Manhattan Runs the Warehouse Record Agents Must Check, and Owners Kept 259 Million Dollars Last Year

Owner cash after capex and all stock pay

$258.9M

Twelve months ended Sep 30, 2026, our calculation

Owner cash as a share of revenue

22.4%

Twelve months ended Sep 30, 2026, our calculation

Remaining performance obligations growth

25%

Sep 30, 2026 against a year earlier, company figure

1. Our call: Buy, because Manhattan runs the warehouse and order floor and has kept cash for six straight years

Our call: Buy. Manhattan Associates sells the software that tells a warehouse what to pick, a store what to ship and a carrier what to move, and it now sells nearly all of it as cloud subscriptions on one codebase.

Over the twelve months ended Sep 30, 2026, operating cash flow was $390.4M, capital spending was $10.8M and stock pay was $120.7M, leaving $258.9M of owner cash, 22.4% of $1,156.6M of revenue, our calculation from SEC XBRL ^[2][11]. Owner cash has been positive every year from fiscal 2020 to 2025, rising from $104.8M to $262.7M, our calculation ^[11].

Growth comes from the cloud. Cloud subscription revenue rose 28% to $134.4M in the third quarter, and remaining performance obligations, the contracted revenue not yet recognized, reached $2.59B, up 25% from a year earlier ^[2].

Total revenue rose 11% to $306.2M because services, the other half of revenue, grew only 1% to $134.4M ^[2].

The question this piece answers is whether software agents will make warehouse and order systems less needed or more. Our view is more: an agent that promises a delivery date or reroutes an order still needs a system that knows where every unit sits, and that system is what Manhattan sells ^[1][3].

2. Manhattan spends 12% of revenue on research this year and keeps about a fifth as profit

2b. Manhattan owns the execution record, but prices by subscription, not by outcome

Manhattan sells warehouse, transportation and order management, point of sale and supply chain planning software, mostly as cloud subscriptions under the Manhattan Active brand, plus the services to implement it ^[1]. In the third quarter cloud subscriptions were $134.4M, services $134.4M, maintenance $29.2M, hardware $4.5M and software licenses $3.6M ^[2].

One pass, two partials and a fail. The strength is the record itself: inventory and order data sit inside Manhattan's system and customers sign multi-year terms for it ^[3].

The weakness is that the company has not yet shown agents as a separate revenue line, and its pricing does not rise when its software does more of the work ^[2][3]

3. Revenue grows about 9% a year as cloud replaces license and maintenance

Fiscal 2025 growth slowed to 3.7% because license and maintenance revenue shrank faster as customers moved to the cloud, our calculation ^[11]. Over the nine months ended Sep 30, 2026, maintenance fell 8% to $90.3M and software licenses fell to $7.8M from $12.2M, while cloud subscriptions rose 26% to $378.3M, our calculation ^[2].

Services are the swing line. Services revenue was $393.2M over the nine months, up 3%, our calculation, and services are close to half of revenue ^[2].

Services revenue depends on how many customers start large implementations, so it moves with customer spending budgets more than cloud subscriptions do ^[1].

Management guides 2026 revenue to $1,176M to $1,178M, up 9%, with a GAAP operating margin of 24.1% to 24.3% ^[2]. Cloud is now 44% of quarterly revenue, against 38% a year earlier, our calculation ^[2].

4. Contracted revenue of $2.59B shows customers are committing for years

Remaining performance obligations were $2.59B at Sep 30, 2026, up from $2.47B at Jun 30 and up 25% from a year earlier ^[2]. The company expects to recognize about 40% of them over the next 24 months and most of the rest over the following 36 months ^[3].

That backlog is large against the cloud line: about $1.0B due over two years, our calculation, against $378.3M of cloud revenue in the first nine months of 2026 ^[2][3]. It also tells us contract lengths are long, which supports the idea that customers see these systems as hard to replace ^[3].

The 10-K lists the competition as customer IT departments building their own tools; enterprise resource planning vendors Oracle, SAP and Infor; supply chain vendors including Blue Yonder, E2Open, Infios, SAS Institute, IBM's Sterling Commerce and Relex; and point of sale vendors including Aptos, Jumpmind and Salesforce ^[1].

