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Kinaxis Inc. Reports Second Quarter 2019 Results

CNW Group - Thu Aug 1, 4:00PM CDT

SaaS revenue grows 18%, adjusted EBITDA of 27%, fiscal year outlook supported by multiple major customer wins

Kinaxis® (TSX:KXS.TO) , the leader in empowering people to make confident supply chain decisions, today reported results for its second quarter ended June 30, 2019. All amounts are in U.S. dollars. All figures are prepared in accordance with International Financial Reporting Standards (IFRS) unless otherwise indicated.

Q2 2019 total revenue increased 9% to $42.4 million with SaaS revenue growing by 18% to $28.3 million. Adjusted EBITDA((1)) was up 5% to $11.6 million (27% of revenue) and profit decreased slightly to $4.0 million from $4.3 million.

"Our second quarter results further support our strong growth outlook for the year. We secured major new customer wins in every theatre this quarter, which are reflected in our record-breaking backlog. These contracts reinforce our confidence in 2019 guidance, drive increased revenue in Q3 and Q4, and support our accelerated investments in sales force expansion," said John Sicard, Kinaxis CEO. "We are very pleased to have been able to announce a number of these new relationships, including Johnson Electric and Yamaha."

Q2 2019 Highlights





       $ USD millions, except as otherwise indicated

            Q2 2019

            Q2 2018         Change

    ---

                   Total Revenue                                           42.4                       39.0       9%

    ---

                   SaaS                                                    28.3                       23.9      18%


                   Subscription term
                    license                                                 2.4                        2.5      -5%

    ---

                   Gross profit                                            29.4                       26.5      11%


                                                                          (69%)                     (68%)



                   Profit                                                   4.0                        4.3      -6%


                                                          ($0.15/diluted share)     ($0.16/diluted share)



                   Adjusted EBITDA(1)                                      11.6                       11.0       5%


                                                                          (27%)                     (28%)



                   Cash from operating
                    activities                                              8.8                        9.1      -4%

    ---
(1)
                "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 2019 vs Q2 2018 Financial Highlights Revenue: Growth in total revenue of 9% was driven primarily by 18% growth in SaaS revenue, which resulted from contracts secured with new customers, as well as expansion of existing customer subscriptions. Subscription term license revenue declined 5%, as it depends on the timing of renewals, expansions and new engagements for on-premise and hybrid subscription arrangements, and will vary substantially quarter to quarter.

Gross profit margin: Growth in gross profit margin to 69% resulted from the growth in SaaS revenue, partly offset by an increase in costs of revenue, such as related headcount, partner and third-party costs, and higher depreciation costs associated with the expansion of data center capacity.

Profit and adjusted EBITDA: The 6% decrease in profit was due to an increase in operating expenses, partly offset by an increase in revenue and gross profit. Additional investments to support the company's long-term strategic growth initiatives drove increased operating expenses, including additional headcount in sales and marketing and research and development, and higher expenses related to sales commissions and marketing activities. The 5% increase in Adjusted EBITDA was due to an increase in revenue and gross profit, partly offset by the increases in operating expenses, excluding stock-based compensation and depreciation.

Cash from operating activities: The 4% decrease in cash from operating activities was largely due to recognition of deferred revenue balances and payment of income taxes. At June 30, 2019, cash, cash equivalents and short-term investments grew by $19.4 million to $200.9 million from $181.5 million at December 31, 2018.

Financial GuidanceKinaxis is pleased to reaffirm its 2019 fiscal year financial targets, as follows:

FY 2019 Guidance





     Total revenue
         $183-188 million

    ---

                                                       SaaS
         20-22% growth

                                                        ---



     Subscription term license
          $22-24 million

                                                        ---



     Adjusted EBITDA margin
         25-27% 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 that forms an integral part of this release.

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 June 30, 2019.

Remainder of 2020            2021  Total
                                            2019       and thereafter





     SaaS                              57.7  81.7            89.9  229.3

    ---

          Subscription term license          0.9                        0.9

    ---

          Maintenance and support            5.7   6.2             5.1   17.0

    ---

                              Total         64.3  87.9            95.0  247.2

                                ---

This press release, along with the financial statements and MD&A for the three and six months ended June 30, 2019, are available on Kinaxis' website and on SEDAR at www.sedar.com.

