Manhattan Associates Inc (MANH) 2011 Q3 法說會逐字稿

Good afternoon. My name is Felicia, and I will be your conference operator today. At this time, I would like to welcome everyone to the Manhattan Associates third quarter 2011 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. (Operator Instructions). Thank you. Mr. Story, you may begin your conference.

Thank you, Felicia, and good afternoon, everyone. Welcome to Manhattan Associates 2011 third quarter earnings call. Before we jump into the call, I want to apologize to everyone for the premature issuance of our earnings press release at about 2.00 PM this afternoon. Normally we issue our press release after the market closes at 4.00 PM, followed by this call at 4.30. We're currently working with the vendors who assist us in our earnings communication process to investigate what happened. It is important to note that the press release version issued at 2.00 PM was not our final release. The correct release was posted at 2.59 PM by GlobeNewswire and is also posted on our website at manh.com. Now I'll review our cautionary language and then turn the call over to Pete, our CEO.

During this call, including the question and answer session, we may make forward-looking statements regarding future events or future financial performance of Manhattan Associates. You are cautioned that these forward-looking statements involve risk and uncertainties, are not guarantees of future performance and that actual results may differ materially from those in our forward-looking statements. I refer you to the reports Manhattan Associates files with the SEC for important factors that could cause actual results to differ materially from those in our projections, particularly our annual report on Form 10-K for fiscal 2010 and the risk factor discussion in that report. We are under no obligation to update these statements.

In addition, our comments will cover certain non-GAAP financial measures. These measures are not in accordance with or an alternative for GAAP and may be different from non-GAAP measures used by other companies. We believe that this presentation of certain non-GAAP measures facilitates investors' understanding of our historical operating trends with useful insight into our profitability exclusive of unusual adjustments. Our Form 8-K filed today with the SEC and available from our website, manh.com, contains important disclosure about our use of non-GAAP measures. In addition, our earnings release filed with the Form 8-K reconciles our non-GAAP measures to the most directly comparable GAAP measures. Now, I'll turn the call over to Pete.

Thanks, and welcome to our third quarter call. I'll start by reviewing highlights from the quarter. Dennis will then get into the details of our financial results. I'll follow with additional details about our business, and then we'll move to questions.

We posted strong results across essentially all financial metrics in our third quarter. License revenue was $13.6 million, up about 12% versus last year. We recognized three $1 million plus license revenue deals in the quarter. All 3 are well known retailers in the United States. 2 are new customers, and 1 is an existing customer. I have permission from the 2 new customers to use their name, Abercrombie & Fitch and Winn-Dixie. We're thrilled to add such great brands to the list of our partners. All 3 large sales included warehouse management on our platform, plus other platform-based solutions. The existing customer already owned our inventory optimization solution and added warehousing and transportation.

Overall, our platform strategy continues to play very well in the market. That's illustrated by our strong, competitive win rate. As you may remember, historically, we had been winning about 2 of every 3 deals we compete in versus our major competitors. More recently, we're winning 4 out of 5. Importantly, we're winning the large strategic deals, like Abercrombie and Winn-Dixie.

Our professional services business continues to post great results, with revenue up 19% in the third quarter. During the quarter, we added about 75 people to our staff, with the vast majority in billable positions. We continue to search for about 100 more professional services people to add to staff to meet the needs of our customers. Our meaningful investments in research and development have enabled us to extend our strong competitive position. In a moment, I'll cover several key software releases we delivered in the third quarter.

With respect to operations, we continue to manage expenses very well. The combination of strong revenue growth and tight expense management led to our best earnings per sale results in the Company's history, and Dennis will cover that in just a minute. Finally, with our strong third quarter and year-to-date financial results and our many years of continuous substantial investments in research and development and other strategic areas, we're quite optimistic about our future. Dennis?

