Kinaxis Inc. Reports Fourth Quarter 2023 Results

OTTAWA, Ontario--(BUSINESS WIRE)--Kinaxis® (TSX:KXS), the leading provider of supply chain management solutions, reported results for its fourth quarter and year ended December 31, 2023. All amounts are in U.S. dollars. All figures are prepared in accordance with International Financial Reporting Standards (IFRS) unless otherwise indicated.

"We finished the year with a record number of customer wins, a record backlog that provides strong visibility into 2024 and beyond, and record free cash flow. These achievements were won through a persistently high win rate against key competitors, ongoing progress penetrating all tiers of our markets, strong renewals and expansions, ongoing enhancement of the value we offer, and a focus on balancing rapid growth with profitability," said John Sicard, president and chief executive officer at Kinaxis. "More and more, we are seeing siloed, legacy methods giving way to end-to-end supply chain orchestration, where Kinaxis is the acknowledged leader. We have made strong investments over the past few years that have put us in excellent position to capture even more share in our markets while we make steady progress towards our mid-term profitability goals."

Q4 2023 Highlights

$ USD thousands, except as otherwise indicated		Q4 2023		Q4 2022		Change
Total Revenue		111,990		98,483		14%
SaaS		69,891		58,839		19%
Subscription term licenses		2,899		9,131		(68)%
Professional services		34,318		26,156		31%
Maintenance and support		4,882		4,357		12%
Gross profit		68,890		61,266		12%
Margin		62%		62%
Profit		4,021		8,562		(53)%
Per diluted share		$0.14		$0.30
Adjusted EBITDA1		19,727		21,116		(7)%
Margin		18%		21%
Cash from (used in) operating activities		27,969		(2,327)		1,302%

(1) "Adjusted EBITDA" is a non-IFRS measures that 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.

FY 2023 Highlights

$ USD thousands, except as otherwise indicated		FY 2023		FY 2022		Change
Total Revenue		426,971		366,889		16%
SaaS Revenue		265,080		213,306		24%
Adjusted EBITDA1		74,872		79,446		(6)%
Margin		18%		22%

Key Performance Indicators

The company's Annual Recurring Revenue² (ARR), which includes subscription amounts related to both SaaS and on-premise contracts, rose 18% to $322 million at the end of the quarter.

$USD millions		Q4 2023			Q4 2022			Change
Annual recurring revenue2		$	322		$	274		18	%

(2) 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 December 31, 2023.

$USD millions		2024		2025		2026 and later		Total
SaaS		274.0		197.7		228.9		700.6
Maintenance and support		17.5		12.4		8.3		38.2
Subscription term licenses		2.2		0.1		-		2.3
Total		293.7		210.2		237.2		741.1

Financial Guidance

Kinaxis is introducing its fiscal 2024 financial guidance, as follows.

		FY 2024 Guidance
Total revenue		$483-495 million
SaaS		17-19% growth
Subscription term license		$9-11 million
Adjusted EBITDA1 margin		16-18%

"We are steadily marching towards our baseline mid-term Adjusted EBITDA margin target of 25%. Our 2024 guidance reflects the current ARR growth level, ongoing operating leverage, but also the impacts of being at the low point in our normal cycle for our high-margin subscription term license revenue and our current transition to public cloud, which involves some duplicative costs. Normalizing for these two items better demonstrates our steady progress," said Blaine Fitzgerald, chief financial officer at Kinaxis. "I am particularly pleased to have generated a record $77.1 million in free cash flow in 2023, which is over 70% higher than in any other year. It's another data point that demonstrates our focus on balancing strong growth and profitability."

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 December 31, 2023 are available on Kinaxis' website and on SEDAR at www.sedar.com.

Conference Call

Kinaxis will host a conference call tomorrow, February 29, 2024, 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, February 29, 2024
TIME:		8:30 a.m. Eastern Time
CALL REGISTRATION:		https://registrations.events/direct/Q4I914168
WEBCAST		https://events.q4inc.com/attendee/409673001 (available for three months)
REPLAY:		(800)-770-2030 or [phone]
		Available through March 14, 2024
		Reference number: 91416

About Kinaxis Inc.

