Manhattan Associates, Inc. (MANH) Earnings Call Transcript & Summary

Hi. Welcome to Truist Securities Software, Internet and Services Conference. I'm Terry Tillman. I cover application software and SaaS companies at Truist Securities. Extremely pleased and looking forward to today to have Manhattan Associates to the fireside chat with me. Before I get into a little bit of background on Manhattan Associates, I do need to read a disclaimer. This call is arranged by Truist Securities Research for use by institutional investors and issuer clients as defined by FINRA. If you're not an institutional investor or issuer, please disconnect at this time. And for required disclosures, please see our website at truistsecurities.com or our equity research library. From Manhattan Associates today, I'm very pleased to have Eddie Capel, CEO; Dennis Story, CFO; and along with Mike Bauer, Senior Director of IR. Thanks, gentlemen, for joining me today. We're going to have fun. As I said, it's going to be an interactive fireside chat. I've got a long list of questions, and I appreciate everybody's time on the call. And hopefully, you'll get value out of this. Before I get into the questions, for those that don't have any familiarity with Manhattan Associates, we've been tracking the company for a long time. And it's been fascinating to watch their progression from kind of supply chain specialists to really enabling digital commerce for some of the biggest brands in the world. And so it's been really impressive to see kind of the growth in the business and your value prop. And now the company has even extended to really serving all channels, including brick-and-mortar, contact center, you name it. But they really are an interesting cog, if you will, in the omnichannel world.

I guess maybe the first question after that kind of intro there and company description, what I would love to hear from you, Eddie, is just a little bit more about the actual innovation cycle with Manhattan Active architecture. I think you're all using Google Cloud as part of your platform. But whether it's the versionless software or just the microservices architecture, could you help us a little bit with just kind of, under the hood, if you will, the power of this platform and the implications of that?

Yes, sure thing, Terry. And thanks to Truist for having us at the conference, and thanks to everybody for attending the fireside chat and your interest in Manhattan Associates. So yes, we've been through, frankly, a couple of discrete innovation cycles in our 30-year history. But over the last, let's call it, around about 6 or 7 years, we've been on our journey to become a cloud-first company. And the approach that we've taken is -- use our words here, but to take a purist approach to cloud technology. We haven't taken our existing on-premise software and just sort of moved it into the cloud in a hosted fashion. We've taken the opportunity to take a pure engineering approach to creating native cloud solutions. So what that means from our perspective is we are primarily, but not exclusively, using Google as our public cloud partner. But what it essentially means to us to be cloud native is that we have a microservices-based architecture, so no longer the kind of monolithic software applications that are all componentized in a microservices architecture. And what that really brings to the table for our customers is a great deal of flexibility. Okay, what do I mean by flexibility? But first of all, in a microservices architecture, we can deliver versionless software to our customers, so -- right -- what version of Facebook are you running today -- running today's version, right? There are no versions anymore, no version disparity and no upgrades that you ever have to do in the future. So you think about enterprise applications of the past and you would go through arguably almost a reimplementation every 5 years or 6 years or so. No longer do you have to deal with those things, you are always current. Arguably, the most important component of that, it means that every -- in our case, we've chosen 90 days. Every 90 days, we can deliver brand-new innovation in production for our customers with no interruptions whatsoever. So no longer are you in a situation where you implement a version and then have, frankly, version envy for the next 5 years because there's new capabilities that you want to get your hands on. It is in your hands and available to you every 90 days. And we deliver those new capabilities to you in a zero downtime world. So there is no interruption in production whatsoever. So if you're running literally 7/24 operations, new capability is delivered in a zero downtime world, facilitated again by a microservices architecture. The second component of benefit of a microservices architecture, it gives you the ability to scale up and down at real time. So you probably heard about cloud being very elastic and scalable. It's a microservices architecture that allows you to scale up and scale down on demand. Very important for really everybody, but particularly important for verticals like retail where you'll see, during holiday peak seasons, 10x volume. So no longer do you have to build an infrastructure and as the expression goes, you don't have to build an infrastructure much like you would build a church for Easter, right? You don't have to build it for the biggest capacity you're ever going to run. You can flex on a day-by-day or an hour-by-hour, certainly, on a season-by-season basis. So zero downtime updates, versionless software, media access to new innovation, great scalability. The thing that we've brought to the table, too, which is not unique, but it is a differentiator and a little bit unusual, and that is the ability to be able to customize this versionless solution, right? We live in a world where our customers either want customization because it's -- they have specific business needs and they need customization. They want to create their own special source to create differentiation against their competitors. But regardless of the reason, there is requirements for customization. So we've created an environment where customers can extend or customize that capability but still honor that versionless software that we're delivering every 90 days. So we honor the contracts with any customizations and extensions that the customer may have built. So that -- again, not a unique, not completely unique, but rather unusual. And so that was a long answer, but real-time access to new innovation is probably the #1 capability delivered by cloud-native microservices architecture.

