Manhattan Associates Inc (MANH) 2014 Q3 法說會逐字稿

Good afternoon. My name is Chris, and I will be your conference facilitator today. At this time I would like to welcome everyone to the Manhattan Associates third-quarter 2014 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 period. (Operator Instructions) As a reminder, ladies and gentlemen, this call is being recorded on today, October 21, 2014. I would now like to introduce Dennis Story, CFO of Manhattan Associates. Mr. Story, you may begin your conference.

Thank you, Chris. Good afternoon, everyone. I hope all of you including our Manhattan associates that are listening in are having a super fantastic day. Welcome to Manhattan Associates 2014 third-quarter earnings call. I will review our cautionary language and then turn the call over to Eddie Capel, 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 risks and uncertainties, are not guarantees of future performance, and that actual results may differ materially from projections contained 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 2013 and the risk factor discussion in that report. We are under no obligation to update these statements.

In addition, our comments include certain non-GAAP financial measures in an effort to provide additional information to investors. All non-GAAP measures have been reconciled to the related GAAP measures in accordance with SEC rules. You will find reconciliation schedules in our Form 8-K we submitted to the SEC earlier today and on our website at MANH.com. Now I will turn the call over to Eddie.

Good afternoon, everybody. We're quite pleased with our third-quarter and year-to-date financial results. We posted record results across essentially all financial metrics. Our competitive position continues to improve, and customer satisfaction continues to increase across the globe. So heading into Q4 and 2015 we continue to be encouraged by our near-term and long-term growth prospects.

For the quarter we set new all-time revenue and earnings per share records. Q3 total revenue of $125.6 million increased 17% and adjusted earnings per share of $0.32 increased 23% over Q3 2013. The combination of strong organic revenue growth and sensible expense discipline led to the best quarter in our Company's history. With these strong results we are raising our revenue and earnings per share guidance for the year. And Dennis will take you through those details in just a moment.

License revenue for the quarter was $16.9 million, up 15% over Q3 last year, led by a strong Americas performance bolstering a somewhat but expected sluggish EMEA and APAC license revenue performance. We closed four $1 million-plus license deals in the quarter, two with new customers and two with existing customers. Three of the large deals were in the US and one was in Canada. Two of the four deals were led by omni-channel initiatives and the other two included our platform-based warehouse management and transportation management solutions. In all of these four deals we were successful head to head against very strong competition.

Our sales teams continue to execute well and year-to-date competitive win rates in head-to-head sales cycles against major competitors remain very strong at about 75%. And license revenue from net new customers was about 30%. While the ratio of net new customers can fluctuate somewhat from quarter to quarter, we continue to be quite pleased with our new customer acquisition performance.

Our consulting services business posted record revenues with Q3 revenue up 20%. Demand and visibility continues to be quite strong. We added 35 associates to our global team in Q3. We continue to search for about 100 more professional services people to meet the needs of our customers.

Overall, with our strong quarter and year-to-date performance, we're certainly optimistic but we can help to remain a little bit cautious as the global economy continues to exhibit some sluggish growth. But outlook is positive, our pipeline is solid, services business demand is strong, customer satisfaction is good, and the implementations of our solutions continue to go very well.

Our focus remains on being the leading pure play technology innovator in the supply chain commerce market, leveraging our platform strategy and investments in research and development to deliver solutions to help our customers get commerce ready in the new digital world. And I will provide more color in my business update following Dennis's review of our financial results.

Thanks, Eddie. I will review our financial performance, our 2014 full-year guidance, and finish with some initial comments on 2015. Well, we continued our solid 2014 performance, firing on all eight cylinders, posting total revenue of $125.6 million, an increase of 17% over Q3 2013. By region Americas grew 18%, EMEA grew 12%, and APAC grew 11% compared to Q3 last year.

