Manhattan Associates Inc (MANH) Q2 2021 Earnings Call Transcript

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Manhattan Associates Inc (MANH -10.54%)
Q2 2021 Earnings Call
Jul 27, 2021, 4:15 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good afternoon. My name is Ren, and I will be your conference facilitator today. At this time, I would like to welcome everyone to the Manhattan Associates Q2 2021 Earnings Call. [Operator Instructions] As a reminder, ladies and gentlemen, this call is being recorded today, July 27.

I would now like to introduce Mr. Michael Bauer, Head of Investor Relations of Manhattan Associates. Sir, you may begin.

Michael Bauer -- Head of Investor Relations

Thank you, Ren, and good afternoon, everyone. Welcome to Manhattan Associates 2021 Second 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 the 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 the 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 year 2020 and the risk factor discussion in that report as well as any risk factor updates we provide in our subsequent Form 10-Qs. We note in particular that uncertainty regarding the impact of the COVID-19 pandemic on our performance could cause actual results to differ materially from our projections. We are under no obligation to update these statements. In addition, our comments include certain non-GAAP financial measures in an effort to provide additional information to investors. We have reconciled all non-GAAP measures to the related GAAP measures in accordance with SEC rules. You'll find reconciliation schedules in the Form 8-K we submitted to the SEC earlier today and on our website at manh.com.

Now I'll turn the call over to Eddie.

Eddie Capel -- President and Chief Executive Officer

Thanks, Mike, and good afternoon, everybody, and thank you for joining us as we review our second quarter results and discuss our updated full year outlook. So Q2 and first half 2021 results were an all-time record for Manhattan Associates, with Q2 total revenue increasing 22% to $166 million and adjusted earnings per diluted share increasing 53% to $0.61, and both of these metrics exceeded our expectations. Our global teams are very busy and continue to execute extremely well as broad revenue outperformance translated into strong top line growth and also earnings leverage. Furthermore, demand continues to strengthen for our growing set of cloud solutions, resulting in record second quarter bookings, with RPO increasing 117% year-over-year and 16% sequentially to $489 million. So with momentum accelerating and forward revenue visibility improving, once again, we're increasing our 2021 guidance, including RPO. Now as many of you are aware, our solutions are mission-critical and that we're focused on providing modern, cloud-native solutions that are architected to unify commerce and supply chain experiences.

Our technology is differentiating and industry-leading. And by providing solutions that are scalable, versionless and extensible, our customers are able to adapt more quickly to changing market conditions and are better positioned to profitably scale their businesses. On the sales front, competitive win rates remain strong at about 70% as that commitment to innovation keeps Manhattan Associates atop our industry rankings. From a vertical perspective, retail, manufacturing and wholesale drove more than 80% of our bookings in the quarter. And if we drill in a little to the sub verticals, they're pretty diverse, including apparel, department stores, food and beverage, industrial as well as durable and nondurable goods. Now our Manhattan Active Solution pipeline continues to grow nicely too, benefiting from our market leadership position, our unparalleled technology and global infrastructure and favorable market tailwinds, which are all driving strong demand for our modern, adaptable, scalable and resilient supply chain, inventory and omnichannel solutions. We're experiencing solid demand across all of our product suites. About 90% of our pipeline consists of cloud opportunities with existing customers' conversion accelerating somewhat. And in addition, net new potential customers represent about 40% of the pipeline demand. Americas pipeline is particularly strong, but we're starting to see Europe and APAC strengthen heading into the second half as well. Now our global services team executed amazingly well in Q2.

They conducted over 100 go-lives. And as expected, our Services segment returned to growth in this quarter, increasing 18% compared with the prior year period. Now with strong demand for our services, we're aggressively recruiting talent globally. But like everyone, we expect the market to be extremely competitive for services and technical talent in the second half, which we have factored into our operational planning and guidance. Now on the innovation front, it's still quite early in our journey to unify mission-critical commerce and supply chain systems. But that said, given our solution breadth, industry expertise and commitment to innovation, we are uniquely positioned to successfully do so. With our R&D spend approaching $9 million annually, growing opportunities to innovate within white space and a large opportunity to drive penetration of our Manhattan Active Solutions with new and existing customers, we're very well positioned for long-term sustainable growth. Now as most of you know, in late May and for the second straight year, we held our annual user conference, Momentum Connect, virtually. Like last year, we saw strong registration attendance at the conference, which offered a mix of live sessions and a plethora of on-demand sessions as well. And also for the second year running, we made a major product enhancement, this time regarding our transportation management solution. Now before we get into the details of Manhattan Active Transportation Management, a quick short recap of our multiyear product strategy is probably in order.