It wasn't a long answer. It was a great answer. And too bad you can't get on the road as much if you'll talk about this. I mean you probably have personal relationships with some of your customers that go back decades to talk about no more upgrades. I would love to see what the look is on their faces. I assume you're still doing some virtual -- some Zoom calls, at least with them. But what I'm curious about is, particularly the cloud WMS product, which I think was kind of the last major kind of area of transition that happened in '20. If you look at early adopters, and maybe also kind of bringing it into where you're seeing kind of activity going to '21, is it the biggest customers that you have? Is it smaller ones that feel more nimble and agile to do it or in between? Where are you seeing some of the buying persona of the cloud innovation on WMS?

Yes, that's a great question, Terry. So we're pretty early. We're really 3 quarters from release. And frankly, the first quarter customers and prospects were sort of getting their heads around what it was we had released. And now we're starting to see kind of buying traction. And -- but if you actually look across the profile of the body of sales that we've had so far, it's really up and down the spectrum. We've got, frankly, a family-owned third-party logistics company, right, family-owned third party logistics company, pretty small, and some Tier 1 retail companies that have all bought into Manhattan Active WM, as we call it. We've got customers from 10 countries represented in the pool of new customers, France, Uruguay, Brazil, the U.S., Canada and so on. So a pretty diverse geo base. We have 10 verticals represented, so retail, grocery, food and bev, direct-to-consumer, 3PL we talked about and so forth. So up and down the tiers, pretty diverse geo penetration and terrific vertical penetration and pretty early days. So we feel very good about it, frankly.

Yes. One quick kind of follow-up though. As you're talking about like this move to cloud, maybe it changes because of COVID and folks just have to move fast and e-commerce is just growing so rapidly. So maybe it forces their hand to move to cloud. But I'm curious, though, do you have people that push back? "No, I'm not ready for this workload in the cloud?" Or what has been the interest and/or anybody pushing back and saying, "No, I'm not ready for this workload to move to cloud"?

Yes. I would say this isn't terribly scientific, but somewhere in the range of 97% or 98% of customers and prospects are embracing cloud. There's 1 or 2 that, for various reasons and sometimes very good reasons, are saying, hey -- and what they're actually saying -- there's a couple or 3 that have said, "We're not ready right now." They said, "Honestly, we love the direction you're going. We're glad we've got our wagon hitched here, but we will get you next cycle," right? And like we have one customer, for example, that frankly, they got caught a little bit. They fairly recently built their own brand-new data center. They're in a little bit of a pinch there. They got kind of caught with the timing of move to the cloud there and so forth. And as I say, they're completely committed to the cloud. They'll get their next cycle and so forth. But very few people are not seeing the benefit of going to the cloud.

97%, 98%, that feels like a super majority. I'll call it 97.5%. So yes, the -- hey there, Dennis, how are you doing?

Good, Terry.

So the one thing that the remaining performance obligations is an important kind of proxy for new business being signed. What I would love to hear is, as we're moving into '21, Dennis, you provided -- it was a wide range, but probably give yourself some cushion, but it was well above our assumptions for kind of remaining performance obligations, particularly at the high end. What I'm curious about, I mean, you clearly have a bottom-up pipeline that is kind of fueling that guidance you gave us. But as part of the visibility of this large installed base and just seeing the ones that want to convert, and then I wanted to follow-up with how that looks in the model on the maintenance kind of reach -- changing their contracts to move into more of a cloud contract. But I'm curious about, yes, the visibility, particularly at the high end, is that just a lot of the installed base that is really kind of trying to get in a queue or ready to go?

I would say it's 50-50. So 50% of it is installed base and 50% of it is net new business, just in terms of number of deals exiting the year, Terry.

Okay. Yes. And on the net new business, I mean, that has been something I think both of you all have talked about on the calls, the vibrancy and the pipeline of new logos. What I'm curious about is, I don't know who this question is for. But like, there's just a lot going on, on these emerging D2C brands and just a lot in kind of e-commerce and even nontraditional areas, B2B moving to e-commerce. But I'm curious, is there a common like buying persona for the new logos that are in the pipeline or deals you're closing? Like are they mid-sized, but they're all in cloud or are they big or small, but they have huge growth plans? Anything that you can kind of see a similarity?

