CEO's confidence in Kinaxis 'remains high' in midst of pandemic as Q1 revenues jump

John Sicard
Kinaxis CEO John Sicard. File photo

Shares of Kanata-based Kinaxis jumped more than 10 per cent Thursday afternoon after the company said it remains on track to hit its 2020 revenue targets despite a global economic downturn as demand for its software continues to grow.

Kinaxis (TSX:KXS), which makes software that helps large enterprise customers manage their supply chains, said Thursday its first-quarter revenues grew 15 per cent year-over-year to $52.8 million. The company reiterated that it expects revenues for the current year to fall between $211 million to $215 million, within the range of its previously announced guidance. 

Markets responded favourably to the announcement, with shares of Kinaxis gaining more than $15 to $167.68 in late afternoon trading on the Toronto Stock Exchange.

During a conference call with investors to announce the firm’s first-quarter results, CEO John Sicard said global economic volatility fuelled by the coronavirus pandemic has made his company’s products more valuable than ever.

“While nothing is normal right now, I’m very pleased with our progress,” he said. “Like no event before it, COVID-19 has highlighted the need for supply chain agility.” 

Kinaxis’s RapidResponse software helps some of the world’s largest companies ​– including automakers Ford and Nissan as well as consumer products giant Unilever ​– ensure they have the right amount of raw materials on hand to manufacture their goods by tracking demand and inventory in real time. 

Sicard said Kinaxis’s solution can let its customers in the consumer packaged goods space, for example, know when there’s a spike in sales of toilet paper and soap, allowing them to ramp up production accordingly.

At the same time, he explained, other customers faced with a sudden drop in demand for their products can quickly scale back orders for new materials rather than overspend on inventory they don’t need.  

“In both cases, you need to be able to respond,” he said. “Supply chains have to be far more agile and resilient. Every boardroom will be asking their CEOs, ‘What will you do next time?’ They’ll be measuring their supply chain resilience and responsiveness and agility. That's what they’re going to be after, and so I do think we’ll come out of this stronger.”

Sicard said overall usage of Kinaxis software rose 20 per cent in the first quarter and continued to climb as the pandemic spread across the world. He said some customers have been running hundreds of simulations a day to try to account for a myriad of potential supply-and-demand scenarios.

“These spikes in usage speak directly to our growing value to customers,” Sicard told analysts. 

Kinaxis’s net profit dipped to $5.6 million from just under $7 million a year earlier due in large part to increases in sales, marketing and R&D expenses as the company continues to expand its global footprint and engineer new products. 

But revenue from the firm’s subscription-based software – which accounts for the lion’s share of Kinaxis’s income – climbed 24 per cent to nearly $34 million, while the company’s professional services division, which implements Kinaxis software and trains its users, saw its revenues increase 54 per cent to $10.7 million. 

Officials said they remained confident the company is on a healthy growth trajectory. Kinaxis said it had several significant customer wins in the first quarter, including a “household name” in consumer products manufacturing that it has not yet identified publicly.

“Our confidence in our pipeline remains high,” Sicard said, adding “it’s a matter of when, not if” the company expands into new verticals beyond the tech, life sciences, consumer packaged goods and automotive sectors that form the core of its customer base.