Demand for our solutions continues to be solid in our target markets. Adjusted earnings per share for the quarter was a record $0.32, increasing 23% over prior-year on solid revenue growth and continued expense management and our buyback program. Manhattan continues to deliver strong organic top-line growth and quality earnings leverage.

Our GAAP diluted earnings per share was a record $0.30, increasing 20% over Q3 2013. A detailed reconciliation of GAAP to non-GAAP adjustments is included in our earnings release today.

The remainder of my P&L discussion represents our adjusted results.

License revenue for the quarter totaled $16.9 million, up 15% over prior-year. From a regional perspective, Americas posted license revenue of $15.6 million, EMEA $589,000, and APAC $705,000. EMEA and APAC license performance was impacted by usual Q3 summer holiday seasonality and a dose of regional macroeconomic weakness.

That said, our Q4 pipeline activity for both Europe and Asia is encouraging. Overall, like any major enterprise software company selling mission-critical solutions, our license performance depends on the number and relative value of large deals, which can be impacted by tough macroeconomic headwinds. However, we continue to execute very well in our target markets, as reflected in our competitive win rates and solid customer activity.

Shifting to services, customer demand continues to be strong. Q3 services revenue totaled $98.5 million, increasing 16% year over year. Our service revenue is bifurcated into two revenue streams -- consulting and maintenance. Our consulting revenue for the quarter totaled $69.4 million, growing 20% over Q3 last year. With solid demand, year over year, we have grown our services practice by about 220 associates, up 14%. As Eddie noted, we continue to hire additional Associates to support demand and focus on customer satisfaction.

Maintenance revenue for the quarter totaled $29.1 million, increasing 7% over last year on license revenue performance. Retention rates also remained very strong at 90% plus. While there are no major impacts this quarter, as a reminder we recognize annual maintenance renewal revenue on a cash basis, so the timing of cash collections can cause inter-period lumpiness from quarter to quarter.

Consolidated services margins were 56.1% in the quarter on strong revenue growth. For the year we expect our 2014 services margins to be in the 55.4% to 55.6% range. Consistent with historical performance, Q4 services margins will decline sequentially over Q3, principally driven by, one, the retail holiday season as clients idle implementations; two, onboarding second half new higher activity; and, three, continuing integration of our Global Bay investments. All in, we expect Q4 services margins to land in the 53% to 53.5% range, which is relatively consistent with Q4 2013 and Q4 2012.

Operating expenses for the quarter were $34.3 million compared to $31 million in Q3 2013. Operating expense was up 11%, driven by performance-based compensation, incremental expense from our Global Bay investment, and early stage global investments in facilities expansion and enterprise IT system replacements necessary to support our workforce growth in future scalability.

Turning to operating income and margins, with strong revenue growth we delivered record Q3 adjusted operating income of $37.9 million with an operating margin of 30.1%, up 40 basis points over Q3 2013. Apples to apples, Q3 2014 operating margins increased 200 basis points. As a reminder, in Q3 2013 our operating margin was 29.7%, which was unusually high, benefiting from $2 million of accelerated maintenance collections and rupee currency impact. Excluding these items in Q3 2013 operating margins were 28.1%.

On another note, in the quarter operating income was negatively impacted by a strengthening rupee. The impact was immaterial at $171,000. However, this is the first quarter since Q3 2011 the rupee has had a negative impact to operating income. While we are not alarmed, we are currently modeling a stronger rupee into our preliminary 2015 projections.

For 2014 full-year we expect about a 200 to 220 basis point expansion in operating margin over 2013. At the midpoint this would peg 2014 full-year adjusted operating income at about $136 million with year-over-year organic growth of 26% and an operating margin of about 28.2%.

That covers the operating results.

Below the line, in other income, we posted a slight loss of $55,000 in the quarter on FX losses compared to other income of $546,000 in Q3 2013. A more meaningful view is 2014 year to date, where other income is essentially net zero compared to $1.9 million of benefit in 2013, driven by FX gains of $1.1 million. As I've mentioned in the past, FX gains and losses reported in other income result from quarterly intercompany settlements with our international units. Given the volatile nature of foreign currency fluctuations, we do not attempt to forecast the impacts to other income.

