Kinaxis executives may be excited about the firm’s pace of growth, but were forced to lower the Ottawa-based company’s guidance for its fiscal 2017 year due to the loss of a large Asian customer and its channel partners taking a bigger slice of the pie.
Investors drove Kinaxis’ share price down 16.6 per cent, or $13.19, on the Toronto Stock Exchange on Wednesday.
The Ottawa-based provider of supply chain management solutions brought in total revenues of $32.9 million for the three-month period that ended June 30, a 14 per cent increase over the same quarter a year ago. A majority of this revenue can be traced to the firm’s subscription vertical, which increased 21 per cent year-over-year on the back of new customers and expansions to existing subscriptions.
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Profits were also up on the quarter, coming in at $5.6 million as compared to $3.2 million in 2016.
Despite the positive quarter, Kinaxis (TSX:KXS) lowered its full year guidance by roughly $10 million on balance, now anticipating revenues only as high as $133 million.
One reason was the loss of a major Asian customer that the company says failed to meet its contractual obligations. Analysts pressed for details about what fell through on the customer’s end during Kinaxis’ quarterly earnings call on Tuesday, but executives declined to provide specific information, saying only that late payments were among multiple factors. The lost contract was valued at roughly $4 million annually, according to chief financial officer Richard Monkman.
The other reason Kinaxis lowered its guidance, chief executive John Sicard told the call, was actually a positive one: the success of its channel partner program. Though Mr. Sicard indicated the firm was very pleased with the rapid acceleration of its partners’ roles in sales, the growth has outpaced Kinaxis’ expectations, and these partners have accordingly taken a bigger chunk than anticipated out of the firm’s professional services revenue. Indeed, that revenue channel saw a decrease of two per cent this past quarter.
Despite the short-term pain, Mr. Sicard indicated that he was encouraged by the positive uptick in Kinaxis’ partner program, instead urging investors and analysts to view the losses in a wider light.
“In the long term, the benefits to scaling the business through our strategic partnerships will far outweigh the impacts today,” he told the call. “We maintain a long-term view of growth and strongly believe this near-term success of our partners will strengthen and support Kinaxis for many years to come.”
Mr. Monkman added later that a majority of the new business acquired in this quarter was driven by “partner-influenced deals,” including a recently announced partnership with Japanese automaker Nissan.
Elsewhere, Mr. Sicard told the call that Kinaxis was experiencing substantial growth in the life sciences sector, even beginning to outpace growth in its traditional high tech business.