At a time when the fortunes of corporate Canada are shrouded in uncertainty, Ottawa-based Kinaxis Inc. is brimming with confidence.
On Thursday, the company’s leaders assured investors it is on track to meet its 2020 growth forecasts, which were set well before the coronavirus sabotaged the global economy.
Kinaxis’s software helps large companies navigate their operations through all manner of disasters and disruptions. And for businesses the world over, the pandemic is the mother of all disruptions.
“Like no event before it, COVID-19 has highlighted the need for supply chain agility,” chief executive John Sicard said in a conference call. “We all feel its importance every time we enter the grocery store or pharmacy, and hope that the essential items we need are on the shelves.”
After reporting first-quarter results that came in ahead of analyst forecasts following Wednesday’s market close, shares of Kinaxis rose by 10 per cent in Thursday trading.
Kinaxis is one of a group of Canadian information technology firms that is practically tailored to the lockdown era, by helping other companies adjust to a radically altered operating environment. Those same homegrown IT names are also some of the hottest stocks on the market.
At the top of the pile is Shopify Inc., which has ridden a wave of demand for its e-commerce platform, as traditional retailers scramble to establish a presence online. Shopify’s market capitalization has nearly doubled in value just since the start of the year to become the country’s largest publicly traded company on Wednesday. (Royal Bank of Canada reclaimed the top spot on Thursday.)
Other tech stocks in the S&P/TSX Composite Index have beat the market by a wide margin. Lightspeed POS Inc., a cloud-based retail and restaurant point-of-sale service provider is up by 103 per cent since the market rebound began on March 23.
Celestica Inc., which is an electronics manufacturing services provider, has gained 96 per cent over that same time. Enghouse Systems Ltd., which specializes in communications software and services, has gained 57 per cent. And logistics software firm Descartes Systems Group Inc. is up 50 per cent.
What all these companies have in common is that they operate behind the scenes.
Canada is no tech powerhouse, especially when compared with the United States, which is home to the consumer-oriented tech giants that increasingly dominate stock markets as well as global commerce.
Where Canada has made its greatest advancements in the tech space is in the business-to-business segment, starting with telecom equipment maker Nortel Networks Inc.
“We are great at B2B. It’s in our DNA,” said Ron Shuttleworth, a partner at Toronto-based Oak Hill Financial and a veteran of the Canadian tech sector.
That orientation has proved fortuitous, as work has moved from the office to the home, and retail has moved from bricks and mortar to online.
“It’s a perfect setup for Canadian tech,” Mr. Shuttleworth said. “The last three months have been just a cataclysmic change toward the digital economy. And that is fundamentally a B2B phenomenon.”
For Kinaxis, its software allows companies to run simulations, to determine the impact of a disruption to its supply chain and model around it. The loss of a key supplier, for example, is a pitfall that manufacturers around the world have had to manoeuvre around this year.
“The company has offered a critical system for many of its Fortune 1000 clients, particularly in the area of consumer packaged goods and pharma,” Richard Tse, an analyst at National Bank of Canada, said in a note.
The new customers Kinaxis gained in the quarter included “one of the world’s largest consumer products companies,” which Mr. Sicard said he can’t yet name.
Strong demand in all of the company’s markets is one reason Kinaxis reiterated its 2020 guidance, which pegs total revenue growth at 10 per cent to 12 per cent, year-over-year.
“We are full steam ahead,” Mr. Sicard said, suggesting that the heightened level of attention on supply chain flexibility will be a lasting shift after the pandemic fades.
“Supply chains have to be far more agile and resilient. Every boardroom will be asking their CEOs, ‘What will you do next time?’”
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