Thanks, Pete. I'm going to cover our non-GAAP results for Q3 2011. Then I'll review 2011 guidance and our preliminary thoughts for 2012 and then turn the call back to Pete for a business update. As you can see, we delivered another exceptional quarter of financial performance, delivering record Q3 revenue, operating profit and earnings per share, both adjusted and GAAP. Our financial results reflect great execution by our Manhattan team and demonstrate the strength of our operating model and our supply chain software leadership position in our target markets. We posted record Q3 total revenue of $85.6 million, increasing 16% over Q3 2010 on double-digit growth in license and services of 12% and 19% respectively.

On a regional basis, Americas grew total revenue 13%, EMEA 21% and APAC 53% over Q3 last year. We are continuing to experience strong momentum in our target markets, and the demand environment continues to remain quite positive. On strong revenue and operating leverage performance, we delivered record Q3 adjusted earnings per share of $0.67, representing 76% growth over the prior year. Apples to apples, Q3 adjusted EPS increased 62%, excluding $0.04 of positive impact from unrealized FX gains and other income and nonrecurring income tax expense adjustments. Year-to-date adjusted earnings per share of $1.72 is up 43% over 2010 and has exceeded our 2010 full year performance of $1.58. Apples to apples, excluding the impact of foreign currency gains and losses in other income and nonrecurring income tax impacts, year-to-date adjusted EPS growth is up 30%.

License revenue for the quarter totaled $13.6 million, up 12% compared to the $12.1 million we delivered in Q3 2010, and as expected, down sequentially from Q2 2011 on typical Q3 seasonality for our markets. From a regional perspective, Americas posted license revenue of $11.5 million, with 14% growth over the $10 million delivered in Q3 2010. EMEA's Q3 license revenue totaled $1.8 million versus $1.7 million in Q3 2010, and our APAC team delivered license revenue totalling $281,000 compared to $363,000 in Q3 2010. Our license performance continues to depend heavily on the number and relative value of large deals we close in any quarter. With global economic swings continuing to shape buying decisions, estimating sales cycles for large deals remains somewhat less predictable than in prior years, but overall, large size deal activity remains quite strong.

Services revenue of $63.6 million grew 19% and is up 13% year to date. As you know, within our services revenue, consulting services revenue of $41.4 million increased 24% for the quarter, while maintenance services revenue of $22.2 million improved 10%. Our consulting services business momentum is reflected in our second consecutive quarter of 20%-plus revenue growth as strong demand continues to exceed capacity. We are continuing to increase our professional services resources to satisfy current and foreseeable customer demand.

As we formulate our outlook for 2011, we expect Q4 2011 consulting services revenue will post 20%-plus year-over-year growth at about the same year-over-year growth rate as our Q2 and Q3 2011 performance. Consistent with prior years, our Q4 total services revenue, which includes maintenance services revenues, will be down sequentially by about 4% to 6% as consulting services experiences its typical Q4 slowdown due to the seasonal holiday period. Consolidated services margins for the quarter were 56.5% compared to 54.6% in Q3 2010. Of the nearly 75 net new associates hired in Q3, the vast majority is in our professional services practice, and the full cost of these added resources will not manifest until Q4. We also are on boarding and training new hires in Q4 to meet 2012 demand. With the timing of the new hire additions and the impact of Q4 holidays, we expect Q4 2011 services margins to be in the 51% to 52% range, which is consistent with prior Q4 services margin performance. Regarding full year 2011 services margins, we are raising our range estimate 50 basis points to 54.5% to 55.5%, up from our previous expectation of 54% to 55%.

Now, turning to operating leverage, through strong revenue growth and exceptional services productivity, we achieved record Q3 operating income of $19.7 million, and 23% operating margin. Year to date, operating margins are at 20.8%. For the year, we expect to finish 2011 strong, with full-year operating margin in the range of 19.9% to 20.4%. That's 20.4%, representing about a 200-basis point improvement over our 2010 adjusted operating margin of 18%. Now, this blows away our 2011 margin expansion objective of 100 basis points, or 19%. So, just to set expectations, we continue to be committed to margin expansion in 2012, but not at 2011's heightened level as we harmonize the services demand/supply equation.

