Kinaxis® (TSX:KXS), provider of RapidResponse®, delivering the leading cloud-based concurrent planning solution, reported results for its fiscal third quarter, which ended September 30, 2017. All amounts are in U.S. dollars. All figures are prepared in accordance with International Financial Reporting Standards (IFRS), unless otherwise indicated.
Third Quarter 2017 Highlights
(Comparisons made between fiscal Q3 2017 and fiscal Q3 2016 results, unless otherwise noted)
- Revenue totaled $33.5 million, up 12%
- Subscription revenue was $25.8 million, up 24%
- Gross profit was $23.8 million (71% of total revenue), up 16%
- Profit was $6.0 million or $0.24 per basic and $0.23 per diluted share
- Adjusted EBITDA(1) totaled $10.8 million (32% of total revenue)
- Adjusted diluted earnings per share(1) of $0.31
(1) “Adjusted EBITDA” and “Adjusted diluted earnings per share” are non-IFRS measures and are not recognized, defined or standardized measures under IFRS. These measures as well as other non-IFRS financial measures reported by Kinaxis are defined in the “Non-IFRS Measures” section of this news release.
“Our strong third quarter results demonstrate that sustained subscription revenue growth and consistent profitability remain the fundamental tenets of our robust business model,” said John Sicard, Chief Executive Officer of Kinaxis. “Our business momentum continues to be fueled by a world class product delivered by a growing strategic partner ecosystem. Our partners expand access to new prospective customer relationships and deliver value through an accredited network of knowledgeable professionals. This is a powerful combination that enables us to profitably scale Kinaxis. Our leadership team remains focused on delivering on our promise to revolutionize supply chain planning and enable customers to proactively plan and respond in today’s complex and unpredictable business environment. With the recent addition of Paul Carreiro as Chief Revenue Officer, we are well positioned for continued growth.”
Fiscal Q3 2017 Financial Results
Total revenue for the three months ending September 30, 2017 (Q3 2017) was $33.5 million, an increase of 12% compared to the same period in 2016.
Subscription revenue was $25.8 million in Q3 2017, an increase of 24% from $20.8 million for the same period in 2016. The increase was driven by contracts secured with new customers in the last twelve months, as well as expansion of existing customer subscriptions.
Professional services revenue was $7.4 million in Q3 2017, a decline of 17% compared to $8.9 million for the same period in 2016. Professional services revenue reflects the ongoing strong support of our partners in implementing new customer projects.
Gross profit was $23.8 million in Q3 2017, compared to $20.5 million for the same period in 2016. As a percentage of revenue, gross profit increased to 71% from 68%. The increase came as a result of revenue growing at a higher rate than the cost of revenue compared to the prior year period.
Profit for Q3 2017 was $6.0 million or $0.24 per basic and $0.23 per diluted share compared to a profit of $2.4 million or $0.10 per basic and $0.09 per diluted share for the same period in 2016. The change was primarily driven by an increase in subscription revenue, which was partially offset by the investment in professional services, data center capacity, research and development and an increase in share-based payments.
Adjusted EBITDA increased 59% to $10.8 million in Q3 2017, compared to $6.8 million in the same period last year. The increase was driven by the growth in subscription revenue offset by an increase in operating expenses from investments in headcount and program spending.
Cash provided by operating activities was $3.3 million for Q3 2017 compared to $1.5 million used in the same period in 2016. The change resulted from an increase in profit and in trade and other receivables which was partially offset by an increase in deferred revenue.
Cash and cash equivalents were $151.4 million as at September 30, 2017 as compared to $127.9 million as at December 31, 2016.
Full Year 2017 Financial Guidance
With today's announcement, the Company is updating its 2017 full-year financial guidance:
- Annual total revenue to be in the range of $132 million to $134 million
- Annual subscription revenue to grow 22% to 23%
- Annual Adjusted EBITDA as a percentage of total revenue to be between 27% and 29% of total revenue
This guidance is provided to enhance visibility into the Company’s expectations for financial targets for the year ending December 31, 2017. Please refer to the section regarding forward-looking statements which forms an integral part of this release.