No other than the move to digitalization, right? I mean just a public company comment. But look, you can't jump on a public company earnings call hardly without almost the first words out of the CEO. As Matt is saying, we're on a path to be a digital-first company regardless of whether they're a manufacturer, a wholesaler or a retailer, and that's up and down the spectrum. Again, those 3 segments as well as up and down the segments of tiers and verticals. And that move to being a digitally diverse company generally means getting closer to the customer, smaller, swifter shipments. And all of the things that are driven by a modern warehouse management system will move into some of the other capabilities, I'm sure, soon. But higher levels of automation for various reasons, whether it be minimum wage, labor shortages and those kinds of things. But -- so the answer is no. And it's encouraging that the enthusiasm is broad and across geo, as we've mentioned.

Yes.

Yes. Just really great diversity in terms of vertical mix there, Terry.

Yes. One thing, Dennis, I was going to -- I mentioned a few minutes ago, but the move from a maintenance -- license and maintenance to kind of always on, you're going to have to provide a service level agreement to keep them running, the elasticity that, Eddie, you talked about, there's a lot of incremental value you're going to provide when folks move to cloud. So like how does that look? Or is it too early? I'd be curious about what it looks like from somebody paying maintenance and they would move to subscription because of all the extra stuff you're now providing them. You're the first line of defense for them. Is there any way to look at how that kind of -- the multiples of that or how that maintenance grows when they move to subscription? Anything you can share?

Yes. Well, as they move to subscription, what we expect and are kind of forecasting from a conversion point of view is roughly, on average, about 5% -- 5% to 6% a year of our [ basal ] convert. So when an existing customer converts, typically, they don't drop their maintenance contract altogether until they become fully online from a cloud solution point of view. From a revenue perspective, we don't really put any multiples out there on the maintenance revenue. Suffice to say, it's very, very attractive, what we've seen early days from a multiple perspective. But just putting that out there is really -- given the fact that we're a pure play, publicly traded supply chain company, yes, it's just competitive intelligence we don't want to put out there.

But it is fair to say, Terry, that the customer lifetime value goes up in a cloud world.

Yes, right.

In the old world -- simply put, in the old world, there were essentially 3 lines of revenue that we had access to: the license revenue, the maintenance revenue and the services revenue because our customers would buy their own -- simply put, buy their own hardware and run it in their own data center. They would hire an IT staff to manage those applications in that infrastructure. So we had 3 lines. Essentially, they had 2 lines. In the new world, we provide the infrastructure and we provide the managed services to run the infrastructure. So all of those 5 revenue lines now become essentially available to us. So customer life cycle, it's a better total cost of ownership for the customer, but greater customer lifetime value for Manhattan Associates.

Yes. And Dennis, can you remind us again, because fourth quarter, I mean, it -- I don't want to -- I shouldn't use the word watershed, but that's the word that comes to mind. It was a big quarter. You guys signed a lot of business. You gave that big range for RPO ending balance. What I'm curious about is, can you remind us again? So this is going to -- the implications are accelerating subscription or cloud revenue growth as we move into '22. Is that right?

As you move into '23, license -- cloud revenue growth will surpass RPO growth. So if you look at 2022, we said -- or 2021, $450 million to $550 million, $500 million midpoint on RPO, that's 60% year-over-year growth. Our cloud revenue estimate at midpoint is about $109 million. That's 37% growth. And 2022, $625 million to $775 million, $700 million midpoint with 40% RPO growth. And our cloud revenue growth would be 31% growth year-over-year 2022 over 2021, which is about $143 million. And then rolling into 2023, $850 million up to $1 billion, essentially, $950 million midpoint. And that RPO growth is 36%. So from 2022 at 40% to 36% on the RPO. On cloud revenue, 31% growth 2022 to 42% growth in 2023. And that's where the ramps in the contracts are starting to peak.

Yes.