Kinaxis is a global leader in modern supply chain management. We serve supply chains and the people who manage them in service of humanity. Our software is trusted by renowned global brands to provide the agility and predictability needed to navigate today's volatility and disruption. We combine our patented concurrency technique with a human-centered approach to AI to empower businesses of all sizes to orchestrate their end-to-end supply chain network, from multi-year strategic planning through down-to-the-second execution and last-mile delivery. For more news and information, please visit kinaxis.com or follow us on LinkedIn.

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 December 31,						Year ended December 31,
		2023			2022			2023			2022
		(In thousands of USD)						(In thousands of USD)
Profit		4,021			8,562			10,060			20,080
Change in fair value of contingent consideration		-			1,367			1,951			(826	)
Share-based compensation		8,388			7,558			34,507			26,238
Adjusted profit		12,409			17,487			46,518			45,492
Income tax expense (recovery)		4,791			(635	)		9,676			11,406
Depreciation and amortization		6,424			6,761			26,284			25,060
Foreign exchange loss (gain)		(797	)		(1,648	)		1,236			(1,499	)
Net finance income		(3,100	)		(849	)		(8,842	)		(1,013	)
		7,318			3,629			28,354			33,954
Adjusted EBITDA		19,727			21,116			74,872			79,446
Adjusted EBITDA as a percentage of revenue		17.6	%		21.4	%		17.5	%		21.7	%

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, 2024;
• SaaS growth and increased profitability in years beyond 2024; and
• contracted revenue in future periods, including 2024, 2025 and 2026 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 2024 annual total revenue, annual SaaS and Subscription term license revenue and annual Adjusted EBITDA margin, as well as our comments on our expectations for SaaS growth and increased profitability in years beyond 2024, 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 2024, 2025 and 2026 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 February 28, 2024, 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.

Kinaxis Inc. Consolidated Statements of Financial Position (Expressed in thousands of USD)
		December 31, 2023		December 31, 2022
Assets
Current assets:
Cash and cash equivalents		174,844		175,347
Short-term investments		118,118		50,476
Trade and other receivables		156,609		157,657
Prepaid expenses		14,810		13,660
		464,381		397,140
Non-current assets:
Unbilled receivables		3,155		7,245
Other receivables		972		971
Prepaid expenses		1,130		2,395
Investment tax credits recoverable		8,362		7,591
Deferred tax assets		1,184		1,065
Contract acquisition costs		27,438		24,892
Property and equipment		40,300		51,852
Right-of-use assets		47,109		53,537
Intangible assets		23,394		28,271
Goodwill		74,556		73,314
		227,600		251,133
		691,981		648,273
Liabilities and Shareholders' Equity
Current liabilities:
Trade payables and accrued liabilities		39,700		40,107
Deferred revenue		137,598		133,467
Provisions		-		296
Contingent consideration		-		9,146
Lease obligations		5,805		6,991
		183,103		190,007
Non-current liabilities:
Lease obligations		45,985		49,977
Deferred tax liabilities		8,065		6,861
		54,050		56,838
Shareholders' equity:
Share capital		307,327		244,713
Contributed surplus		44,339		65,129
Accumulated other comprehensive gain (loss)		1,360		(156	)
Retained earnings		101,802		91,742
		454,828		401,428
		691,981		648,273

Kinaxis Inc. Consolidated Statements of Comprehensive Income (Expressed in thousands of USD, except share and per share data)
		Three months ended December 31,							Year ended December 31,
		2023				2022				2023			2022
Revenue		$	111,990		$	98,483			$	426,971			$	366,889
Cost of revenue			43,100			37,217				168,074				131,102
Gross profit			68,890			61,266				258,897				235,787
Operating expenses:
Selling and marketing			26,606			21,213				102,719				79,446
Research and development			20,665			19,494				81,707				74,147
General and administrative			16,703			13,804				60,369				54,273
			63,974			54,511				244,795				207,866
			4,916			6,755				14,102				27,921
Other income:
Foreign exchange gain (loss)			797			1,648				(1,236	)			1,499
Net finance and other income			3,099			891				8,821				1,240
Change in fair value of contingent consideration			-			(1,367	)			(1,951	)			826
			3,896			1,172				5,634				3,565
Profit before income taxes			8,812			7,927				19,736				31,486
Income tax expense (recovery):			4,791			(635	)			9,676				11,406
Profit			4,021			8,562				10,060				20,080
Other comprehensive income:
Items that are or may be reclassified subsequently to profit:
Foreign currency translation differences - foreign operations			2,543			4,539				1,075				441
Change in net unrealized gain on cash flow hedges			804			-				441				-
			3,347			4,539				1,516				441
Total comprehensive income		$	7,368		$	13,101			$	11,576			$	20,521
Basic earnings per share		$	0.14		$	0.31			$	0.36			$	0.73
Weighted average number of basic Common Shares			28,114,987			27,903,102				28,321,874				27,667,100
Diluted earnings per share		$	0.14		$	0.30			$	0.35			$	0.70
Weighted average number of diluted Common Shares			28,863,575			28,790,951				29,149,535				28,609,603