And back in 2014, we started on our mission to modernize our product lines to ensure both Manhattan and our customers were strategically positioned for future needs. Our strategy really had two key elements: relaunching our industry-leading solutions like WMS, OMS and TMS as true cloud native solutions, and leveraging our leading-edge cloud-native platform to create solution capability and unification to a degree that really was previously impossible. Now in 2017, we launched Manhattan Active Omni, the first of these unified cloud native suite of solutions. Manhattan Active Omni unifies contact center, order management, customer engagement point of sale and store inventory and fulfillment into a single offering. It allows our customers to deliver unparalleled omnichannel customer experiences without ever needing to install additional applications or ever perform an upgrade. Now in 2020, we shipped Manhattan Active Warehouse Management, the industry's first Tier one cloud native WMS. And this year, at Momentum Connect, we announced Manhattan Active Transportation Management, where the industry's fastest and smartest multimodal transportation optimization engine. And together with Manhattan Active WM, Manhattan Active TM forms the Manhattan Active Supply Chain, the industry's first unified supply chain execution platform. And we believe Manhattan Active Supply chain is really a game changer for our customers.

For the last couple of decades, we've had a front row seat to see the challenges and opportunities that come with integrating WMS and TMS in high-volume, high-complexity digital supply chains. And along the way, we came to realize that the way to solve this problem was not just better integration, but rather through a truly unified distribution and transportation solution. And fortunately, the advent of micro services and a cloud-native architecture presented us with the unique opportunity to build such a unified offering. And we launched it in May of this year. Solution unification delivers some obvious benefits like single user experiences for all things, supply chain execution, a dramatically simplified integration picture and a common technology platform for our customers to extend the solution and innovate alongside us. But we believe the opportunities that the unified supply chain platform brings are actually much larger than that. Unification of a WMS and a TMS allows us to solve entirely new set of problems, a holistic approach to solving problems that benefits our customers in our base application. And it also allows them to solve problems creatively using our entire catalog of micro services. And perhaps most importantly of all, it allows our customers to break down their organizational silos between distribution and transportation and to think about optimizing inventory flow and customer deliveries. Because now more than ever, supply chain professionals are effectively customer service associates because their actions directly impact customer outcomes and brand loyalty.

So Manhattan Active Supply Chain comprises the newly Manhattan Active Transportation Management, combined with Manhattan Active Warehouse Management. And frankly, it's been a great first year for Manhattan Active WM. Market response for Manhattan Active WM has really exceeded our expectations, and our product and delivery teams are fully engaged with a busy summer of go-lives. In hindsight, it does appear that there was a significant market demand for a Tier one cloud-native WMS. And this quarter's new Manhattan Active WM subscriptions continue to show a nice diversification of geographies and industries and a nice mix of net new WM logos and conversions from our existing on-premise WMS. And early reports that customers are seeing significant benefit from innovations like customer-grade mobile experience for warehouse associates, order streaming and its first-of-a-kind employee engagement capability built directly into WMS. Now I'll close out my product remarks today with just a few updates on our other major Manhattan Active platforms, Manhattan Active Omni. Last quarter, I updated you on some pretty nice signings and growing pipeline for our point-of-sale application. And this quarter, I will tell you a little bit about what we're seeing in order management. We kicked off projects this year at a number of large, well-known global retailers to implement our core order management applications. And not only will they activate core OMS, they'll also take advantage of the Manhattan exclusive innovations like interactive inventory for dynamic order promising.

And they're also using NAV digital self-service capabilities to allow their customers to change order pickup windows, to create their own returns, to create their own exchanges, all directly on their own mobile devices. And we continue to push the boundaries of the problems we solve with Manhattan Active Omni. And with an increasing frequency of our omnichannel micro services that are at the center of our customers' headless commerce architectures, all for the future good of the industry. Now that concludes my brief business update.

