News Release

Kinaxis Inc. Reports Second Quarter 2019 Results

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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.

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