News Release

Kinaxis Inc. Reports Third Quarter 2019 Results

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Q3 SaaS revenue growth of 28% and adjusted EBITDA(1) of 26%

OTTAWA, Oct. 31, 2019 /CNW/ - Kinaxis® (TSX: KXS), the leader in empowering people to make confident supply chain decisions, today reported results for its third quarter ended September 30, 2019. All amounts are in U.S. dollars. All figures are prepared in accordance with International Financial Reporting Standards (IFRS) unless otherwise indicated.

Q3 2019 total revenue increased 29% to $47.1 million with SaaS revenue growing by 28% to $31.2 million. Adjusted EBITDA(1) was up 29% to $12.1 million (26% of revenue) and profit grew 70% to $4.5 million from $2.7 million. Both adjusted EBITDA and profit reflected the impact of a one-time charge of $2.5 million related to a previously disclosed and now amicably resolved arbitration proceeding. Excluding this charge, adjusted EBITDA and profit were $14.6 million and $6.3 million, respectively.

"As expected, our success in the second quarter winning some very large new customers, such as British American Tobacco, Honda, Yamaha Motors, Teva Pharmaceuticals and others has led to faster SaaS revenue growth in Q3. Bookings were strong again in the third quarter, such that our backlog has grown further and provides excellent visibility into the remainder of 2019. We are increasing all aspects of our guidance, with higher expectations for SaaS, term license and total revenue, as well as a higher EBITDA target for the year," said John Sicard, President and Chief Executive Officer.

Q3 2019 Highlights

               

$ USD thousands, except as otherwise
indicated

Q3 2019

Q3 2018

Change

Total Revenue

47,131

36,585

29%

SaaS

31,229

24,489

28%

Subscription term license

3,278

508

545%

Gross profit

33,328

24,571

36%

 

(71%)

(67%)

 

Profit(2)

4,533

2,665

70%

($0.17/diluted share)

($0.10/diluted share)

 

Adjusted EBITDA(1)(2)

12,100

9,353

29%

(26%)

(26%)

 

Cash from operating activities

1,054

1,796

-41%

(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.

(2)

Q3 2019 amounts reflect the impact of the $2.5M receivable write-off related to a previously disclosed and now amicably resolved arbitration proceeding. Excluding this amount adjusted EBITDA was $14.6 million (31% of revenue) and profit was $6.3 million ($0.23 per diluted share).

 

Analysis of Q3 2019 vs Q3 2018 Financial Highlights
Revenue: Growth in total revenue of 29% was driven primarily by 28% growth in SaaS revenue, which resulted from contracts secured with new customers, as well as expansion of existing customer subscriptions. Subscription term license revenue growth 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 71% 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 70% increase in profit and 29% increase in adjusted EBITDA was due to an increase in revenue and gross profit, partly offset by an increase in operating expenses, including investments to support the company's long-term strategic growth initiatives and a one-time charge of $2.5 million related to a previously disclosed arbitration proceeding. Excluding this charge, adjusted EBITDA and profit were $14.6 million and $6.3 million, respectively.

Cash from operating activities: The 41% decrease in cash from operating activities was largely due to fluctuations in operating assets and liabilities including a smaller decrease in trade and other receivables compared to Q3 2018, partly offset by higher profit. At September 30, 2019, cash, cash equivalents and short-term investments grew by $20.7 million to $202.2 million from $181.5 million at December 31, 2018.

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

 

                   

FY 2019 Guidance

Total revenue

                 

$188-190 million

SaaS

             

~22% growth

Subscription term license

             

 ~$26 million

Adjusted EBITDA margin

                 

27-29% 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 September 30, 2019.

 

 

Remainder of
2019

2020

2021
and thereafter

Total

$USD millions

SaaS

31.2

97.4

118.3

246.9

Subscription term license

12.1

4.1

-

16.2

Maintenance and support

3.3

10.4

12.9

26.6

Total

46.6

111.9

131.2

289.7

 

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

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

Time:

8:30 a.m. Eastern Time

Webcast:

https://bit.ly/2nuqwaw

Dial-in number:

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

Replay:

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

 

Available until 11:59 p.m. EDT, Friday, November 8, 2019

Reference number:

4299048

 

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 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 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
September 30,

Nine months ended
September 30,

 

2019

2018

2019

2018

 

(In thousands of USD)

   

Profit............................................................................

$

4,533

$

2,665

$

15,500

$

11,483

Share-based compensation........................................