Dennis is going to provide you with an update on our financial performance and outlook, and then I'll close our prepared remarks with a brief summary before we move to Q&A. So Dennis?

Dennis Story -- Executive Vice President and Chief Financial Officer

Thanks, Eddie. And as Eddie mentioned, record Q2 and first half results in nearly every major metric category, we put up record numbers. Growth, profitability, cash flow and balance sheet results were all solid for the quarter. Our quality of earnings performance was outstanding top to bottom. There are no onetime adjustments in these results, just great execution. And here is the summary of Q2 financial highlights, which includes our guidance for total revenue, operating profit and earnings per share. You also can refer to today's earnings release for our adjusted and GAAP guidance. Also, unless otherwise stated, growth rates are on a year-over-year basis. So total revenue was up $166 million -- or was $166 million, up 22%. Our outperformance was broadened across all revenue line items. Like Q1, we again experienced notable strength in cloud. Based on our strong first half and second half outlook, we are raising our total revenue guidance from our previous range of $625 million to $640 million to $643 million to $650 million. So our new range is: $643 million to $650 million on total revenue, targeting 10% growth at the midpoint of $646 million. Our underlying total revenue growth, excluding license and maintenance, which removes the revenue compression from our cloud transition, is targeted to be 18% at the midpoint. And for Q3, we expect total revenue of $162 million to $165 million or 9% growth at the midpoint. For adjusted EPS, EPS was up $0.61 or was $0.61, up 53%, and GAAP EPS was $0.48. For adjusted EPS, we are raising our full year guidance range to $2 to $2.06, with a midpoint of $2.03, up 23% from our previous midpoint of $1.65.

For GAAP earnings per share, our guidance range is $1.50 to $1.56, with a midpoint of $1.53. And that's up 33% from our previous midpoint of $1.15. For Q3, we expect adjusted EPS to be $0.53 to $0.55. Moving to revenue lines. Cloud revenue was $29 million, up 55%. For Q3, we expect cloud revenue of roughly $30.5 million and are raising our previous full year 2021 cloud revenue estimate of $111 million to $113 million. We're raising that up to $117 million to $119 million, equating to 48% growth at the midpoint. Q2 was a record second quarter with RPO, with bookings totaling $489 million, up 117% year-over-year and 16% sequentially. With RPO continuing to compound positively, our visibility into future subscription revenue continues to strengthen. As mentioned in Q1, we will update our forward-looking guidepost on our Q4 call, and we intend to guide RPO on an annual basis as bookings can be lumpy, primarily based on sales cycle timing, the number and relative value of large deals and product mix from quarter-to-quarter. That said, with our strong year-to-date RPO performance, we are raising our 2021 estimate of $450 million to $550 million to $550 million to $600 million. License revenue for the quarter was $8.8 million as our base of existing customers added users in the quarter. And maintenance revenue was up -- or, I'm sorry, was $38 million, up 5% on license revenue and solid cash collections. As previously discussed, we expect second half license and maintenance revenue to decline on customer conversions to cloud, which is positive for our company, our customers, RPO and future subscription revenue growth.

We expect license to decline to about $6 million in Q3 and $4.5 million in Q4. For maintenance revenue, we are targeting roughly $36 million in Q3 and $35.5 million in Q4. For perspective, on cloud demand full year 2020, license revenue was down 22% and maintenance down 1%. Our 2021 forecast has license down about 54% in the second half and down 29% for the full year. No question, cloud demand is outstripping license. Maintenance will be down about 1% for full year 2021. Also, maintenance will have a longer attrition tail as customers typically maintain customer support through the cloud conversion cycle. Moving to services revenue. Services revenue was $85 million, up 18%, with our cloud momentum fueling our services and revenue growth. Our Q3 services revenue estimate is $86 million. And for Q4, our estimate is $83 million. The sequential decline is driven by Q4 retail peak season impact as customers typically idle implementations. And our final revenue line, hardware, delivered $6 million in revenue, up 66%. So that covers growth. How about profitability? Our consolidated subscription, maintenance and services margin for the quarter was 55.9%, up over 350 basis points compared to the year ago period, And it was predominantly driven by revenue performance and cloud operating leverage.

