Manhattan Associates Inc

NASDAQ:MANH

Earnings Call Analysis

Manhattan Associates reports strong earnings and raises 2024 guidance

Manhattan Associates reported record Q2 2024 results, with revenue up 15% to $265 million and adjusted EPS up 34% to $1.18. This growth was driven by a 35% increase in cloud revenue and a 10% rise in services revenue. The company expects 2024 revenue between $1.036 billion and $1.044 billion, reflecting 17% growth excluding licenses and maintenance. Operating margins are projected to increase to 32.1%. Manhattan also announced continued investments in innovation and share repurchases totaling $148 million year-to-date. The strong financial position is supported by $203 million in cash and zero debt .

Introduction

On the latest earnings call, Manhattan Associates showcased a stellar performance in Q2 2024, setting new records across multiple financial metrics. The company’s strategic focus on cloud solutions and robust execution across global markets were central to this success.

Financial Performance

Manhattan Associates reported a 15% year-over-year rise in total revenue, reaching $265 million. Adjusted earnings per share soared by 34% to $1.18. Key drivers included a 35% increase in cloud revenue and a 10% boost in services revenue. This impressive growth was backed by strong performance across all geographical regions and customer segments, particularly retail, manufacturing, and wholesale【4:0†source】.

Revenue Forecast

The company lifted its full-year revenue outlook for 2024, projecting total annual revenue to range between $1.036 billion and $1.044 billion. This represents a midpoint growth of 17% when excluding license and maintenance revenue. For Q3, revenue is expected to be between $261 million and $265 million, accounting for peak retail seasonality【4:2†source】【4:7†source】.

Operating Margins

Manhattan Associates also reported a strong increase in adjusted operating profit, which rose by 36% to $93 million. The adjusted operating margin improved by 540 basis points year-over-year, reaching 35%. This growth was attributed to the scalability of its cloud business and increased services revenue【4:2†source】【4:7†source】.

Cash Flow and Share Buybacks

Operating cash flow grew significantly by 81% to $73 million in Q2, resulting in a 27% free cash flow margin and a 36% adjusted EBITDA margin. The company ended the quarter with $203 million in cash and no debt. Additionally, Manhattan Associates repurchased $75 million in shares during the quarter, bringing the year-to-date total to $148 million【4:2†source】【4:6†source】.

Bookings and Pipeline

The company reported a 29% increase in RPO (remaining performance obligations), reaching over $1.6 billion—a testament to strong demand for its cloud solutions. Competitive win rates remained solid at about 75%, and 20% of new Q2 bookings came from new clients. The company’s diverse client base and high customer satisfaction are expected to sustain future growth【4:0†source】【4:15†source】.

Product Innovation

Manhattan Associates continues to push the envelope with new product developments. A notable upcoming release is Manhattan Active Supply Chain Planning, expected to debut in the fall of 2024. This innovation integrates supply chain planning and execution, providing customers with real-time optimization and improved operational efficiency【4:3†source】【4:18†source】.

Generative AI Initiatives

The company also announced Manhattan Active Maven, a generative AI-powered customer service tool designed to enhance both consumer-facing interactions and contact center efficiency. Additionally, Manhattan Assist will provide AI-driven guidance across all Manhattan Active applications, helping clients maximize their investment value【4:4†source】【4:17†source】.

Guidance

Looking forward, Manhattan Associates raised its adjusted earnings per share guidance for the full year 2024 to $4.26, reflecting a 9% increase from the prior midpoint of $3.90. For Q3, adjusted EPS is estimated to be $1.06, while GAAP EPS for the same period is projected to be $0.74【4:6†source】.

Conclusion

In summary, Manhattan Associates demonstrated a robust performance in Q2 2024 and remains optimistic about its growth trajectory despite global economic uncertainties. The company’s investments in cloud services, innovative product launches, and strategic market positioning are expected to drive sustained growth and shareholder value in the coming quarters【4:0†source】【4:7†source】.

