What's the right amount of notice to give the market for a major transition in the C-suite? Supply chain and inventory software provider Manhattan Associates (MANH 6.88%) announced the retirement of now-former CEO Eddie Capel just two days before changes went into effect. After shares fell 11% on the unexpected announcement on Monday, Feb. 10, the company hosted an investor webinar on Wednesday to take questions about what's next for Capel and to introduce the new CEO at the helm, Eric Clark. Here's what investors shouldn't miss.
"I'm not going anywhere."
As announced earlier this week, Capel is retiring from his roles as CEO and president and shifting to a seat on the board as executive vice chairman. Additionally, with Chairman John J. Huntz Jr. expected to depart the board in May, Capel would then assume the role of executive chairman, continuing his 25 years of tenure at the company.
Capel described how succession planning had been an ongoing discussion with the board for roughly a decade, and an exhaustive search for the next CEO started in earnest about two and a half years ago. When asked why Manhattan Associates didn't set expectations months or years ago, while the search was ongoing, he said that management wanted to have a candidate in place before making any announcement. As Capel put it, an early announcement would have been a distraction for employees, especially without a hard deadline in place.
Listeners to the conference call heard relatively little from incoming CEO Eric Clark, but he made sure to praise the culture he was entering at Manhattan Associates and outline that his first priorities would be to embed himself with the leadership team to listen and learn more about the problems the company is solving for its customers. While such a comment might seem innocuous, its humility is refreshing.
NASDAQ: MANH
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With a new captain at the helm, management reiterated its full-year guidance for sales growth to slow into low single digits in 2025, with CFO Dennis Story remarking on the continued mantra to underpromise and overdeliver. This tempered guidance of only 2% to 3% revenue growth for the year ahead sent shares plummeting in late January -- the stock fell 24% after the earnings report.
But there's reason for optimism. Despite notable macro headwinds, the company is coming off a quarter of record bookings and surpassing $1 billion in full-year revenue for the first time. Management repeatedly returned to continued growth in cloud subscription RPO (remaining performance obligations) alongside a shifting revenue mix as drivers for future success. Since its services revenue lags software bookings, cloud RPO is a leading indicator for the future health of Manhattan's business.
While the services segment might grow in the single digits at the best of times, the cloud segment grew 28% in 2024 and could sustain growth rates of 20% in the years ahead -- especially when the average cloud contract duration is 5.5 years. Management noted that it expects cloud subscriptions to overtake services revenue by the fourth quarter of 2026. If that occurs, investors might be able to look forward to some top-line reacceleration in 2026.
Foolish investors might want to keep an eye on Manhattan's international ambitions under Clark as well. Monday's press release highlighted his global senior leadership positions, and Clark himself made a point to mention his experience leading abroad in yesterday's (Wednesday's) webinar. Furthermore, Capel highlighted several recently won cloud customers on the January earnings call, and the key word that several held in common was "global."
It's been just two years since Manhattan started referring to itself as a global technology company, and while less than a quarter of its revenue currently comes from outside of the Americas, we'll be keeping an eye out for an increasing number of mentions in future earnings calls.
