Market Overview

Kinaxis Inc. Reports Second Quarter 2018 Results

Share:

Kinaxis Inc. Reports Second Quarter 2018 Results

Canada NewsWire

Reports 24% growth in subscription revenue, and Adjusted EBITDA(2) of 27% of revenue (1)

OTTAWA, Aug. 2, 2018 /CNW/ -  Kinaxis® (TSX:KXS), provider of RapidResponse®, the leading cloud-based supply chain management solution based on concurrent planning, today reported results for its fiscal second quarter ended June 30, 2018. Kinaxis has adopted IFRS 15 and 16(1) (or "the Standards") with an initial date of application of January 1, 2018. The information for Q2 2018 has been presented both before and after adoption of the Standards, while the information presented for 2017 has not been restated.

Logo: Kinaxis (CNW Group/Kinaxis Inc.)

Prior to the effect of the Standards, Q2 2018 total revenue was up 22% to $40.0 million, subscription services revenue grew by 24% to $30.1 million, Adjusted EBITDA(2) was up 12% to $10.7 million (27% of revenue), and profit declined to $4.4 million from $5.6 million, all compared to Q2 2017. Giving effect to the Standards, Q2 2018 total revenue was $39.0 million, total subscription revenue was $29.1 million, Adjusted EBITDA(2) was $11.2 million (29% of revenue) and profit was $4.3 million. All amounts are in U.S. dollars. All figures are prepared in accordance with International Financial Reporting Standards (IFRS), unless otherwise indicated.

"Q2 represented another strong quarter for Kinaxis—both the top and bottom line. We had record revenue from Europe, which reaffirms our decision to invest significant sales and operations resources in the region. We see even greater opportunity ahead as the expanded European team continues to engage with prospective accounts across all market verticals, but particularly Consumer Packaged Goods, Automotive, and Life Sciences," said John Sicard, Chief Executive Officer of Kinaxis. "During the quarter we launched our Self-Healing Supply Chain application applying advanced machine learning algorithms to detect key supply chain design gaps and automatically take corrective action before they impact performance. We also announced a number of new customers across regions and verticals, including top-tier brands such as Volvo, Ipsen and Extreme Networks, and provided some insight into the success we have been having at our existing customer, BASF. There is no greater testament to the proven transformative value of our unique concurrent planning technique than its ability to serve leaders in such different industries, all from the same cloud-based platform."

Q2 2018 Highlights


Under IFRS 15/16(1)

Prior to IFRS 15/16(1)

$ USD millions, except as otherwise indicated

Q2 2018

Q2 2018

Q2 2017

Change

Total Revenue

39.0

40.0

32.9

22%


Subscription services

26.5

30.1

24.2

24%


Subscription term licenses

2.5

-

-

-


Total subscription revenue

29.1

30.1

24.2

24%

Gross profit

26.5
(68%)

27.5
(69%)

22.9
(70%)

20%

Profit

4.3
($0.16/diluted share)

4.4
($0.17/diluted share)

5.6
($0.21/diluted share)

(22%)

Adjusted EBITDA(2)

11.2
(29%)

10.7
(27%)

9.6
(29%)

12%

Cash from operating activities

9.3

9.3

7.5

23%

(1)

 Kinaxis has adopted IFRS 15, using the cumulative effect method, and IFRS 16, using the modified retrospective approach, and an initial date of application of January 1, 2018. Accordingly, the information presented for 2017 has not been restated. The impact of the adoption of IFRS 15 relates primarily to accounting for Kinaxis' revenue from on-premise, fixed term subscription arrangements and capitalization of contract acquisition costs. IFRS 16 specifies how to recognize, measure, present and disclose leases. The standard provides a single lessee accounting model, requiring lessees to recognize assets and liabilities for all major leases. See the Kinaxis' financial statements and MD&A for the three and six months ended Jun 30, 2018 for further information.