Earnings Call Transcript 2024-Q2

[Operator]

Good afternoon. My name is Alicia, and I'll be your conference facilitator today. At this time, I would like to welcome everyone to the Manhattan Associates Q2 2024 Conference Call. [Operator Instructions] As a reminder, ladies and gentlemen, this call is being recorded today, July 23, 2024. I would now like to introduce you to your host, Michael [indiscernible], Head of Investor Relations of Manhattan Associates. Mr. Bayer, you may begin your conference.

[Unknown Executive]

Great. Thanks, Alicia, and good afternoon, everyone. Welcome to Manhattan Associates 2024 Second Quarter Earnings Call. I will review our cautionary language and then turn the call over to Eddie Capel, our CEO. During this call, including the question-and-answer session, we may make forward-looking statements regarding the future events or the future financial performance of Manhattan Associates. We caution that these forward-looking statements involve risks and uncertainties, are not guarantees of future performance and that actual results may differ materially from the projections we contain in our forward-looking statements.

I refer you to the reports Manhattan Associates files with the SEC for important factors that could cause actual results to differ materially from those in our projections, particularly our annual report on Form 10-K for fiscal year 2023 and the Risk Factor discussion in that report as well as any risk factor updates we provide on subsequent Form 10-Qs. Please note [indiscernible] global macro environment could impact our performance and cause actual results to differ materially from our projections.

We are under no obligation to update these statements. In addition, our comments include certain non-GAAP financial measures to provide additional information to investors. We have reconciled all non-GAAP measures to the related GAAP measures in accordance with SEC rules. You'll find reconciliation [indiscernible] Form 8-K we submitted to the SEC earlier today and on our website at manh.com.

Now I'll turn the call over to Eddie.

[Eddie Capel, executive]

All right. Thanks, Mike. Well, good afternoon, everyone, and thanks for joining us as we review our second quarter results and discuss our increased full year financial 2024 outlook. Manhattan delivered record Q2 and first half results. For the quarter, total revenue increased 15% to $265 million and adjusted earnings per share increased 34% to $1.18, both exceeding our expectations. Driving the top line outperformance and earnings leverage was 35% growth in cloud revenue and 10% growth in services revenue. And this encompasses double-digit top line growth across all of our geographies as our global teams continue to execute very well for our customers. While the global macro environment certainly remains volatile, Manhattan's business is solid, and we're very optimistic about our business opportunity.

Demand for our solutions are robust, customer satisfaction is high, and investment in R&D and our associates continue to widen our technological leadership across our supply chain planning, execution and omnichannel retail offerings. Now RPO, the leading indicator of our growth increased 29% to just over $1.6 billion. Demand for our mission-critical cloud solutions remains strong and resilient across all of our product portfolio. From a vertical perspective, retail, manufacturing and wholesale continue to drive more than 80% of our bookings in the quarter. And across our solutions, the sub-verticals are pretty diverse.

For example, in the quarter, deals won include a global apparel and home fashions retailer, a global developer and manufacturer of construction equipment, a grocery chain, a global manufacturer of HVAC and refrigeration products, a global supply chain management company, a beauty and wellness retailer as well as a number of others. Overall, competitive win rates remained solid at about 75%. 20% of our Q2 new bookings were generated from net new logos, and we continue to have a healthy mix of conversions, upsells and cross-sells. And while the timing of large deals and bookings mix will certainly vary on a quarterly basis, we believe our sales breadth exemplifies the many and varied opportunities for sustainable future growth.

The key to this growth and steady execution is unparalleled combination of industry-leading solutions and world-class service that we provide to our customers. Our best-of-breed cloud native platform and solutions provide continuous access to innovation and are key component of our customer success. These mission-critical solutions help our clients strengthen their relationships with their end customers, drive more revenue and improve efficiency.

