Profits up 53% in Q1 at Ottawa-based Kinaxis

Sicard
Kinaxis CEO John Sicard. File photo

Even with lower-than-expected earnings over the first three months of the year, Kinaxis (TSX:KXS) turned in sizeable growth in revenue and profit during the Ottawa firm’s first quarter.

On Friday morning the supply chain management software developer reported revenues of $45.8 million for the three months ending March 31, an increase of 24 per cent. The firm’s software sales streams are divided between SaaS customers and subscription licence sales on a term-to-term basis. (All figures USD.)

Growth in the company’s SaaS segment, which represented more than half its total revenues this past quarter, was 17 per cent year-over-year – lower than Kinaxis management had expected due to big deals that are taking a longer time to close. On the other end, subscription term licence revenues were up 87 per cent year-over-year to $8.4 million in the quarter.

Kinaxis posted a profit of $7 million in the quarter, up 53 per cent from its net income in the first quarter of 2018.

The SaaS slowdown last quarter didn’t discourage CEO John Sicard, who told analysts on the company’s earnings call Friday morning that the company’s sales pipeline in the fiscal year’s remaining quarters should make up for any lags in recent months.

Kinaxis maintained its revenue guidance of between $183 million and $188 million for the full fiscal year 2019, though it reduced the expected contributions from the SaaS revenue stream and raised expectations for term licences. The firm also raised guidance for its adjusted EBITDA margin this year from 23-25 per cent to 25-27 per cent.

Kinaxis attributes much of its growth in recent quarters to its “land and expand” strategy, which has seen the firm increase its business within its client base or sister companies of existing customers, as well as the success of its channel partner arrangements.

Sicard said the company is seeing strong returns on recent expansions to its sales staff, particularly in the European and Asian markets. He noted the addition of Lenovo as a customer last quarter as an indication of success.

Shares of Kinaxis rose as high as C$82 in early morning trading on the TSX, an increase of more than 11 per cent over market close on Thursday. The stock settled later in the day, trading around C$77.63 in the mid-afternoon.