The 10-K describes the product as one versionless codebase that every customer runs, with new features released each quarter

5. Selling costs rose faster than revenue as management pushes for growth

Third-quarter GAAP operating income rose 7% to $81.0M, a 26.5% margin against 27.5% a year earlier, our calculation ^[2]. Sales and marketing expense rose $8.7M to $26.8M as the company expanded its sales force and marketing to speed up revenue growth, the 10-Q says ^[3].

Over the nine months, operating income was flat at $212.2M against $212.8M, after $8.3M of restructuring expense from the June headcount cut ^[2]. Net income fell 4% to $161.0M because the tax provision rose to $58.4M from $49.4M ^[2].

On Jun 1, 2026 the company cut global headcount by about 6%, expecting $7M to $9M of mostly cash severance costs in the second quarter ^[5]. It had about 4,370 employees at Dec 31, 2025 ^[1].

6. Owners kept $258.9M after capex and all stock pay

Capital spending is purchases of property and equipment; the XBRL filings show no separate line for capitalized software, so there is nothing further to deduct ^[11]. Stock pay is the full equity-based compensation expense ^[11].

Owner cash grew at about 18% a year from fiscal 2021 to 2025, our calculation ^[11].

Stock pay is heavy. It was 30.9% of operating cash flow over the twelve months, our calculation, and management guides it to 10.4% of 2026 revenue ^[2][11].

Shareholders approved 3,000,000 more shares for the equity plan in May 2026, about 5% of the 59,162,073 shares outstanding at the record date, our calculation ^[7][8].

Cash collection slowed in the third quarter. Operating cash flow fell to $68.6M from $93.1M, and days sales outstanding rose to 81 from 67 at Jun 30

7. Buybacks outran cash this year, drawing down the cash balance

Over the nine months, the company bought back 2,162,089 shares for $325.0M under its program, and total repurchase payments, which include shares withheld for employee taxes, were $356.9M against $243.3M of operating cash flow ^[2][11]. Cash and cash equivalents fell to $199.4M from $328.7M at Dec 31, 2025 ^[3].

The board raised the buyback authorization to $500M in March 2026, and about $175.0M remained after the third quarter ^[2]. Shares outstanding fell to 58,061,274 at Sep 30, 2026 from 59,845,291 at Dec 31, 2025, our count from XBRL, a 3.0% drop, our calculation ^[11].

Diluted weighted shares were 64.3M in fiscal 2021 and 58.7M in the third quarter ^[2][11].

The balance sheet carries no debt, and the company says it does not expect to need any in 2026 for general corporate purposes ^[3]. Shareholders' equity fell to $200.7M from $314.8M over the nine months as buybacks exceeded earnings ^[3].

That leaves buybacks limited by cash on hand, so the pace of the first nine months cannot continue without either more cash generation or debt

8. Services weakness, cash timing and governance changes are the main risks

Risks. Services: services revenue grew 1% in the third quarter and depends on new implementation starts, so a pause in customer projects would hit nearly half of revenue ^[1][2].

Competition: ERP vendors such as SAP and Oracle bundle warehouse and order tools with their own systems ^[1]. Collections: days sales outstanding rose to 81 from 67 at Jun 30, 2026 ^[2].

Agent risk: the 10-K lists risks from the company's own use of generative and agent software ^[1].

Governance. On Oct 22, 2026 the board adopted bylaw amendments that require holders to own 1% of shares before bringing a derivative suit and name the Georgia Business Court and federal courts as exclusive forums for certain claims ^[4].

These limit shareholder recourse and were adopted without a shareholder vote ^[4].

Catalysts: fourth quarter and full-year 2026 results, expected in late January 2027, a date the company has not yet confirmed

9. Six positive years support valuing the business on owner cash

Owner cash has been positive for six straight years, from $104.8M in fiscal 2020 to $262.7M in fiscal 2025, and $258.9M over the latest twelve months, our calculation ^[11]. That record meets our standard for valuing the business on owner cash rather than on hope.