These powerful benefits are translating into record solutions pipeline for us with new potential customers representing about 35% of the demand as solid product demand is also fueling opportunities for growth of our internal services organization as well as the growing roster of Manhattan value partners. Now like the last few quarters, our global services team completed over 100 go-lives in Q2 and continued to perform very well for our customers. And while we remain appropriately cautious on the global economy, we continue to invest to drive growth from our numerous opportunities.

This includes monetizing strategic investments in industry-leading innovation, further enablement of our customer success and the expansion of our addressable market. From a hiring perspective, we've hired just over 100 new team members year-to-date and plan on continuing a hiring posture for the remainder of the year. Turning now to just a few updates on our products. But before I cover the important new product announcements we made in May at Momentum Customer Conference, I'd like to highlight some recent external validation of the innovation that we've been within applications. Certainly, well, the most important validation we get is from our customers, and it is also gratifying to see our products recognized by some of these third parties.

So first, we had 2 of our applications, named Innovation of the Year by 2 industry publications. The first recipient was our recently released Fulfillment Experience Insights dashboard, part of Manhattan Active Omni. This new capability allows the Manhattan Active Omni customers to benchmark that omnichannel fulfillment performance against a group of peers. And Manhattan Yard Management was also an as an Innovation of the Year. This is part of our Manhattan Active Supply Chain Execution platform and the solution unifies distribution and logistics where they come together in the physical world. And a quick mention of the most recently published Gartner Magic Quadrant for warehouse management and transportation management.

For the 16th consecutive year, Manhattan was the definitive leader in the WMS Magic Quadrant. And for the sixth consecutive year, Manhattan was amongst a small group of vendors in the leaders category in the TMS Magic Quadrant. And we're certainly very appreciative of Gartner's recognition of our serial investment in innovation. Now let's turn to a couple of important product updates. First, let's talk about generative AI. As I've mentioned on prior calls, since the initial availability of generative AI models, our engineers have been hard at work designing and building and testing, of course, generative AI-based capabilities.

At Momentum, we announced the first of these capabilities in the form of a new product called Manhattan Active Maven, part of our Manhattan Active Omni platform, the Manhattan Active Maven is a gen AI-powered application, which provides both best-in-class consumer-facing chatbots and the powerful set of capabilities to assist contact center agents. Generative AI technologies, provided they've been trained on the right underlying data, particularly are well suited to automating customer service tasks because of their ability to answer a very wide range of questions. And leveraging on the underlying data is where the Manhattan Active platform really shines, because from day 1, we've built the Manhattan Active platform applications as API first.

Literally, everything in our applications and everything our applications do is available via an API. And this approach gives Manhattan a major advantage when it comes to leveraging generative AI. Our API first approach is one of the key reasons Manhattan Active Maven is proving to be so very powerful.

Going forward beyond answering the basic questions of where is my order, Maven can answer detailed questions about payments, check inventory at local stores or even change delivery methods for orders that are already being processed. Manhattan Active Maven also provides power efficiency and enhancing capabilities for call center agents as well. Manhattan Active Maven makes its debut this month [indiscernible] Manhattan Active platform applications will get better and better and better each quarter thereafter. At Momentum, we also announced Manhattan Assist, a gen AI-powered feature available across all Manhattan Active applications.

Manhattan Assist's first set of capabilities is focused on helping our customers get maximum value from their investments in our platform applications. Our users can now ask Assist detailed questions about the best way to achieve a particular business objective, how to configure a specific behavior and then be guided directly to the relevant configuration screens. And last, but certainly not least though, I'd like to spend a few minutes talking about the biggest announcement that we made a few months back at Momentum. Coming this fall, we'll be releasing Manhattan Active Supply Chain Planning, the culmination of about a decade of investment to move our enterprise applications to an industry-leading cloud-native platform.

The release of Manhattan Active Supply Chain Planning will complete our work to fully transform our solution portfolio to be a cloud-first. And just as importantly, we'll be the first and only vendor to enable a unified cloud-native offering, spanning both Supply Chain Planning and Supply Chain Execution. And consistent with the vision that we brought to market with Manhattan Active Omni and Manhattan Active Supply Chain Execution, Manhattan Active Supply Chain Planning customers will benefit substantially from the power of unification.