(2)

"Adjusted EBITDA" is a non-IFRS measure and is not a recognized, defined or a standardized measure under IFRS. This measure as well as other non-IFRS financial measures reported by Kinaxis are defined in the "Non-IFRS Measures" section of this news release.

 

Analysis of Q2 2018 vs Q2 2017 Financial Highlights

As noted in our financial statements and management's discussion and analysis (MD&A) for the three and six months ended June 30, 2018, Kinaxis adopted the Standards on January 1, 2018.  We have not restated the 2017 comparative information but have also presented the 2018 results prior to giving effect to the Standards, to create a basis for this comparative analysis.  

Prior to the effect of the Standards, in the second quarter of 2018 subscription services revenue grew by 24% to $30.1 million, due to contracts secured with new customers, as well as expansion of existing customer subscriptions. Total revenue grew 22%, to $40.0 million. After applying the Standards, subscription services revenue was $26.5 million, subscription term license revenue was $2.5 million (for total subscription revenue of $29.1 million), and total revenue was $39.0 million.

Prior to the effect of the Standards, in the second quarter of 2018 gross profit grew 20% to $27.5 million and gross profit margin was 69% compared to 70%. The slightly lower gross profit margin reflects increases in headcount and related compensation costs and higher depreciation costs associated with the expansion of data center capacity, including new data centers in Europe and Japan, to support new and ongoing customer engagements, and global expansion. Prior to the effect of the Standards, Profit for the second quarter of 2018 was $4.4 million ($0.17 per diluted share), compared to $5.6 million ($0.21 per diluted share). The decrease in profit reflects an increase in operating expenses made to support our global expansion and ongoing product innovation, net of increases in revenue and gross profit. After applying the Standards, gross profit was $26.5 million, or 68% of revenue, and profit was $4.3 million ($0.16 per diluted share).

Prior to the effect of the Standards, Adjusted EBITDA(2) for the second quarter of 2018 grew 12%, to $10.7 million, or 27% of revenue, which reflects the growth in revenue and gross profit in the period. After applying the Standards, Adjusted EBITDA(2) was $11.2 million, or 29% of revenue.

Cash generated by operating activities was $9.3 million for the second quarter of 2018, up from $7.5 million.  Cash and cash equivalents were $174.6 million at June 30, 2018, compared to $158.4 million at December 31, 2017.

Financial Guidance

Kinaxis is updating the guidance it previously provided for certain key financial targets, both prior to and after adoption of the Standards.  The following are the updated financial targets for FY 2018:

$ in USD millions, except as otherwise indicated

Under IFRS 15/16
FY 2018


Prior to IFRS 15/16
FY 2018

Total revenue

$152-156


$158-163


Subscription services revenue

$109-111


23-26% growth



Subscription term licenses

$8-9


-

Adjusted EBITDA margin

25-28% of revenue


24-27% of revenue

 

This guidance is provided to enhance visibility into Kinaxis' expectations for financial targets for the periods indicated. Please refer to the section regarding forward-looking statements which forms an integral part of this release.

This press release, along with the financial statements and Kinaxis' MD&A for the three and six months ended June 30, 2018, are available on Kinaxis' website and on SEDAR at www.sedar.com.

Conference Call
Kinaxis will host a conference call tomorrow, August 3, 2018, to discuss these results. John Sicard, Chief Executive Officer, and Richard Monkman, Chief Financial Officer, will host the call starting at 8:30 a.m. Eastern time. A question and answer session will follow management's presentation.

Date:

Friday, August 3rd, 2018

Time:

8:30 a.m. Eastern Time

Webcast:

https://bit.ly/2LeO4XC   

Dial-in Number:

(647) 427-7450 or (888) 231-8191

Taped Replay:

(416) 849-0833 or (855) 859-2056


Available until 12:00 midnight Eastern Time Friday August 10, 2018

Reference Number:

4696696

 

Please call the conference telephone number 5-10 minutes prior to the start time. An operator will register your name and organization.

