Good afternoon. My name is Robert, and I'll be your conference facilitator today. At this time, I'd like to welcome everyone to Manhattan Associates fourth quarter earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer period. If you'd like to ask a question during this time, simply press star, then the number 1 on your telephone keypad. If you would like to withdraw your question, please press star, then the number 2 on your telephone keypad. As a reminder, ladies and gentlemen, this call is being recorded today, February second. I would now like to introduce your host, Mr. Michael Bauer, Head of Investor Relations of Manhattan Associates. Mr. Bauer, you may begin your conference.
Thank you, Rob. Good afternoon, everyone. Welcome to Manhattan Associates 2022 fourth quarter earnings call. I will review our cautionary language. 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 future events or the future financial performance of Manhattan Associates. You'll caution that these forward-looking statements involve risks and uncertainties are not guarantees of future performance, that actual results may differ materially from the projections contained in our forward-looking statements.
I refer you to the reports Manhattan Associates files with the SEC for important factors that could cause the actual results to differ materially from those in health projections, particularly our annual report on Form 10-K for fiscal year 2021, and the risk factor discussion in that report, as well as any risk factor updates we provide in our subsequent Form 10-Q's. We note in particular that turbulent 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 net financial measures in an effort 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 schedules in the Form 8-K we submitted to the SEC earlier today and on our website at manh.com. I'll turn the call over to Eddie.
Okay, thanks, Mike. Well, good afternoon, everyone, and thank you for joining us as we review our fourth quarter and full year 2022 results, as well as our outlook for 2023. 2022 was a remarkable year for Manhattan, setting all-time records in total revenue, RPO, operating profits, cash collections, and earnings per share. To drive future growth and innovation, we also invested record amounts in our people and in R&D. In 2022, we spent over $110 million on research and development, which is up 15% from the previous year. We also increased our total headcount by 16% in response to the high demand for our solutions and services.
We're confident that these investments will contribute to our already high levels of customer satisfaction and extend our position as the leading innovator in core supply chain execution, omnichannel solutions, and retail point of sale commerce. Given the size of our opportunity and the long-term favorable business momentum, we plan to continue the investments, including hiring between 400 and 600 new associates in 2023, which we're guiding to be our fourth record revenue year since introducing our goal to become a cloud-first company five years ago. Now, while we remain appropriately cautious regarding the global economy, demand for our solutions remains robust, and we're optimistic about our long-term market opportunity. Now, recall our solutions are mission-critical and they're key components to our customers' success.
Additionally, we're entering 2023 with pretty good visibility and several growth drivers, including the acquisition of new customers, the conversion of our on-premise customers to the cloud, and cross-selling our unified product portfolio into our customer base. Specifically pivoting to our quarterly results, Q4 was a record quarter that exceeded our expectations. Revenue increased 16% as a reported $198 million, as highlighted by 49% growth in cloud, 22% growth in services, and double-digit revenue growth across all of our geographies. These strong results drove our top-line outperformance and solid earnings leverage in the quarter, with adjusted earnings per diluted share increasing 69% to $0.81. RPO, the leading indicator of our growth, increased 50% to $1.1 billion at the end of 2022. Importantly, customer satisfaction levels are high.
Win rates remain at 75% plus, Demand for our cloud solutions continues to be pretty solid across our product portfolio. From a vertical perspective, retail, manufacturing, and wholesale continue to drive more than 80% of our bookings in the quarter. Across our solutions, the subverticals are pretty diverse. For example, in the quarter, cloud deals one include a global cosmetics manufacturer, a grocery retailer, a diversified automotive company, a manufacturer of home goods, a food wholesaler, and an e-commerce retailer, as well as numerous others. This contributed to a healthy mix of bookings across subverticals for the full year. Additionally, aided by the clear benefit of resilient modern supply chains, over 40% of our bookings were generated from new logos and over 30% from cross-sell opportunities in 2022.
