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Kinaxis Inc. Reports Third Quarter 2019 Results

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

OTTAWA , Oct. 31, 2019 /CNW/ - Kinaxis® (KXS.TO), 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 June 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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