Conference CallKinaxis will host a conference call tomorrow, August 2, 2019, 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 2, 2019



     Time:
     8:30 a.m. Eastern Time



     Webcast:

                https://bit.ly/2XAVDx2



     Dial-in number:
     (647) 427-7450 or (888) 231-8191



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


                          Available until 11:59 p.m., Eastern Daylight Time
                           Friday, August 9, 2019


      Reference number:                                             2086230

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

About Kinaxis Inc.Eliminating volatility in your supply chain is impossible, but managing it is not. Trusted by top brands, Kinaxis® gives people the confidence to know they are making the best planning decisions to maximize business performance. We solve complex business problems in easy-to-understand ways faster by combining human and machine intelligence to plan for any future, monitor risks and opportunities and respond at the pace of change. With the support of our community of supply chain experts and using our unique concurrent planning technique and single integrated planning platform, customers can realize higher revenue, lower costs and fewer risks. For more Kinaxis news, visit Kinaxis.com or follow us on LinkedIn, Twitter or Facebook.

Non-IFRS MeasuresThis 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 working 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,



                                                 2019                         2018                       2019                      2018




              (In thousands of USD)





     Profit                                           $
         4,001                                $
      4,265                             $
      10,967   $
      8,818



     Share-based compensation                                3,581                         2,527                 6,653                        5,685




     Adjusted profit                                  $
         7,582                                $
      6,792                             $
      17,620  $
      14,503




     Income tax expense                                      1,905                         1,809                 5,723                        4,939



     Depreciation                                            2,974                         2,398                 5,651                        4,218



     Foreign exchange loss (gain)                             (85)                          222                    85                           26



     Net finance income                                      (821)                        (193)              (1,586)                       (338)



                                                              3,973                         4,236                 9,873                        8,845




     Adjusted EBITDA                                 $
         11,555                               $
      11,028                             $
      27,493  $
      23,348




     Adjusted EBITDA as a percentage of revenue                27%                          28%                  31%                         31%

Forward-Looking StatementsCertain 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, 2019, 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 2019 annual total revenue, annual SaaS and Subscription term license revenue and annual Adjusted EBITDA margin, 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, 2019, 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, 2019 and December 31, 2018



       (Expressed in thousands of USD)



       (Unaudited)





              June 30,
     December 31,
                                                               2019                            2018






       Assets





       Current assets:


        Cash and cash equivalents                                     $
        165,512                 $
        126,144



       Short-term investments                                             35,387                        55,404


        Trade and other receivables                                        43,353                        64,330



       Prepaid expenses                                                    7,068                         5,815

    ---

                                                                          251,320                       251,693





       Non-current assets:



       Property and equipment                                             27,872                        22,785



       Right-of-use assets                                                10,774                         8,873



       Contract acquisition costs                                         13,493                        13,902



       Unbilled receivables                                                  440                           457



       Deferred tax assets                                                    58                            49




                                                                      $
        303,957                 $
        297,759

                                                                                                             ===



        Liabilities and Shareholders' Equity





       Current liabilities:


        Trade payables and accrued
         liabilities                                                   $
        15,856                  $
        21,623



       Deferred revenue                                                   66,161                        78,496



       Lease obligations                                                   2,687                         2,572


                                                                           84,704                       102,691



       Non-current liabilities:



       Lease obligations                                                   8,463                         6,311



       Deferred tax liabilities                                            6,425                         4,075

    ---

                                                                           14,888                        10,386





       Shareholders' equity:



       Share capital                                                     127,977                       124,951



       Contributed surplus                                                30,009                        24,284


        Accumulated other comprehensive loss                                (354)                        (319)



       Retained earnings                                                  46,733                        35,766

    ---

                                                                          204,365                       184,682




                                                                      $
        303,957                 $
        297,759

                                                                                                             ===
Kinaxis Inc.



       Condensed Consolidated Interim Statements of Comprehensive Income





       For the three and six months ended June 30, 2019 and 2018



       (Expressed in thousands of USD, except share and per share data)



       (Unaudited)




                                                                   For the three months
      For the six months


               ended June 30,
       ended June 30,


                                                                      2019                         2018                       2019              2018






       Revenue                                           $
              42,352            $
             38,994         $
              88,106 $
             75,843





       Cost of revenue                                             12,984                       12,493                     25,175            22,628





       Gross profit                                                29,368                       26,501                     62,931            53,215





       Operating expenses:



       Selling and marketing                                       10,446                        8,897                     19,761            16,283


        Research and development                                     8,101                        7,357                     16,095            14,106


        General and administrative                                   5,821                        4,144                     11,886             9,381

    ---

                                                                    24,368                       20,398                     47,742            39,770




                                                                     5,000                        6,103                     15,189            13,445



       Other income (expense):


        Foreign exchange gain (loss)                                    85                        (222)                      (85)             (26)



       Net finance income                                             821                          193                      1,586               338


                                                                       906                         (29)                     1,501               312




        Profit before income taxes                                   5,906                        6,074                     16,690            13,757





       Income tax expense                                           1,905                        1,809                      5,723             4,939





       Profit                                                       4,001                        4,265                     10,967             8,818




        Other comprehensive income (loss)


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


        Foreign currency translation
         differences -foreign operations                                21                        (443)                      (35)             (43)




        Total comprehensive
         income                                            $
              4,022             $
             3,822         $
              10,932  $
             8,775

    ===                                                                                                                                         ===



        Basic earnings per share                            $
              0.15              $
             0.17           $
              0.42   $
             0.34




        Weighted average number of basic
         Common Shares                                          26,146,682                   25,720,014                 26,119,264        25,631,985




        Diluted earnings per
         share                                              $
              0.15              $
             0.16           $
              0.41   $
             0.33




        Weighted average number of diluted
         Common Shares                                          26,840,552                   26,749,364                 26,841,775        26,733,546
Kinaxis Inc.



