Ottawa’s Kinaxis raises guidance after 26% jump in Q3 revenue

Kinaxis (TSX:KXS) said a growing customer base helped the Ottawa-based firm record a sharp increase in third-quarter revenues, although higher expenses dragged down the software company’s profits.

The message from executives to investors during a Thursday morning call was clear: We’ll stay the course.

Total revenue for the three months ending Sept. 30 was US$29.9 million, an increase of 26 per cent year-over-year. This growth was fuelled by an increase in subscription revenue, up to US$20.8 million this past quarter compared to US$16.5 million a year earlier. (All figures in US$)

Kinaxis, which develops supply chain management software, credited its growth to an increase in contracts secured with new customers and an expansion of existing customer deals in the past year. The company’s flagship product is its RapidResponse, which helps customers to manage complex and interconnected supply chains with analytics and planning capabilities.

The increase in revenues continues a trend of growing sales recorded earlier in the year for Kinaxis.

The downside for the company and investors was a drop in the bottom line, associated with higher costs of sales and marketing as well as research and development. Profit for the quarter was $2.4 million, a decrease from $3.8 million in the same quarter a year previous. These losses were partially offset by the lower value of the Canadian dollar compared to its U.S. counterpart.

During its investors call on Thursday morning, CEO John Sicard extolled new vertical markets as a driver of Kinaxis’ growth, as well impending further expansions into Europe and Asia.

“Our pipeline of new customer expansion opportunities remains very strong, and in fact, is growing as a result of our strategic partner initiative,” he told the call.

Mr. Sicard also mentioned that the company’s knowledge services division is now fully operational, and will play a key role in scaling the business further.

The company showed confidence heading into the fourth quarter, as it raised its annual revenue estimates from around $112 million to as high as $116.5 million. It also expects annual subscription revenues to grow by 24-25 per cent.

Chief financial officer Richard Monkman told the investors call that the diversified markets Kinaxis caters to and the long-term nature of its contracts allow for relative clarity in making its annual estimates.

Investors left the company’s stock price largely unchanged Thursday morning. It was down 0.4 per cent to $65.09 at 11 a.m. on the Toronto Stock Exchange.