Press Release

Kinaxis Inc. Reports Fourth Quarter and Full Year 2018 Results

Reports 21% growth in annual subscription revenue and annual Adjusted EBITDA(2) of 26% of revenue(1)

OTTAWA, Febr. 28, 2019 /CNW/ - Kinaxis® (TSX: KXS) , the leader in empowering people to make confident supply chain decisions, today reported results for its fiscal fourth quarter and year ended December 31, 2018. Kinaxis has adopted IFRS 15 and 161 (or "the Standards") with an initial date of application of January 1, 2018. The information for Q4 and FY 2018 has been presented both before and after adoption of the Standards, while the information presented for 2017 has not been restated. 

Prior to the effect of the Standards and on a comparative basis, Q4 2018 total revenue increased 15% to $39.5 million; total subscription revenue grew by 18% to $31.8 million; Adjusted EBITDA(2) was down 22% to $8.7 million (22% of revenue); and profit declined to $3.0 million from $5.5 million. Giving effect to the Standards, Q4 2018 total revenue was $38.3 million, total subscription revenue was $30.6 million, Adjusted EBITDA(2) was $9.0 million (23% of revenue) and profit was $2.9 million. Prior to the impact of the Standards full year 2018 revenue grew 16% to $155.0 million; total subscription revenue grew 21% to $122.0 million; and Adjusted EBITDA(2)  grew 2% to $40.9 million (26% of revenue). After giving effect to the standards, full year 2018 revenue was $150.7 million, total subscription revenue was $117.8 million and Adjusted EBITDA(2)  was $41.7 million (28% of revenue). All amounts are in U.S. dollars. All figures are prepared in accordance with International Financial Reporting Standards (IFRS), unless otherwise indicated.

"We continued to deliver high revenue growth and strong profitability in 2018, reflecting the sustained strength of our business. Throughout the year, we executed on a number of strategic investments including the expansion of our global sales team and key product innovations. These investments helped drive our strong financial performance and will position Kinaxis for continued growth in 2019 and beyond," said John Sicard, Kinaxis CEO. "Our stronger focus in Europe supported a number of recent blue-chip customer wins, including Novartis, Unilever and Dyson. Our partner network continues to expand, as demonstrated by the recent announcement of a partnership with EY.  We continued to scale our global workforce and strengthen the management team, most recently adding Anne Robinson as Chief Strategy Officer.  Finally, since product innovation remains the key to success at Kinaxis, we continued to add new product capabilities and win industry recognition for our unique product differentiation. We expect to accelerate our investments in product innovation even further in 2019."

 

Q4 2018 Highlights




Under IFRS 15/16(1)

Prior to IFRS 15/16(1)






$ USD millions, except as otherwise indicated

Q4 2018

Q4 2018

Q4 2017

Change

Total Revenue

38.3

39.5

34.4

15%

Subscription services

28.2

31.8

27.0

18%

Subscription term licenses

2.4

-

-

-

Total subscription revenue

30.6

31.8

27.0

18%

Gross profit

25.9

27.0

24.7

9%


(68%)

(68%)

(72%)


Profit

2.9

3.0

5.5

(46%)


($0.11/diluted share)

($0.11/diluted share)

($0.21/diluted share)


Adjusted EBITDA(2)

9.0

8.7

11.2

(22%)


(23%)

(22%)

(32%)


 

FY 2018 Highlights




Under IFRS 15/16(1)

Prior to IFRS 15/16(1)

$ USD millions, except as otherwise indicated

FY 2018

FY 2018

FY 2017

Change

Total Revenue

150.7

155.0

133.3

16%

Subscription services

107.9

122.0

100.8

21%

Subscription term licenses

9.9

-

-

-

Total subscription revenue

117.8

122.0

100.8

21%

Gross profit

103.7

107.8

93.5

15%


(69%)

(70%)

(70%)


Profit

14.4

15.8

20.4

(22%)


($0.54/diluted share)

($0.59/diluted share)

($0.77/diluted share)


Adjusted EBITDA(2)

41.7

40.9

40.1

2%


(28%)

(26%)

(30%)


(1)

Kinaxis has adopted IFRS 15, using the cumulative effect method, and IFRS 16, using the modified retrospective approach, and an initial date of application of January 1, 2018. Accordingly, the information presented for 2017 has not been restated. The impact of the adoption of IFRS 15 relates primarily to accounting for Kinaxis' revenue from on-premise, fixed term subscription arrangements and capitalization of contract acquisition costs. IFRS 16 specifies how to recognize, measure, present and disclose leases. The standard provides a single lessee accounting model, requiring lessees to recognize assets and liabilities for all major leases. See the Kinaxis financial statements and MD&A for the three months and year ended December 31, 2018 for further information.

