Software maker Kinaxis is boosting its revenue projections for fiscal 2021 in the wake of a third quarter that saw the Ottawa firm win a record number of new customers.
Kinaxis (TSX:KXS) says orders for its supply-chain management software are surging as manufacturers around the world grapple with a shortage of products such as semiconductors while consumer demand for goods skyrockets.
The company, which keeps its books in U.S. dollars, says it’s now expecting revenues of between $248 million and $250 million for the year. That’s up from previous projections of $242 million to $247 million.
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The revised guidance comes as Kinaxis rides a wave of new customer signings in 2021. The firm says it has landed three times as many new clients so far this year as it did in the same period in 2020.
Those wins were reflected in the firm’s balance sheet as it reported revenues of $64.4 million for the three-month period ending Aug. 31, up from $55.1 million the previous year.
CEO John Sicard said the pandemic has spotlighted the need for manufacturers to respond quickly to ebbs and flows in demand for their products, and more and more companies are turning to Kinaxis to help them tackle those challenges.
‘Positive momentum’
“It has put supply-chain issues at the centre of boardroom conversations,” he told analysts on Friday. “Every board is asking their CEOs, ‘What are you going to do next time?’ That’s what’s driving the positive momentum in the market.”
Kinaxis’s RapidResponse software helps 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.
In response to an analyst’s question, Sicard said the firm is benefiting from the growing realization that ill-managed supply chains waste resources, and environmentally conscious companies now see the software as a key component in their campaigns to go green.
“There’s not another discipline on this planet that has a more pronounced impact on the health of the environment,” he said. “It’s absolutely part of the narrative.”
Sicard said Kinaxis’s decision early in 2021 to specifically target mid-market customers is paying dividends.
“It’s starting to fuel the pipeline,” he said, adding the company is seeing growth in all geographic markets and industry verticals, particularly life sciences and consumer packaged goods.
Profit dips
The firm posted a net profit of $200,000, or one cent per share, down from $731,000, or three cents per share, a year earlier. Kinaxis attributed the decline to higher operating costs and income tax expenses.
Revenue from the company’s subscription-based software – which accounts for the lion’s share of its income – rose 14 per cent year-over-year to nearly $45 million.
The company’s professional services division, which implements Kinaxis software and trains its users, saw its revenues increase 27 per cent to $14.6 million. Meanwhile, subscription term licensing revenues for traditional on-premise software nearly doubled year-over-year to $2 million.
In addition, Kinaxis’s annual recurring revenues – a new 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 23 per cent from a year earlier to $207 million.
Chief financial officer Blaine Fitzgerald said the steady influx of new business has allowed Kinaxis to maintain a strong order backlog despite hitting a recent “trough” in contract renewals. He said the firm expects to see an uptick in re-signings in the months ahead.
“We’re in a great position because we’re focused on the incremental bookings,” he said. “If we look down the road in three or four or five years, they will be the renewals that we expect.”
Kinaxis shares were down 29 cents to $196.26 in mid-afternoon trading on the Toronto Stock Exchange.