We expect Q3 consolidated cloud subscription, maintenance and services margin to be about 55.2% and Q4 margin to be 52.7%, again driven by retail peak season resulting in a second half margin of approximately 54%, ahead of our prior outlook of 51.1%. And how about the bottom line? Q2 operating income totaled $50 million, up 46%. Operating margin was 30.2%, up over 490 basis points. GAAP operating margin was 23.7%. We are increasing our full year adjusted operating margin range to 25.5% to 26%, up about 400 basis points over prior guidance of 21% to 22%. For Q3, we expect a range of 27% to 27.5%, and for Q4, a range estimate of 22.5% to 23%. Just a reminder, our second half license and maintenance at TRID expectations, combined with Q4 retail peak seasonality, is factored into our Q4 estimates. That said, we are very pleased with our earnings leverage, and we are continuing to invest significantly in our business to drive long-term sustainable, double-digit top line growth balanced with top quartile operating margins. Now turning to cash, cash flow, taxes and cap structure, another solid performance. We closed with Q2 cash on hand totaling $209 million with 0 debt. Our operating cash flow was $46 million, resulting in year-to-date operating cash flow of $85 million, up 41%. Our Q2 free cash flow margin was 27%. And note, our capex estimate for 2021 continues to be $6 million to $8 million. Also, we invested $33 million in share buybacks in Q2, resulting in $60 million in buybacks year-to-date. For the third quarter and full year, we estimate our diluted shares outstanding to be about 64.4 million shares, which assumes no buyback activity.

And also our Board raised our buyback authority to $50 million. Regarding taxes, our adjusted effective income tax rate for Q2 was 21.7% and our GAAP tax rate was 23%. For full year 2021, we continue to expect an adjusted tax rate of about 21.5% and a GAAP tax rate of approximately 20%. So that covers the financial update.

Thank you, and back to Eddie.

Eddie Capel -- President and Chief Executive Officer

Very good. Thanks, Dennis. Well, we're very pleased with our strong second quarter and year-to-date results. And while the global macro environment remains somewhat turbulent, Manhattan Associates is entering into the second half of 2021 with some tailwinds. We've accelerated the pace of our innovation and are delivering the right solutions at the right time. And the result is a strong business momentum and a great opportunity for us to deliver success to our customers and help shape their digital transformation. Now before opening it up for questions, I do want to take this opportunity to thank all of my Manhattan Associate teammates across the globe. Many of you have started to return to our offices, and I continue to be inspired by your flexibility, resilience and ongoing commitment to ensure our customers are successful. So thanks again.

Dennis Story -- Executive Vice President and Chief Financial Officer

I'll second that.

Eddie Capel -- President and Chief Executive Officer

Ren, we're now open to take questions.

Questions and Answers:

Operator

[Operator Instructions] Your first question comes from the line of Terry Tillman from Truist Securities. Your line is open.

Terry Tillman -- Truist Securities -- Analyst

Hey gentlemen good afternoon. And definitely, congratulations on the results and the outlook update. I have two questions. First one, Eddie, for you, in terms of now delivering on the innovation around Active WM and TM and combined, are you actually seeing sales cycles where they actually want to buy both of the products at the same time?

Or is it more of a differentiator and it's just helping spur the conversations and improve close rates on just either/or? That's the first question.

Eddie Capel -- President and Chief Executive Officer

Yeah. Good question, Terry. Well, it's early. Of course, we're six weeks past release of Manhattan Active TM. But the answer is yes.

We have sold, at least one, comes to mind, brand new customer, so new logo, not done business with us before. And they contracted for both Manhattan Active WM and Manhattan Active TM. So we feel pretty good about that and off to a good start six weeks in.

Terry Tillman -- Truist Securities -- Analyst

That's great. And then, just a follow-up question, Dennis, for you, and thanks for all the financial color.

It's -- what I'm curious about is, I think I forgot if it was the fourth quarter or the first quarter call, I think it was the fourth quarter call, you gave us kind of a long-term road map and how, like the cloud subscription revenue, how it's going to layer on from this growing RPO.