(2)

"Adjusted EBITDA" is a non-IFRS measure and is not a recognized, defined or a standardized measure under IFRS. This measure as well as other non-IFRS financial measures reported by Kinaxis are defined in the "Non-IFRS Measures" section of this news release.

 

Analysis of Q4 2018 vs Q4 2017 and FY 2018 vs FY 2017 Financial Highlights

As noted in our financial statements and management's discussion and analysis (MD&A) for the three and twelve months ended December 31, 2018, Kinaxis adopted the Standards on January 1, 2018.  We have not restated the 2017 comparative information but have also presented the 2018 results prior to giving effect to the Standards, to create a basis for this comparative analysis.

Prior to the effect of the Standards, in the fourth quarter and full year of 2018, subscription services revenue grew by 18% to $31.8 million, and by 21% to $122.0 million, respectively, due to contracts secured with new customers, as well as expansion of existing customer subscriptions. Over the same periods, total revenue grew by 15% to $39.5 million and 16% to $155.0 million, respectively. After applying the Standards, in the fourth quarter and full year of 2018, subscription services revenue was $28.2 million and $107.9 million, respectively, and subscription term license revenue was $2.4 million and $9.9 million, respectively (for total subscription revenue of $30.6 million and $117.8 million, respectively). After applying the Standards, total revenue was $38.3 million in Q4 2018 and $150.7 million in FY 2018.

Prior to the effect of the Standards, in the fourth quarter and full year of 2018, respectively, gross profit grew 9% to $27.0 million (gross margin: 72% to 68%) and grew 15% to $107.8 million (gross margin: consistent at 70%). The lower gross margin in Q4 2018 reflects increases in headcount and related compensation costs, and higher depreciation costs associated with the expansion of data center capacity, including new data centers in Japan, to support new and ongoing customer engagements as well as global expansion. After applying the Standards, gross profit was $25.9 million (gross margin: 68%) in the fourth quarter, and $103.7 million (gross margin: 69%) for the full year of 2018.

Prior to the effect of the Standards, profit for the fourth quarter was $3.0 million ($0.11 per diluted share), compared to $5.5 million ($0.21 per diluted share) in Q4 2017. For the full year of 2018, profit was $15.8 million ($0.59 per diluted share), compared to $20.4 million ($0.77 per diluted share) in 2017. The decrease in profit in both periods reflects an increase in operating expenses incurred to support expansion of our global operations and ongoing product innovation, net of increases in revenue and gross profit. After applying the Standards, profit for the fourth quarter and full year of 2018 was $2.9 million ($0.11 per diluted share) and $14.4 million ($0.54 per diluted share), respectively.

Prior to the effect of the Standards, Adjusted EBITDA(2) for the fourth quarter and full year of 2018 declined 22%, to $8.7 million (22% of revenue), and grew 2% to $40.9 million (26% of revenue), respectively. The decrease in Q4 2018 Adjusted EBITDA was due to an increase in operating expenses net of an increase in revenue and gross profit. The increase in Adjusted EBITDA for the full year was due to an increase in revenue and gross profit. After applying the Standards, for the fourth quarter and full year of 2018 Adjusted EBITDA(2) was $9.0 million (23% of revenue) and $41.7 million (28% of revenue), respectively.

Cash generated by operating activities for the fourth quarter and full year of 2018, respectively, was $6.7 million, compared to $12.5 million, and $27.9 million, compared to $33.6 million. The decrease for the three months and year was due to an increase in trade and other receivables. Cash and cash equivalents and short-term investments were $181.5 million at December 31, 2018, compared to $158.5 million at December 31, 2017.