This press release, along with the unaudited condensed consolidated interim financial statements and the Company's corresponding MD&A, are available on the Company’s website at www.kinaxis.com and on SEDAR at www.sedar.com.
The Company will host a conference call tomorrow, November 2, 2017 to discuss these results. John Sicard, Chief Executive Officer, and Richard Monkman, Chief Financial Officer, will host the call starting at 8:30 a.m. Eastern Time. A question and answer session will follow management’s presentation.
Date: Thursday, November 2, 2017
Time: 8:30 a.m. Eastern Time
Dial-In Number: 1 (888) 231-8191
International: 1 (647) 427-7450
Conference ID#: 97697899
Please call the conference telephone number 5-10 minutes prior to the start time. An operator will register your name and organization.
A replay of the call will be available until 12:00 midnight Eastern Time on Thursday, November 9, 2017.
Toll-Free Replay Number: 1 (855) 859-2056
International Replay Number: 1 (416) 849-0833
Replay PIN: 97697899
Live Webcast: http://bit.ly/2z4IwcK
Webcast will be archived for 90 days
This news release contains non-IFRS measures, specifically, Adjusted profit, Adjusted diluted earnings per share and Adjusted EBITDA. We use Adjusted profit and Adjusted diluted earnings per share, which remove the impact of our share based compensation plans, to measure our performance as these measurements better align the reporting of our results and improve comparability against our peers. We use Adjusted EBITDA to provide investors with a supplemental measure of our operating performance and thus highlight trends in our core business that may not otherwise be apparent when relying solely on IFRS financial measures. We believe that securities analysts, investors and other interested parties frequently use non-IFRS measures in the evaluation of issuers. Management also uses non-IFRS measures in order to facilitate operating performance comparisons from period to period, prepare annual operating budgets and assess our ability to meet our capital expenditure and working capital requirements. Adjusted profit, Adjusted diluted earnings per share and Adjusted EBITDA are not recognized, defined or standardized measures under IFRS. Our definition of Adjusted profit, Adjusted EBITDA and Adjusted diluted earnings per share will likely differ from that used by other companies (including our peers) and therefore comparability may be limited. Non-IFRS measures should not be considered a substitute for or in isolation from measures prepared in accordance with IFRS. Investors are encouraged to review our financial statements and disclosures in their entirety and are cautioned not to put undue reliance on non-IFRS measures and view them in conjunction with the most comparable IFRS financial measures.
The Company has reconciled Adjusted profit and Adjusted EBITDA to the most comparable IFRS financial measure as follows:
Certain statements in this release constitute forward-looking statements within the meaning of applicable securities laws. Forward-looking statements include statements as to our expectations for growth of annual total revenue, annual subscription revenue, and our expectations for Adjusted EBITDA achievement, in each case looking forward for the balance of our fiscal year ending December 31, 2017, as well as statements as to Kinaxis’ growth opportunities, the potential benefits of our strategic partnerships and the potential benefits of, and markets and demand for, Kinaxis’ products and services. These statements are subject to certain assumptions, risks and uncertainties, including our view of the relative position of Kinaxis’ products and services compared to competitive offerings in the industry.
In particular, our guidance for 2017 annual revenue total revenue, annual subscription revenue and annual Adjusted EBITDA, is subject to certain assumptions, including:
- our ability to win business from new customers and expand business from existing customers;
- the timing of new customer wins and expansion decisions by our existing customers;
- maintaining our current customer retention levels; and
- with respect to Adjusted EBITDA, our ability to contain expense levels while expanding our business.
These and other assumptions, risks and uncertainties may cause Kinaxis’ actual results, performance, achievements and developments to differ materially from the results, performance, achievements or developments expressed or implied by forward-looking statements. Material risks and uncertainties relating to our business are described under the headings “Forward Looking Statements” and “Risks and Uncertainties” in our annual MD&A dated February 28, 2017, under the heading “Risk Factors” in our Annual Information Form dated March 27, 2017, and in our other public documents filed with Canadian securities regulatory authorities, which are available at www.sedar.com. Forward-looking statements are provided to help readers understand management’s expectations as at the date of this release and may not be suitable for other purposes. Readers are cautioned not to place undue reliance on forward-looking statements. Kinaxis assumes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as expressly required by law.