Let me, maybe, Terry -- terrific numbers and obviously, very specifically from Dennis. Let me, if I can, maybe give you and the audience a little color as to what we talked about -- on the Q4 call and kind of why maybe, okay, at a high level. So what we did on the Q4 call, we provided guidance for 2021, as we would customarily do. We also provided what we called guideposts for 2022 and 2023, so some sense of what we thought those 2 years were going to shape up like. And we did that for a couple of reasons. One, of course, we wanted to provide transparency to our investors as we've always done over the years. But we have this phenomenon, some of which -- people are very familiar with and maybe some of the audience are not, but we have this ramp phenomenon that it causes a bit of dislocation. And here's how it works. And it's particularly evident in warehouse management. So let's imagine this scenario. We've got a customer, 25 distribution centers around the world. They sign up -- hypothetically, they sign up a 5-year SaaS contract, $5 million total contract value, $5 million in -- over the 5 years. You would say -- you might say, "Oh, okay, great. $5 million over 5 years, $1 million a year in revenue." Not really. Because the way it works with distribution centers is it may take 6 or 9 months to get the first one live and then another 3 months for the second -- and then you ramp into those go-lives of those distribution sectors. So whilst we have signed a deal 5 years, $5 million, the first year, we might only recognize $0.25 million in revenue, right? Now the implication of that is in year 5, we might recognize $1.75 million in revenue, yes, that ramp, okay? So what we thought was important -- so what that means is we'll come into a quarter or a year suggesting, "Hey, we've had great momentum. We've had great sales. Our RPO, our book, the remaining performance obligation has grown. Looks good." And then folks would look at the revenue line and go, "Doesn't seem that way. What's going on?" So we wanted to, a, explain that, number one. B, because the power of this ramp comes later, we felt it is important to give some visibility into those out years so investors could understand the power of signing a deal when the revenue might be a little lighter on the front end, but 100% committed in those out years. It's [ irrevocable ], right? That's where I think I'm in. And then the final piece of that, just to indicate the power, when you get to renewal time, if you do nothing new, right, the renewal is $1.75 million times the next 5 years. And that's without any growth. So it's a very powerful model, and I've made it -- and I've oversimplified it just a little bit. But the numbers then is shared, indicates how that power kind of grows. And at a certain point, of course, you have an inflection point where the revenue actually grows faster than RPO. And for us, that's in 2023.

Yes, yes, yes. No, you're creating great long-term visibility on the cloud revenue. I mean that's just one of the clear things. But yes, there is a cumulative benefit then hitting in '23. Yes, I was wrong on that. I said '22, that's my mistake on that. But one thing I was curious about is going back -- this is going back a while, but like, call it, 2012 and maybe a few years around there, you all did have a really good kind of cycle of replatforming and kind of upgrade cycle for WMS. What I'm curious is, we have e-commerce that is no longer kind of like a side show. It is core to many companies' business. You have these new dynamics like curbside and buy online, pick up in store and just cloud itself. Is there any similarities or compare and contrast with that kind of multiyear cycle we saw, that upgrade cycle back in the 2012-plus time frame with kind of what you're seeing now?

I think there's some similarities. There's a modernization component of distribution centers. And no question, the distribution centers today don't look like distribution centers of 2012. They just don't, right? The order profiles, the SLAs, the customers, the level of robotics and automation is different today than it was in 2012, no question about that. The network design of distribution centers is different today. Maybe the classic example just would be Home Depot of building 125 distribution centers, small but small urban distribution centers to be close to the customer. That was not the game in 2012. It was consolidation, maximized transportation, delivery, those kinds of things. Now it's close to the customer, improve SLAs, reduce those transportation costs. So it's a different phenomenon that we're seeing today. We've continued, obviously, to innovate during that period of time in what might look like a mature market. But the fact of the matter is, yes, the need for WMS is still there. But the need for the next generation of WMS and omnichannel solutions overall for that matter, is different today. So there was a modernization strategy going on in 2012. But today, the market need is so much different and that's why we're quite excited. As you well know, Terry, we've been sort of banging the, call it, what you will, omnichannel or digitalization drum for a number of years now. And in the last 12 months, it's really sort of come towards us as it were and begun to be real.

As it relates to like order management, so things outside of the WMS side, what are your assumptions as we're moving through 2021? And what are the early signals from your customers and prospects to do things like an OMS or a TMS or the non-WMS? Do you see any kind of -- and then the retail store, I guess, I almost forgot about that, that maybe with vaccine distribution, that starts to kind of perk up. So I'm kind of curious, do you actually assume there's more of a dispersion of demand? Or no, is it more heavily weighted with the WMS cycle?