Importantly, our pipeline continues to be strong with solid demand across our product suites. Net new potential customers represent about 35% of that demand, and as of year-end, we had converted less than 10% of our on-premise customers to the cloud. Turning to the product front. We're coming off a very exciting National Retail Federation conference in New York. Customers and prospects were back in force this year, and we had some exciting product innovations to share with them. Those include the work we're doing around fully enabling RFID with our Manhattan Active Store solution. We've added native support for RFID directly into checkouts and returns, inventory management, and store fulfillment functions so that retailers can make more accurate promises, increase conversion rates, and maximize inventory exposure for selling. The value of RFID in stores has proven to be quite significant.
As a digital experience becomes an integral part of bricks-and-mortar shopping, it's vital that our customers know how much of a particular product that they have and where each specific unit is located inside of their store. What's more, RFID allows our customers to deliver these improved experiences and to do it with significantly less labor. Speaking of our store technology, we just finished a very successful retail peak season. Specifically with our point of sale application, a number of our customers are showing very positive results from the rollout of our Omnicart capabilities. That's the ability to sell items from alternate locations in a single transaction. Only a unified commerce solution with a built-in point of sale and order management capabilities can deliver a seamless Omnicart process.
Regarding implementations, we're seeing some really very positive operational results tied to the first wave of deployments of Manhattan Active Warehouse Management. I thought I'd share a couple of anecdotes on the positive operational impact from the deployments of our cloud-native WMS. I've spoken before about Employee Engagement, one of the WMS features which is unique to our application. One of our early adopter Manhattan Active WM customers now activated all the features of Employee Engagement, including enabling their associates to complete in gamified challenges and accumulate points. These points are redeemable for a variety of tangible items in a digital incentive store. The result for this customer is an incremental 5% productivity improvement in the DC on top of their traditional engineered labor standards and incentive program.
Staying on productivity enhancements for a moment, one of our high volume apparel customers in Brazil is showing a double-digit throughput increase in their distribution center after implementing Manhattan Active WM. Even though the facility was already outfitted with pretty extensive automation, the workflow optimization inside of Manhattan Active WM is helping them extract record levels of productivity from their material handling automation. Even in a less automated DC, Manhattan Active WM really shines there too. One of our large wholesale drug customers is reporting a picking productivity improvement in excess of 30%, and this improvement is attributable to the latest pick path optimization algorithms native to Manhattan Active WM. Before I hand off to Dennis, I want to take this opportunity to briefly recognize and thank each and every member of the Manhattan global team.
Manhattan is committed to creating an inclusive culture where our team members can advance their careers, contribute to our company-wide goals, feel valued, and engage with the communities in which they live and work. In 2022, they clearly went above and beyond to deliver a remarkable year with remarkable results for our valued customers. I'm confident in the future success of this company, largely because of this team. That includes or concludes, excuse me, my business update. Dennis is going to provide you with an update of the financial performance and outlook, I'll close our prepared remarks with a brief summary before we move to Q&A. Dennis?
Thanks, Eddie. As Eddie highlighted, in 2022, we set all-time records in RPO, total revenue, operating profit, cash collections, and earnings per share. Congratulations to our team members around the globe for great execution. Overall, for the quarter and the year, we delivered a strong, balanced financial performance on top line growth and operating margin, with both results comparing favorably to the Rule of Forty, and if our revenue growth is normalized for our cloud transition, excluding license and maintenance attrition, both results exceed the Rule of Fifty. We continue to deliver strong metrics across revenue growth, profitability, and cash flow. I'll start with recapping our financial performance for the quarter and year. All growth rates are on a year-over-year basis, unless otherwise stated. Additionally, we are also providing constant currency growth to demonstrate apples to apples comparisons.
Unless otherwise stated, constant currency will compare results as if rates were unchanged from the year ago period. Q4 total revenue was $198 million, up 16% as reported and 19% excluding FX. Full year revenue totaled $767 million, also up 16% and 18% removing FX. Excluding license and maintenance revenue, which removes the revenue compression via our cloud transition, Q4 revenue growth was 29% and full year, 25%. Q4 cloud revenue totaled $52 million, up 49%, with full year revenue totaling $176 million, up 44%. We closed out 2022 with RPO of $1.1 billion on the round, growing 50%. This was at the high end of our guidance.