Other income, which includes net interest income, net gains or losses on asset disposals and the net impact of realized and unrealized foreign exchange gains or losses was unusually high at $862,000 in Q3 2011. Volatility in foreign exchange rates throughout the period resulted in nearly $600,000 in net foreign exchange gains, and about $0.02 in unexpected incremental EPS in the quarter. On the income tax front, our effective income tax rate for the quarter was 31.3%, which represents an underlying rate of 33.5%, less discreet tax items we recorded in the quarter. In the current quarter, we recorded a net tax benefit of $448,000 for the combined impact of our annual provision to return adjustment and the reduction of tax reserves associated with expired tax statutes. The $448,000 tax benefit provided a nonrecurring $0.02 of incremental EPS benefit in the quarter. We continue to expect our Q4 2011 effective rate to remain at 33.5%.

Now, transitioning to diluted shares, we continue to efficiently manage our capital structure with our share buyback program, which is highly accretive to our shareholders. Year to date, we have reduced our common shares outstanding by about 6% by buying back 2.8 million shares against option exercises of 1.3 million shares. In addition, last week our Board approved raising our share repurchase authority limit to a total of $50 million. For the quarter, diluted shares totaled 21.1 million shares, down from 21.8 million shares in Q2 2011. We are estimating full year and Q4 2011 diluted shares to total about 21.2 million shares. An important point about our full year diluted shares, our 2011 full year adjusted and GAAP earnings per share guidance range will be about $0.03 to $0.04 higher than the sum of our individual quarters reported EPS, reflecting the benefit of share buyback earnings leverage. Also, 2011 full year diluted shares will be lower than the average of diluted shares reported in each of our quarters due to the compounding impact of our buyback program. Our diluted share estimate for Q4 and full year 2011 does not assume any common stock repurchases and depends on a number of variables, including stock price, option exercises, forfeitures and share repurchases, which can significantly impact estimates.

That covers the adjusted results. Just a quick update on GAAP earnings per share. We delivered record Q3 GAAP earnings per share of $0.70, representing 150% growth over the prior year. An apples to apples comparison excludes $0.14 of positive EPS impact in the quarter as follows. $0.12 realized from a $2.5 million impairment reserve release associated with the recovery of an option rate security investment and $0.02 related to the nonrecurring $448,000 income tax benefit I previously discussed. Excluding these items, Q3 GAAP EPS increased 100%. Year to date GAAP earnings per share of $1.59 is up 66% over 2010's $0.96. Adjusting for the $0.14 of positive EPS impact from the Q3 adjustments noted above and $0.09 associated with Q1 2011's India nonrecurring income tax benefit, apples to apples, GAAP EPS growth is up 42% year-over-year, year to date.

Now, turning to cash flow. For the quarter, we delivered cash flow from operations of $17 million, bringing our year-to-date total to $41 million, an increase of 16% over our year-to-date total of $35.4 million in 2010. Capital expenditures were $1.7 million in the quarter and our $3.7 million year to date, and on a full year basis we continue to estimate capital expenditures to be about $5 million to $6 million. Our balance sheet continues to support long-term strategic flexibility and stability, with our cash investments balance at September 30, 2011 totalling $102 million compared to $110 million at June 30, 2011. Our cash to asset ratio is 39%, and we have no debt. The net decrease in cash from Q2 2011 is due to the self-funded investment and our share buyback program. That covers my remarks. Let's move on to our updated 2011 guidance and preliminary outlook for 2012.

