Manhattan Associates (MANH) Q1 FY26 earnings call: guidance and Q&A

How will AI agent pilots progress to scaled revenue through the year, and how many early adopters are allowing agents to operate autonomously?

Eric Clark explained that the 90-day paid pilots are designed to convert to subscriptions, with conversations already underway. He expects scaling to continue throughout the year, with a more meaningful revenue impact in 2027. Most agents are designed for autonomous operation once users are comfortable, leveraging Manhattan's microservices and API-driven architecture for 'headless' functionality.

“Most of our agents are designed to be autonomous if they so choose. So they can be working alongside a user and providing suggestions to a user. And then when the user feels comfortable, they can allow the agent to work autonomously.”

asked by Terrell Tillman · answered by Eric Clark

What drove the stronger-than-expected RPO, and is there commonality in deal timing or size for the 55% net new mix?

Eric Clark attributed the strong RPO to increased deal volume across all deal types, reducing dependence on large deals. He noted good variation in deal size, with the largest two Q1 deals coming from Europe and APAC. The 55% net new logo mix continues a successful trend from the previous year, supported by a strong pipeline and high win rates against competitors.

“Our deal volume across all these types was up in Q1, so not nearly as dependent on large deals. In fact, our largest two deals we closed in the quarter came from Europe and APAC.”

asked by Brian Peterson · answered by Eric Clark

Is the customer mindset shifting towards accelerating modernization campaigns due to AI, especially for on-prem deployments?

Eric Clark confirmed that AI is indeed accelerating modernization. He stated that offering fixed-fee, fixed-timeframe deployments and immediate access to base AI agents upon cloud migration is creating more interest. He noted that about 23% of their on-prem customer base has already converted or started conversion, and that competitors who haven't invested in cloud and unified platforms are losing business to Manhattan.

“We've moved up now to about 23% of our on-prem customer base has converted or started the conversion to the cloud, that we still have a large installed base and a large opportunity to go do additional conversions.”

asked by Joseph Vruwink · answered by Eric Clark

How are the impressive ROI statistics from early AI agent deployments fueling expectations for scaling and customer willingness to pay for agents?

Eric Clark expressed strong confidence, stating that customers are easily justifying the ROI of AI agents, sometimes solely through reductions in overtime. He noted that while the company is conservative on 2026 revenue from AI, the early success and value realization give good confidence for a meaningful impact in 2027. He highlighted the advantage of Manhattan's services team in rapidly deploying agents and demonstrating value.

“When they look at all the different ways they can give value out of these AI agents we aren't seeing customers have a problem justify the ROI of what they're getting. So that gives us pretty good confidence.”

asked by Dylan Becker · answered by Eric Clark

Could you elaborate on the drivers of the cloud revenue upside in Q1 and how sustainable these drivers are going forward?

Linda Pinne explained that the Q1 cloud revenue beat was due to strong execution, one-time cloud overage fees, and lower-than-modeled churn rates on renewals. She emphasized that the one-time overage fees would not recur. For Q2 to Q4, the company is maintaining a conservative outlook, keeping metrics in line with prior disclosures due to macro volatility, despite the strong Q1 performance.

“We also did have some onetime cloud overage fees that would not be recurring. And then as you noted, we had lower than modeled churn on our renewals.”

asked by George Kurosawa · answered by Linda Pinne

Can you provide more details on the forward-deployed engineering concept, including structural changes, hiring, and impact?

Eric Clark stated that Manhattan has added about 120 headcount to its services team in Q1, with another 70 pending or open, driven by demand. These Forward Deployed Engineers (FTEs) are primarily experienced Manhattan personnel from R&D and services, ensuring deep product and supply chain expertise. This team is crucial for quickly creating custom agents and activating base agents, providing a significant advantage over competitors who rely on external consultancies.

“To date, we've added about 120 head count into our services team, and we've got another roughly 70 either pending start or open. So we continue to add talent into our services team.”

asked by George Kurosawa · answered by Eric Clark