So regarding taxes, our adjusted effective income tax rate was 37% versus 37.1% in Q3 2013. And on a year-to-date basis our effective rate was 37.1% compared to 35.8% last year. Our 2014 higher effective tax rate is due primarily to two factors -- first, higher proportion of US-based taxable income; and, second, the expiration of US R&D tax credit legislation in January 2014.

As a reminder, 2013 results include two years of tax benefit, significantly impacting year-over-year comps. That's R&D tax benefit.

We are projecting a full-year effective tax rate of about 36.6%, which assumes the fourth quarter effective rate of about 35%. The lower rate is driven by release of IRS tax audit reserves associated with the conclusion of our IRS audit for years 2011 and prior.

Transitioning to diluted shares, for the quarter diluted shares totaled 75.5 million shares, down from Q2 2014 shares of $76 million. We continue to put excess cash to work, investing $15 million to repurchase about 503,000 shares of Manhattan common stock in the quarter against option exercises of about 36,000 shares. Year to date we have reduced common shares outstanding 2.3% or 1.8 million shares net of option exercises. For the balance of 2014 we estimate Q4 diluted shares to be about 75.4 million and the full-year weighted average diluted shares to be 75.8 million. Our estimate does not assume additional common stock repurchases. Finally, on shares, last week our Board approved raising our share repurchase authority limit to a total of $50 million.

Now turning to cash flow, for the quarter cash flow from operations totaled $32.7 million, bringing year-to-date cash flow from operations to $53.7 million compared to $66.4 million last year. Our DSOs were 64 days with no change from Q2 2014. Capital expenditures were $3.1 million in Q3 and now we estimate full-year 2014 CapEx to be about $8 million. As we mentioned on our Q2 call, we expected our operating cash flow to strengthen in the second half as the quality of our trade receivables and cash collections remain strong and year-over-year incremental cash tax paid comps improve the second half.

We posted a solid Q3 and expect Q4 to be very solid.

Our balance sheet continues to support long-term strategic flexibility and stability with cash and investments totaling $112 million and zero debt at September 30, 2014, compared to $101 million at June 30, 2014. That covers my Q3 remarks.

Let's move on to our updated 2014 guidance and some early comments on 2015. For 2014 adjusted earnings per share, we are raising our guidance estimate to $1.13 to $1.15 from our previous range of $1.10 to $1.12. The new range represents 23% to 25% growth over our 2013 adjusted EPS of $0.92. For Q4 we expect earnings per share to be lower than Q3, given the combined impact of seasonally lower Q4 services revenue.

Full-year GAAP EPS guidance estimates also increased to $1.06 to $1.08 from our previous estimate of $1.03 to $1.05, representing 20% to 23% growth over our 2013 GAAP EPS of $0.88. For reference, a guidance table is provided in today's earnings release.

For 2014 revenue, with one remaining quarter in 2014 we are raising and tightening our total revenue guidance estimate from $472 million to $477 million, to $479 million to $481 million, representing 16% growth. With Q4 holiday seasonality and many retail clients idling back of limitations in preparation for peak season, we expect our total revenue to be similar to our Q2 2014 results.

While our license pipeline and potential transactions for Q4 look solid, we continue to remain cautious on timing of deal closings, given the macro backdrop. For services, due to the seasonality we expect Q4 services revenue to be down sequentially from Q3, about 6.5% to 8%.

In summary, achieving the midpoint of our raised 2014 full-year guidance, we expect total revenue growth of about 16% and adjusted earnings per share growth of about 24%. So 16% top-line growth profile and 24% adjusted earnings per share growth profile.

