximately $14.3 million, for the year ended December 31, 2023, that was not subject to tax. Separately, we are subject to India’s Minimum Alternate Tax (MAT) and accordingly incurred income tax expense of approximately $2.3 million in 2023. The impact on diluted earnings per share if the income had been fully taxable would have been a decrease of $0.04 per share in 2023.

We have tax credit carry-forwards of approximately $3.9 million available to offset future state tax. These tax credit carry-forwards expire in 2026 to 2034. These credits represent a deferred tax asset of $3.1 million after consideration of the federal benefit of state tax deductions. A valuation allowance of $1.5 million has been established for these credits because the ability to use them is not more likely than not. We also have a tax credit carry-forward of approximately $5.4 million available to offset future foreign tax. This tax credit carryforward begins expiring in 2036.

At December 31, 2023 we had approximately $90.4 million of undistributed earnings and profits. The undistributed earnings and profits are considered previously taxed income and would not be subject to U.S. income taxes upon repatriation of those earnings, in the form of dividends. The undistributed earnings and profits are considered to be permanently reinvested, accordingly no provision for local withholdings taxes have been provided, however, upon repatriation of those earnings, in the form of dividends, we could be subject to additional local withholding taxes.

We present below 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, 2023, 2022 and 2021:

Year Ended December 31,

Statutory federal income tax rate 21.0 % 21.0 % 21.0 %

Effect of:

State income tax, net of federal benefit 3.0 3.6 3.6

State credit carryforwards (0.2 ) 1.2 (0.8 )

U.S. federal R&D tax credit (1.8 ) (1.8 ) (1.8 )

Non-deductible equity compensation 1.1 1.1 0.9

Excess benefit of equity compensation (3.2 ) (4.8 ) (4.9 )

Employee compensation limitation 3.4 3.7 3.4

Global Intangible Low Taxed Income (GILTI) 0.1 0.1 0.2

Foreign-derived intangible income (FDII) deduction (3.6 ) (3.3 ) (3.1 )

Foreign operations (2.9 ) 0.5 (0.7 )

Tax contingencies (0.3 ) (1.3 ) (0.3 )

Other permanent differences 0.7 (0.3 ) (0.6 )

Change in valuation allowance 0.1 (1.3 ) 0.7

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows for the years ended December 31, 2023, 2022 and 2021 (in thousands):

December 31,

Our unrecognized tax benefits totaled $9.7 million and $10.5 million as of December 31, 2023 and 2022, respectively. Included in these amounts are unrecognized tax benefits totaling $9.1 million and $9.9 million as of December 31, 2023 and 2022, respectively, which, if recognized, would affect the effective tax rate.

We recognize potential accrued interest and penalties related to unrecognized tax benefits within our global operations in income tax expense. For the years ended December 31, 2023, 2022 and 2021, the Company recognized the following income tax expense: $0.1 million, $0.7 million, and $0.4 million, respectively, for the potential payment of interest and penalties. Accrued interest and penalties were $1.3 million and $1.2 million for the years ended December 31, 2023 and 2022. We conduct business globally and, as a result, file income tax returns in the United State federal jurisdiction and in many state and foreign jurisdictions. We are generally no longer subject to U.S. federal, state, and local, or non-US income tax examinations for the years before 2010. Due to the expiration of statutes of limitations in multiple jurisdictions globally during 2023, the Company anticipates it is reasonably possible that unrecognized tax benefits may decrease by $3.2 million.

4. Shareholders’ Equity

During 2023, 2022 and 2021, we purchased 1,024,328, 1,352,954, and 709,200 shares of the Company’s common stock for $166.0 million, $175.4 million, and $100.0 million, respectively, through open market transactions as part of a publicly-announced share repurchase program. Our $75.0 million repurchase authority replenished by our Board of Directors in October 2023 remains in effect.

As of 2023, we are subject to a 1% excise tax on stock repurchases as enacted by the United States Inflation Reduction Act which we include in the cost of stock repurchases as a reduction of shareholders’ equity.