For 2011 revenue, we are maintaining our full year revenue guidance of $325 million to $335 million. And our Q2 call indicated the midpoint of our full year guidance would imply $170 million in the second half of total revenue. Fairly evenly split between Q3 and Q4, with Q3 actual revenue of $85.6 million, we see no reason to change our guidance. We are currently estimating Q4 license revenue will track slightly below our Q2 result of $16.3 million. As I discussed earlier, due to the holiday season, we are forecasting Q4 services revenue to be about 4% to 6% lower in Q3 2011 -- lower than in Q3 2011, and hardware and other revenue will decline sequentially as billed consulting travel will decline for the quarter. Provided there are no meaningful economic disruptions in Q4, our goal is to deliver 2011 total revenue of about $330 million, which represents the midpoint of our guidance and delivers 11% year-over-year growth. Adjusted operating margins, we are targeting full year adjusted operating margins in the range of 19.9% to 20.4%. Q4 operating margins are targeted at 18% to 19%, down sequentially due to, 1, lower services revenue associated with the seasonal holidays, 2, our aggressive hiring and professional services to gear up for 2012 demand. And 3, slightly higher Q4 operating expenses driven by R&D hires, higher sales commissions and marketing expenses for our Europe customer exchange events.

For 2011 adjusted earnings per share, given our better than expected Q3 earnings per share performance, we are raising our previous full year guidance by $0.26, taking our previous range of $1.97 to $2.02 to a new range of $2.23 to $2.27. This new range represents 41% to 44% growth over 2010. Excluding the impact of the nonrecurring India and US income tax benefits which totaled $0.11 of earnings per share, apples to apples, our comparative EPS range is $2.12 to $2.16, representing 34% to 37% growth over 2010 adjusted EPS of $1.58.

As I've mentioned in the diluted share discussion, 2011's full year adjusted and GAAP earnings per share guidance range is about $0.03 to $0.04 higher than the sum of our 4 individual quarters of reported earnings per share because of our share buyback earnings leverage. 2011 full year diluted shares will be lower than the average of the shares reported in each of our quarters due to the compounding impact of our buyback program. This leverage is great for our shareholders. However, I want to caution investors and modelers, if you attempt to derive Q4 earnings per share by subtracting our year to date earnings per share of $1.72 from our full year EPS guidance range, you will be about $0.03 to $0.04 overstated on your derived range. For 2011 GAAP earnings per share, our full year GAAP earnings per share guidance range is revised to $2.03 to $2.07, representing 62% to 66% growth over 2010's $1.25. Excluding the $0.23 of benefit for nonrecurring India and US income tax benefits and the option rate security recovery, apples to apples, our comparative range is $1.80 to $1.84, representing 44% to 47% year-over-year growth. My previous comments regarding the $0.03 to $0.04 impact generated by full year fully diluted shares also applies to GAAP earnings per share results as well.

That covers 2011 guidance on a strong Q3 performance. Shifting our focus to 2012, we are in the early stages of our 2012 budgeting cycle. But here are a few early comments for adjusting earnings per share modeling. Revenue, we plan to grow total revenue at roughly 2X, or 2 times the expected market growth rate of 5% to 7%, so low double-digit year-over-year growth. Adjusted operating margins, given our strong operating performance in 2011, we are targeting operating margin expansion of about 50 basis points over our 2011 result.

Tax rate, we're currently estimating our tax rate to increase modestly to 34% from our 2011 current run rate of 33.5% excluding nonrecurring tax items. Remember that a total of $0.11 of our 2011 earnings per share resulted from a one-time tax credit of $0.09 from our India operations in Q1 and $0.02 of provision to return and tax reserve expirations in Q3 2011. And for diluted shares, we're currently forecasting 21 million shares per quarter. That's a wrap on the financial. I'll turn the call back to Pete for the business update.

Thanks, Dennis. Here are some of the business highlights of the quarter. We added many new customers and expanded relationships with many existing customers across all regions during the quarter. A list of those that have agreed to allow us to use their names is included in our press release. As I mentioned in my opening comments, we closed three $1 million plus deals in the quarter. The retail category plus food and grocery were strong contributors to our license fees, and together, these sectors represented more than half of license revenue in the quarter.

About 60% of the quarter's license revenue was from new customers and about 40% from existing customers. That makes 2 quarters in a row where more than half of license revenue was from new customers. About half of the quarter's license revenue was for warehouse management solutions and the other half from our new supply chain solutions. Our order management solution had a particularly good quarter. Our professional services teams continue to drive customer satisfaction across the globe. Today, we've had more than 10 clients live and more than 20 sites live with our platform-based warehouse management solution and many more in various stages of implementation. These implementations continue to progress quite well.