Now shifting focus to 2015, similar to prior years, we are just starting our 2015 budget cycle. But here are a few early comments for adjusted EPS modeling purposes. Overall we expect the competitive environment to be about the same and remain cautious on the global macro environment. We are committed to driving shareholder return through study revenue growth, consistent earnings growth, and efficient management of our capital structure. With our growth strategy and competitive position we are positive on our outlook and still believe there is solid opportunity to take market share and drive potential earnings leverage.

For revenue, consistent with prior years, we plan to grow total revenue at about 1.5 times the expected market growth rate of about 5% to 7%, so year-over-year growth of about 8% to 9%, pegging the growth rate to the low end of analysts' estimates. This estimate is currently consistent with Street estimates, which we will fine-tune in our Q4 earnings call.

Adjusted operating margins -- we are targeting operating margin expansion of about 50 basis points over 2014 with potential upside which we will address on a quarter-to-quarter basis going forward.

For effective tax rate our best estimate is 37.1%, subject to US federal, state, and foreign tax legislation changes. Diluted shares -- we are currently projecting about 75.2 million diluted shares per quarter, which assumes no buyback activity in Q4 2014 or the full year 2015.

Now, that covers my 2015 comments. We will provide more details in our Q4 earnings call. And that covers my overall financial update. Now, I will turn the call back to Eddie for the business update.

Thanks, Dennis. So first, let me provide a little more detail on the deals we closed in Q3. As I discussed at the beginning of the call, we recognized four large deals in the quarter, two in retail, one in life sciences, and one in third-party logistics. All four deals were driven by strategic technology modernization programs, with two of the four deals specifically driven by omni-channel initiatives. While we are in the early innings, digital commerce continues to drive omni-channel interest across retail, manufacturing, and wholesale. The other two large deals were driven by distribution and transportation management legacy system replacements.

We continue to see solid progress in our core verticals, led by the retail segment. In Q3 our license fee mix was weighted about 50-50 between Warehouse Management and our other solutions. A meaningful portion of our WMS and non-WMS license and services revenue activity continues to be driven by existing and new customer omni-channel initiatives and legacy supply chain modernization.

The retail, consumer goods, and life sciences verticals were the strongest license fee contributors, making up more than half of our license fee revenues for Q3 2014.

And we are certainly very pleased with the successes we've achieved over the past two years or so as our software, platform technology, and domain expertise are core differentiators when it comes to helping new and existing customers adapt to today's ever-changing market conditions. And this is reflected in our win rates.

Q3 software license wins with new customers that have permitted us to share their names included Bass Pro, Citizen Watch of America, E-Land Group, Frito-Lay Manufacturing, Groupe Robert, Suzhou Hengding Logistics, VBM Retail, and Vida Panama Zona Libre. Q3 expanding relationships and with existing customers include Alliance Healthcare, Big Lots stores, Cardinal Health, Central Retail Corporation, Chico's retail services, Cotton On, e-store Logistics, Federal-Mogul, Forever Direct, GENCO Distribution, Giant Tiger stores, the Hillman Group, Holiday Classic, Hot Topic, Mitsubishi Fuso Truck and Bus, Mothercare, [WMI] Veterinary Supply, My Chemist, Northern Safety Corporation, Origin Enterprises, Performance Teams Freight Systems, Redmart, Sodimac Colombia, Stella & Dot, Super Retail Group, Thai Beverage, The Men's Warehouse, and We Pak Logistics.

Our professional services business around the world continues to perform very well and receive high marks for customer satisfaction. And as you might expect, our global services teams are in full swing with retail omni-channel supply chain commerce enablement initiatives with over 100 system go-lives in the quarter.

There continues to be strong focus on store execution solutions and multiproduct platform-based implementations, and we expect this trend to continue. We continue to be the leading innovator in supply chain technology. We invested about $12 million in research and development in Q3 with 650 people dedicated to this area.

At the core of our success is our strategy to grow through investment and forward-thinking innovation, and we continue to invest in innovation at a rapid pace to expand our addressable market and deliver market-leading omni-channel capabilities to our customers.