Now in this case, unification works at several levels. First, via composable set of APIs we use to unify demand forecasting, allocation and replenishment all into a single application. The vast majority of businesses you see distribute and sell both allocated and replenished products. And today, this dual inventory flow method really necessitates either using 2 disparate systems with the enterprise or planning one pool of item without systemic support for all of them.

For the first time, customers are going to be able to use a single-demand forecast to drive both allocated and replenished products. But it's actually the second and larger form of unification, which is proving to be the most exciting and interesting to our customers so far. We call this next level of unification, unified business planning because it enables our customers to drive their inventory, labor and transportation forecasts, all from a single demand forecast [indiscernible]. Now our supply chain practitioners are going to be able to achieve everything from a transportation forecast on a particular outbound transit lane 6 months out [indiscernible] and everything in between.

And this detailed operational forecast enables much more effective labor planning and ensuring that adequate labor capacity to meet customer demand and orders is driven without expensive overtime. On the transportation front, the ability for our customers to collaborate with the strategic carriers using detailed transportation capacity forecast, ensure that they've got the exact capacity they need at the best of available rates, limiting how often they have to go out to the spot market. But beyond forecast visibility, Manhattan Active and Supply Chain Planning is going to enable dynamic collaboration between planning and execution, whether it's turning an inbound purchase order quantity to enable the more efficient transportation or dynamically changing the quantities of in-flight store replenishment orders based upon the very latest sales data. Manhattan Active Supply Chain Planning uses dynamic, always on optimization to process and adjust the plan in real time based on sales and operating data.

It's truly the first of a kind, and we're very excited to debut this in the fall of this year. Now this concludes my business update. Dennis is going to provide you with an update on our financial performance and outlook. And then I'll close our prepared remarks with a brief summary before we move to Q&A. So Dennis?

[Dennis Story, executive]

Thanks, Eddie. Our Manhattan global team has continued to execute well in a challenging macro environment. For the quarter, we delivered a strong balanced financial performance across top line growth, operating margin and cash flow. This includes posting record results across RPO, revenue, operating income and adjusted earnings per share. On an as-reported basis, our Q2 results came in at the rule of 50, and if our revenue growth has normalized for our cloud transition, which excludes license and maintenance revenue, our results exceeded the rule of 50.

FX did not have a meaningful impact to RPO or revenue in the quarter, also in reviewing our financial performance, growth rates are on a year-over-year basis unless otherwise stated. For the quarter, total revenue was $265 million, up 15%, that's a double-digit. Excluding license and maintenance revenue, which removes the compression driven by our cloud transition, our total revenue was up 19%. Cloud revenue totaled $82 million, which was up 35%. We ended the quarter with RPO of $1.6 billion, up 29% compared to the prior year and up 6% sequentially.

This solid performance was driven by a healthy mix of sales from both new and existing customers and transactions from across our Manhattan Active suite of products. Growth was partially offset by some deals pushing into future periods at quarter end. On an FX adjusted basis, our first half RPO will track towards the high end of our RPO guidance. And as Eddie highlighted, we are entering the second half of 2024 with a record pipeline and are confident in our ability to hit our bookings goals.

Our global services teams delivered record revenue totaling $137 million, up 10%. This was in line with our expectations as cloud sales continue to fuel services, revenue growth for Manhattan. Adjusted operating profit was $93 million, up 36% with adjusted operating margin of 35%.

This is up 540 basis points year-over-year. Our performance was driven by strong cloud and services revenue growth, combined with operating leverage as our cloud business continues to scale. Importantly, as Eddie discussed, we are very optimistic on our business opportunity and continue to invest in innovation to drive sustainable long-term growth. Turning to earnings per share. We delivered Q2 adjusted earnings per share of $1.18, up 34% and GAAP earnings per share of $0.85, up 35%.

