Software powerhouse Kinaxis doubled its new customer wins from a year earlier in the second quarter as more mid-sized companies jumped on board amid continued supply-chain upheaval in the wake of the pandemic.
Kinaxis (TSX:KXS) posted revenues of $60.1 million for the three-month period ending June 30, the company reported late last week.
That’s down slightly from $61.3 million in the second quarter of 2020, when Kinaxis was in the midst of a COVID-fuelled sales surge as customers scrambled to address dramatic ebbs and flows in demand for consumer goods from toilet paper to disinfectant wipes.
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But the Kanata-based enterprise – whose 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 – says demand for its products is steadily growing as it taps into new markets and expands its offerings.
CEO John Sicard told analysts the firm is gaining traction among smaller, mid-market companies. Half of its new customer gains in Q2 were in that category, he noted – with many of them signing on to its new RapidStart platform that can start delivering results in a matter of weeks.
“Whether companies are a billion (dollars) in revenue or $75 billion in revenue, they’re being impacted by this global pandemic in precisely the same ways,” he said. “They’re hurting in precisely the same ways. So it’s wonderful to see that RapidStart is having the desired effect.”
Profit down
But Sicard added that Kinaxis continues to reel in big fish too – among its new signings in the second quarter was auto manufacturing giant Subaru of America.
He said the firm is seeing “noticeably strong” uptake from customers in traditional strongholds such as life sciences companies and consumer packaged goods manufacturers. The CEO said Kinaxis is also gaining momentum in new sectors such as aerospace and defence, promising that some “exciting names” will be finalizing deals soon.
Kinaxis booked a new profit of $3.1 million in Q2, down from $9 million a year earlier but a bounceback for the company after two consecutive money-losing quarters.
Now at more than 1,000 employees worldwide, the firm said a spate of new hirings as well as investments in new data centres cut into its profits in Q2.
Subscription term licensing revenues for traditional on-premise software also plummeted 94 per cent year-over-year to $640,000. But chief financial officer Blaine Fitzgerald said that was due to the “normal cyclical decrease” in such revenues, which are becoming a smaller portion of overall sales as Kinaxis’s monthly earnings from cloud-based subscription software continue to rise.
Software-as-a-service revenues jumped to more than $42 million, up 18 per cent compared with the second quarter of 2020.
Guidance holds steady
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 24 per cent from a year earlier to $200 million.
The company reiterated its revenue projections of between $242 million and $247 million for fiscal 2021, roughly a 10 per cent gain over the previous year, as its pipeline of new business keeps growing.
Meanwhile, Sicard said Kinaxis – which acquired Toronto software-maker Rubikloud and India-based consultancy Prana Consulting in 2020 – is on the lookout for more M&A opportunities to augment its organic growth.
“We are constantly evaluating buy versus build as it relates to our (strategic growth) road map,” he said, noting the firm is eyeing a couple of potential “tuck-in” acquisitions of smaller firms over the next few quarters.
Kinaxis shares ended the day up more than three per cent at $176.91 on the Toronto Stock Exchange.
