Automotive sales drive Kanata’s Kinaxis to $4.3M Q2 profit

John Sicard
John Sicard

Big customer wins in the automotive vertical and continued expansion into European markets are revving up growth at Ottawa-based Kinaxis (TSX:KXS), the firm’s CEO told analysts Friday.

The maker of supply chain management software reported revenues of $39 million for the quarter ending June 30, an increase of nearly 20 per cent over a year earlier, when the firm used slightly different accounting standards. The company’s total subscription revenue was $29.1 million, up 24 per cent from the same period in 2017. (All figures in USD.)

Chief executive John Sicard said on a conference call the second-quarter numbers included record revenues in Europe, where the firm recently opened an office in London and has been aggressively expanding its sales and marketing teams.

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Among Kinaxis’s biggest recent customer signings is Swedish carmaker Volvo, which joins other carmaking giants Toyota, Nissan and Ford in the firm’s stable of clients.

“Automotive is shaping up to be one of our fastest-growing markets,” said Sicard, while noting the consumer packaged goods and life sciences sectors are also making strong headway – particularly in Europe and Asia, where Kinaxis has signed the world’s largest tofu manufacturer, a South Korean fresh food company.  

Kinaxis reported a net profit of $4.3 million in the quarter. Under the former accounting standards, it stood at $4.4 million, down from $5.6 million in fiscal 2017. Chief financial officer Richard Monkman attributed to the decline to increased expenses related to the firm’s rapid expansion efforts.

Sicard said he sees no signs of a slowdown in demand for Kinaxis’s concurrent supply chain planning software, which uses real-time data to update suppliers on expected performance and helps them find quick solutions when interruptions arise.

He also said Kinaxis is “extremely happy” with early beta testing results from a new “self-healing” application that uses machine learning algorithms to spot flaws in supply chains and correct them before they have an impact on the manufacturing process.

“I believe the market shift towards concurrent planning is well under way, and this is well-reflected in the growing strength of our pipeline across all verticals,” Sicard said. “I’ve never been happier with our place in the market and the health of our funnel, and our ability to capitalize on it.”

In response to an analyst’s question about how the growing spectre of tariff wars could affect the company’s revenues, the CEO said anything that has the potential to disrupt the flow of supplies to major manufacturers makes Kinaxis’s software that much more attractive.

“It’s all about absorbing volatility, and these types of types of trade wars and trade barriers, they just augment that volatility and give cause for the need for this type of concurrent planning and agility in supply chains,” Sicard said, noting many large manufacturers use components that come from all over the world. “It has simply made us even more relevant.”

The company is projecting total revenues of between $152 million and $156 million for fiscal 2018, of which about $110 million is expected to come from subscriptions.

Shares of Kinaxis were up more than three and a half per cent to $92.50 in late-day trading on the Toronto Stock Exchange.

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