Moving to cash. Q2 operating cash flow increased 81% to a solid $73 million. This resulted in 27% free cash flow margin and 36% adjusted EBITDA margin. The difference is due to $35 million in cash taxes paid in the quarter. Year-to-date, our operating cash flow is up 29% to $128 million. Regarding the balance sheet, total deferred revenue increased 14% to $260 million. We ended the quarter with $203 million in cash and zero debt.

Accordingly, we leveraged our strong cash position and invested $75 million in share repurchases in the quarter, resulting in $148 million in buybacks year-to-date. Also, our Board has approved the replenishment of our $75 million share repurchase authority. So that covers the Q2 summary, which our associates delivered 13 double-digit returns on key metrics in the quarter.

Now on to our updated 2024 guidance. As consistently mentioned, our financial objective is to deliver sustainable double-digit top line growth and top quartile operating margins benchmarked against enterprise SaaS comps. These are important drivers to our best-in-class return on invested capital as we maintain a balanced investment approach to growth and profitability. With our solid first half performance, we are again raising our 2024 revenue, operating margin and earnings per share guidance, which can be found in today's earnings release. We are also reiterating our 2024 RPO target range and midpoint of $1.78 billion.

As noted on the prior earnings calls, our objective is to update our RPO outlook on an annual basis. And lastly, on RPO, as previously noted, our bookings performance is impacted by the number and relative value of large deals we close in any quarter, which can potentially cause lumpiness or nonlinear bookings throughout the year. With that, for the full year 2024, we expect total revenue of $1.036 billion, to $1.044 billion with $1.04 billion midpoint comparing favorably to our prior outlook and representing 17% growth, excluding license and maintenance and 12% all-in.

For Q3, we are targeting total revenue of $261 million to $265 million accounting for retail peak seasonality. For Q4, we're targeting a midpoint of $257 million. For adjusted operating margin, we are increasing the midpoint to 32.1% from our prior midpoint of 29.8%, which includes a 120 basis point headwind from our license and maintenance revenue attrition to cloud. And as Eddie highlighted, given the combination of our demand and size of our opportunity, we continue to invest in our business.

At the midpoint, we are targeting Q3 adjusted operating margin of 31.5% and accounting for retail peak seasonality of 30.5% in Q4. Our full year adjusted earnings per share is increasing by $0.36 to $4.26, up 9% from our prior midpoint of $3.90. On a quarterly basis, we are targeting Q3 earnings per share of $1.06 and accounting for retail peak seasonality of $1 in Q4. Similarly, for GAAP earnings per share, our midpoint increases by $0.30 to $3.12. For Q3, we are targeting GAAP earnings per share of $0.74.

Here are some additional details on our 2024 outlook. We are increasing our cloud revenue midpoint to $334.5 million, representing 31% growth. On a quarterly basis, we are targeting $85 million in Q3 and $89 million in Q4.

Due to the timing of project go-lives and several deal pushes, we are tweaking our services forecast slightly lower by $4 million to $535 million to $539 million, with the $537 million midpoint representing 10% growth. On a quarterly basis, we are targeting Q3 services revenue of $136 million and accounted for retail peak seasonality $130 million in Q4. For maintenance, our midpoint upticks to $134 million, which represents a 7% decline.

On a quarterly basis, we are targeting $34 million in Q3 and $30 million in Q4. For consolidated subscription, maintenance and services margin, we are targeting 140 basis points of margin improvement for the year. Finally, we expect our tax rate to be 21.5% for Q3 and Q4 and our diluted share count to be 62.2 million shares, which assumes no buyback activity.

So that covers the financial update. I'll turn it back to Eddie.

[Eddie Capel, executive]

Okay. Thanks, Dennis. It's terrific. Well, we're certainly very pleased with our second quarter and our first half results. Of course, we continue to be appropriately cautious on the volatile macro conditions that are out there. And there's no doubt that we experienced a little more choppiness this quarter than we usually do, but clearly, our business fundamentals are very solid. We continue to be very optimistic about expanding our market opportunity and we entered the second half of 2024 certainly from a position of strength. So we thank everybody for joining the call, and thank you to our global team for all the great work that they are doing for our customers out there in the field. So that concludes our prepared remarks. And Alicia, we'd be happy to take any questions.