But what I'm curious about is, yes, you guys are well ahead of expectations on RPO. But also your cloud subscription revenue's been coming along faster than I would have expected.

Does that change kind of how the glide path or the acceleration curve is going to be, that you talked about in a couple of years on cloud subscription revenue? Or could it be maybe more evened out because of what you're seeing? Thank you.

Dennis Story -- Executive Vice President and Chief Financial Officer

It is the former versus the latter, Terry. It will change. And we'll address that -- we'll address those updates in the Q4 call for sure, great forward visibility.

Terry Tillman -- Truist Securities -- Analyst

Sounds great.

Operator

Your next question comes from the line of Joe Vruwink from Baird. Your line is open.

Joe Vruwink -- Baird -- Analyst

Great. Hi everyone. I wanted to go to the comments just on existing customers, maybe choosing to migrate a little more quickly, where I think you said, it's accelerating somewhat.

Is that just a function of maybe time and comfort, the fact that we're over a year now with Active WM end market. So there's been a chance to see it. There's, maybe some reference examples.

Or is there something else going on there where, given what's happening from an industry backdrop, just the elevated importance of supply chain, maybe comfort with cloud ultimately feeds in as well that more customers are arriving at the conclusion that now is the right time to maybe embrace the new product?

Eddie Capel -- President and Chief Executive Officer

Yeah, yeah, I think you answered the question well there, Joe. We're a year in or a year or so, and certainly, it takes a little time.

Not so much from a referenceability perspective, but the budgeting cycles and even though our existing customers, if you want to call them sales cycles, take a while. And we're starting to see more of them come to fruition, but also the accelerating need for digital transformation in that core supply chain execution space.

We've talked about this before that distribution centers don't look the same today as they did five or certainly 10 years ago. And the need for that modern software engine and technology to be able to power those distribution centers is certainly something that's fueling the growth, too.

Joe Vruwink -- Baird -- Analyst

Okay. That's great. And then, just on the development of cloud and other gross margins and the upside you're starting to see, I guess, bigger picture because there's a couple of quarters in a row now of sequential gross margin improvement.

Do you think you're at the point within the context of the broader transition and really the investment in cloud infrastructure and personnel that you've been making over a number of years now?

You're at a point where there just should be greater leverage behind that past investment. And so understandably, there's, seasonal changes in gross margin. But maybe as we look to the out years, there is an opportunity to build on 2021's levels?

Eddie Capel -- President and Chief Executive Officer

Yeah. Well, Dennis will take some of the details here as well. But certainly, there's opportunity to build on scale and leverage and so forth. I do think we had a virtual Momentum conference this year, so we ended some underspend there, frankly.

We still have the opportunity that we believe to invest more in marketing and awareness. We're doing OK, clearly, but we've got to get the message out and make sure we're not one of the world's best kept secrets from a technology and a supply chain perspective. So there's still some underspend there from our perspective. And we'll continue to make those investments as well as material investments in research and development.

Dennis Story -- Executive Vice President and Chief Financial Officer

Yes, Joe, I'll piggyback on Eddie, too. So we're in year four or five, so I'd say we're probably -- when we look at where we're at, we're probably a year ahead of what we expected. We're pretty excited about that. But bottom-line is, is we're going to continue to invest in T&T, and that's talent and technology.

We think we -- our overall objective is, as I said in this call and continue to say is, is the objective is really to create long-term sustainable double-digit top-line growth and be a top quartile margin performer against any tech comps out there. And I think we're doing pretty good there.

Joe Vruwink -- Baird -- Analyst

Okay. That's great. Thank you very much.

Eddie Capel -- President and Chief Executive Officer

Thank you, Joe.

Operator

Your next question comes from the line of Brian Peterson from Raymond James. Your line is open.

Brian Peterson -- Raymond James -- Analyst

Thank you, all and congrats on a really strong RPO number. So Dennis, maybe a follow-up on that last question. I think we've seen the initial outlook over the last three years imply a decline in operating margins. But now we're seeing expansion in 2020. We'll see margins up again this year. I know there's still a lot of moving parts, but are we at the point where we can kind of call a trough in operating margins? Or is there any dynamic related to hiring or investments that we need to keep in mind there?