I believe our relative competitive position has never been stronger. The primary way we've strengthened our position and will continue to improve it is through important investments in our products, our technology and our people. About a third of our global staff, or more than 600 people, are in research and development. And in the third quarter, they delivered 6 important releases of our solutions. Let me highlight 3.

1, warehouse management on our platform. This release features enhanced integration with distributed order management, extended enterprise management and transportation planning and execution, which will help our customers use these solutions across their business operations to improve decisions and more close. The integrations are supported by our supply chain process platform, common business objects and our integration framework. The release also includes important enhancements to core warehouse functionality, yard management features and transportation/execution functionality.

2, distributed order management. This release features several improvements to our distributed selling solution, including customer communication tracking that imports all order related e-mail so it can be viewed within our screens, along with the ability to capture notes while on a customer call so that customer service reps have a quick and easy way to view all communication and notes related to an order. Also, we've added an easier to use payment screen that includes e-check support so that orders can be paid for by a direct draw from a bank checking or savings account.

And 3, extended enterprise management. This release is primarily focused on key improvements in our store order fulfillment module. Site to store order visibility helps store's associates see when inventory is being shipped to their store specifically for customers to pick up. While our ship only partial functionality helps store associates make efficient shipping decisions.

Moving to head count, at the end of September, we had about 2,100 employees around the world. That's an increase of about 75 in the last quarter, essentially all in billable professional services positions. Today, we have about 64 people in sales and sales management, the same as last quarter. And as I mentioned in my opening comments, we hope to add about 100 positions in the near term to fill existing customer demand for professional services.

Last week, we completed our European customer conferences. We started October 4 in the United Kingdom, progressed to France on the 6th, and finished in Holland on October 11. Attendance was about at all 3 conferences, and the mood was positive, especially given the state of the local economies. While we expect the economies across Europe to continue to struggle, particularly in the UK, we're encouraged by our customers' enthusiasm about our solutions and our partnerships with them.

So, let me wrap up my comments. As Dennis mentioned, looking at Q4, we expect another solid financial quarter. And as we look out to 2012 and beyond, we're excited about our strong competitive market position and our market momentum. Operator, we'll now take questions.

(Operator Instructions). And your first question comes from the line of Eric Lemus with Raymond James.

Hey, guys. Great job on the quarter. Thanks for taking my question. First off, just looking at the large transformative deals going into the last quarter and potentially in 2012, are you guys seeing any sort of hesitancy around the large initiatives, the larger than $1 million size deals or any lengthening of sales cycles? And any chance for expectations around close rates assumptions in the fourth quarter?

Thanks, Eric. Thanks for the comments on the quarter. We are quite pleased with the size and the activity in our large deal pipeline. As we mentioned on previous calls, that's been building for quite some time, and the large deal pipeline activity level today is quite good. We've not yet seen real hesitancy in those targeted customers to slow down activity. Now, that, of course, could change. There's a lot of noise in the marketplace at the moment, and it concerns us to a degree. But having said that, the activity level continues to be quite good, and we're optimistic that close rates in Q4 will be comparable to what we've seen over the last couple of quarters.

Okay. Great. And then on the license revenue side, you said sequentially could be down in the fourth quarter. Is there any sense of -- I know it's early in the quarter, but is there any sense of potential upside attributable to the potential budget flush in the fourth quarter?

I think Dennis' comments about down sequentially related to the services business. I think he also mentioned we should be up sequentially for license revenue. And I think the target was in the neighborhood slightly lower than our Q2 result of $16.3 million. There's always the upside potential of budget flush. We're always a little bit cautious to plan on that, but would love to see some of the major players in the target markets we focus on gaining confidence and wanting to spend a little bit more of capital that they have on their balance sheets. We're working very hard, particularly on the larger deals, to encourage companies to move more quickly, and would love to see a meaningful year end budget flush.