If FX rates remain unchanged from the year-ago period, RPO growth would be 54%, and if rates remained unchanged from September 30 levels, sequential RPO growth would be 6%. As of December 31st, over 97% of our RPO represents true cloud-native subscriptions. Q4 services revenue increased 22% to $100 million, and full year services revenue increased 18% to $394 million. Both were records as cloud sales continue to fuel services growth globally. Shifting to earnings leverage, our Q4 adjusted operating income totaled $60 million, with an operating margin of 30.2%, 30.2%. The 740 basis point increase was driven by revenue growth. Full year adjusted operating margin was 27.6%, up 80 basis points on revenue growth.
Our Q4 GAAP operating income was $45 million, with a 22.6% operating margin, with full year GAAP operating income totaling $153 million with a 20% operating margin. Our Q4 earnings per share increased 69% to $0.81. Note, our EPS includes $0.05 of tax benefit associated with expiring tax statutes, lowering our effective tax rate in the quarter to 16%. This resulted in full year EPS of $2.76, which was up 24%, exceeding guidance. Q4 operating cash flow increased 38% to $55 million, as Q4 adjusted EBITDA margin was 31% and free cash flow margin was 26.6%. Our full year operating cash flow was $180 million.
Adjusted EBITDA margin was 28.5%, and free cash flow margin was 22.6%. Remember, these figures include $58 million in cash taxes paid, which is roughly doubling the amount of cash taxes paid over last year. For more information on the $26 million incremental cash taxes paid associated with the U.S. Tax Cuts and Jobs Act, please refer to Item 8 in our earnings supplemental information schedules. Turning to the balance sheet, deferred revenue increased 36% year-over-year, and 23% sequentially to $209 million. We closed 2022 with $225 million in cash and zero debt. For the year, we invested $175 million in share buybacks, including $25 million in Q4.
Our board has approved the replenishment of our $75 million share repurchase authority. Now moving to 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. As Eddie mentioned, we will continue to invest with a balanced approach to growth and profitability. We are raising the midpoint of the preliminary 2023 revenue, operating margin, and EPS guidance that we provided last quarter. We are also reiterating our 2023 RPO guidepost midpoint of $1.35 billion. Consistent with our recent earnings releases, our guidepost can be found in today's earnings release supplemental schedules. As noted on prior earnings calls, we will be updating our RPO outlook on an annual basis.
Additionally, as previously discussed, 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. For full year 2023, we expect total revenue of $820 million-$833 million, with a $826.5 million midpoint, up from our prior midpoint of $810 million. Excluding license and maintenance attrition, this represents 16% growth. All in, our target is 8%. First half and second half total revenue splits are expected to be about 50/50. For Q1, we expect total revenue of $198 million-$202 million, which at the midpoint represents 21% growth, ex license and maintenance attrition, and 12% growth all in.
We continue to track ahead of our original margin expectations. Reflective of our higher revenue outlook, we are increasing our 2023 adjusted operating margin range to 25.5%-26.5%, with a midpoint of 26% up from our prior guidance of 25.5%. Included in this range is a 260 basis point headwind from the $35 million reduction in maintenance and license revenue from our transition to cloud. At the midpoint, operating margin on a quarterly basis is expected to be roughly, for Q1, 26%, Q2, 26.8%, Q3, 27%, and accounting for retail peak seasonality, 24.3% in Q4. Those are pretty exact targets. This results in a full year adjusted EPS range of $2.61-$2.75.