Dennis Story -- Executive Vice President and Chief Financial Officer

We're not going to call a trough at this stage. So we'll evaluate that and discuss that in the Q4 earnings call, Brian. We are going to continue to invest in the business. But suffice to say, we're pretty confident in our ability to generate operating leverage.

Brian Peterson -- Raymond James -- Analyst

Got it. And maybe just one follow-up for me on the RPO. That was pretty strong again this quarter. I'm curious, if you had to look back in the first half of the year, and clearly, RPO exceeded our expectations. Do you think the upside was more related to volume or just like the sales cycles or maybe related to deal value in any way that you could kind of slice and dice it that way? Just be curious to get your thoughts there. Thanks, guys.

Dennis Story -- Executive Vice President and Chief Financial Officer

It's pretty balanced, Brian, actually. So we've seen nice deal volume. We've seen some bigger deals. Not much, but a little bit on the longer contract side. So a really nice balance that's driving that RPO number, frankly.

Eddie Capel -- President and Chief Executive Officer

Yes, we're seeing a nice balance of not just our installed base but net new customers in our portfolio as well, pretty exciting.

Brian Peterson -- Raymond James -- Analyst

Good to hear. Thanks, guys.

Dennis Story -- Executive Vice President and Chief Financial Officer

Thank you, Brian.

Operator

Your next question comes from the line of Mark Schappel from Benchmark. Your line is open.

Mark Schappel -- Benchmark -- Analyst

Hi. Good afternoon and thank you for taking my question. Let me start off by saying congratulations. Nice job on the quarter, another good quarter. Driving -- I just want to drive down into some of the drivers of growth in the quarter. Were there particular product areas that you saw certain outperformance more so than others? I mean, it appears just based on some of your commentary in your prepared remarks that WMS kind of led the way. Is that a good read?

Dennis Story -- Executive Vice President and Chief Financial Officer

Certainly, WMS was the preponderance. You know our heritage there and so forth, and it tends to be sort of the lead product. But much like Q1, there was a very nice balance across the product portfolio.

WMS was strong for sure, and it was the lead dog. But MAO really stepped up in Q2 and delivered some nice numbers and TMS point of sale and inventory participated as well. So pretty nice balance, frankly.

Eddie Capel -- President and Chief Executive Officer

Yes. And the pipeline is -- it continues to strengthen as well. So we're...

Dennis Story -- Executive Vice President and Chief Financial Officer

Similar -- yes, similar balance in the pipeline.

Mark Schappel -- Benchmark -- Analyst

Okay. Great. And then just diving down a little bit on the point of sale product that you're having on the Q1 call, you know that you were seeing a pickup in some large point-of-sale projects. And the sense was that retailers were just kind of restarting some of the strategic initiatives that they had. And I was wondering if that momentum carried over into the second quarter here. It appears that it did.

Eddie Capel -- President and Chief Executive Officer

Yes. Yes, continues to have nice momentum. The good news is that some of these implementation time lines are getting shorter and shorter. So we've actually had three point-of-sale customers go live in just the last -- the back half of this quarter. And the nice thing about the point-of-sale pipeline for us is about 50% of the pipeline, again, brand new customers that we've never done business with before. So this is -- as we've said many, many times, not going to be an overnight success. But we really do feel like the flywheel, given the wins, some go-lives we're getting under our belt now and the pipeline, that we're starting to see the flywheel pick up some momentum.

Mark Schappel -- Benchmark -- Analyst

Okay. Very good. And then finally here -- just stepping back, taking like a 30,000-foot view, Eddie, based on the over performance, it appears that you're seeing a sense of heightened urgency from your customers regarding modernizing their supply chains. And just I wonder if you could just address how customers are maybe thinking differently about supply chain modernization today than say were a year or two ago.