About Kinaxis Inc.
Offering the industry's only concurrent planning solution, Kinaxis is helping organizations around the world revolutionize their supply chain planning. Kinaxis RapidResponse, our cloud-based supply chain management software, connects your data, processes and people into a single harmonious environment. With a consolidated view of the entire supply chain, you can plan expected performance, monitor progress and respond to disconnects when reality hits. RapidResponse lets you know sooner and act faster, leading to reduced decision latency, and improved operational and financial performance. We can prove it. From implementation to expansion, we're here to help our customers with every step of their supply chain journey.

Non-IFRS Measures
This news release contains non-IFRS measures, specifically, Adjusted profit, Adjusted diluted earnings per share and Adjusted EBITDA.  We use Adjusted profit and Adjusted diluted earnings per share, which remove the impact of our redeemable preferred shares and share based compensation plans, to measure our performance as these measurements better align the reporting of our results and improve comparability against our peers. We use Adjusted EBITDA to provide investors with a supplemental measure of our operating performance and thus highlight trends in our core business that may not otherwise be apparent when relying solely on IFRS financial measures.  We believe that securities analysts, investors and other interested parties frequently use non-IFRS measures in the evaluation of issuers.  Management also uses non-IFRS measures in order to facilitate operating performance comparisons from period to period, prepare annual operating budgets and assess our ability to meet our capital expenditure and work capital requirements. Adjusted profit, Adjusted diluted earnings per share and Adjusted EBITDA are not recognized, defined or standardized measures under IFRS. Our definition of Adjusted profit, Adjusted diluted earnings per share and Adjusted EBITDA will likely differ from that used by other companies (including our peers) and therefore comparability may be limited.  Non-IFRS measures should not be considered a substitute for or in isolation from measures prepared in accordance with IFRS. Investors are encouraged to review our financial statements and disclosures in their entirety and are cautioned not to put undue reliance on non-IFRS measures and view them in conjunction with the most comparable IFRS financial measures. Kinaxis has reconciled Adjusted profit and Adjusted EBITDA to the most comparable IFRS financial measure as follows:

 


Three months ended June 30,


Six months ended June 30,




Pre-IFRS 15/16




Pre-IFRS 15/16


2018


2018


2017


2018


2018


2017






(In thousands of U.S. dollars)

















Profit 

$4,265


$4,425


$5,640


$8,818


$7,635


$8,866

Share-based compensation

2,527


2,527


2,397


5,685


5,685


5,113

Adjusted profit

$6,792


$6,952


$8,037


$14,503


$13,320


$13,979

Income tax expense

1,809


2,127


1,043


4,939


3,995


2,974

Depreciation

2,564


1,720


818


4,550


3,025


1,606

Foreign exchange loss

222


371


12


26


349


23

Net finance income

(193)


(446)


(310)


(338)


(807)


(477)


4,402


3,772


1,563


9,177


6,562


4,126

Adjusted EBITDA

$11,194


$10,724


$9,600


$23,680


$19,882


$18,105

Adjusted EBITDA as a percentage
of revenue

29%


27%


29%


31%


26%


28%

 

Forward-Looking Statements
Certain statements in this release constitute forward-looking statements within the meaning of applicable securities laws.  Forward-looking statements include statements as to our expectations for growth of annual total revenue, annual subscription services and term license revenue, and our expectations for Adjusted EBITDA achievement, in each case looking forward for the balance of our fiscal year ending December 31, 2018, as well as statements as to Kinaxis' growth opportunities and the potential benefits of, and markets and demand for, Kinaxis' products and services. These statements are subject to certain assumptions, risks and uncertainties, including our view of the relative position of Kinaxis' products and services compared to competitive offerings in the industry.

In particular, our guidance for 2018 annual total revenue, annual subscription services and term license revenue and annual Adjusted EBITDA, is subject to certain assumptions, including:

  • our ability to win business from new customers and expand business from existing customers;
  • the timing of new customer wins and expansion decisions by our existing customers;
  • maintaining our current customer retention levels; and
  • with respect to Adjusted EBITDA, our ability to contain expense levels while expanding our business.