Recently, we were very pleased to be recognized for our omni-channel innovation leadership in Forrester Wave omni-channel order management report that was published in Q3 of 2014. The Forrester report evaluated nine vendors in the omni-channel order management category, reviewing current offering, strategy, and market presence. Manhattan Associates scored the highest of all vendors evaluated in the current offering category and stands out as a leader with the highest scores in customer service, store fulfillment, product roadmap, and vision.

We continue to be position as a leader in the Gartner Magic Quadrant for Warehouse Management Systems -- the latest version, that was published in September. This marks the seventh year that we have been positioned as a leader in this prestigious report. Industry analysts continue to recognize our market-leading solutions and customer satisfaction.

Our warehouse management solution for open systems opened a significant lead over all competitors and received very high praise. A short quote from the report -- WMoS offers industry-leading depth and breadth, leading in releasing a next-generation user interface. And Manhattan is one of the few vendors that can address multichannel commerce on a single platform with competitive offerings in logistics and distributed order management, where many other vendors are strong in one area or weak in others or have solutions on different platforms, end of quote.

We believe that our enduring leadership position in this Magic Quadrant and further separation from our nearest competitor is reflective of our relentless focus on the customer, investment in innovation, and the strong execution of our platform strategy for true supply chain conversions.

In August we broadened our investment in innovation, announcing the acquisition of Global Bay Technologies from VeriFone Incorporated. This investment extends Manhattan's market-leading omni-channel store, inventory fulfillment, and order lifecycle management solutions with a hardware-independent mobile point-of-sale and clienteling set of capabilities. For our customers, this means they now will have the ability to aggregate data that can present a single view of customer buying history across all selling channels, along with a network-wide view of available inventory.

This unique combination allows our retail customers to provide a complete sales and clienteling solution, including best-in-class inventory and order management capabilities to their retail stores, delivering a sophisticated and frictionless retail experience that the new omni-channel shopper has come to expect.

In addition to the Global Bay acquisition, on September 29 of this year we announced the release of the new unique capability within our market-leading omni-channel order management application. We branded it as Available to Commerce. And we are seeing a very favorable reaction to it from the marketplace. Available to Commerce gives retailers the power to offer specific units of inventory available for sale in the most appropriate channel -- online, store, same-day delivery and so on, and then optimize how the order is fulfilled, all based on a variety of strategic planning and daily operational variables.

Traditional inventory visibility systems can really only provide us a view of total inventory on hand, and they are unable to accommodate the business rules or other factors to make specific inventory available for particular channels, delivery methods, or customer types. Available to Commerce takes into account all inventory transactions, synthesizes them with configured business rules, and produces an effective availability picture for all inventory in real-time. Available to Commerce can ensure the profitability and the ability to execute are considered before the fulfillment promise is ultimately made to a consumer. Incidentally, we already have one customer live on our 2014 version of OLM that was released just this past September.

Our investment strategy is primarily driven by market demand for net new capabilities that don't exist today in the market. Digital selling and omni-channel commerce have transformed the way customers shop and have raised the bar for retailers in how they engage with their customers. Store associates today are expected to deliver a customer experience that is engaging, informative, and profitable, as profitability is accurate and efficient. And to do this they must have the ability to see a complete omni-channel view of the customer, sell any unit of inventory across the entire network, and effortlessly handle cross-channel transactions including returns and exchanges.

And the combination of Manhattan's enterprise inventory visibility, order management, and store solutions with global-based point-of-sale and clienteling applications, will deliver the industry's only true omni-channel sales and fulfillment platform. We believe that this new offering represents a notable competitive differentiating capability both for Manhattan Associates and our customers, while at the same time expanding our adjustable market.