The $2.68 midpoint, up from our prior $2.55 midpoint outlook. For GAAP EPS, our guidance range is $1.81-$1.95. Note, if the 2022 below-the-line income taxes and other income were normalized at 2022 levels, 2023 adjusted EPS would be $0.13 higher and GAAP EPS would be $0.14 higher. For Q1, we expect adjusted EPS of $0.64-$0.66 and GAAP EPS of $0.46-$0.48. For Q2 through Q4, we expect GAAP EPS to be about $0.20 lower than adjusted EPS per quarter, which accounts for our investment in equity-based compensation. Here are some additional details on our 2023 outlook.
For full year 2023, we are increasing our cloud revenue range to $232 million-$236 million, representing 33% growth at the midpoint, and assumes $53.8 million in Q1, with about a $3 million sequential increase per quarter throughout the year. For services revenue, we are increasing our forecast of $428 million-$437 million, representing 10% growth at the midpoint. On a quarterly basis, we expect Q1 services revenue of roughly $103 million, Q2, $111 million, Q3, $114 million, and accounting for retail peak seasonality, $106 million in Q4. On attrition to cloud, we expect maintenance and license to represent about an 8-point headwind in total revenue growth in 2023.
For maintenance, we expect a range of $122 million-$124 million, or a 14% decline at the midpoint. On a quarterly basis, we expect Q1 to be $33 million, Q2, $32 million, Q3, $30 million, and Q4, $28 million. We expect license revenue to be roughly $9 million or 1% of 2023 total revenue. For Q1, we expect $3.5 million of license revenue, $2.5 million in Q2, and $1.5 million in both Q3 and Q4. For hardware, we anticipate approximately $7 million in revenue per quarter. For consolidated subscription, maintenance, and services margin, we are targeting about 54% for the full year.
On a quarterly basis, Q1 will be about 53%, Q2 and Q3 is expected to be 54.5%, accounting for seasonality, Q4 is expected to be about 53.5%. We expect our effective tax rate to be 21.7% and our diluted share count to be 63 million shares, which assumes no buyback activity. In summary, 2022 was a great year, we expect 2023 to be another year of balanced growth across revenue, profitability, and cash flow. Thank you, back to Eddie for some closing remarks.
Terrific. Thanks, Dennis. Look, 2022 was a very good year for Manhattan. While we remain appropriately cautious, as I mentioned, on the volatile macro conditions out there, we're entering 2023 with solid business momentum, and we're very excited about the many opportunities that lie ahead. Just to recap that, strategic demand for our solutions is solid and seems to be resilient. Our global teams are executing very well, and we're continuing to invest in our business to deliver leading innovation to help our customers with their digital and supply chain transformation journeys. In closing, again, thank you to all of our employees across the globe for a fantastic 2022. It's your dedication and commitment to our growing customer base that continues to be one of Manhattan's key differentiators.
Robert, with that, we're now ready to take any questions that might be out there.
Thank you. At this time, we will be conducting a question and answer session. If you'd like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please while we poll for questions. Our first question comes from Terry Tillman with Truist Securities. Please proceed with your question.
Yeah. Hey, Eddie, Dennis, and Mike. Congratulations on the results. I'm gonna do my standard annoying preamble, and then I'll finally get to my questions. First, Eddie, I love kinda the different examples of the customers. That helps a lot in terms of understanding how the business has evolved, so I hope you keep doing that. Dennis, modeling, basically, we don't really have anything to do. You basically told us every line item across all 4 quarters, so thanks for making that easy. Now finally to my questions. Maybe the first question for you, Eddie, is just, you know, given what you've done with the platform, the cloud products, and just nowadays, the business models are a lot different, and you have omnichannel.
When you bring on a new logo, and you've been bringing on more than you had in the past, what does the new logo look like versus three or five years ago in terms of the size and scope of that initial deal or project? Then I had a follow-up for you and then, Dennis.
Yes. great question, Terry. it tends to be a little bit, a little bit different. you know, in the old world of, you know, of license revenue, it was more typical for customers to buy multiple products at the same time. In a subscription-based world, it seems to be more popular, not exclusively this way, but more popular, frankly, to buy one product at a time with, you know, follow-on upsell, later. You can kinda see that in the, you know, in the results with 30% of our revenue coming from, you know, coming from upsell. That, I think, is also indicative of the unified platform that we have. you know, the bridge from one solution to the other is frankly not very long.