Okay, great. Thanks for that clarity there. And then just lastly, you mentioned the two times growth of the broader industry. Is there any indication, especially with the overall macro right now, that the broader industry could be slowing? And if that's the case, would you still be comfortable with the two times growth going forward?

Yes, it's another good question, Eric. At the moment, we would be comfortable with that. It will, of course, depend, as Dennis mentioned, it's early in the budgeting cycle, planning cycle for 2012. Historically, we tend to do well in tough economies. We believe we're doing well in this difficult economy and believe we will continue to do so. So, we are cautiously optimistic that even in a tough economy, we can post solid results in 2012 and '13. We're quite enthusiastic about our current market position. The competitive position is quite strong, and the platform message is resonating very well in the market that we target. So, we are optimistic that even in a tough environment, that we can post numbers along the lines of what Dennis had suggested. But quite frankly, we're looking forward to the place in time where the global economy is on better footing and we can post even stronger results.

Great, and just one last question. On the head count increase for this quarter, you said 75. I think last quarter the guidance for the balance of the year was about 100, but seems like you guys are saying that you need 100 more potentially as far as the strategy going for the rest of the year. Is that correct to look at? Is there an upside from what you said in the prior quarter?

Yes, that's correct, Eric. Directionally correct. We've had a very strong quarter in services business in Q3, and we have good visibility of our services business out several quarters and would very much like to find 100 or so talented folks to add to our professional services teams to address forecastable demand among our customers in the relative near term.

Great. Thanks, guys.

Thanks, Eric.

Your next question comes from the line of Alan Weinfeld with Davis Securities

Congratulations, guys. True (inaudible). I think it's your best quarter in the 10-plus years I've been watching you guys.

Thanks, Alan.

So, we've seen such diversified companies as IBM that are in every single business you're in, they couldn't avoid the economic macro issues. And if you want to go to a company that's more your size in the last quarter, JDA Software, they couldn't avoid the macro economic issues and they missed. What is different, special going on in the last two quarters that you clearly didn't have trouble in Europe and you're signing new customers and you're just really cooking the margins getting back to historical margins much quicker than any of us expected. What's the secret sauce, because I think a lot of companies would really want to know.

It's a great question, Alan. Thank you. We certainly do feel the tough macro environment in general, particularly in some of our international markets. I think what's different, the difference really started showing up in the early part to mid 2010, with the launch of our new suite of platform-based products and our strengthening relative competitive position. This is probably a little over simplistic, but as I mentioned in my prepared remarks, historically we're winning two out of every three deals and more recently, we're winning four out of every five. So, I probably would agree that the market activity isn't as robust as we would like. It's probably down from where it was three, four years ago. But with our stronger relative competitive position, we're just winning more business and taking more market share, and I think that is probably the biggest difference between ourselves and some of the folks you spoke about.

IBM being such a big player, it's hard for them to take a whole lot of market share, but I think in our case, we believe there's still plenty of market share for us to capture. We've invested an awful lot of money over the last five years or so developing our suite of solutions, and we believe we're at the early stages of being able to capitalize on that investment and believe our strong market position and the message we send about platform applications is really, really resonating well. And also, we have one or two really important initiatives in our target market. You hear a lot about multichannel retailing, the growth in eCommerce and the need to integrate eCommerce delivery with their broader brick and mortar channels and doing that from an efficient perspective, from a supply chain optimization perspective. And our solutions really help in that regard as well. We've got some unique capability that we believe no one else on the planet has, and that also helps us better defend our financial position in a tough macro environment.

So, looking into the future, looks like you guys are moving well into, not huge new markets, but things that you certainly should do a lot of revenue in this order management market. I think i2 used to do a lot of business there, but who knows how much business i2 is doing now. Probably not too much. And talk about transportation, that was another -- i2 used to do a lot of business transportation, they're not around anymore. So, besides the core market, there's that 50% -- 40 -- 50% of the non-warehouse market where you guys should continue to grow. So, who do you really see as today's true competitors? Because it's not i2, and Oracle seems to be doing a great job in things that are -- they are working on hardware now at Sun, or SAP is working on mobile computing and analytics. Who are the real competitors that you really get to the last five, last three and you guys seem to beat 80% of the time?