       Condensed Consolidated Interim Statements of Changes in Shareholders' Equity





       For the six months ended June 30, 2019 and 2018



       (Expressed in thousands of USD)



       (Unaudited)





          Accumulated



              other
      Retained



       Share
       Contributed
          comprehensive
      earnings
      Total



       capital
         surplus
              loss
      (deficit)
      equity




        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 income                                                                                                                         (43)                                           (43)


        Total comprehensive income                                                                                                                         (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

    ===                                                                                                                                                                                                                 ===



        Balance, December 31,
         2018                                                                                    $
       124,951                  $
       24,284                      $
       (319)               $
       35,766              $
       184,682





       Profit                                                                                                                                                                   10,967                  10,967


        Other comprehensive loss                                                                                                                           (35)                                           (35)


        Total comprehensive income (loss)                                                                                                                  (35)                  10,967                  10,932




        Share options exercised                                                            3,026                         (928)                                                                            2,098



       Share based payments                                                                                            6,653                                                                             6,653


        Total shareholder transactions                                                     3,026                         5,725                                                                             8,751




        Balance, June 30, 2019                                                                   $
       127,977                  $
       30,009                      $
       (354)               $
       46,733              $
       204,365

    ===                                                                                                                                                                                                                 ===
Kinaxis Inc.



       Condensed Consolidated Interim Statements of Cash Flows





       For the three and six months ended June 30, 2019 and 2018



       (Expressed in thousands of USD)



       (Unaudited)




                                                                       For the three months                  For the six months

                                                                            ended June 30,                      ended June 30,


                                                                           2019                       2018                      2019                   2018





        Cash flows from operating activities:





       Profit                                                      $
          4,001             $
           4,265        $
              10,967       $
             8,818



       Items not affecting cash:


        Depreciation of property and equipment
         and right-of-use assets                                          2,974                      2,398                     5,651                  4,218



       Share-based payments                                              3,581                      2,527                     6,653                  5,685


        Investment tax credits recoverable                                                                                             911



       Net finance income                                                (821)                     (193)                  (1,586)                 (338)



       Income tax expense                                                1,905                      1,809                     5,723                  4,939


        Change in operating assets and
         liabilities                                                    (2,045)                     (848)                   10,974                (2,607)



       Interest received                                                 1,000                        446                     1,873                    807



       Interest paid                                                     (158)                     (321)                    (270)                 (469)



       Income taxes paid                                               (1,676)                     (998)                 (12,465)               (2,499)


                                                                          8,761                      9,085                    27,520                 19,465




        Cash flows used in investing
         activities:




        Purchase of property and equipment                              (8,301)                   (4,529)                  (9,194)               (9,350)


        Purchase of short-term investments                             (15,001)                  (37,500)                 (30,006)              (52,543)


        Redemption of short-term investments                             22,500                     15,000                    50,006                 55,005


                                                                          (802)                  (27,029)                   10,806                (6,888)




        Cash flows from financing activities:





       Payment of lease obligations                                      (687)                     (544)                  (1,287)                 (998)


        Common shares issued on exercise of
         stock options                                                    1,153                      4,361                     2,098                  7,139


                                                                            466                      3,817                       811                  6,141




        Increase (decrease) in cash and cash
         equivalents                                                      8,425                   (14,127)                   39,137                 18,718




        Cash and cash equivalents, beginning of
         period                                                         156,984                    136,587                   126,144                103,392




        Effects of exchange rates on cash and
         cash equivalents                                                   103                      (427)                      231                   (77)




        Cash and cash equivalents,
         end of period                                            $
          165,512           $
           122,033       $
              165,512     $
             122,033

    ===                                                                                                                                                ===

SOURCE Kinaxis Inc.

View original content: http://www.newswire.ca/en/releases/archive/August2019/01/c6377.html

SOURCE: Kinaxis Inc.

Investor Relations: Rick Wadsworth, Kinaxis, Tel: (613) 907-7613,
rwadsworth@kinaxis.com; Media Relations: Danielle McNeil Taylor, Kinaxis, Tel: (343)
998-7284, dmcneiltaylor@kinaxis.com

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