Okay. Maybe my follow-up for you, Eddie, then I had a quick for Dennis. You actually did mention in your prepared remarks visibility or solid or strong visibility. I forgot exactly the description there. What I'm curious about is you do have the installed base, and we're gonna see this maintenance start to, you know, kind of decline maybe more meaningfully. That's one driver. The cross-selling. You know, how's the visibility changing or improving? Is one much more notable than the other in terms of driving this visibility?
You mean customer base versus new logos?
No, installed base now starting their journey versus then cross-selling. Like you had just said, you know, they...
Oh.
They get going, and then there's this repetition to buy more.
Yeah, I don't think there's a big, you know, there's a huge difference in visibility or frankly confidence with visibility. Only because, you know, we're pretty close to our customers, Terry. Whether it be an on-premise to cloud conversion or whether it be an expansion of capability inside the customer base, we're pretty close. You know, we've got long-term relationships with, you know, with these guys, generally they share their roadmap with us. No big, you know, difference in visibility across the two.
Okay. Finally for you, Dennis, in terms of the free cash flow margin, maybe you could either answer or give a perspective on how to think about free cash flow margin for the year or just incremental headwinds on that $56 million+ in cash taxes in 2022 and how that looks in 2023. Thank you.
Yeah. On the free cash flow, it's gonna follow a point or 2, relative to our operating margin. You know, I would probably handicap it as 2 to 3 points, difference between operating margin. Then... I'm sorry, Terry, what was your other?
Well, yeah, I'm hogging up this call. I should just stop.
No, no.
It was related to that and the impact from the cash taxes. Like, does it take another step up, or are we starting to kind of, you know, we're gonna get past the worst of that?
We're past the worst of that. Essentially we're in a mode of about the same amount of taxes on an annual basis now.
Okay. Thank you.
Thank you, Terry.
Our next question is from Joseph Vruwink with Baird. Please proceed with your question.
Great. Hi, everyone.
Hi, Joe.
I guess I wanted to go back. I wanted to go back to NRF this year. One thing that really stood out to me was just all the attention on the floor and speaking to folks about order management and also store-related solutions. You know, I would imagine WMS is still gonna be the primary driver of bookings for you this year, but you anticipate a bit of an uptick in interest as it relates to the omni and inventory suites?
Well, we certainly hope so, Joe. I don't know that there's gonna be a massive step up, frankly. As you know, order management is sort of the, is sort of number two on the pecking order of solutions for us. You know, there certainly is a lot of interest. We've clearly continued to make significant investments in that solution, and particularly the integration with, you know, the bricks and mortar store solutions. There's no question, there is, you know, significant interest there. We're, you know, we're hoping for continued growth in that and momentum in that particular area.
Okay, great. you know, Eddie, I think at one point in time as you were looking at and kind of thinking about, migrating the installed base, I know there's not any sort of timetable, you know, customers can move as they're ready, but I wanna say maybe six, seven years was contemplated. Do you have any views on if it's less than 10% of the base today, maybe how long until most of your installed base has a cloud solution from Manhattan?
Yeah. Still feel the same way. Well, okay. There's two subtly different questions there, Joe. You know, I definitely, you know, when I look at my crystal ball, I think most of our existing customers will migrate from on-premise to the cloud over the next 6 to 7 years. You know, there's always a few laggards and so forth, the bulk of our customers will transition from on-premise to the cloud over the next 6 or 7 years. The second part of the question is, you know, when will our customer base own something in the cloud from us? Remember, we're now a cloud-first company.
As we cross-sell and upsell into the, into our customer base, it is quite likely that an on prep, just hypothetically, an on-premise customer for WMS, might well buy a cloud TMS solution, a cloud point-of-sale solution, or a cloud OMS solution. You know, that would mean that time horizon would be shorter than six or seven years.
