Kinaxis raises 2022 revenue projections on growing wave of customer wins

Kinaxis HQ

Kinaxis raised its 2022 revenue projections again Friday as demand for its supply-chain management software continued to soar amid ongoing global economic turbulence.

The Kanata-based firm, which keeps its books in U.S. dollars, said it expects to generate sales of between $365 million and $370 million for the year, up from its previous projection of $355 million to $365 million.

It’s the third time Kinaxis has boosted its 2022 outlook as the company rides a wave of interest that’s seen unsolicited inbound sales leads increase for six quarters in a row.

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“We are experiencing a significant inflection in the business,” CEO John Sicard told analysts on a conference call Friday morning after Kinaxis reported revenues of $89.5 million for the three-month period ending Sept. 30, a 39 per cent increase over the previous year as the company set a third-quarter record for new customer wins.

Kinaxis’s RapidResponse and RapidStart software platforms help companies such as Ford and Unilever ensure they have the right amount of raw materials on hand to manufacture their goods by tracking demand and inventory in real time.

Among the marquee brands that joined the platform in the third quarter were German cleaning-equipment giant Karcher.

Asked whether he’s seeing any signs of waning momentum as pandemic-related shortages of container ships and manufacturing components appear to be easing, Sicard said getting a better handle on supply-chain issues has become a “globally urgent imperative” that’s not going away.

“In short, we firmly believe the answer is no,” he said. “We’ve been experiencing a notable increase in demand for roughly two years now, and there are no signs of slowing down. This doesn’t feel temporary one bit.”

Sicard said a host of factors – including persistent component shortages due to COVID-related factory shutdowns, rising inflation, shifts in demand for products, energy woes triggered by the war in Ukraine and a “myriad of other disruptions” continue to test global supply chains, pushing demand for Kinaxis’s platform to new highs.

“We’re definitely seeing a consistent message from the market that this renaissance is absolutely real,” he said. “This is just all proof of momentum in the business … The velocity and ferocity of disruption is not easing. It’s just different. I don’t see that letting up, frankly.”

Sicard said the spectre of a looming recession is ratcheting up pressure on manufacturers to do more with less, making his firm’s software even more indispensable.

Shorter sales cycles

As a result, he said Kinaxis is beginning to see a trend toward shorter sales cycles, with some deals now closing in six months or less as opposed to the 18 months or more typically required to seal major contracts in the past.

“This is becoming urgent for many of these companies, and the directives are coming right from the board,” Sicard said. “Establishing a resilient supply chain is a means to survival.”

As more customers signed on, Kinaxis’s order backlog grew to more than half a billion dollars in the third quarter, up 46 per cent year-over-year.

“Our pipeline is getting bigger, our conversion is getting better and our win rate is getting better every quarter,” chief financial officer Blaine Fitzgerald told analysts.

Kinaxis saw gains across all its revenue streams in the quarter.

Software-as-a-service revenues from monthly subscription fees – which account for more than half of the firm’s income – rose 21 per cent to $54 million. Subscription term licence revenues soared 192 per cent on a wave of renewals from many customers at the end of their previous contracts.

Meanwhile, professional services revenues jumped 76 per cent as a growing number of new customers were trained and onboarded, while maintenance and support revenue increased 28 per cent.

In addition, annual recurring revenues – a metric aimed at giving investors an updated snapshot of the total annual value of all recurring subscription contracts, including SaaS, term licensing and maintenance revenue, at a specific point in time – rose 30 per cent year-over-year to $269 million in constant currency.

The company booked a net profit of $1.6 million, or six cents per diluted share, up from $200,000, or one per cent per diluted share, a year earlier.

Sicard also touted Kinaxis’s acquisition earlier this year of Netherlands-based order management platform MPO, saying the product will expand his firm’s range of offerings and provide more upselling opportunities.

New office in India

“We’re getting great feedback from our customers already when they recognize what this will unlock for them,” he said of the US$45-million deal that closed in August.

In a bid to bolster its presence in Asia, Kinaxis also opened a new 44,000-square-foot office in Chennai, India, last month and recently announced it inked a dozen new reselling agreements on the continent.

Sicard said the moves will make it easier to serve global customers around the clock and tap into new sources of employees in major markets such as India.

“We’ve been talking about talent wars,” he said. “I’d say they’ve subsided a little bit, but they’re still omnipresent. This is giving us an opportunity to extend our talent pool.”

Kinaxis shares were down $1.13 to $143.22 in midday trading on the Toronto Stock Exchange.

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