These and other assumptions, risks and uncertainties may cause Kinaxis' actual results, performance, achievements and developments to differ materially from the results, performance, achievements or developments expressed or implied by forward-looking statements. Material risks and uncertainties relating to our business are described under the headings "Forward-Looking Statements" and "Risks and Uncertainties" in our annual MD&A dated February 28, 2018, under the heading "Risk Factors" in our Annual Information Form dated March 29, 2018, and in our other public documents filed with Canadian securities regulatory authorities, which are available at www.sedar.com. Forward-looking statements are provided to help readers understand management's expectations as at the date of this release and may not be suitable for other purposes. Readers are cautioned not to place undue reliance on forward-looking statements. Kinaxis assumes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as expressly required by law.


 

Kinaxis Inc.
Condensed Consolidated Interim Statements of Financial Position

 

As at June 30, 2018 and December 31, 2017
(Expressed in thousands of U.S. dollars)
(Unaudited)












June 30, 2018


December 31, 2017






Assets










Current assets:






Cash and cash equivalents

$

174,577

$

158,398


Trade and other receivables


40,133


31,783


Investment tax credits recoverable



911


Prepaid expenses


5,901


4,196



220,611


195,288






Non-current assets:






Property and equipment


23,576


17,350


Right-of-use assets


13,342



Contract acquisition costs


13,722



Unbilled receivables


492



Deferred tax assets


12


55







$

271,755

$

212,693






Liabilities and Shareholders' Equity










Current liabilities:






Trade payables and accrued liabilities 

$

15,936

$

11,176


Deferred revenue


58,635


67,040


Lease obligations 


3,076





77,647


78,216

Non-current liabilities:






Deferred revenue


3,983


7,745


Lease obligations


10,144



Deferred tax liabilities


9,761


1,944




23,888


9,689







Shareholders' equity:






Share capital


118,688


108,253


Contributed surplus


21,683


19,294


Accumulated other comprehensive loss 


(327)


(284)


Retained earnings (deficit)


30,176


(2,475)




170,220


124,788









$

271,755

$

212,693



*

The Company adopted IFRS 15 and 16 as described in Note 3. Under this adoption, the comparative information is not restated.

 


Kinaxis Inc.
Condensed Consolidated Interim Statements of Comprehensive Income

For the six months ended June 30, 2018 and 2017
(Expressed in thousands of U.S. dollars, except share and per share data)
(Unaudited)











For the three months

For the six months


ended June 30,

ended June 30,



2018


2017


2018


2017










Revenue                                                                                       

$

38,994

$

32,866

$

75,843

$

65,408










Cost of revenue                                                                                


12,493


9,985


22,628


20,362










Gross profit                                                                                      


26,501


22,881


53,215


45,046










Operating expenses:










Selling and marketing                                                             


8,897


7,367


16,283


14,298


Research and development                                                    


7,357


5,874


14,106


12,097


General and administrative                                                      


4,144


3,255


9,381


7,265



20,398


16,496


39,770


33,660












6,103


6,385


13,445


11,386

Other income (expense):










Foreign exchange loss                                                         


(222)


(12)


(26)


(23)


Net finance income                                                                  


193


310


338


477



(29)


298


312


454










 

Profit before income taxes                                                             


6,074


6,683


13,757


11,840










Income tax expense                                                                         


1,809


1,043


4,939


2,974










Profit                                                                                                 


4,265


5,640


8,818


8,866










Other comprehensive income (loss)


















Items that are or may be reclassified
subsequently to profit or loss:









Foreign currency translation
differences - foreign operations                                        


(443)


(17)


(43)


129










Total comprehensive income                                                  

$

3,822

$

5,623

$

8,775

$

8,995










Basic earnings per share                                                          

$

0.17

$

0.22

$

0.34

$

0.35










Weighted average number of basic
Common Shares                                                                  


25,720,014


25,331,522


25,631,985


25,188,312










Diluted earnings per share                                                       

$

0.16

$

0.21

$

0.33        $


0.34










Weighted average number of diluted
Common Shares                                                                 


26,749,364


26,523,749


26,733,546


26,427,595










* The Company adopted IFRS 15 and 16 as described in Note 3. Under this adoption, the comparative information is not restated.