Okay. Yes, that makes sense. I have one quick one if I can squeeze it in. Just, you know, any thoughts on just RPO quarter by quarter, if you'd expect seasonality or, you know, I guess if the macro is a bit tougher, customers might review budgets more on a quarterly basis. Just any way to think about kind of the cadence of RPO bookings throughout 2023?
You know, Look, we suspect. We've always said, you know, RPO bookings likely will suffer from a little bit of lumpiness, just like, you know, just like license revenue did back in the day. We haven't seen a ton of seasonality, you know, as when it comes to RPO bookings. You know, these said it before, but frankly, these are big strategic purchases and so forth, and, you know, frankly, our customers wanna get going whenever they wanna get going and, you know, there isn't generally a particular slowdown in any particular quarter. Again, very strategic decisions.
Great. Thank you very much.
Thank you, Joe.
Our next question is from Brian Peterson with Raymond James. Please proceed with your question.
Hi. Thanks for taking the question. This is John on for Brian. I wanted to first touch on cross-sell. Eddie, you referenced really good cross-sell numbers here in 2022. I think you said 30%.
Yeah.
I'm curious if you're seeing a change in cadence with customers coming back for additional products. Maybe any geographies you'd call out where you're seeing faster cross-sell? Any color there would be great.
Yeah. Not particularly, John, to be perfectly honest. You know, the cross-sell across geography is A, pretty consistent or has been pretty consistent, you know, kinda year-over-year, and is pretty consistent across that 30% in 2022. You know, number one. You know, and, more recently, you know, we've seen a little bit of an uptick in cross-sell, meaning 2022 over, you know, over prior years. I think again, part of that is as we move, you know, and have moved into a cloud-first environment, we've seen customers bite off smaller pieces of the product portfolio up front and then but move more quickly into a larger portfolio.
Okay. That's great color there. Thank you very much. Then also I wanna touch on the TMS product.
Yeah.
I seem to recall in the past you've called out strength outside of the U.S.
Yeah.
I'm curious how that pipe's progressing though within the U.S., and maybe you can give us, insight into how the customer conversations are going there. Thank you.
Yeah. Pretty good. I mean, look, honestly, the only reason, you know, the reason that we called out TMS growth outside of the Americas is historically, that has not been the strongest market for us by design. By design. We tended not to offer TMS outside of the Americas in a very strong way. That's picked up over the last few years. We were certainly highlighting some of the successes, particularly in Europe, particularly in Latin America, particularly in Australia, you know, Australia and New Zealand.
You know, the product is doing very well, frankly, and we've talked a little bit about this before, the unification of Manhattan Active WM with Manhattan Active TM is really, you know, jump-starting some pretty interesting conversations. I guess, about half of our more recent Manhattan Active Transportation customers are Manhattan Active WM customers, so really starting to benefit from that unification. You know, we see that as something that will continue on into the future.
Well, thank you very much. Congrats on the great quarter.
Thank you, John. Appreciate it.
Our next question is from Matthew Pfau with William Blair. Please proceed with your question.
Great. Thanks for taking my questions, guys, and great quarter. You know, I wanted to ask in terms of the new customers you're signing, and it seemed like this year was a particularly strong year for net new customers that you brought on to Manhattan. Is there any particular product that you're landing the majority of those with? You know, where are those customers coming from typically? Thanks.
Yeah. Yeah. Well, the great news there, Matt, is not particularly. It's across the product portfolio, so that's, you know, that's encouraging, number 1. Number 2, you know, it is across the subverticals. So I listed out some of the, you know, some of the principal sub, you know, subverticals, and the product portfolio, and it's a pretty nice spread there, you know, across new customers versus, you know, versus existing. Now, you know, as you...
