Press Release

Kinaxis Inc. Reports Second Quarter 2019 Results

SaaS revenue grows 18%, adjusted EBITDA of 27%, fiscal year outlook supported by multiple major customer wins

OTTAWA, Aug. 1, 2019 /CNW/ - Kinaxis® (TSX: KXS) , the leader in empowering people to make confident supply chain decisions, today reported results for its second quarter ended June 30, 2019. All amounts are in U.S. dollars. All figures are prepared in accordance with International Financial Reporting Standards (IFRS) unless otherwise indicated.

Q2 2019 total revenue increased 9% to $42.4 million with SaaS revenue growing by 18% to $28.3 million. Adjusted EBITDA(1) was up 5% to $11.6 million (27% of revenue) and profit decreased slightly to $4.0 million from $4.3 million.

"Our second quarter results further support our strong growth outlook for the year. We secured major new customer wins in every theatre this quarter, which are reflected in our record-breaking backlog. These contracts reinforce our confidence in 2019 guidance, drive increased revenue in Q3 and Q4, and support our accelerated investments in sales force expansion," said John Sicard, Kinaxis CEO. "We are very pleased to have been able to announce a number of these new relationships, including Johnson Electric and Yamaha."

 

Q2 2019 Highlights





$ USD millions, except as otherwise indicated

Q2 2019

Q2 2018

Change

Total Revenue

42.4

39.0

9%

SaaS

28.3

23.9

18%

Subscription term license

2.4

2.5

-5%

Gross profit

29.4

26.5

11%


(69%)

(68%)


Profit

4.0

4.3

-6%


($0.15/diluted share)

($0.16/diluted share)


Adjusted EBITDA(1)

11.6

11.0

5%


(27%)

(28%)


Cash from operating activities

8.8

9.1

-4%


(1)  "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 Q2 2019 vs Q2 2018 Financial Highlights
Revenue: Growth in total revenue of 9% was driven primarily by 18% growth in SaaS revenue, which resulted from contracts secured with new customers, as well as expansion of existing customer subscriptions. Subscription term license revenue declined 5%, as it depends on the timing of renewals, expansions and new engagements for on-premise and hybrid subscription arrangements, and will vary substantially quarter to quarter.

Gross profit margin: Growth in gross profit margin to 69% resulted from the growth in SaaS revenue, partly offset by an increase in costs of revenue, such as related headcount, partner and third-party costs, and higher depreciation costs associated with the expansion of data center capacity.

Profit and adjusted EBITDA: The 6% decrease in profit was due to an increase in operating expenses, partly offset by an increase in revenue and gross profit. Additional investments to support the company's long-term strategic growth initiatives drove increased operating expenses, including additional headcount in sales and marketing and research and development, and higher expenses related to sales commissions and marketing activities. The 5% increase in Adjusted EBITDA was due to an increase in revenue and gross profit, partly offset by the increases in operating expenses, excluding stock-based compensation and depreciation.

Cash from operating activities: The 4% decrease in cash from operating activities was largely due to recognition of deferred revenue balances and payment of income taxes. At June 30, 2019, cash, cash equivalents and short-term investments grew by $19.4 million to $200.9 million from $181.5 million at December 31, 2018.

Financial Guidance
Kinaxis is pleased to reaffirm its 2019 fiscal year financial targets, as follows:

 


                                   FY 2019 Guidance

Total revenue

$183-188 million

                                                        SaaS

20-22% growth

Subscription term license

 $22-24 million

Adjusted EBITDA margin

25-27% of revenue

 

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 that 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 expected to be recognized in the future related to performance obligations that are unsatisfied (or partially unsatisfied) at June 30, 2019.

 


Remainder of
2019

2020

2021
and thereafter

Total

SaaS

57.7

81.7

89.9

229.3

Subscription term license

0.9

-

-

0.9

Maintenance and support

5.7

6.2

5.1

17.0

Total

64.3

87.9

95.0

247.2

 

This press release, along with the financial statements and MD&A for the three and six months ended June 30, 2019, are available on Kinaxis' website and on SEDAR at www.sedar.com.

