With Canada’s beleaguered tech sector desperately seeking a much-needed dose of upbeat news amid a recent slew of layoffs and plummeting stock valuations, it was fitting that the country’s biggest producer of supply-chain management software delivered the goods on Wednesday.
Kanata-based Kinaxis – which helps manufacturers around the world ensure they have enough inventory on hand to get their products to market on time – offered up another glowing earnings report as it continues to see unprecedented demand for its platform amid global economic upheaval.
Kinaxis, which keeps its books in U.S. dollars, hauled in $80.8 million in revenues in the second quarter ending June 30, a 35 per cent increase over the same period last year. When exchange rate fluctuations for sales in currencies such as the British pound, the Euro and the Japanese yen are taken into account, its revenues were up 42 per cent year-over-year.
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CEO John Sicard said the strong results are more proof that Kinaxis is in the right space at the right time as macroeconomic factors such as rampant inflation and pandemic-fuelled raw material shortages wreak havoc with the world’s supply chains.
“I am happy to report that momentum in the business has not let up,” Sicard said during a conference call with analysts Wednesday morning to discuss the company’s latest financial report.
The veteran CEO said the firm saw a “sharp increase” in its sales pipeline and new inbound leads in the quarter, adding both metrics are at an “all-time high” as Kinaxis continues to ride a hot streak.
The bulk of those inquiries are coming from enterprise-level customers, which accounted for 60 per cent of the firm’s customer wins in the second quarter. Sicard reiterated a point he’s driven home repeatedly over the past two years – that corporate boards are demanding better solutions to manage the ups and downs of supply-chain fluctuations.
“The thing that unites all manufacturers right now is this belief that the methods they used to govern supply chains over the last 30 years won’t survive the next three,” he said. “They realize that there’s a new competence required in order to survive all of this turmoil.”
The result has been a string of record-breaking financial results for Kinaxis.
With new customer wins in the first six months of 2022 up more than 50 per cent from a year earlier, the firm raised its full-year revenue guidance once again on Wednesday.
Kinaxis is now projecting revenues of between $355 million and $365 million for the fiscal year ending Dec. 31, up $10 million from its previous forecast in May – marking the second time the company has revised its projection upward in 2022.
“Every quarter we’re seeing a pretty dramatic increase in new accounts,” Sicard said, pointing to the energy sector as a new customer vertical that’s been gaining traction during the pandemic.
Indeed, Kinaxis has emerged as a shining star in what’s been a less-than-stellar summer for North America’s tech sector.
While Ottawa software darling Shopify, for example, has seen its stock value fall nearly 70 per cent over the past six months amid widespread selloffs, Kinaxis has held its own.
The firm’s stock was up more than $8 to $166.17 in midday trading on the Toronto Stock Exchange Wednesday. Since February, Kinaxis shares have gained about 3.5 per cent on the TSX – bucking a trend that’s seen tech giants from Amazon to Google parent Alphabet take significant hits.
And in contrast to Shopify and other big tech players that are slashing their workforces in response to market headwinds, Kinaxis says it intends to keep adding to its current 1,400-employee headcount.
“There’s never a day we’re not hiring,” Sicard said. “We’re very aggressively looking to increase staff to meet the demand.”
As a result, Kinaxis dramatically upped its spending across the board in the second quarter, increasing its R&D budget nearly 50 per cent while boosting its sales and marketing spending by 60 per cent in a bid to convert the flood of inbound sales leads into paying customers.
The increased expenses cut into the firm’s bottom line. Kinaxis posted a $2.6-million loss in the second quarter, compared with a $3.1-million profit a year ago.
But chief financial officer Blaine Fitzgerald downplayed the reversal, noting the company’s earnings before taxes, interest, depreciation and amortization were up 13 per cent to $10.4 million.
He said the red ink was largely the result of Kinaxis’s “focused investment” to drive future sales growth, adding the firm remains “very excited” about its future market prospects and believes increased spending now will pay dividends down the road.
“We see a huge opportunity right now,” Fitzgerald added. “We are seeing our (sales) pipeline grow extremely fast. So we don’t want to take our foot off the pedal.”
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