If you drill in a little bit, you know, a little bit further, you know, you see on the distribution side of that, the house, you certainly see verticals that we've maybe not been quite as strong in over the years, you know, kind of bubbling to the surface, particularly CPG, industrial manufacturing and so forth, as they need to, you know, reenergize and modernize their supply chains, and particularly with a focus on kind of direct-to-consumer or direct-to-consumer, consumer ready. Similar things are happening in the LMS space as well. As you see companies that traditionally were not selling direct-to-consumer now either selling direct-to-consumer or at least being direct-to-consumer ready as they ship into, you know, retail, you know, retail channels.
Those would be a couple spots where we've seen, you know, some nice growth, which, you know, really speaks to not, you know, not, just, you know, total addressable market growth, but certainly verticals that we've not typically been as strong in, which is very nice.
Great. Just to follow up on the margin, operating margin guidance and commentary, Dennis. It seems like X, the impact of the cloud transition, which is accelerating in 2023, you would actually show year-over-year margin improvement in 2023. Is that correct? What else should we think about from an expense perspective in terms of, you know, wage inflation and then other investment areas that you're making, particularly with the, you know, hundreds of people that you plan to add next year or this year? Thanks.
Yeah. Definitely. Look, we guided across all key metrics above the 2022 performance from that perspective. We would expect operating margin to increase through the year, et cetera. Having a little brain cramp here. Well, in terms of where, you know, where the people generally, you know, where the investments in people will be, you know, for the most part, Matt, those will be customer-facing folks. Largely in our professional services organization and in our customer service organization. We do plan to, and, you know, are actively investing more in research and development this year. You'll see some heads, you know, move into there.
Sales and marketing is also another area that we'll continue to add, you know, add heads. As we've talked about before, you know, it's important for us to keep driving awareness for the solutions that, for which we are, you know, not quite as well known. That's important to us 'cause we, you know, we think we've got a great opportunity there. As always, you know, we'll be selective about adding team members to our sales organization. We've got a very effective and a very efficient sales organization, but as the customer base grows, account coverage and overall coverage is, you know, is important to us. Again, you know, back to summarize on those people, principally customer facing, but sales and marketing and, you know, R&D as well.
Got it. Thanks for taking my questions. Appreciate it.
Okay. Thank you, Matt. See ya.
Our next question is from Mark Schappel with Loop Capital Markets. Please proceed with your question.
Hi. Thank you for taking my questions, nice job on the quarter.
Thank you, Mark.
Eddie. You're welcome. Eddie, with respect to the macro environment, there was little, very little way in commentary in your prepared remarks on that front. Obviously based on the strong results and guide, it appears you're encountering very few headwinds, but I was wondering if you could just provide some additional commentary of what you're seeing from a macro perspective.
The, you know, look, there's definitely chop out there. There's no question about that, Mark. You know, each of us wake up every morning can see, feel, and, you know, and see the chop. You know, I mean, when we look at the demand for our solutions, when we look at our pipeline, we believe, driven by the investments in innovation that, you know, that we're making, the critical nature of our solutions to the, both the resilience and the growth of our target markets, you know, we obviously feel pretty good about, you know, about where we are. We've got pretty good visibility. So that, you know, is how it feels to us. That forward motion feels pretty good, but it is not without its headwinds, for sure.
Not without its headwinds.
Okay, great. Then, just shifting gears to your point of sale solution. I think it was last year's user conference, you expressed that achieving like 10 to 12 go lives would be a pretty significant milestone for the company.
Yeah.
just 'cause it would-
Yeah.
Make it very easy for the next sale. I was wondering if you could just give us a little bit of an update on where you stand on that front.
Yeah. Yeah. We're making good progress. I don't honestly, you, you caught me a little colder. I should know all those numbers specifically. We're not quite at that number, but we're, you know, we're less than a handful away from our, you know, initial target. I mean, we're not Listen, obviously the finish line is not 10 or 12 installations, but we've got this, you know, this is the first, the first lap for us is sort of getting there. We're making good progress. We've got a couple of go lives, I think, coming up here in Q1, early 2Q, and by, you know, certainly by the fall of this year, we will have, you know, we will have rounded out and met that first milestone.
