Kinaxis Inc. Reports First Quarter 2023 Results

OTTAWA--(BUSINESS WIRE)--Kinaxis® (TSX:KXS), the authority in driving agility for fast, confident decision-making in an unpredictable world, reported results for its first quarter ended March 31, 2023. All amounts are in U.S. dollars. All figures are prepared in accordance with International Financial Reporting Standards (IFRS) unless otherwise indicated.

"Our first quarter results provide a solid start to support our outlook for another Rule of 40² performance this year. Our win rate remains high, and we continue to secure marquee brands even as an uncertain economic backdrop drives some prospects to exercise extra rigor in their purchasing processes," said John Sicard, President and CEO of Kinaxis. "We recently announced our relationship with Havi, which manages the supply chains of the world's largest quick service restaurant brands. Additionally, during the first quarter we added two more iconic brands, including another household name in QSR and one of the most recognized and oldest snacking powerhouses globally. We're thrilled to see market leaders continuing to partner with Kinaxis to leverage the power of concurrent planning and our unique ability to combine state-of-the-art machine learning/AI, optimization, and configurable heuristics to drive their digital transformations."

Q1 2023 Highlights
$ USD thousands, except as otherwise indicated		Q1 2023		Q1 2022		Change
Total Revenue		101,130		98,108		3%
SaaS		63,145		49,320		28%
Subscription term licenses		7,028		23,474		(70%)
Professional services		26,568		21,458		24%
Maintenance and support		4,389		3,856		14%
Gross profit		61,001		69,642		(12%)
Margin		60%		71%
Profit		1,189		12,522		(91%)
Per diluted share		$0.04		$0.44
Adjusted EBITDA1		17,142		33,149		(48%)
Margin		17%		34%
Cash (used in) from operating activities		38,905		21,993		77%

(1)		"Adjusted EBITDA" is a non-IFRS measure and is not a recognized, defined or standardized measure under IFRS. This measure as well as any other non-IFRS financial measures reported by Kinaxis are defined in the "Non-IFRS Measures" section of this news release.
(2)		Rule of 40 calculated as the sum of SaaS revenue growth and adjusted EBITDA margin results.

Key Performance Indicators
The company's Annual Recurring Revenue³ (ARR), which includes subscription amounts related to both SaaS and on-premise contracts, rose 23% to $285 million at the end of the quarter.

$USD millions	Q1 2023	Q1 2022	Change
Annual recurring revenue3	285	232	23%

(3)

Annual Recurring Revenue (ARR) is the total annualized value of recurring subscription amounts (ultimately recognized as SaaS, Subscription term licenses and Maintenance and support revenue) of all subscription contracts at a point in time. Annualized subscription amounts are determined solely by reference to the underlying contracts, normalizing for the varying revenue recognition treatments under IFRS 15 for cloud-based versus on-premise subscription amounts. It excludes one-time fees, such as for non-recurring professional services, and assumes that customers will renew the contractual commitments on a periodic basis as those commitments come up for renewal, unless such renewal is known to be unlikely. We believe that this measure provides a more current indication of our performance in the growth of our subscription business than other metrics.

The nature of the company's long-term contracts provides visibility into future, contracted revenue. The following table presents revenue expected to be recognized in the future related to performance obligations that are unsatisfied (or partially unsatisfied) at March 31, 2023.

$USD millions		Remainder of 2023		2024		2025 and later		Total
SaaS		180.2		185.5		161.9		527.6
Maintenance and support		12.4		14.3		12.3		38.9
Subscription term licenses		1.0		0.2		-		1.2
Total		193.5		200.0		174.2		567.7

Financial Guidance
Kinaxis is updating its fiscal 2023 financial guidance, as follows.

	FY 2023 Guidance
Total revenue	$425-435 million
SaaS	25-27% growth
Subscription term license	$16-18 million
Adjusted EBITDA1 margin	14-16%

Guidance in this press release is provided to enhance visibility into Kinaxis' expectations for financial targets for the periods indicated. Please refer to the section regarding forward-looking statements that forms an integral part of this release. This press release along with the financial statements and MD&A for the quarter ended March 31, 2023 are available on Kinaxis' website and on SEDAR at www.sedar.com.

Conference Call
Kinaxis will host a conference call tomorrow, May 4, 2023, to discuss these results. John Sicard, Chief Executive Officer, and Blaine Fitzgerald, 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. Investors and participants must register for the call in advance. See registration link below. Please call the conference telephone number fifteen minutes prior to the start time.