[Operator]

[Operator Instructions] Our first question is from Terry Tillman with Truist Securities.

[Terrell Tillman, analyst]

And I guess I would say congratulations, especially on the operating margin and the operating profit. It's very impressive. I'm going to go a little bit different here and ask maybe 2.5 questions versus 2 questions. So hopefully that's okay. But maybe the first question for you, Eddie, is you have a large WMS installed base. I think I asked last quarter or the quarter prior as well. Just where are we now in the cycle in terms of folks somewhere in the journey of kicking off a move to cloud WMS.

So whether they've signed deals, they're in flight or they're fully up and running, just whether it's sites or percentage of the installed base? Would love to get an update on that. And then I had, like I said, maybe 1.5 other questions.

[Eddie Capel, executive]

Sure. Certainly, Terry. In terms of migrating our existing customers to the cloud, we're about 15% through the journey. Now I've said that we think the journey is about a 6- or 7-year journey. Now to be clear, I've been saying it's a 6- or 7-year journey for about 1.5 years now. It does seem to sort of extend that a little bit. But I still think that horizon is about what we're looking at. Maybe there'll be a couple of stragglers at the end of it. But to specifically answer your question, within a couple of decimal places, we're about 15% through the migration.

[Terrell Tillman, analyst]

Got it. That's helpful, Eddie. And I guess maybe the second question and then I have just one more follow-up. If we look at demand, so whether it's WMS or your other SKUs, how does it feel from a geo perspective across the different geographies you're in? You talked about a couple of large deals or deals that slip, but overall, it sounded pretty solid. But what are you seeing? Is it pretty balanced across deals? Or do you see any kind of interesting patterns across geos? And then I have a follow-up.

[Eddie Capel, executive]

Yes, it's pretty balanced, Terry, across geos and across products. I would say that given we focus mostly on finished goods, less on manufacturing and with a little bit of tension between the U.S. and China, Chinese market is probably a little flatter, but it's a very small piece of our business to begin with. So honestly, the flatness there, you don't really see. It's not terribly consequential to the overall top line.

[Terrell Tillman, analyst]

Got it. And then just the last question for you, Dennis. I mean 27%, if I have this right, free cash flow margin is pretty strong. And that's, I guess, with $35 million or so in cash taxes. Can you share whether it's in the third quarter or the second half? Is it about the same level of cash taxes you're assuming? Or do you get a little bit of benefit in the second half or less of a headwind?

[Dennis Story, executive]

It's about the same level, Terry. So it will be in the neighborhood of $35 million to $38 million in the second half.

[Terrell Tillman, analyst]

In the second half, not per quarter, second half?

[Dennis Story, executive]

That's right. Basically, we'll spread it across the second half.

[Operator]

Our next question comes from the line of Joe Vruwink with Baird.

[Joseph Vruwink, analyst]

I wanted to start by asking about the opportunity created within SAP's installed base by needing to migrate off legacy on-prem versions of their WMS and ERP. I think Manhattan has already signed customers that initiated RFPs because of these migration events. Do you think this is starting to register more prominently in your pipeline activity? Or could it actually become bigger as end-of-life dates approach. I think there's one next year and then also in 2027.

[Eddie Capel, executive]

Yes, it's a good question, Joe. I mean it's certainly not anything that we're banking on, to be perfectly honest with you. But it is, I would say a sort of a growing trend. We've seen some customers being quite public about it, frankly.

They're moving from on-prem to S/4HANA moving to the cloud with SAP. It's a like-for-like move for them. And they -- the customers that we have concluded that they need to innovate in the supply chain area and fortunately have chosen us to be able to do that. They tend to be the larger global players. So the decision-making process is not super fast or anything but it's very strategic for us.