You know, from a, from an overall momentum of, you know, point of sale and store solutions, it feels, again, it feels pretty good. You know, we came off of a very enthusiastic National Retail Federation conference where sort of the, you know, all the retailers are. We had a, you know, pretty big presence from a point of sale perspective. Actually, we were fortunate enough to have two components. We had our own booth. We were also, you know, the only third-party vendor in the Google Cloud booth as well, demonstrating point of sale. We saw a lot of interest coming out of that.
Okay, great. Then, on the point of sale, again, I think fiscalization was an important new capability that you were building into the product.
Yeah.
You know, mainly to go after the international customers. Maybe just provide us a little bit of an update there.
Yeah, sure. Well, actually it's so you're spot on. In addition to international customers, you know, oftentimes when you sell point of sale even to, you know, kind of a domestically headquartered company. They have operations overseas. They want a single solution. Fiscalization is important for them as well. We're knocking them down, frankly. We're knocking down the countries, you know. There is a process there. There's a technical integrate, there's a design process, a technical integration process, and then there's a certification process with each and every government, you know, agency in those individual companies, countries. To be honest with you can only go at a certain pace 'cause you're dealing with those legislative, you know, legislative bodies. We're making good progress.
The principal focus of wave 1 is being on Europe for us. We're moving to both APAC and to Latin America, you know, just as fast as we can and knocking them off as fortunately, as fast as our customers need them.
Great. Thank you. That's all for me.
Thank you, Mark.
Our final question is from Blair Abernethy with Rosenblatt Securities. Please proceed with your question.
Thanks for taking the question and nice quarter, guys. Just following on the point of sale product lines, I guess I'm just curious that maybe you give us a little more color on the competitive landscape as you're bidding for these new projects. What are you typically displacing or what are you seeing in place that you're able to, you know, to push aside with your solution?
Well, I'm about push aside, yeah, I mean, look, there's a, there's a lot of sort of legacy, if you wanna call it that, competition out there, because this is obviously point of sale in general is not a new space. There have been solutions available for literally 100 years out there. Our real competitive differentiation is with an omni-channel solution, right? We're not, you know, we're not just providing a, you know, a cash and carry cash register centric solution. You know, obviously we've seen over the years the point of sale industry, you know, kind of move from being a hardware centric industry to now a software based solution with, you know, pretty commoditized, you know, hardware, whether it be, you know, tablet or, you know, or, you know, or desktop PCs.
You know, the disposition or the transition is around both hardware and software. You know, again, in any solution where there is a level of personalization and consumer touch involved, that's where we are really able to shine.
Okay, great. In terms of the, you know, the macro environment, I'm just wondering of your key verticals, is there anyone you would call out to say, "Hey, this is a little bit squishier than some of the others?
No, I don't think so, Blair. You know, again, we're all reading, frankly, the same articles and watching the same news feeds. You know, this is a, there's a little bit of squishiness, you know, everywhere. You know, as a function of that, in order to compete, you know, you've got to be close to the customer. You've got to, you know, you've got to be able to provide or our customers have to provide excellent service, maximum utilization of the biggest piece of working capital they have, which is, you know, the inventory on hand, and bringing those two things together, customer demand and available inventory. You know, we're, as you know, providing mission-critical systems to our, you know, our customers.
Yeah, there's, you know, frankly, there's winners and losers across the customer base. The fortunate thing is, you know, we're much more diverse today, frankly, than we were maybe, you know, 10 or 12 years, you know, 12 years ago. That's helpful to us.
Yeah. That's great. Thanks for the extra color.
Sure thing, Blair.
We have reached the end of the question and answer session. I'd now like to turn the call over to Eddie Capel for closing comments.
Very good. Thank you, Robert. Well, again, as always, we appreciate you taking the time to join us this afternoon, particularly since it's our year-end earnings call. We're very pleased with the 22 results. We appreciate your support throughout the year, and we're excited about the path ahead. We look forward to talking to everybody in about 90 days or so. Thanks a lot.
This concludes today's conference. You may disconnect your lines at this time. We thank you for your participation.