DATE:		Thursday, May 4, 2023
TIME:		8:30 a.m. Eastern Time
CALL REGISTRATION:		https://conferencingportals.com/event/eopSfgtI
WEBCAST:		https://events.q4inc.com/attendee/676139643 (available for three months)
REPLAY:		(800)-770-2030 or (647)-362-9199 Available through May 18, 2023 Reference number: 29488

About Kinaxis Inc.
Everyday volatility and uncertainty demand quick action. Kinaxis® delivers the agility to make fast, confident decisions across integrated business planning and the digital supply chain. People can plan better, live better and change the world. Trusted by innovative brands, we combine human intelligence with AI and concurrent planning to help companies plan for any future, monitor risks and opportunities and respond at the pace of change. Powered by an extensible, cloud-based platform, Kinaxis delivers industry-proven applications so everyone can know sooner, act faster and remove waste. For more Kinaxis news, follow us on LinkedIn or Twitter.

Non-IFRS Measures
Adjusted EBITDA and Adjusted EBITDA Margin
This press release contains non-IFRS measures, specifically Adjusted EBITDA and Adjusted EBITDA margin. 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 working capital requirements. Adjusted EBITDA and Adjusted EBITDA margins are not recognized, defined or standardized measures under IFRS. Our definition of Adjusted EBITDA and Adjusted EBITDA margin 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 EBITDA to the most comparable IFRS financial measure as follows:

		Three months ended March 31,
			2023					2022
	(In thousands of USD)
Profit		$	1,189				$	12,522
Change in fair value of contingent consideration			2,194					-
Share-based compensation			8,219					6,003
Adjusted profit		$	11,602				$	18,525
Income tax expense			304					7,128
Depreciation and amortization			6,887					5,914
Foreign exchange loss (gain)			(265	)				1,165
Net finance expense (income)			(1,386	)				417
			5,540					14,624
Adjusted EBITDA		$	17,142				$	33,149
Adjusted EBITDA as a percentage of revenue			17	%				34	%

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 SaaS and Subscription term licenses revenue, and our expectations for Adjusted EBITDA margin achievement, in each case looking forward for our fiscal year ending December 31, 2023; and
• contracted revenue in future periods, including 2023, 2024 and 2025 and later.

This release also includes forward-looking 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 2023 annual total revenue, annual SaaS and Subscription term license revenue and annual Adjusted EBITDA margin are subject to certain assumptions and associated risks 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 customer retention levels, and specifically, that customers will renew contractual commitments on a periodic basis as those commitments come up for renewal, at rates consistent with our historic experience;
• fluctuations in the value of foreign currencies relative to the U.S. Dollar; and
• with respect to Adjusted EBITDA and profitability, our ability to contain expense levels while expanding our business.

Our guidance and commentary for achievement of contracted revenue in future periods, including in 2023, 2024 and 2025 and later, is based on assumptions and associated risks including:

• our ability to satisfy material unperformed obligations under our long-term contracts; and
• the continued financial capacity and creditworthiness of our customers under long-term contracts.

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 March 1, 2023, under the heading "Risk Factors" in our Annual Information Form dated March 3, 2023 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.

SOURCE: Kinaxis Inc.

Consolidated Statements of Financial Position (Expressed in thousands of USD) (Unaudited)
	March 31,		December 31,
	2023		2022
Assets
Current assets:
Cash and cash equivalents	$	181,566	$	175,347
Short-term investments		91,111		50,476
Trade and other receivables		119,218		157,657
Prepaid expenses		15,965		13,660
		407,860		397,140
Non-current assets:
Unbilled receivables		1,285		7,245
Other receivables		989		971
Prepaid expenses		2,577		2,395
Investment tax credits recoverable		8,506		7,591
Deferred tax assets		837		1,065
Contract acquisition costs		25,764		24,892
Property and equipment		48,989		51,852
Right-of-use assets		51,747		53,537
Intangible assets		27,199		28,271
Goodwill		74,126		73,314
		242,019		251,133
	$	649,879	$	648,273
Liabilities and Shareholders' Equity
Current liabilities:
Trade payables and accrued liabilities	$	30,805	$	40,107
Deferred revenue		124,245		133,467
Provisions		119		296
Contingent consideration		5,559		9,146
Lease obligations		6,819		6,991
		167,547		190,007
Non-current liabilities:
Lease obligations		48,433		49,977
Deferred tax liabilities		4,208		6,861
		52,641		56,838
Shareholders' equity:
Share capital		266,595		244,713
Contributed surplus		69,532		65,129
Accumulated other comprehensive gain (loss)		633		(156	)
Retained earnings		92,931		91,742
		429,691		401,428
	$	649,879	$	648,273