 

Kinaxis Inc.

Condensed Consolidated Interim Statements of Changes in Shareholders' Equity


For the six months ended June 30, 2018 and 2017

(Expressed in thousands of U.S. dollars)

(Unaudited)



Share
capital

Contributed
surplus

Accumulated
other
comprehensive
income (loss)

Retained
earnings
(deficit)

Total equity*












Balance, December 31, 2016

$

97,164

$

13,924

$

(519)

$

(22,858)

$

87,711












Profit





8,866


8,866

Other comprehensive income




129



129

Total comprehensive income




129


8,866


8,995












Share options exercised


8,360


(2,438)




5,922

Share based payments



5,113




5,113

Total shareholder transactions


8,360


2,675




11,035












Balance, June 30, 2017

$

105,524

$

16,599

$

(390)

$

(13,992)

$

107,741












Balance, December 31, 2017

$

108,253

$

19,294

$

(284)

$

(2,475)

$

124,788












Adjustment on initial application of IFRS 15





23,833


23,833

Adjusted balance, January 1, 2018


108,253


19,294


(284)


21,358


148,621












Profit





8,818


8,818

Other comprehensive loss




(43)



(43)

Total comprehensive income (loss)




(43)


8,818


8,775












Share options exercised


10,036


(2,897)




7,139

Deferred share units exercised


399


(399)




Share based payments



5,685




5,685

Total shareholder transactions


10,435


2,389




12,824












Balance, June 30, 2018 

$

118,688

$

21,683

$

(327)

$

30,176

$

170,220












* The Company adopted IFRS 15 and 16 as described in Note 3. Under this adoption, the comparative information is not restated.

 

Kinaxis Inc.

Condensed Consolidated Interim Statements of Cash Flows


For the three and six months ended June 30, 2018 and 2017

(Expressed in thousands of U.S. dollars)

(Unaudited)





For the three months

For the six months


ended June 30,

ended June 30,


2018

2017

2018

2017






Cash flows from operating activities:











Profit

$

4,265

$

5,640

$

8,818

$

8,866


Items not affecting cash:







Depreciation of property and equipment and right-of-use assets

2,564

818

4,550

1,606



Share-based payments

2,527

2,397

5,685

5,113



Amortization of lease inducement

-

(4)

-

(18)



Investment tax credits recoverable

-

(1,051)

911

(842)



Net finance income

(193)

-

(338)

-



Income tax expense

1,809

1,043

4,939

2,974



Change in operating assets and liabilities

(848)

(168)

(2,607)

3,166


Interest received

446

-

807

-


Interest paid

(321)

-

(469)

-


Income taxes paid

(998)

(1,156)

(2,499)

(3,087)


9,251

7,519

19,797

17,778






Cash flows used in investing activities:











Purchase of property and equipment

(4,529)

(1,327)

(9,350)

(1,644)






Cash flows from financing activities:











Payment of lease obligations

(534)

-

(1,282)

-


Common shares issued on exercise of stock options

4,361

1,952

7,139

5,922


3,827

1,952

5,857

5,922






Increase in cash and cash equivalents

8,549

8,144

16,304

22,056







Cash and cash equivalents, beginning of period

166,631

141,989

158,398

127,910






Effects of exchange rates on cash and cash equivalents

(603)

292

(125)

459







Cash and cash equivalents, end of period

$

174,577

$

150,425

$

174,577

$

150,425










* The Company adopted IFRS 15 and 16 as described in Note 3. Under this adoption, the comparative information is not restated.

 

SOURCE Kinaxis Inc.

View original content with multimedia: http://www.newswire.ca/en/releases/archive/August2018/02/c2582.html

View Comments and Join the Discussion!