It's a very good question. Thanks, Alan. I think there were two parts to that question. Let me see if I can answer them both. The first was a little bit about the new markets and the solutions and so forth and where we're competing. I was very pleased to share in my opening comments some of the new big wins and the competitive wins and the platform successes there. And one that I kind of glossed over quickly that we're all very proud to have achieved, is one of the big wins in the quarter was a client who first purchased from us our inventory optimization solution. Thrilled with that solution, and then added warehousing and transportation. So, a cool opportunity for us to cross-sell into that part of our customer base. And of course, the same thing is true for all of the WMS clients, we have the ability to cross-sell solutions into that market space. I consciously chose the three releases to focus on in my discussion of our investment from R&D. Talking about warehouse management, distributed order management and extended enterprise management, because those three applications are quite core to differentiating Manhattan Associates from all of our competitors in that multichannel space. So, the buy online, pickup in store, the ability to shop from mobile devices and to fully integrate that requirement into a broader supply chain, I think gives us a real competitive advantage.

So, those are some of the new markets for us, and we're pretty excited about it. But to your question about the competition, there of course is very good competition in our market spaces. We've got the two big ERPs that are very capable firms. SAP and Oracle (inaudible) and far deeper pockets. We're cautiously approaching the market space today and competing well with them. Believe both of those firms have their hands full with higher priorities than supply chain and as that continues to be the case, I think our relative competitive position strengthens. Of course we also have other so-called best of breed competitors across the broad product suite areas that we compete. They are all solid companies that compete aggressively with us. I happen to believe at the moment our relative competitive strength versus those other best of breed competitors has never been stronger. But we certainly are very aware that they are good companies and good competitors, and we need to stay quick and innovative and with high quality to continue to do well in that market space. Operator, we have -- Thanks, Alan. Operator, I think we have time for one more question.

Okay, and your last question comes from the line of Mark Schappel with The Benchmark Company.

Hi, good evening, and nice job on the quarter, guys.

Hi, Mark.

Pete, starting with you, during your prepared remarks, you noted that your order management application had a good quarter. And I was wondering if you could give us a little more color on the buying patterns there. Are customers buying that as stand-alone module, or are they deploying it as part of a larger, or a broader supply chain initiative where people are buying the broader suite?

We've sold it both ways, Mark. We have a number of instances where the client first chose our order lifecycle management solution. But in the majority of cases, it's part of a multiproduct purchase. As I just mentioned, I do believe that the combination of our warehouse management solution, extended enterprise management solution and our order management solution, that combination, plus benefits from our other solutions, but those three in particular really do bring a true, unique value proposition to the marketplace. And in a couple cases in the quarter, we sold those products to clients.

Okay, thank you. And Pete, if you could just give us an update on your perspective of the SAS supply chain market. In the past, I believe you thought it was -- or there just wasn't that much enthusiasm for it, for SAS delivery models and supply chain space. Is that still your view?

We continue to monitor that very closely, Mark. There's a lot of energy around the whole concept of SAS and Cloud and so forth, and so we continue to monitor it very closely. I think as you and I have discussed, we do offer SAS solutions today, primarily in our transportation space. And we've been doing that for more than a decade, so we have a lot of experience in how best to deliver on a software as a service model. However, as we've also discussed before, to date, our target market, that is larger companies with sophisticated supply chain needs, have not shown much of an appetite for multitenant software as a service offering. We'll continue to monitor it very closely. If there's any move in that direction, I believe our applications would be as easy or easier than any of our competitors to place in a hosted environment. But to date, not a lot of energy in our target markets for software as a service.

Thank you. That's all for me.

Thank you, Mark.

And there are no further questions at this time.

Thank you all for joining us. We appreciate your time this evening and look forward to speaking with you again in about 90 days. Good night.

Thank you. This concludes today's conference call. You may now disconnect.