And I think there's more of it to come. It's not going to be hundreds of customers or anything like that, I don't think, but it will be a strategic advantage for us to be able to provide that immediate access to innovation in areas that they needed.

[Joseph Vruwink, analyst]

Okay. That's great. And then maybe another strategic advantage for you. So your qualitative comments, Eddie, about just the deals signed in the quarter, you mentioned a number of global customers and brands. I don't quite remember the global [indiscernible] as often as this quarter. I guess, are these bigger deals by virtue of being with global accounts and is the global scope something that is maybe a bit new relative to the demand you've seen so far?

[Eddie Capel, executive]

Now I'd like to tell you, it was something new. But we've got a lot of global customers, Joe. There was a nice spread this quarter. There's no question, both across vertical and across geo, but honestly, it wasn't a particularly unusual this quarter.

[Operator]

Our next question comes from the line of Brian Peterson with Raymond James.

[Brian Peterson, analyst]

So Eddie, you had a lot of product innovation. You mentioned at Momentum, 11 new products that are coming to market later this year. I'd be curious -- as we think about maybe the next 12 to 18 months in that cross-sell opportunity, what are you most excited about?

[Eddie Capel, executive]

Wow, that's a great question. That's a great question. I'm excited about a lot of things. I really am. I mean certainly, Supply Chain Planning that we announced at Momentum a couple of months ago, it launches right at the end of Q3, this quarter for us is very exciting. It's a journey, frankly, and something that the supply chain software industry has been chasing for decades now to bring together supply chain planning and supply chain execution on a truly unified platform.

And we're the first one to get there and so forth. And obviously, we're excited. We're excited about the opportunity, and we're excited for the first mover opportunity. I would tell you that I continue to be very excited about our opportunity in point-of-sale and retail store systems before you ask, we didn't actually close any point-of-sale deals in Q2, but that does not dived my enthusiasm at all. The pipeline is pretty stack for us. We continue to have very encouraging conversations, both with existing customers and new prospects in that area.

And making what we think is really good progress. We did have some nice new go-lives in the quarter with customers that we signed in prior quarters going live for the first time with point-of-sale in Q2. But listen, let us not lose our focus on warehouse management. It continues to be a very important part of our portfolio. We've got a terrific pipeline for WMS as well.

So I'm pretty much going to that portfolio to tell you I'm excited about everything we're doing. But I suppose, in the near term, the true release of Supply Chain Planning in the fall would have to be top of the list at the moment.

[Brian Peterson, analyst]

Great color. And Dennis, maybe a follow-up for you. If I'm looking at the gross margin for subscription maintenance and services, that was much higher than we had modeled up north of 300 basis points year-over-year. Anything you'd call out that's driving that?

[Dennis Story, executive]

Just a positive mix between services and cloud and the gross margin.

[Brian Peterson, analyst]

Okay. So just more on the mix of the revenue components?

[Blair Abernethy, analyst]

Yes.

[Operator]

Our next question comes from the line of Dylan Becker with William Blair.

[Dylan Becker, analyst]

Maybe, Eddie, starting with you. Obviously, one of the retailers and businesses you're talking to are looking to operate more efficiently. I think labor constraints are a big component of that. I wonder how are your conversations trending as you think about kind of the opportunity for a modern platform or point-of-sale is a key enabler of driving not only like efficiency, upscaling, obviously, employee retention, tied to that kind of tangible ROI and how that's maybe helping continue to kind of contribute to some of the resiliency or decisioning that you're seeing today?

[Eddie Capel, executive]

Yes. I mean it's true in the retail stores. Efficiency is important. Obviously, revenue generation is the key factor in stores, but you quickly mentioned a quick point there. The retention of team members in stores being able to have them or enable them with modern technology, both from an efficiency and a retention perspective is super important, but also the labor component inside distribution centers. Hard to find, hard to keep, they need to be flexible and so forth is very, very, very important.