5. Contingencies

From time to time, we may be involved in litigation relating to claims arising in the ordinary course of business, and occasionally legal proceeding not in the ordinary course. Many of our installations involve products that are critical to the operations of our clients’ businesses. Any failure in our company’s 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 its contracts will be enforceable in all instances. We are not currently a party to any legal proceeding in the ordinary course of business or other legal proceedings the result of which we believe is likely to have a material adverse impact upon our business, financial position, results of operations, or cash flows. We expense legal costs associated with loss contingencies as such legal costs are incurred.

6. Employee Benefit Plan

We sponsor 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 our employees. 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 $22,500, as defined, to the 401(k) Plan. The Internal Revenue Service sets the eligible compensation limit at $330,000 for 2023. Since 2012, we have 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, 2023, 2022 and 2021, the Company expensed matching contributions to the 401(k) Plan of $7.8 million, $6.7 million, and $5.2 million, respectively.

7. Leases

We lease our facilities and some of our equipment under noncancelable operating lease arrangements that expire at various dates through 2029. The total operating lease liabilities for these leases at December 31, 2023 was approximately $24.1 million. For a few of our facility leases, we have certain options to extend the lease term for up to 10 years, at our sole discretion. We have no finance leases.

We present below the operating lease right-of-use assets and lease liabilities as of December 31, 2023 (in thousands):

ASSETS

Operating lease right-of-use assets $21,645

LIABILITIES

Operating lease liabilities, long-term 17,694

Total operating lease liabilities $24,122

Aggregate future minimum lease payments under noncancelable operating leases as of December 31, 2023 are as follows (in thousands):

Year Ending December 31,

Total minimum payments required 25,842

Less short-term leases (97 )

Less imputed interest (1,623 )

Total operating lease liabilities $ 24,122

We are applying the practical expedient to not separate lease and non-lease components, which allows us to account for lease and non-lease components as a single lease component. The total lease cost in 2023 was $8.1 million, consisting of $7.8 million of operating lease costs, and $0.3 million of short-term lease costs. The total lease cost in 2022 was $7.7 million, consisting of $7.3 million of operating lease costs, and $0.4 million of short-term lease costs. Total lease costs in 2021 were $7.9 million, consisting of $7.5 million of operating lease costs, and $0.4 million of short-term lease costs. Our variable lease cost during 2023, 2022 and 2021 were immaterial.

Weighted average remaining lease term 4.1 years

Weighted average discount rate 4 %

Supplemental cash flow information - operating cash flows (in thousands):

Cash paid for amounts included in the measurement of lease liabilities

Operating cash flows for operating leases $ 7,016

See Note 9 for information regarding an amendment to our headquarters lease that we entered into after December 31, 2024.

8. Segment Reporting

We manage our business by geographic segment and have three geographic reportable segments: the Americas, EMEA, and APAC. All segments derive revenue from the sale and implementation of our supply chain commerce 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 commerce. We use the same accounting policies for each reportable segment. The chief operating decision maker (chief executive officer and chief financial officer) evaluate performance based on revenue and operating results for each reportable segment.

The Americas segment charges royalty fees to the other segments based on cloud subscriptions and software licenses sold by those reportable segments. The royalties, which totaled $13.7 million, $8.9 million, and $6.1 million in 2023, 2022 and 2021, respectively, are included in costs of revenue for each segment with a corresponding reduction in the America’s cost of revenue. The revenues represented below are from external customers only. The geography-based costs consist of costs for professional services personnel, direct sales and marketing expenses, infrastructure costs to support the employee and customer base, billing and financial systems, management and general and administrative support. There are certain corporate expenses included in the Americas segment that we do not charge to the other segments. Such expenses include research and development, certain marketing and general and administrative costs that support the global organization, and the amortization of acquired developed technology. Costs in the Americas’ segment include all research and development costs including the costs associated with our operations in India.