 

3,537

 

2,959

 

10,190

 

8,644

Adjusted profit............................................................

$

8,070

$

5,624

$

25,690

$

20,127

Income tax expense....................................................

 

1,725

 

1,333

 

7,448

 

6,272

Depreciation................................................................

 

3,045

 

2,483

 

8,696

 

6,701

Foreign exchange loss.................................................

 

101

 

177

 

186

 

203

Net finance income.....................................................

 

(841)

 

(264)

 

(2,427)

 

(602)

   

4,030

 

3,729

 

13,903

 

12,574

Adjusted EBITDA.........................................................

$

12,100

$

9,353

$

39,593

$

32,701

Adjusted EBITDA as a percentage of revenue............

 

26%

 

26%

 

29%

 

29%

 

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 September 30, 2019 and December 31, 2018

       

(Expressed in thousands of USD)

       

(Unaudited)

       
         
   

September 30,
2019

 

December 31,
2018

         

Assets

       
         

Current assets:

       

Cash and cash equivalents

$

171,957

$

126,144

Short-term investments  

 

30,257

 

55,404

Trade and other receivables

 

41,703

 

64,330

Prepaid expenses

 

7,144

 

5,815

   

251,061

 

251,693

         

Non-current assets:

       

Property and equipment

 

26,619

 

22,785

Right-of-use assets

 

9,950

 

8,873

Contract acquisition costs

 

14,855

 

13,902

Unbilled receivables

 

1,911

 

457

Deferred tax assets

 

67

 

49

         
 

$

304,463

$

297,759

         

Liabilities and Shareholders' Equity

       
         

Current liabilities:

       

Trade payables and accrued liabilities

$

17,400

$

21,623

Deferred revenue

 

55,321

 

78,496

Lease obligations

 

2,511

 

2,572

   

75,232

 

102,691

Non-current liabilities:

       

Lease obligations

 

7,841

 

6,311

Deferred tax liabilities

 

6,824

 

4,075

   

14,665

 

10,386

         

Shareholders' equity:

       

Share capital 

 

131,010

 

124,951

Contributed surplus

 

32,738

 

24,284

Accumulated other comprehensive loss

 

(448)

 

(319)

Retained earnings

 

51,266

 

35,766

   

214,566

 

184,682

         
 

$

304,463

$

297,759

 

Kinaxis Inc.

               

Condensed Consolidated Interim Statements of Comprehensive Income

               
                 

For the three and nine months ended September 30, 2019 and 2018

               

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

               

(Unaudited)

               
                 
 

For the three months
ended September 30,

For the nine months
ended September 30,

   

2019

 

2018

 

2019

 

2018

                 

Revenue 

$

47,131

$

36,585

$

135,237

$

112,428

                 

Cost of revenue

 

13,803

 

12,014

 

38,978

 

34,642

Gross profit

 

33,328

 

24,571

 

96,259

 

77,786

                 

Operating expenses:

               

Selling and marketing

 

10,762

 

8,487

 

30,523

 

24,770

Research and development 

 

8,587

 

6,415

 

24,682

 

20,521

General and administrative

 

8,461

 

5,758

 

20,347

 

15,139

   

27,810

 

20,660

 

75,552

 

60,430

   

5,518

 

3,911

 

20,707

 

17,356

Other income (expense):

               

Foreign exchange loss

 

(101)

 

(177)

 

(186)

 

(203)

Net finance income 

 

841

 

264

 

2,427

 

602

   

740

 

87

 

2,241

 

399

Profit before income taxes

 

6,258

 

3,998

 

22,948

 

17,755

                 

Income tax expense

 

1,725

 

1,333

 

7,448

 

6,272

Profit 

 

4,533

 

2,665

 

15,500

 

11,483

                 

Other comprehensive income (loss):

               
                 

Items that are or may be reclassified

               

subsequently to profit or loss:

               
                 

Foreign currency translation

               

differences - foreign operations

 

(94)

 

(170)

 

(129)

 

(213)

Total comprehensive income

$

4,439

$

2,495

$

15,371

$

11,270

                 

Basic earnings per share

$

0.17

$

0.10

$

0.59

$

0.45

                 

Weighted average number of basic Common Shares 

 

26,184,980

 

25,974,858

 

26,141,410

 

25,747,532

                 

Diluted earnings per share

$

0.17

$

0.10

$

0.58

$

0.43

                 

Weighted average number of diluted Common Shares

 

26,928,596

 

26,894,970

 

26,888,187

 

26,786,436

 

Kinaxis Inc.