And the level of automation that our customers are putting into distribution centers is continuing to increase because of that lack of availability of labor and the need to improve efficiency. And we -- as you know, we thrive in environments that are complex in that nature, highly automated and the need for a great deal of velocity and throughput from those distribution centers. We think that the innovation that we've built over the last 10 years meets those market needs, and it's definitely a differentiator for us.

[Dylan Becker, analyst]

Okay. That's great. That's helpful. Maybe switching over to you, Dennis, and sticking with the gross margin theme. Obviously, that favorable mix shift is going to continue. But how should we think about kind of the opportunity for further leverage maybe even more towards kind of a steady-state dynamic as we think about where the cloud business sits today, leverage and efficiencies as that continues to scale paired with the opportunity of that becoming a larger share of the business here over the next 3 to 5 years or so?

[Dennis Story, executive]

Yes, early -- I mean, early days, we'll give more commentary in the Q3 call on our outlook for next year. I'm not trying to push you off there. But we feel real good around our margin profiles and very confident.

[Operator]

Our next question comes from the line of George Kurosawa with Citi.

[George Michael Kurosawa, analyst]

Congrats on good results here in a choppy environment. I wanted to touch on the deal pushouts you called out. Any kind of commonalities between those deals? And are those situations where they signed in the first few weeks here of July or maybe budgetary situations those might kind of push out until later in the year?

[Eddie Capel, executive]

No particular commentary -- no commonality, excuse me, there. George, they span geographies, they span industries, they span product offerings and proposals that we had out there. So I'd love to point to something and tell you it was funds being put towards Gen AI or whatever, some threat, but it really wasn't. There wasn't anything specific there.

I'm not going to go into a ton of details this early in the quarter, yes, a couple of them have closed. So that's been that's been helpful. The good news is across all of that is our win rates are at 75%, so they weren't losses. They were just sort of [indiscernible] for a variety of reasons across the board.

[George Michael Kurosawa, analyst]

Okay. That's helpful. And then on services, I think there's a commentary about kind of retaining your hiring posture, maybe just to double-click on what exactly you meant there in terms of does that imply kind of hiring for replacement or maybe expanding by, let's say, another 100 heads in the kind of back half, that would be helpful.

[Eddie Capel, executive]

We plan to continue to hire. Now the good news is that our attrition rate for this year is lower than we had forecasted. So that helps in all kinds of different ways, not least of which on efficiency, margin, customer satisfaction and so forth, but lower attrition does mean potentially a little bit less hiring, but we do definitely plan to expand our team in the second half of the year for sure and those hires will be largely in customer-facing and services roles.

[Operator]

Our last question comes from the line of Mark Schappel with Loop Capital Markets.

[Mark Schappel, analyst]

A nice job on the quarter. Most of my questions have been answered but I just have one here with respect to Active Supply Chain Planning. I was wondering if you could just talk a little bit about whether that solution is designed to go head-to-head with some of the more established supply chain planning systems out there like from Blue Yonder or Kinaxis?

[Eddie Capel, executive]

Well, yes, probably not so much Kinaxis because it's a little further down market and a little more manufacturing focused. But yes, it certainly is. Obviously, we -- Mark, as you know, we're not focused on the manufacturing side of planning. So it's certainly in the finished goods side of the world and so forth. But the answer to that is yes. But of course, we're taking quite a different approach with this being not a batch-based solution as they traditionally have been for the last several decades, number one, continuous planning and inventory optimization, integrated and unified with supply chain execution system. So definitely, the holy grail of the things that we've been -- the world is -- and market has been chasing for quite some time now.

[Operator]

There are no further questions at this time. I would like to turn the floor back over to Eddie for closing comments.

[Eddie Capel, executive]

Okay. Well, thank you, Alicia, and thank you, everybody, for joining the call. We're excited about where we are. We're excited about the results for the first half and even more excited about the second half of 2024 and beyond. So thanks a ton for joining the call, and we'll speak to you in about 3 months from now with Q3 update. Thanks a lot. Bye-bye.

[Operator]

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.