Conference Call
Kinaxis will host a conference call tomorrow, August 2, 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, August 2, 2019

Time:

8:30 a.m. Eastern Time

Webcast:

https://bit.ly/2XAVDx2

Dial-in number:

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

Replay:

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


Available until 11:59 p.m., Eastern Daylight Time Friday, August 9, 2019

Reference number:

2086230

 

Please call the conference telephone number five to ten 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 planning decisions to maximize business performance. We solve complex business problems in easy-to-understand ways faster 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, visit Kinaxis.com or 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 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 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 June 30,


Six months ended June 30,


2019


2018


2019


2018


(In thousands of USD)



Profit

$

4,001


$

4,265


$

10,967


$

8,818

Share-based compensation


3,581


2,527


6,653


5,685

Adjusted profit

$

7,582


$

6,792


$

17,620


$

14,503

Income tax expense


1,905


1,809


5,723


4,939

Depreciation


2,974


2,398


5,651


4,218

Foreign exchange loss (gain)


(85)


222


85


26

Net finance income


(821)


(193)


(1,586)


(338)



3,973


4,236


9,873


8,845

Adjusted EBITDA

$

11,555


$

11,028


$

27,493


$

23,348

Adjusted EBITDA as a percentage of revenue


27%


28%


31%


31%

 

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 license 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.





Condensed Consolidated Interim Statements of Financial Position






As at June 30, 2019 and December 31, 2018



(Expressed in thousands of USD)



(Unaudited)












June 30,
2019


December 31,
2018






Assets










Current assets:





Cash and cash equivalents

$

165,512

$

126,144

Short-term investments  


35,387


55,404

Trade and other receivables


43,353


64,330

Prepaid expenses


7,068


5,815



251,320


251,693






Non-current assets:





Property and equipment


27,872


22,785

Right-of-use assets


10,774


8,873

Contract acquisition costs


13,493


13,902

Unbilled receivables


440


457

Deferred tax assets


58


49







$

303,957

$

297,759






Liabilities and Shareholders' Equity










Current liabilities:





Trade payables and accrued liabilities

$

15,856

$

21,623

Deferred revenue


66,161


78,496

Lease obligations


2,687


2,572



84,704


102,691

Non-current liabilities:





Lease obligations


8,463


6,311

Deferred tax liabilities


6,425


4,075



14,888


10,386






Shareholders' equity:





Share capital 


127,977


124,951

Contributed surplus


30,009


24,284

Accumulated other comprehensive loss


(354)


(319)

Retained earnings


46,733


35,766



204,365


184,682







$

303,957

$

297,759

  

Kinaxis Inc.









Condensed Consolidated Interim Statements of Comprehensive Income










For the three and six months ended June 30, 2019 and 2018

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

(Unaudited)




















For the three months

 ended June 30,


For the six months

 ended June 30,



2019


2018


2019


2018










Revenue 

$

42,352

$

38,994

$

88,106

$

75,843










Cost of revenue


12,984


12,493


25,175


22,628










Gross profit


29,368


26,501


62,931


53,215










Operating expenses:









Selling and marketing


10,446


8,897


19,761


16,283

Research and development 


8,101


7,357


16,095


14,106

General and administrative


5,821


4,144


11,886


9,381



24,368


20,398


47,742


39,770












5,000


6,103


15,189


13,445

Other income (expense):









Foreign exchange gain (loss)


85


(222)


(85)


(26)

Net finance income 


821


193


1,586


338



906


(29)


1,501


312










Profit before income taxes


5,906


6,074


16,690


13,757










Income tax expense


1,905


1,809


5,723


4,939










Profit 


4,001


4,265


10,967


8,818










Other comprehensive income (loss)









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









Foreign currency translation differences - foreign operations


21


(443)


(35)


(43)










Total comprehensive income

$

4,022

$

3,822

$

10,932

$

8,775










Basic earnings per share

$

0.15

$

0.17

$

0.42

$

0.34










Weighted average number of basic Common Shares 


26,146,682


25,720,014


26,119,264


25,631,985










Diluted earnings per share

$

0.15

$

0.16

$

0.41

$

0.33










Weighted average number of diluted Common Shares


26,840,552


26,749,364


26,841,775


26,733,546

  

Kinaxis Inc.