Yes. That's a great question and an important one. So largely speaking, 2020 was sort of a gap year for OMS. Now we did a number of important but -- point projects. So we had customers and prospects and so forth coming to us saying, "Hey, can you help with buy online, pickup in store? Quick, I need to be -- I need to enable curbside in the next 6 -- pickup in the next 6 weeks. Can you help us with that?" Very point solutions. But in terms of strategic omnichannel programs in 2020 and particularly store systems replacements for obvious reasons, it was largely a gap year, right, largely a gap year. We're starting to see those conversations pick back up now. So to state the obvious, we've got the combination of stores reopening, number one, store networks being reimagined and technology being introduced into the stores because stores are -- you've heard us talk about this before. But moving from single-function facilities to multifunction facilities, curbside, BOPUS, return from store, ship from store, all those kinds of things, and that's becoming front and center now because we, the consumer, are demanding it versus the retailers saying, "Hey, this is an offering." So now we're starting to see all of those conversations, whether it be order management, the point solutions, BOPUS, curbside and then next generation of point-of-sale begin to pick up.

That's good to hear. I guess, Dennis, I'd love to talk about cash flow. You know a little bit about cash flow. I think you gave guidance for '21. And then, as Eddie said, you have guidepost for '22 and '23. And if I'm not mistaken, maybe you even gave a little bit of commentary on like the EBIT margin, but I'm curious about cash flow because, look, with these cloud contracts, I mean, you're invoicing these customers. They're paying for the future value upfront. How do you think about the cash flow progression over the next couple of years and kind of uses of this excess cash flow?

Yes. So I think from a progression point of view, our free cash flow margin will follow somewhat closely to our just operating margin targets that we put out there. From a cash prioritization and capital allocation, number one, our focus is investing in innovation. And we feel like as long as we can drive top line growth from innovation from a cloud-first point of view, that's a good bet for investors. Second, we'll look at M&A, but we said we're not going to be a public rollout. So it's got to be some technology that fits within our technology framework. And then last but not least, we'll put excess cash back to work in a buyback program. We'd like to carry about $100 million on the balance sheet. We closed out the year with about $205 million. On the balance sheet itself of $100 million, we could probably run the business on $50 million of cash. We'd like to carry $100 million just to show strength against our larger competitors.

Got it. This is -- I'm going to ask about R&D and innovation. It's for both of you all, so be prepared. I guess, first, Eddie, I'm not trying to front run your Momentum Conference. I'm assuming it's going to be virtual. But every year, there is something to look forward to. Last year, we knew what that was. It was the cloud WMS. But now maybe you're done. Is there anything else you need to do? Or maybe we just take a break from Momentum this year? Or what's the new thing that maybe we will hear about from you? And then I want to ask Dennis a little bit about R&D and maybe harvesting some leverage there.

Yes. So to your point, we're not going to foreshadow any announcements of Momentum. They'll be in mid-May, Terry. But you're right, we do like to announce new innovation at the Momentum Conference, and this year will be no exception to that. We will certainly be announcing new innovation. I mean, honestly, given the magnitude of the release for Manhattan Active WM, arguably the biggest product release in the supply chain market and anywhere in the supply chain market in the last 10 years, that we're just starting to get kind of ramped up, frankly, from a sales and delivery perspective. On the heels of that, we are going to be making some pretty major additional innovation announcements at Momentum. So yes, mark your calendars, for sure. And I think you should also look for the same in 2022 as well. We have big plans over the next few years, for sure.

Okay. I tried with that. So Dennis, like I'm not suggesting R&D as a percentage of revenue will really kind of like start coming down dramatically. But is there points of leverage now? And also with microservices, it seems like there's even some leverage from just having that architecture. But can you talk a little bit about your various OpEx lines, in this case, R&D and how you see that? Is that an area of operating leverage over the next couple of years?

Well, we've always said that from an operating leverage point of view, every line on the P&L creates an operating leverage opportunity for us. So as Eddie mentioned, we're going to continue to double down on R&D as long as we're hitting our top line growth objectives and taking market share, continue to deliver meaningfully differentiated innovation into the marketplace to grow the business. So yes, there are opportunities. I'd say since our IPO, we've delivered about $7.6 billion in revenue and operating margin of 25% over that 23-year period. So I think we're pretty good at finding leverage opportunity on the bottom line, so very focused on driving sustainable top line growth.

And I would just say, Terry, from -- yes, there is -- there certainly is leverage of a microservices architected platform. So Manhattan Active WM and Manhattan Active Omni, our order management and point-of-sale solutions, run on exactly the same microservices platform and architecture. So clearly, there is some kind of horizontal scalability and leverage there. But the flip side of that is we've got more innovation that we want to get to than frankly we have capacity to manage today. So no slowdown in R&D investment, no slowdown in innovation. I would -- honestly, I'd say to the investment community, other than maybe a bit of exchange rate fluctuation here and there with the rupee, this and that and the other, if you start to see a gradual and steady decline in R&D investment, you might want to take a hard look at that company.