Financial Guidance

In order to better show revenue growth related to the company's core SaaS business, in 2019 Kinaxis will be presenting SaaS (or cloud-based) revenue separately while combining the maintenance and support revenue related to Subscription term licenses (currently reported as part of "Subscription services", together with SaaS revenue) with the maintenance and support related to its legacy perpetual licenses. On this basis, the company provides the following guidance for 2019.

 


2018 Actual

2019 Guidance

Total revenue

150.7

$183-188

SaaS

97.2(3)

22-24% growth

Subscription term licenses

9.9

$20-22

Maintenance and support, Subscription term licenses

10.7(3)


Maintenance and support, legacy perpetual licenses

1.1


Total Maintenance and support

11.8


Professional services

31.9


Adjusted EBITDA margin

28%

23-25%

(3)

FY 2018 Subscription services revenue of $107.9 million is composed of $97.2 million in SaaS revenue plus $10.7 million in Maintenance and support related to Subscription term licenses.

 

"We are pleased to provide guidance for fiscal 2019 that reflects accelerating revenue growth and continued strong profitability.  Key 2019 investments will include the accelerated growth of our engineering team to further drive product innovation, together with the continued expansion of our global sales, marketing and support teams," said Richard Monkman, Chief Financial Officer.

This guidance is provided to enhance visibility into Kinaxis' expectations for financial targets for the periods indicated. Please refer to the section regarding forward-looking statements which forms an integral part of this release. The nature of the company's long-term contracts provides visibility into future, contracted revenue. The following table presents revenue, based on the Standards, expected to be recognized in the future related to performance obligations that are unsatisfied (or partially unsatisfied) at December 31, 2018.

 


2019

2020

2021
and thereafter

Total

SaaS

100.4

62.1

59.8

222.3

Subscription term license support

8.4

3.2

2.2

13.8

Subscription term license

0.2

-

-

0.2

Maintenance and support

0.9

0.2

0.1

1.2

Total

109.9

65.5

62.1

237.5

 

This press release, along with the financial statements and Kinaxis' MD&A for the three and twelve months ended December 31, 2018, are available on Kinaxis' website and on SEDAR at www.sedar.com.

Conference Call
Kinaxis will host a conference call tomorrow, March 1, 2019, 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:

Friday, March 1, 2019

Time:

8:30 a.m. Eastern Time

Webcast:

https://bit.ly/2RNQTGD

Dial-in number:

(647) 427-7450 or (888) 231-8191

Replay:

(416) 849-0833 or (855) 859-2056


Available until 12:00 midnight Eastern Time Friday, March 8, 2019

Reference number:

9191697

 

Please call the conference telephone number 5-10 minutes prior to the start time. An operator will register your name and organization.

About Kinaxis Inc.

Eliminating volatility in your supply chain is impossible, but managing it is not. Trusted by top brands, Kinaxis®gives people the confidence to know they are making the best supply chain planning decisions to maximize business performance. We solve complex business problems in easy-to-understand ways by combining human and machine intelligence to plan for any future, monitor risks and opportunities and respond at the pace of change. With the support of our community of supply chain experts and using our unique concurrent planning technique and single integrated planning platform, customers can realize higher revenue, lower costs and fewer risks. For more Kinaxis news, follow us on LinkedIn, Twitter or Facebook.

Non-IFRS Measures

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 redeemable preferred shares and 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 work 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 diluted earnings per share and Adjusted EBITDA 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. Kinaxis has reconciled Adjusted profit and Adjusted EBITDA to the most comparable IFRS financial measure as follows:

 



Three months ended December 31,


Year ended December 31,




Pre-IFRS 15/16



Pre-IFRS 15/16


2018

2018

2017


2018

2018

2017

2016


(In thousands of USD)

















Profit

$

2,925

$

2,978

$

5,485


$

14,408

$

15,846

$

20,383

$

10,745

Share-based compensation


2,924


2,924


2,334



11,568


11,568


9,746


8,140

Adjusted profit

$

5,849

$

5,902

$

7,819


$

25,976

$

27,414

$

30,129

$

18,885

Income tax expense


1,796


2,028


2,584



8,068


8,788


7,375


7,258

Depreciation


2,571


1,894


1,101



9,272


6,728


3,618


2,494

Foreign exchange loss (gain)