Eddie Capel -- President and Chief Executive Officer

Yes. Well, I think a combination of needing or recognizing that they need resilience in the supply chain. They need contingency in the supply chain. And frankly, it's a very competitive world out there. I said a little bit of a different way than I said in the script. Supply chain these days is a customer service attribute, right? So each one of the customer -- supply chain associates and our customers feel like they're customer service advocates. And so I think the need continues to grow. The need continues to heighten, to bring supply chain to the forefront and be a competitive differentiator for our customers.

Mark Schappel -- Benchmark -- Analyst

Okay. Great. Thank you. That's all for me.

Eddie Capel -- President and Chief Executive Officer

Thanks for your question. Nice job.

Dennis Story -- Executive Vice President and Chief Financial Officer

Thanks, Mark.

Operator

Your next question comes from the line of Yun Kim from Loop Capital Markets. Your line is open.

Yun Kim -- Loop Capital Markets -- Analyst

Thank you. So congrats on another strong quarter, Eddie and Dennis.

Eddie Capel -- President and Chief Executive Officer

Thank you.

Yun Kim -- Loop Capital Markets -- Analyst

So yes, Eddie, Nelda rolled out at the PM. I believe that's the last of the high-profile products to be activated into the Active product family, if I could say that. So can you just give us an update on what your overall thoughts on what's next? Maybe this is a good time to update us on your acquisition strategy? Thanks.

Eddie Capel -- President and Chief Executive Officer

Yes. Still plenty of work to do in the supply chain space. We have frankly, a much longer list of innovations in the hopper than we can get through in the next quarter or 2. So we're continuing to bear down on the investment strategy, build out the innovation into the white space that we see.

I do think that there's a couple of areas in addition to the constant build-out, the constant changing markets, that drive new needs in the Omni suite of solutions into WMS, into TMS. There's two categories, I think, that are popping out as a continuum. One is greater and greater levels of customer engagement. And so all of this work in digital self-service, what we've called consumer-grade CRM still, I think, is a very vibrant market and a white space for us to drive into.

And then the second piece is inventory optimization. I'm not suggesting that any of our customers or the market is not focused on inventory optimization, but there is still a real race to drive customer satisfaction and meet all of those SLAs. And we have yet to see a real acute focus on inventory optimization in the omnichannel world. And we believe that's coming, and we're investing out ahead of that trend.

Yun Kim -- Loop Capital Markets -- Analyst

Okay. That's great. Thanks. And Dennis, we used to get a metric in a number of deals above $1 million in the good old license revenue days. So how should we think about what is a similar metric for large subscription deals. Should we look at it from the total RPO perspective? Like should we be asking you how much of your RPO growth is driven by these large deals or something like that? Just wanted to get your sense on how we should assess your overall kind of exposure to big deal activity? Because you have mentioned that RPO growth could be lumpy, depending on the sizable bookings and whatnot. Thanks.

Dennis Story -- Executive Vice President and Chief Financial Officer

Yes. So from an RPO point of view, it can be lumpy from quarter-to-quarter. But bottom line is, is it's compounding from a growth point of view, and that's a very linear line, in essence. So that's from a -- what I would judge our performance by is really the RPO, overall RPO growth from quarter to quarter and the guidance we're giving.

Yun Kim -- Loop Capital Markets -- Analyst

Got you. And then a question that I always ask, any meaningful change in the overall contract links that may have a meaningful impact on the RPO?

Eddie Capel -- President and Chief Executive Officer

No.

Dennis Story -- Executive Vice President and Chief Financial Officer

No. Not at all.

Yun Kim -- Loop Capital Markets -- Analyst

All right. Sounds good. Thank you very much.

Eddie Capel -- President and Chief Executive Officer

Thank you, Yun.

Operator

[Operator Instructions] Your next question comes from the line of Matt Pfau from William Blair. Your line is open.

Matt Pfau -- William Blair -- Analyst

Hey, guys. Thanks for taking my questions. Eddie, I think in your prepared remarks, you mentioned that you are seeing existing customers accelerate their conversion to the cloud. Maybe just care to expand on those comments a little bit on in terms of what's driving that?

Eddie Capel -- President and Chief Executive Officer

I just think timing, Matt, for the most part. We're about a year from release upgrade cycles, budgeting for upgrade cycles and so forth, take some time. So I think that's one factor. And then the continuing need to modernize the distribution center and get access to -- get almost immediate access to the innovation that we're developing.