Condensed Consolidated Interim Statements of Changes in Shareholders' Equity 

















For the six months ended June 30, 2019 and 2018







(Expressed in thousands of USD)









(Unaudited)


























Accumulated











other


Retained





Share


Contributed


comprehensive


earnings


Total



capital


surplus


loss


(deficit)


equity












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


-


-


-


8,818


8,818

Other comprehensive income


-


-


(43)


-


(43)

Total comprehensive income


-


-


(43)


8,818


8,775












Share options exercised


10,036


(2,897)


-


-


7,139

Deferred share units exercised


399


(399)


-


-


-

Share based payments


-


5,685


-


-


5,685

Total shareholder transactions


10,435


2,389


-


-


12,824












Balance, June 30, 2018

$

118,688

$

21,683

$

(327)

$

30,176

$

170,220












Balance, December 31, 2018

$

124,951

$

24,284

$

(319)

$

35,766

$

184,682












Profit


-


-


-


10,967


10,967

Other comprehensive loss


-


-


(35)


-


(35)

Total comprehensive income (loss)


-


-


(35)


10,967


10,932












Share options exercised


3,026


(928)


-


-


2,098

Share based payments


-


6,653


-


-


6,653

Total shareholder transactions


3,026


5,725


-


-


8,751












Balance, June 30, 2019

$

127,977

$

30,009

$

(354)

$

46,733

$

204,365

  

Kinaxis Inc.









Condensed Consolidated Interim Statements of Cash Flows















For the three and six months ended June 30, 2019 and 2018






(Expressed in thousands of USD)

(Unaudited)




















For the three months

 ended June 30,


For the six months

 ended June 30,



2019


2018


2019


2018










Cash flows from operating activities:


















Profit 

$

4,001

$

4,265

$

10,967

$

8,818

Items not affecting cash:









Depreciation of property and equipment and right-of-use assets


2,974


2,398


5,651


4,218

Share-based payments


3,581


2,527


6,653


5,685

Investment tax credits recoverable


-


-


-


911

Net finance income


(821)


(193)


(1,586)


(338)

Income tax expense


1,905


1,809


5,723


4,939

Change in operating assets and liabilities


(2,045)


(848)


10,974


(2,607)

Interest received


1,000


446


1,873


807

Interest paid


(158)


(321)


(270)


(469)

Income taxes paid


(1,676)


(998)


(12,465)


(2,499)



8,761


9,085


27,520


19,465










Cash flows used in investing activities:


















Purchase of property and equipment


(8,301)


(4,529)


(9,194)


(9,350)

Purchase of short-term investments


(15,001)


(37,500)


(30,006)


(52,543)

Redemption of short-term investments


22,500


15,000


50,006


55,005



(802)


(27,029)


10,806


(6,888)










Cash flows from financing activities:


















Payment of lease obligations


(687)


(544)


(1,287)


(998)

Common shares issued on exercise of stock options


1,153


4,361


2,098


7,139



466


3,817


811


6,141










Increase (decrease) in cash and cash equivalents


8,425


(14,127)


39,137


18,718










Cash and cash equivalents, beginning of period


156,984


136,587


126,144


103,392










Effects of exchange rates on cash and cash equivalents


103


(427)


231


(77)










Cash and cash equivalents, end of period

$

165,512

$

122,033

$

165,512

$

122,033

 

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