Yes, yes. Understood. And I guess one thing I'm curious about is the prioritization for these big Tier 1 complex supply chain customers and prospects to buy your stuff versus some other things that I'm seeing. We're seeing a lot of funding around the supply chain visibility players, kind of these transportation network providers. There are a lot of kind of younger companies, cloud-based. You also have a lot around robotics in the warehouse. And I'm kind of curious, are those competitors to you all or not really, but they're competing for the same budget? Can you talk about kind of whether you're seeing -- maybe on the horizon, do the competitors change?

No, they are absolutely 100% complementary. We're thrilled to see the investment in those areas, for sure. We're the beneficiaries. Essentially, our customers are the beneficiaries of the inputs of supply chain visibility tools. And obviously, the flexibility, the automation and robotics deliveries to our customers. So very supportive and thrilled to see those investments. I knew -- I think this -- as you know, there's a lot of -- all of them out there at the moment vying for a position. I do think there'll be consolidation within both of those spaces over time, but that will certainly shake out. But no, it's, again, very, very complementary. We're thrilled to see it. And we generally do not compete for those dollars. They are very complementary for what we do. But honestly, at the end of the day, neither of those solutions deliver any value without what we do.

Yes, yes. I know we don't have much time left, but we do have a few minutes. So let's just keep going.

Sure, sure.

The -- on professional services, you run that business very well. Now you've got a lot of customers that probably are on older versions. They probably want to move to the cloud product. You got a lot of net new opportunities. So there's a lot going on. But what are you seeing right now with your teams and how they're kind of screwing in the new cloud software? How is that going? How quick are they installing it? And then maybe they can be productive and move on to the next engagement and just kind of increase the speed and velocity. But what are you seeing so far from these cloud products, including WMS on professional services and productivity?

Yes. So not a ton of change. When it comes down to it, what happens on the WMS side is the first distribution center to go live, it's still about the same amount of time to get that DC, that first DC live. But rollouts can be accelerated. Rollouts passed the first DC. So if you've got a 5, 10, 20, 30 distribution center network, certainly, cloud technology gives you the ability to be able to speed up that rollout measurably and considerably. In terms of our professional services teams, they are, frankly, very busy. They are efficient, as you pointed out. They're very bit -- we've added somewhere in the range of 75 people so far this year. We're calling for somewhere in the range of about another 250 professional services people around the world over the balance of the year based upon kind of strong demand.

Yes. Well, maybe before we leave, I'd like to ask kind of a question about kind of where the puck is going. Like in terms of -- let's look at industries or kind of business model type where you're seeing some interesting activity and it's a notable change or an inflection point. I know last year, grocery was very active. And actually, I think grocery has been very active for a couple of years across some of your products. But is there any verticals or maybe regions of the world that's surprising you or you would say, "Hey, Terry. You should focus on this because this could be an area of, yes, incrementalism or kind of above-average kind of dynamics"?

Yes. The good news is, no, not really in terms of one particular vertical or geography that is hot. Grocery is still a very vibrant market, for sure. There's a couple of geos that for us are a little more suppressed than others. U.K. is still pretty flat. Japan is pretty flat, but that's just the way of the world in terms of economic cycles. They'll come back and so forth. In terms of verticals, no, it really is across the board. And again, it goes back to that. I do think every -- virtually, every manufacturer, wholesaler and retailer on the planet is looking to continue their digital journeys. And we're right in the middle of all of that. I would say that in terms of percentage growth, [indiscernible] store systems because, again, the [ ad store is open ]. And there is this realization that there's an absolute need for more modern technology in the store. I think sequential growth there could be -- it's smaller but could be stronger. We talked about years ago that 2020 and 2021, we thought was going to be in important years for our next generation of point-of-sale. What turns out, 2020 was, as I talked about, a gap here. So that kind of got pushed a little bit. And I think over the next couple of years, we'll see that accelerate.

Well, that sounds great. I think we've run out of time. Eddie, Dennis and Mike, thanks so much for spending time with me. And hopefully, investors that dialed in got some value out of this. And I hope you have some great meetings, and have a great rest of your day, gentlemen.

Okay. Terry, thanks for having us. And thanks, Truist, for having us. And thanks, the audience, for participating. Really appreciate it. Thank you. Have a great day. Bye-bye.

Thanks, Terry.

Take care. Yes. Bye.