                   

Condensed Consolidated Interim Statements of Changes in Shareholders' Equity

               
                     

For the nine months ended September 30, 2019 and 2018

                   

(Expressed in thousands of USD)

                   

(Unaudited)

                   
                     
           

Accumulated

       
           

other

 

Retained

   
   

Share

 

Contributed

 

comprehensive

 

earnings

   
   

capital

 

surplus

 

loss

 

(deficit)

 

Total 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

 

-

 

-

 

-

 

11,483

 

11,483

Other comprehensive loss

 

-

 

-

 

(213)

 

-

 

(213)

Total comprehensive income (loss)

 

-

 

-

 

(213)

 

11,483

 

11,270

                     

Share options exercised

 

13,384

 

(3,742)

 

-

 

-

 

9,642

Deferred share units exercised

 

852

 

(852)

 

-

 

-

 

-

Share based payments

 

-

 

8,644

 

-

 

-

 

8,644

Total shareholder transactions

 

14,236

 

4,050

 

-

 

-

 

18,286

                     

Balance, September 30, 2018

$

122,489

$

23,344

$

(497)

$

32,841

$

178,177

                     

Balance, December 31, 2018

$

124,951

$

24,284

$

(319)

$

35,766

$

184,682

                     

Profit

 

-

 

-

 

-

 

15,500

 

15,500

Other comprehensive loss

 

-

 

-

 

(129)

 

-

 

(129)

Total comprehensive income (loss)

 

-

 

-

 

(129)

 

15,500

 

15,371

                     

Share options exercised

 

6,059

 

(1,736)

 

-

 

-

 

4,323

Share based payments

 

-

 

10,190

 

-

 

-

 

10,190

Total shareholder transactions

 

6,059

 

8,454

 

-

 

-

 

14,513

                     

Balance, September 30, 2019

$

131,010

$

32,738

$

(448)

$

51,266

$

214,566

 

Kinaxis Inc.

               

Condensed Consolidated Interim Statements of Cash Flows

               
                 

For the three and nine months ended September 30, 2019 and 2018

               

(Expressed in thousands of USD)

               

(Unaudited)

               
                 
 

For the three months
ended September 30,

For the nine months
ended September 30,

   

2019

 

2018

 

2019

 

2018

                 

Cash flows from operating activities:

               
                 

Profit 

$

4,533

$

2,665

$

15,500

$

11,483

Items not affecting cash:

               

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

 

3,045

 

2,483

 

8,696

 

6,701

Share-based payments

 

3,537

 

2,959

 

10,190

 

8,644

Investment tax credits recoverable

 

-

 

-

 

-

 

911

Net finance income

 

(841)

 

(264)

 

(2,427)

 

(602)

Income tax expense

 

1,725

 

1,333

 

7,448

 

6,272

Change in operating assets and liabilities

 

(12,061)

 

(6,519)

 

(1,087)

 

(9,126)

Interest received

 

1,120

 

506

 

2,993

 

1,313

Interest paid

 

(149)

 

(242)

 

(419)

 

(711)

Income taxes received (paid)

 

145

 

(1,125)

 

(12,320)

 

(3,624)

   

1,054

 

1,796

 

28,574

 

21,261

                 

Cash flows from (used in) investing activities:

               
                 

Purchase of property and equipment

 

(1,147)

 

(1,762)

 

(10,341)

 

(11,112)

Purchase of short-term investments

 

(20,102)

 

(32,544)

 

(50,108)

 

(85,087)

Redemption of short-term investments

 

25,102

 

15,044

 

75,108

 

70,049

   

3,853

 

(19,262)

 

14,659

 

(26,150)

                 

Cash flows from financing activities:

               
                 

Payment of lease obligations

 

(708)

 

(580)

 

(1,995)

 

(1,578)

Common shares issued on exercise of stock options

 

2,225

 

2,503

 

4,323

 

9,642

   

1,517

 

1,923

 

2,328

 

8,064

                 

Increase (decrease) in cash and cash equivalents

 

6,424

 

(15,543)

 

45,561

 

3,175

                 

Cash and cash equivalents, beginning of period

 

165,512

 

122,033

 

126,144

 

103,392

                 

Effects of exchange rates on cash and cash equivalents

 

21

 

(450)

 

252

 

(527)

                 

Cash and cash equivalents, end of period

$

171,957

$

106,040

$

171,957

$

106,040

 

SOURCE Kinaxis Inc.

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