The balance sheet is clean but thinner. Cash fell $129.3M in nine months, our calculation, almost all of it to buybacks ^[3].

We value the business on owner cash of roughly $260M a year growing with cloud subscriptions, and we would lower our base if twelve-month owner cash drops below $220M.

10. Agents still need to know where the stock is, and Manhattan knows

Tailwind. An agent that promises a customer a delivery date, splits an order across stores or books a truck must check live inventory and labor in the warehouse, and Manhattan's systems hold that data for its customers ^[1].

Management has named Manhattan Active Agents as a first priority for cash in 2026 ^[3].

The risk to this view is that agents built by ERP vendors or by customers call Manhattan's data as a cheap utility while capturing the value themselves ^[1]. Manhattan prices by subscription, so if agents do more of the planning work, Manhattan's revenue does not rise with it ^[3].

We would want to see agent products priced separately before giving the connection test a pass.

The single-codebase design is the best defense: every customer runs the same current version, so an agent written once works for all of them ^[1].

11. A new CEO, a new CFO and a chairman who stepped back

Eric Clark became President and CEO on Feb 12, 2025, succeeding Eddie Capel ^[10]. Capel became Executive Chairman in May 2025 and moved to non-executive, non-employee Chairman on Jan 1, 2026, with Thomas Noonan as Lead Independent Director ^[9][10].

Changes by 8-K. On Feb 26, 2026 the company said CFO Dennis Story, in the role since March 2006, would retire from it on Mar 31, 2026 and stay as advisor to the CEO through Dec 31, 2026; Linda Pinne, Chief Accounting Officer since January 2016, became Senior Vice President, Chief Financial Officer, Chief Accounting Officer and Treasurer ^[6].

On Oct 27, 2026 the company reported that Juan Perez was elected a Class III director, to start Jan 28, 2027 ^[4].

Votes. At the May 14, 2026 annual meeting, Linda Hollembaek was re-elected with 24.6% of votes cast against, Eddie Capel with 14.4% against and Charles Moran with 8.8% against, and the pay vote drew 10.5% against, our calculations ^[7].

Vanguard held 11%, BlackRock 10%, AllianceBernstein 5% and FMR 5% as of March 2, 2026 ^[10].

12. The questions we would ask management, and the calls we are tracking

Question one: why did days sales outstanding jump to 81, and when will it return to the high 60s?

Question two: how will buybacks be paced now that cash is down to about $200M?

Question three: when will Manhattan Active Agents be priced and reported separately?

Question four: what has to happen for services revenue to grow again?

Question five: what return is expected from the sales and marketing increase? That answer sets our conviction.

Prediction one: 2026 revenue lands at or above $1,176M (80%).

Prediction two: fourth quarter 2026 cloud subscription revenue grows at least 25% (65%).

Prediction three: days sales outstanding is below 75 at Dec 31, 2026 (55%).

Prediction four: twelve-month owner cash stays above $220M through Jun 30, 2027 (75%).

Prediction five: cash and cash equivalents are above $150M at Dec 31, 2026 (70%).

Filing notes. The Oct 27, 2026 8-K lists Item 2.01 in its index data, but the filing covers results and director and bylaw changes ^[4].

Repurchase payments in XBRL exceed the program total because they include shares withheld for taxes ^[2][11]. The release notes an unusual health insurance claim excluded from adjusted results in 2025 ^[2]

Bottom line: Manhattan runs the execution record and has paid owners for six years

Manhattan's warehouse and order systems hold the live inventory data that agents must check, and customers have committed $2.59B of future revenue to them ^[2]. Owners kept $258.9M over the latest twelve months after capex and all stock pay, and owner cash has been positive for six straight years, our calculation ^[11].

Services are flat, collections slowed and buybacks outran cash this year, so conviction is moderate. We would move to Hold if twelve-month owner cash falls below $220M or cloud growth drops under 20% for two quarters, and to conviction 4 if days sales outstanding returns below 70 and agent products show separate revenue.

Our call: Buy, conviction 3 of 5.