CEO John Sicard says more and more companies are seeing Kinaxis's supply chain management platform as must-have technology as they look to be better prepared for the next global crisis.
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Kinaxis continues to be a shining star in Ottawa’s tech constellation as the Kanata company exceeded analysts’ forecasts and saw its revenues soar nearly 50 per cent in the fourth quarter. The supply chain management software firm, which keeps its books in U.S. dollars, posted revenues of $98.5 million in the three-month period ending Dec. 31, a 44 per cent jump from the previous year. Kinaxis reported a profit of $8.6 million, a sharp turnaround from a loss of $2.9 million the previous year. The company earned 30 cents per diluted share, beating the 25 cents per share analysts expected, according to Refinitiv. It was the culmination of a stellar 2022 in which Kinaxis generated revenues of $367 million, up from $251 million the previous year, and turned a $20-million profit compared with a $1.2-million loss in 2021. “Quite simply, 2022 was a phenomenal year for Kinaxis,” CEO John Sicard told analysts on a conference call to announce the company’s financial results Thursday morning. Not every tech firm entering its fourth decade can boast such heady growth. But the Ottawa software company founded in 1984 by a trio of former Mitel executives has proven it’s no ordinary business. While a host of other tech firms have taken it on the chin over the past 14 months, Kinaxis has held its own. Its stock was up $4.25 to $163.27 in afternoon trading on the Toronto Stock Exchange and has risen more than seven per cent since last March. Meanwhile, as tech giants from Amazon to Shopify slash their workforces to cut costs, Kinaxis continues to hire. The firm’s headcount now tops 1,500, up from 500 five years ago. Sicard told analysts that Kinaxis’s secret sauce lies in the widespread appeal of its flagship platform, called RapidResponse, that helps customers track inventories and shipments while forecasting demand for future inventory. “I frankly don’t see any other provider in our space that takes the same posture as we do around concurrent (supply-chain) planning,” he said. Hundreds of the world’s biggest companies now use RapidResponse to manage their inventories, including household names in the manufacturing, industrial and consumer packaged goods sectors. Among the corporate heavyweights that signed on to Kinaxis’s platform last quarter were General Motors, Mazda and telecom equipment provider Ciena. Kinaxis was already gaining momentum before the pandemic plunged the world’s supply chains into chaos. Now, Sicard said, more and more companies big and small are seeing the platform as must-have technology as they look to be better prepared for the next global crisis. “Despite the widespread turmoil and uncertainty in the world – and possibly because of it in part – the urgency for digital supply chain transformation has never been greater,” he said. The longtime Kinaxis executive said he’s spoken with more than 150 chief supply officers around the world over the past couple of years. The discussions, he said, all have a similar narrative. “Boards are asking their CEOs, ‘What will you do next time?’ Supply chains are clearly not as resilient as they thought they were.” Yet nearly 30 years into his own tenure with the company, Sicard feels Kinaxis is still barely off the launch pad. “We continue to be thrilled with the pipeline,” he said. “We’re excited about 2023, but I have to say I’m even more excited about ’24, ’25 and ’26.” Kinaxis is projecting revenues of between $420 million and $430 million this year, a 17 per cent increase from 2022. Company officials stressed they’re erring on the side of caution as macroeconomic factors such as rising interest rates, soaring inflation and downsizing in the tech sector play havoc with many businesses’ outlooks. But Sicard says his reasons for optimism far outweigh those concerns. The company’s expanding network of sales partners that help customers install Kinaxis software in return for a portion of revenues is opening doors to new markets in Asia and other parts of the world, he explained on Thursday’s call. Meanwhile, the company’s platform is now available on the public cloud via agreements with Microsoft Azure and Google Cloud, making it more easily accessible to small and mid-sized businesses that account for a growing share of its customers. “We may not just stop at those two,” Sicard told analysts, referring to the two cloud networking giants. “We’ll see in the months ahead whether others are added.” In response to a question about which verticals provide the biggest potential for growth, Sicard mentioned a couple. He said he’s “pretty excited” about expanding Kinaxis’s reach in the energy sector, an industry it’s just begun to penetrate. The other is retail. Sicard described it as “larger than the sum of all of the other verticals that we serve because there are so many subsegments,” citing quick-service restaurants and pharmaceutical companies as examples. “There is so much yet ahead of us,” he said. “We’re clearly not in every vertical. I remember talking about our (total addressable market) being 3,000 (customers), and it’s well north of (20,000) to 30,000 (today) when you start adding the mid-market and the small to medium-sized enterprises. We see a very, very long path ahead in terms of the demand for RapidResponse.” Kinaxis’s software also keeps evolving, Sicard explained, making it even more valuable to customers. The firm’s acquisition of Dutch order management platform MPO last summer gives Kinaxis more of an “end-to-end supply chain management solution,” he said. While Kinaxis gained some new customers in the deal, it also opened up “substantial” cross-selling opportunities with existing clients, Sicard added. In addition, RapidResponse is getting smarter as well as quicker and easier to deploy. Customers can now see results in a matter of weeks, Sicard said, accelerating sales cycles as new clients jump on board to tap into the platform’s accumulated supply chain wisdom. “I’ve witnessed extremely large enterprise-class customers and deals come through in a very short period of time in comparison to years past,” Sicard said, adding that many smaller companies are also realizing the software’s benefits. “I think that we’re going to continue to see the small to mid(-sized) players basically saying, ‘I’ll have what they’re having,’ to quote the famous movie. They really want the sum of the intellect of the larger players.”