In accordance with the segment reporting topic of the FASB Codification, we present below financial information by reportable segment for 2023, 2022 and 2021 (in thousands):

Year Ended December 31,

Americas EMEA APAC Consolidated Americas EMEA APAC Consolidated

Revenue:

Costs and Expenses:

Americas EMEA APAC Consolidated

Revenue:

Costs and Expenses:

In the following table, we present goodwill, long-lived assets, and total assets by reportable segment as of December 31, 2023 and 2022 (in thousands):

Americas EMEA APAC Consolidated Americas EMEA APAC Consolidated

For the years ended December 31, 2023, 2022 and 2021, we derived revenue from sales to customers outside the United States of approximately $301.4 million, $238.4 million, and $196.4 million, respectively. Our remaining revenue was derived from domestic sales.

Cloud subscriptions revenue primarily relates to our Manhattan Active omnichannel, warehouse management solutions, and transportation management solutions for the year ended December 31, 2023. The majority of our software license revenue (approximately 85%) relates to our warehouse management product group for the same period.

9. Subsequent Events

On January 31, 2024, Manhattan executed the eighth amendment to its corporate headquarters lease agreement with 2300 Windy Ridge LLC ("Lessor”). Under the amendment, Manhattan extended its lease termination date from September 30, 2025, to September 30, 2036 for substantially all of its leased premises, for additional minimum rental payments of $67.2 million over the extended lease term and changed its base square footage from approximately 221,000 to 209,000 square feet. Manhattan also received $12.6 million in tenant allowances. While the parties delivered executed copies of the amendment into escrow, effectiveness of the amendment is subject to the satisfaction or waiver of several conditions, including the Lessor obtaining new financing for the property and delivery of a letter of credit in favor of Manhattan for the tenant allowance.

We evaluated all other subsequent events that occurred after the date of the accompanying financial statements and determined that there were no other events or transactions during this subsequent event reporting period which require recognition or disclosure in our financial statements.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

Item 9A. Controls and Procedures

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 our internal control over financial reporting as of December 31, 2023, and the report of Ernst & Young LLP on the effectiveness of our internal control over financial reporting are contained on pages 40 and 41 of this report.

Change in Internal Control over Financial Reporting

During the fourth quarter of 2023, 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.

Item 9B. Other Information

None.

Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

Not applicable.

PART III

Item 10. Directors, Executive Officers and Corporate Governance

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 March 29, 2024, including under the captions "Governance—Proposal 1 Election of Directors,” “Executive Compensation—Executive Officers Biographies,” “Section 16(a) Beneficial Ownership Reporting Compliance,” "Governance—Board of Directors and Committees—Code of Ethics,” “Governance—Board of Directors and Committees—Board Committees,” and if applicable, "Security Ownership—Delinquent Section 16(a) Reports."

Item 11. Executive Compensation

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 March 29, 2024, including under the caption “Security Ownership—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 Form 10-K and is incorporated by reference herein.

Item 13. Certain Relationships and Related Transactions, and Director Independence

Item 14. Principal Accountant Fees and Services

PART IV

Item 15. Exhibits

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).

Item 16. Form 10-K Summary

None.

EXHIBIT INDEX

The following exhibits or incorporated by reference as part of this Report.

ExhibitNumber Description

MANH US Equity

MANH · 10-K · period ended 2023-12-31

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Item 8. Financial Statements and Supplementary Data

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Item 9A. Controls and Procedures

Item 9B. Other Information

Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

Item 10. Directors, Executive Officers and Corporate Governance

Item 11. Executive Compensation

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters

Item 13. Certain Relationships and Related Transactions, and Director Independence

Item 14. Principal Accountant Fees and Services

Item 15. Exhibits

Item 16. Form 10-K Summary

MANH US Equity☆

MANH · 10-K · period ended 2023-12-31

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Item 8. Financial Statements and Supplementary Data

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Item 9A. Controls and Procedures

Item 9B. Other Information

Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

Item 10. Directors, Executive Officers and Corporate Governance

Item 11. Executive Compensation

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters

Item 13. Certain Relationships and Related Transactions, and Director Independence

Item 14. Principal Accountant Fees and Services

Item 15. Exhibits

Item 16. Form 10-K Summary

MANH US Equity