(22)


117


31



181


507


84


198

Net finance income


(1,208)


(1,270)


(378)



(1,810)


(2,583)


(1,131)


(307)



3,137


2,769


3,338



15,711


13,440


9,946


9,643

Adjusted EBITDA

$

8,986

$

8,671

$

11,157


$

41,687

$

40,854

$

40,075

$

28,528

Adjusted EBITDA as a percentage of revenue


23%


22%


32%



28%


26%


30%


25%

 

Forward-Looking Statements

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 SaaS and Subscription term licenses revenue, and our expectations for Adjusted EBITDA margin achievement, in each case looking forward for our fiscal year ending December 31, 2019, as well as statements as to Kinaxis' growth opportunities 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 2019 annual total revenue, annual SaaS and Subscription term licenses revenue and annual Adjusted EBITDA margin, 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, 2019, under the heading "Risk Factors" in our Annual Information Form dated March 29, 2018, 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.

 

Kinaxis Inc.



Consolidated Statements of Financial Position






As at December 31, 2018 and December 31, 2017



(Expressed in thousands of USD)







2018

2017*




Assets






Current assets:



Cash and cash equivalents

126,144

103,392

Short-term investments  

55,404

55,138

Trade and other receivables

64,330

31,651

Investment tax credits recoverable

-

911

Prepaid expenses

5,815

4,196


251,693

195,288




Non-current assets:



Property and equipment

22,785

17,350

Right-of-use assets

8,873

-

Contract acquisition costs

13,902

-

Unbilled receivables

457

-

Deferred tax assets

49

55





297,759

212,693




Liabilities and Shareholders' Equity






Current liabilities:



Trade payables and accrued liabilities

21,623

11,176

Deferred revenue

78,496

67,040

Lease obligations

2,572

-


102,691

78,216

Non-current liabilities:



Deferred revenue

-

7,745

Lease obligations

6,311

-

Deferred tax liabilities

4,075

1,944


10,386

9,689




Shareholders' equity:



Share capital 

124,951

108,253

Contributed surplus

24,284

19,294

Accumulated other comprehensive loss

(319)

(284)

Retained earnings (Deficit)

35,766

(2,475)


184,682

124,788





297,759

212,693




*

The Company adopted IFRS 15 and 16 as described in Note 4 to the Consolidated Financial Statements, which are available on sedar.com. Under this adoption, the comparative information is not restated.

 

Kinaxis Inc.

Consolidated Statements of Comprehensive Income


For the three months and years ended December 31, 2018 and 2017

(Expressed in thousands of USD, except share and per share data)


For the three months ended December 31,

For the year ended December 31,


2018

2017*

2018

2017*






Revenue 

38,299

34,423

150,727

133,317






Cost of revenue

12,390

9,737

47,032

39,780






Gross profit

25,909

24,686

103,695

93,537






Operating expenses:





Selling and marketing

10,285

7,882

35,055

29,280

Research and development 

7,105

5,608

27,626

23,691

General and administrative

5,028

3,474

20,167

13,855


22,418

16,964

82,848

66,826







3,491

7,722

20,847

26,711

Other income (expense):





Foreign exchange loss

22

(31)

(181)

(84)

Net finance income 

1,208

378

1,810

1,131


1,230

347

1,629

1,047






Profit before income taxes

4,721

8,069

22,476

27,758






Income tax expense

1,796

2,584

8,068

7,375






Profit 

2,925

5,485

14,408

20,383






Other comprehensive income (loss)





Items that are or may be reclassified subsequently to profit or loss:





Foreign currency translation differences - foreign operations

178

(131)

(35)

235






Total comprehensive income

3,103

5,354

14,373

20,618






Basic earnings per share

0.11

0.22

0.56

0.81






Weighted average number of basic Common Shares 

26,037,096

25,457,874

25,820,518

25,314,091






Diluted earnings per share

0.11

0.21

0.54

0.77






Weighted average number of diluted Common Shares

26,812,260

26,502,885

26,824,435

26,479,621











*

The Company adopted IFRS 15 and 16 as described in Note 4 to the Consolidated Financial Statements, which are available on sedar.com. Under this adoption, the comparative information is not restated.