Dennis Story -- Executive Vice President and Chief Financial Officer

Hey Matt, the other -- just jumping in here is, is a broader suite of solutions. We've been delivering new innovation over the last four years. And what we're seeing is really from a pipeline build and just in the sales process, pretty nice diversity across the solutions.

Matt Pfau -- William Blair -- Analyst

Got it. And then from a geographic perspective, I think you called out the Americas as being particularly strong in the pipeline, but also seen some improvement in EMEA and APAC. Is that just driven by America reopening quicker, being more open than some of those other geographies? Or what's sort of behind the pipeline strength there?

Eddie Capel -- President and Chief Executive Officer

Yes, I think that's it, Matt. Because even within APAC and an EMEA returning, you can see the sort of the micro trends. There are certain countries and so forth that are still lagging from a perspective of opening and opening up the doors and so forth. So yes, I just think it's a little bit of a lag and a little bit of timing there before we see the same kind of modernization trends really start to blossom in those -- in this market, but we can certainly see it. I think it's on the doorstep, frankly.

Matt Pfau -- William Blair -- Analyst

Okay. That's all I have. Thanks a lot.

Eddie Capel -- President and Chief Executive Officer

Thank you, Matt. See you.

Operator

Your next question comes from the line of Mark Zgutowicz from Rosenblatt Securities. Your line is open.

Mark Zgutowicz -- Rosenblatt Securities -- Analyst

Thank you. good evening, guys.

Eddie Capel -- President and Chief Executive Officer

Hey, Mark.

Dennis Story -- Executive Vice President and Chief Financial Officer

Hi, Mark.

Mark Zgutowicz -- Rosenblatt Securities -- Analyst

Just a quick follow-up to the earlier question on the RPO strength. Obviously, blew through it through just the first couple of quarters. And I was wondering how much of your original guidance had -- or how much macro conservatism might have been built in? And sort of how that may or may not still be extended into the second half of the year, relative to the obvious incremental strength that you've been seeing?

Eddie Capel -- President and Chief Executive Officer

Yes. I mean there's a question coming into the year, we were a little cautious about how things were going to shape up here and around the world. But now we -- obviously, we're seeing the demand. We're seeing the bookings. We're seeing the pipeline grow. So, feeling stronger about it, and so the raises across the board. So, we are -- we certainly try to be an under-promise, over-deliver organization. So, we'd like to keep that trend going. But I think as you can see from the raises that we provided, that we've delivered and guidance that we've given and so forth, we're not exactly holding back, now we're feeling more confident.

Mark Zgutowicz -- Rosenblatt Securities -- Analyst

Got it. And just last one on Europe. A comment on strength there, just to follow on to the last question. Is there some quantification to that strength? Or is it too early to tell just how strong Europe will come back? Just maybe some color as you're looking at Europe over the next six to 12 months.

Eddie Capel -- President and Chief Executive Officer

It's just been a little flatter. I mean a little flatter relative to the US over the last two or three quarters. And we see it coming back to normality, if you want -- if you'd like to put it that way. Typically, we've seen Europe represent somewhere between 12% and 15% of software revenues. And it's been a little lower not materially, but a little bit lower than that for the last couple of three quarters. And we see it coming back to normal ranges here in the near future.

Mark Zgutowicz -- Rosenblatt Securities -- Analyst

Got it. Awesome. Thanks guys.

Eddie Capel -- President and Chief Executive Officer

Our pleasure, Mark. Thank you.

Operator

[Operator Closing Remarks]

Duration: 47 minutes

Call participants:

Michael Bauer -- Head of Investor Relations

Eddie Capel -- President and Chief Executive Officer

Dennis Story -- Executive Vice President and Chief Financial Officer

Terry Tillman -- Truist Securities -- Analyst

Joe Vruwink -- Baird -- Analyst

Brian Peterson -- Raymond James -- Analyst

Mark Schappel -- Benchmark -- Analyst

Yun Kim -- Loop Capital Markets -- Analyst

Matt Pfau -- William Blair -- Analyst

Mark Zgutowicz -- Rosenblatt Securities -- Analyst

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