As you can tell, at the core of our success continues to be our strategy to grow through investment and innovation coupled with a highly targeted and strategic acquisition strategy. Our supply chain process platform-based suite of solutions, including our omni-channel solutions, distinguishes us from all other competitors. Our R&D team continues to do a really excellent job of driving innovation in all product areas and we continue to deliver more robust and more efficient solutions to the markets we serve.

Turning to our global associates for a moment, we ended Q3 with about 2,750 employees around the globe, up 9% over the prior year. Now, 95% plus of our headcount growth is in our professional services group on strong demand to support top-line growth and customer satisfaction. We finished the quarter with 68 people in sales and sales management, with 61 quota-carrying sales reps, up three heads from last quarter. We continue to be opportunistic and look to add about half a dozen additional talented sales professionals to our Company.

In early October we completed three European customer conferences -- one in the UK, one in central Europe, and one in France. Attendance was terrific at all three of these conferences and the mood was positive, especially given the state of the local economies. While we expected the economies across Europe to continue to be somewhat challenged, particularly in the UK, we are encouraged by our customers' enthusiasm about our solutions and our partnership with them. The focus and interest level and omni-channel was also quite encouraging from all of the industry leaders in those geographies.

And we will close out our international customer conferences for the year in late October with one event in Mexico and another one in Australia, where we expect similar enthusiasm, given the registration level of those events.

So let me close my prepared remarks with a brief summary. We are very, very pleased with our 2014 year-to-date performance, and we remain focused on our customers and getting them commerce ready.

Our relative competitive position continues to be strong and it's improving. We plan to continue to invest in innovation to extend our market leadership and differentiation in supply chain commerce enablement. With the world's most talented supply chain employees, the best software solutions, and great market momentum, we are well-positioned for the balance of 2014 and beyond.

And with that, Chris, I would now be happy to take any questions.

(Operator Instructions) Mark Schappel with Benchmark.

Nice job in the quarter again. Eddie, starting with you, is it fair to assume that you saw the normal competitive suspects in your large deals?

Yes, I think that's -- not a ton has changed in the macro competitive environment. The usual suspects and the usual competitors are out there for us.

Okay, great. And also over the past couple quarters has been a focus -- seemed to be a particular focus from your customers on your in-store inventory and fulfillment solutions. And I was just wondering if that trend continued for the most part this quarter.

Yes, it did. And I think we've talked about it before. We have got a combination of already live or being implemented thousands of stores now on our store inventory and fulfillment solution, which is quite rewarding and provided some terrific benefit for our customers. And as you essentially alluded to, that trend has not slowed down in Q3.

One more question and one for Dennis here. But with respect to your hiring activity, it seemed to slow a little this quarter with only 35 new consultants hired. Was this just a one-quarter blip that we can expect or are you really having a real hard time finding qualified people?

Actually, Mark, we are doing quite a bit of hiring directly off campus. So you will see it will bit of lumpiness based on graduation times and so forth. We generally have two major classes coming in, one at the beginning of the year and one during the typical graduation time at the end of Q2. So as we continue that program you will see a little bit of volatility quarter to quarter.

Okay, great. And then, Dennis, one for you here, with respect to your 2015 preliminary outlook for revenue growth, you mentioned 8% to 9% revenue growth. Was that license or was that just total revenue growth?

Total revenue growth.

Thank you. That's all for me.

Terry Tillman from Raymond James.

I'd echo Mark's comment -- nice job on the quarter. I guess the first question -- it is a macro question. Yesterday a large technology company, NCR, talked about -- when they released numbers, talked about retail being a real area of weakness, I believe. And I know you talk about being cautious overall in the macro. But the license results -- it's four quarters in a row of double-digit license growth in retail. It sounds like it's a strong part of your business. Can you help us reconcile some of these crosscurrents we're hearing on retail and then the consistency you have seen in your business? Is it shifting of prioritization of budgets or how would you reconcile some of these crosscurrents?