 

Kinaxis Inc.






Consolidated Statements of Changes in Shareholders' Equity











For the years ended December 31, 2018 and 2017






(Expressed in thousands of USD)













 

Share

capital

 

Contributed

surplus

Accumulated

other

comprehensive

loss

 

Deficit

 

Total equity*










Balance, December 31, 2016

97,164

13,924

(519)

(22,858)

87,711







Profit

-

-

-

20,383

20,383

Other comprehensive income

-

-

235

-

235

Total comprehensive income

-

-

235

20,383

20,618







Share options exercised

9,437

(2,724)

-

-

6,713

Restricted share units vested

1,652

(1,652)

-

-

-

Share based payments

-

9,746

-

-

9,746

Total shareholder transactions

11,089

5,370

-

-

16,459







Balance, December 31, 2017

108,253

19,294

(284)

(2,475)

124,788







Adjustment on initial application of IFRS 15

-

-

-

23,833

23,833

Adjusted balance, January 1, 2018

108,253

19,294

(284)

21,358

148,621







Profit

-

-

-

14,408

14,408

Other comprehensive income

-

-

(35)

-

(35)

Total comprehensive income (loss)

-

-

(35)

14,408

14,373







Share options exercised

14,012

(3,892)

-

-

10,120

Restricted share units vested

1,834

(1,834)

-

-

-

Deferred share units exercised

852

(852)

-

-

-

Share based payments                               

-

11,568

-

-

11,568

Total shareholder transactions

16,698

4,990

-

-

21,688







Balance, December 31, 2018

124,951

24,284

(319)

35,766

184,682







*

The Company adopted IFRS 15 and 16 as described in Note 4 to the Consolidated Financial Statements, which are available on sedar.com. Under this adoption, the comparative information is not restated.

 

Kinaxis Inc.





Consolidated Statements of Cash Flows










For the three months and years ended December 31, 2018 and 2017





(Expressed in thousands of USD)











For the three months ended December 31,

For the year ended December 31,


2018

2017*

2018

2017*






Cash flows from operating activities:










Profit 

2,925

5,485

14,408

20,383

Items not affecting cash:





Depreciation of property and equipment

2,571

1,101

9,272

3,618

Share-based payments

2,924

2,334

11,568

9,746

Amortization of lease inducement

-

-

-

(18)

Investment tax credits recoverable

-

376

911

(156)

Net finance income

(1,208)

(378)

(1,810)

(1,131)

Income tax expense

1,796

2,584

8,068

7,375

Change in operating assets and liabilities

(4,089)

1,509

(13,215)

(2,629)

Interest received

1,100

378

2,413

999

Interest paid

(62)

-

(773)

-

Income taxes paid

697

(875)

(2,927)

(4,624)


6,654

12,514

27,915

33,563






Cash flows used investing activities:





Purchase of property and equipment

(1,198)

(5,845)

(12,310)

(10,149)

Purchase of short-term investments

(27,597)

(20,000)

(112,684)

(80,006)

Redemption of short-term investments

42,539

20,000

112,588

25,000


13,744

(5,845)

(12,406)

(65,155)






Cash flows from financing activities:





Payment of lease obligations

(582)

-

(2,160)

-

Common shares issued on exercise of stock options

478

281

10,120

6,713


(104)

281

7,960

6,713






Increase in cash and cash equivalents

20,294

6,950

23,469

(24,879)






Cash and cash equivalents, beginning of period

106,040

96,429

103,392

127,910






Effects of exchange rates on cash and cash equivalents

(190)

13

(717)

361






Cash and cash equivalents, end of period

126,144

103,392

126,144

103,392






*

The Company adopted IFRS 15 and 16 as described in Note 4 to the Consolidated Financial Statements, which are available on sedar.com. Under this adoption, the comparative information is not restated.

 

SOURCE Kinaxis Inc.

 

Investor Relations

Rick Wadsworth | Kinaxis
rwadsworth@kinaxis.com
(613) 907-7613

Media Relations

Danielle McNeil Taylor | Kinaxis
Tel: (343) 998-7284 
dmcneiltaylor@kinaxis.com