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Kinaxis shares fall as firm predicts 2024 revenues will come in on ‘lower end’ of guidance

August 1, 2024

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Kinaxis’s share price fell nine per cent Thursday after the Kanata-based software powerhouse said its 2024 revenues would likely come in on the low end of their projected range as large enterprise customers continue to drag their feet on signing deals. The supply-chain management software company’s stock finished the day down more than $15 to $154.55 on the Toronto Stock Exchange after the firm released its second-quarter financial results. Earlier in the day, Kinaxis chief financial officer Blaine Fitzgerald told financial analysts the firm was downgrading its projected software-as-a-service growth for the rest of 2024, adding it needed to lock up more long-term, high-value contracts with big clients if it hoped to meet its targets. Kinaxis, which keeps its books in U.S. dollars, still expects to bring in revenues of between $483 million and $495 million in fiscal 2024. But Fitzgerald tempered expectations during a conference call with analysts Thursday morning. “We are maintaining our total revenue guidance, but fully expect the result to be at the lower end of the range,” he said. At the same time, the company said a cost-cutting campaign that saw it trim six per cent of its workforce earlier this year should help its earnings picture. Kinaxis reported revenues of $118.3 million in the quarter ended June 30, up 12 per cent from a year earlier. The company also turned a profit of $3.4 million, compared with a net loss of $2.5 million the year before. Those results amounted to a net gain attributable to shareholders of 12 cents per diluted share, compared with a net loss of nine cents per share a year earlier. CEO John Sicard told analysts it’s taking the company longer to finalize deals with major enterprise customers than it did at the height of the pandemic. He said sales cycles have doubled over the past year and a half as manufacturers put big-ticket expenditures under a heftier microscope amid ongoing global economic uncertainty. “I wouldn’t categorize it as losing opportunities as much as I would categorize it as scrutiny on the signing process often requiring board-level approval for things that quite frankly we didn’t see in 2022 or prior to 2022,” Sicard explained. Still, Kinaxis’s boss reassured analysts he had plenty of reasons for optimism heading into the second half of 2024. The company set a quarterly record for new contract signings between April and June, he noted, adding Kinaxis’s win rate versus its competitors was still “north of 60 per cent.” Among the marquee clients that joined the firm’s roster of more than 300 customers in the second quarter were drug manufacturing giant Eli Lilly and global electronics company Brother Industries. Kinaxis said half of the world’s 20 largest pharmaceutical companies now use its software to help manage their supply chains. Sicard said the spate of new customer signings is a “healthy sign” that demand for Kinaxis’s platform remains strong. “We’re winning customers at a record pace, including marquee names like Eli Lilly. And when we win a customer, we keep them for a very long time,” he said. “There are multiple large enterprise opportunities ahead of us for the remainder of the year.” Meanwhile, Kinaxis continues to add new capabilities to its software, which now uses artificial intelligence to orchestrate supply-chain functions such as procurement, production, planning and fulfilment in one platform to deliver what-if simulations to users in a matter of seconds. Sicard described the firm’s new AI-powered system, called Maestro, as giving customers a “real-time view of their supply-chain network at any moment in time.” The company is also beefing up its global sales network, recently signing a three-year agreement with a yet-to-be-announced partner that will “augment our selling engine quite significantly,” Sicard added. “This is not like a marketing agreement,” he explained. “There’s already a very tight collaboration and an expansion in the overall opportunity that we’re going after together.” A confident Sicard said he believes there is a “100 per cent chance” that supply-chain management products like Kinaxis’s will soon be must-have technology for all major manufacturers. “There are certainly a lot of companies out there that are recognizing the need to transform (their supply-chain systems),” he said. “The question is timing. It’s kind of like when the internet was born and people could send emails. There were still some people licking stamps. Eventually, people realized that maybe email is a better way to go. We feel the same way about supply chain. It’s still a very healthy buying environment. We have some wonderful logos in the pipeline right now in the large enterprise space that we’re working on.”