What happened

Shares of supply chain, omnichannel, and inventory software company Manhattan Associates (NASDAQ:MANH) fell as much as 15.6% on Wednesday morning after the company reported its fourth-quarter and full-year 2017 results. The stock is down about 15% at the time of this writing.

Investors may be disappointed by the company's worse-than-expected revenue, and its weak outlook for 2018. It's in the midst of a transformation intended to shift its business to cloud-first solutions, which led to weakness in legacy client solutions -- namely software licensing and services.

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So what

Manhattan reported revenue of $144.1 million, down from $147.6 million in the year-ago quarter. Year-over-year decreases in licensing and services revenue were the primary reasons for that drop. On average, analysts were expecting revenue of about $144.6 million. 

Non-GAAP adjusted earnings for the quarter were $0.45 per share, down from $0.46 per share in the year-ago quarter. This was in line with analysts' consensus estimate for the key metric. 

Despite Manhattan's lower revenue and EPS, CEO Eddie Capel said its Q4 and full year "marked a pivotal beginning" to the company's cloud transformation. To his credit, cloud subscription revenue in Q4 more than doubled from the year-ago quarter, from $1.4 million to $3.2 million.

Now what

Looking ahead, Manhattan's guidance suggests it will have more headwinds to overcome before its cloud-first transformation gains enough steam to return consolidated results to growth.

The company said it expected 2018 revenue of between $546 million and $558 million, which would amount to an 6% to 8% decline in revenue. Non-GAAP EPS is forecast to land between $1.48 and $1.52, down 19% to 21%.

Of course, investors will want to watch Manhattan's cloud subscriptions closely in 2018 to see if the sharp growth rate persists. Fortunately, Capel said the company expects "ongoing growth of our Manhattan Active cloud offerings as customers seek a cloud-first approach."

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