A couple different comments in there -- Terry, from our perspective we have yet to see and feel a real tailwind in the global macro economy. So with that, we feel duty bound just to offer a consistent little bit of caution that's out there. That said, we are very pleased with our performance over the last number of quarters, frankly, continue to be very optimistic about the future. So please don't confuse that overall general caution with our optimism and the bright outlook we believe we have going forward.

With regard to NCR's comments around retail and so forth, of course, I don't know their business anything like as well as they do, so I can only tell you what we are seeing. There is strength in retail, for sure, driven by the revolution that we are seeing, the omni-channel phenomenon. We do believe it's still in the early innings, so there's a lot of strength there, we believe, still going forward.

I really can't pass a lot of comments on what NCR is seeing but I would say, from our perspective, we do see the in-store experience moving to a very personal one, a very mobile one, and a hardware-independent clienteling experience. So I don't know if that is something that NCR are on the backside of there or not. But certainly that's the direction that we are seeing, that the in-store hardware is becoming device agnostic.

Jerry, the other thing through the financial eyes is the tough macro economics, not necessarily bad for Manhattan Associates. And given the retail dynamics that Eddie was talking about, we have a long history of driving efficiency in supply chains. But now we are also on that consumer side in terms of driving revenue for our customers as well. So it's a pretty nice dynamic, and I think we are getting recognized or the market is validating our ability to monetize the supply chain.

Okay, got it. And Eddie, as it relates to two deals, or I guess two of the four deals that were omni-channel oriented, I guess was distributed order management or order management product a part of that? And just typically are these omni-channel-led deals -- are the bigger in size than your average deal, in general?

Let's see. So when we refer to -- I guess, as a point of clarification, when we -- we have been doing business for a little while now. When we refer to an omni-channel deal, it's led, generally speaking, by our order lifecycle management solution, Terry. And no WMS component, no TMS component or anything else like that. So generally it's going to be order lifecycle management and probably the store execution components as well, number one.

Number two, obviously we talk about our ASP, and our average selling price, as being [250] to [750]. Two of the deals this quarter were omni-channel related and were double comma or greater than $1 million deals. So certainly above our average selling price. Obviously, we don't go into a ton of details around deal size, but they are commensurate with the larger execution solutions sized deals, WMS or TMS, certainly.

Okay. And I guess, Dennis, a quick question on Global Bay. Should we think about the contribution either in the third quarter or the fourth quarter? Is it immaterial on the software side, any perspective you can give on that and/or its accretion dilution or is it neutral to earnings?

It's slightly dilutive. We would expect it to be neutral to earnings in the back half of 2015 and it's really immaterial on the license side.

Okay. And my last question is just related to the initial outlook for 2015, when you talk about --

And let me add one other thing. From my perspective, Eddie talked about the strategy with Global Bay in his script. I view it as low-risk, high-return potential; the profit is made in the buy, not in the sell.

And again, accretive or modestly accretive starting in the second half of 2015? Or neutral, you said?

Neutral.

Got it, okay. And the last question, Dennis, is for you. If I go back 2011, 2012, 2013 and even in this year, you have comfortably been above 10% total revenue growth. I know that you've had a certain MO in the past -- under promise and over deliver. But initially you are talking 8% to 9% growth. Is there anything to read in the sales coverage, the pipeline activity? Or should we just chalk this up -- you still got a quarter to go in the year this year and just leaving some conservatism in place? Thank you.

Yes, we still got some wood to chop with one quarter left, and we will focus on that. But we are not going to get away -- we like our MO. We don't see anything systemic at this stage but we are going to stick with our MO.

All right, thanks, guys.

(Operator Instructions) There are no further questions at this time. I'll turn the call back over to our presenters.

Good. Thank you, Chris. And thank you, everybody, for joining us this afternoon. We've enjoyed reporting out to you Q3 results, and we will look forward to doing the same for Q4 in about 90 days or so. Bye-bye.

Ladies and gentlemen, this concludes today's conference call. You may now disconnect.