Consolidated Statements of Comprehensive Income (Loss) (Expressed in thousands of USD, except share and per share data) (Unaudited)
	Three months ended March 31,
		2023			2022
Revenue	$	101,130		$	98,108
Cost of revenue		40,129			28,466
Gross profit		61,001			69,642
Operating expenses:
Selling and marketing		24,164			17,126
Research and development		19,929			18,157
General and administrative		14,791			13,184
		58,884			48,467
		2,117			21,175
Other income (expense):
Foreign exchange gain (loss)		265			(1,165	)
Net finance and other income (expense)		1,305			(360	)
Change in fair value of contingent consideration		(2,194	)		-
		(624	)		(1,525	)
Profit before income taxes		1,493			19,650
Income tax expense		304			7,128
Profit		1,189			12,522
Other comprehensive income (loss):
Items that are or may be reclassified subsequently to profit:
Foreign currency translation differences - foreign operations		712			(380	)
Unrealized gain on cash flow hedges		77			-
Total comprehensive income	$	1,978		$	12,142
Basic earnings per share	$	0.04		$	0.46
Weighted average number of basic Common Shares		28,086,983			27,481,560
Diluted earnings per share	$	0.04		$	0.44
Weighted average number of diluted Common Shares		28,941,335			28,466,916

Consolidated Statements of Changes in Shareholders' Equity (Expressed in thousands of USD) (Unaudited)
								Accumulated other comprehensive income
	Share capital			Contributed surplus				Cash flow hedges			Currency translation adjustments				Total				Retained earnings			Total equity
Balance, December 31, 2021	$	195,414		$	54,739			$	-		$	(597	)		$	(597	)		$	71,662		$	321,218
Profit		-			-				-			-				-				20,080			20,080
Other comprehensive income		-			-				-			441				441				-			441
Total comprehensive income		-			-				-			441				441				20,080			20,521
Share options exercised		38,791			(9,076	)			-			-				-				-			29,715
Restricted share units vested		10,091			(10,091	)			-			-				-				-			-
Performance share units vested		417			(417	)			-			-				-				-			-
Share based payments		-			29,974				-			-				-				-			29,974
Total shareholder transactions		49,299			10,390				-			-				-				-			59,689
Balance, December 31, 2022	$	244,713		$	65,129			$	-		$	(156	)		$	(156	)		$	91,742		$	401,428
Profit		-			-				-			-				-				1,189			1,189
Other comprehensive income		-			-				77			712				789				-			789
Total comprehensive income		-			-				77			712				789				1,189		$	1,978
Share options exercised		13,804			(3,293	)			-			-				-				-			10,511
Performance share units vested		2,297			(2,297	)			-			-				-				-			-
Share based payments		-			9,993				-			-				-				-			9,993
Shares issued from contingent consideration		5,781			-				-			-				-				-			5,781
Total shareholder transactions		21,882			4,403				-			-				-				-			26,285
Balance, March 31, 2023	$	266,595		$	69,532			$	77		$	556			$	633			$	92,931		$	429,691

Consolidated Statements of Cash Flows (Expressed in thousands of USD) (Unaudited)
	Three Months Ended March 31,
		2023			2022
Cash flows from operating activities:
Profit	$	1,189		$	12,522
Items not affecting cash:
Depreciation of property and equipment and right-of-use assets		5,475			5,331
Amortization of intangible assets		1,412			583
Share-based payments		8,219			6,003
Net finance expense (income)		(1,386	)		417
Change in fair value of contingent consideration		2,194			-
Income tax expense		304			7,128
Investment tax credits recoverable		(915	)		(1,042	)
Change in operating assets and liabilities		22,959			(7,232	)
Interest received		1,261			30
Interest paid		(433	)		(454	)
Income taxes received (paid)		(1,374	)		(1,293	)
		38,905			21,993
Cash flows used in investing activities:
Acquisition of business, net of cash acquired		-			(3,028	)
Purchase of property and equipment and intangible assets		(863	)		(6,279	)
Purchase of short-term investments		(55,083	)		(15,006	)
Redemption of short-term investments		15,006			15,006
		(40,940	)		(9,307	)
Cash flows from financing activities:
Payment of lease obligations		(1,819	)		(1,477	)
Proceeds from exercise of stock options		10,511			7,177
		8,692			5,700
(Decrease) increase in cash and cash equivalents		6,657			18,386
Cash and cash equivalents, beginning of period		175,347			203,220
Effects of exchange rates on cash and cash equivalents		(438	)		377
Cash and cash equivalents, end of period	$	181,566		$	221,983

Contacts

Investor Relations
Rick Wadsworth | Kinaxis
[e-mail]
613-907-7613

Media Relations
Jaime Cook | Kinaxis
[e-mail]
289-552-4640