There's been a lot of demand for companies trying to take advantage of the cloud computing revolution, and the demand for innovative cloud solutions has led many companies to seek to offer platforms that can meet their clients' needs. Manhattan Associates (NASDAQ:MANH) has worked hard to integrate supply chain management tools into a user-friendly cloud format, and over the long run, that's been an important key to the company's long-term growth prospects.

Coming into Tuesday's fourth-quarter financial report, investors were prepared to deal with some less-than-stellar financial results as the company continued to make its transformation toward becoming fully in line with developments in cloud computing. Yet sales and earnings dipped from year-ago levels, forcing investors to be patient once more. Let's take a closer look at Manhattan Associates and what's ahead for the supply chain specialist.

Infographic showing pieces of Manhattan Active Solutions platform as three blue circles integrated into a helix-shaped structure.

Image source: Manhattan Associates.

Manhattan Associates faces headwinds

Manhattan Associates' fourth-quarter results showed some of the same difficulties that the company has faced in recent quarters. Revenue was down 2.4% to $144.1 million, which was a bit worse than most of those following the stock had expected to see. Net income was down a steeper 18%, and even after accounting for one-time issues, adjusted earnings of $0.45 per share were still down from year-earlier levels and just matched the consensus forecast among investors.

Tax reform had a net negative impact in the immediate term. The company took a $2.8 million net charge in the quarter, with the charged blamed on both taxes on foreign earnings and the revaluation of deferred tax assets.

There was a tug-of-war among Manhattan Associates' various revenue sources. Cloud subscription revenue more than doubled from the year-ago quarter, but it still made up just a puny 2% of total sales. Maintenance and hardware-based revenue were also higher compared to the prior year's quarter. But huge declines in software licensing revenue showed the impact that can come from moving toward a recurring revenue model, and a sizable drop in services-based revenue also hurt Manhattan's top line.

Manhattan Associates kept seeing weakness concentrated close to home. In Europe, the Middle East, and Africa, sales gains amounted to almost 25%, and operating income jumped more than a third. The Asia-Pacific segment saw smaller but still marked progress from year-ago levels. But performance in the Americas was weak, with a 7% drop in segment sales translating to 8% lower profits.

CEO Eddie Capel was pleased with the results. "Q4 and full-year 2017 marked a pivotal beginning to our cloud transformation," Capel said, noting that "deal volume and competitive win rates were strong with better-than-anticipated market enthusiasm for our recently launched Manhattan Active Omni Solution." He explained that some license sales got pushed into 2018, but that should help support future results.

Can Manhattan Associates keep growing?

Manhattan Associates was also optimistic about its future. In Capel's words, "We expect ongoing growth of our Manhattan Active cloud offerings as customers seek a cloud-first approach."

Unfortunately, its guidance suggests another tough year before the company can fully turn the corner in its transition efforts. Total revenue for the year of $546 million to $558 million would represent further decreases of 6% to 8% from 2017 figures. Weaker operating margin figures will keep adjusted earnings moving lower as well, with a range of $1.48 to $1.52 per share working out to a roughly 20% drop from the just-ended year. That will require investors to keep being patient as Manhattan works to keep taking steps toward full cloud integration.

Shareholders in Manhattan Associates didn't like that delay, and the stock was down about 5% in after-hours trading following the announcement. The supply chain services provider's future hinges on being efficient in its transformative efforts, and it's uncertain how much more time Manhattan Associates will have to get the job done before it risks getting left behind by competitors.

Dan Caplinger has no position in any of the stocks mentioned. The Motley Fool recommends Manhattan Associates. The Motley Fool has a disclosure policy.