Kinaxis Inc. Consolidated Statements of Changes in Shareholders' Equity (Expressed in thousands of USD)
										Accumulated other comprehensive income (loss)
		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			-				-				-			-				-				10,060			10,060
Other comprehensive income			-				-				441			1,075				1,516				-			1,516
Total comprehensive income			-				-				441			1,075				1,516				10,060			11,576
Share options exercised			41,545				(9,991	)			-			-				-				-			31,554
Restricted share units vested			10,676				(10,676	)			-			-				-				-			-
Performance share units vested			2,628				(2,628	)			-			-				-				-			-
Share based payments			-				35,788				-			-				-				-			35,788
Shares issued for contingent consideration			11,097				-				-			-				-				-			11,097
Shares re-purchased			(3,332	)			(33,283	)			-			-				-				-			(36,615	)
Total shareholder transactions			62,614				(20,790	)			-			-				-				-			41,824
Balance, December 31, 2023			307,327				44,339				441			919				1,360				101,802			454,828

Kinaxis Inc. Consolidated Statements of Cash Flows (Expressed in thousands of USD)
		Three months ended December 31,								Year ended December 31,
			2023				2022				2023				2022
Cash flows from (used in) operating activities:
Profit		$	4,021			$	8,562			$	10,060			$	20,080
Items not affecting cash:
Depreciation of property and equipment and right-of-use assets			5,093				5,363				20,880				21,496
Amortization of intangible assets			1,331				1,398				5,404				3,564
Share-based payments			8,388				7,558				34,507				26,238
Net finance income			(3,100	)			(849	)			(8,842	)			(1,013	)
Change in fair value of contingent consideration			-				1,367				1,951				(826	)
Income tax expense (recovery)			4,791				(635	)			9,676				11,406
Investment tax credits recoverable			1,463				(601	)			(771	)			(3,975	)
Change in operating assets and liabilities			4,633				(24,064	)			5,369				(49,123	)
Interest received			2,508				1,087				7,853				2,546
Interest paid			(393	)			(444	)			(1,640	)			(1,841	)
Income taxes paid			(766	)			(1,069	)			(5,090	)			(4,034	)
			27,969				(2,327	)			79,357				24,518
Cash flows from (used in) investing activities:
Acquisition of business, net of cash acquired			-				(76	)			-				(36,738	)
Purchase of property and equipment and intangible assets			(289	)			(8,169	)			(2,299	)			(18,249	)
Purchase of short-term investments			(32,955	)			(35,149	)			(205,679	)			(80,314	)
Redemption of short-term investments			45,501				15,149				140,666				60,314
			12,257				(28,245	)			(67,312	)			(74,987	)
Cash flows from (used in) financing activities:
Payment of lease obligations			(1,729	)			(1,770	)			(6,974	)			(6,733	)
Lease incentives received			-				-				-				3,858
Repurchase of shares			(36,615	)			-				(36,615	)			-
Proceeds from exercise of stock options			10,839				6,345				31,554				29,715
			(27,505	)			4,575				(12,035	)			26,840
Increase (decrease) in cash and cash equivalents			12,721				(25,997	)			10				(23,629	)
Cash and cash equivalents, beginning of year			160,303				202,764				175,347				203,220
Effects of exchange rates on cash and cash equivalents		$	1,820			$	(1,420	)		$	(513	)		$	(4,244	)
Cash and cash equivalents, end of year			174,844				175,347				174,844				175,347

Contacts

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

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