Kinaxis shares rise as software firm raises 2022 guidance, reports record customer signings

supply chain

The kind of business headaches that are prompting executives in C-suites around the world to pull their hair out – rampant inflation, pandemic-fuelled shortages of raw materials, ripple effects from the war in Ukraine – are also causing some sleepless nights for Kinaxis boss John Sicard.

In Sicard’s case, though, he’s staying up late trying to figure out how to get his software into the hands of his ever-expanding list of customers as fast as possible.

Such is life when you’re in charge of one of the world’s leading companies for helping manufacturers manage their supply chains, during a time when a global health crisis, an escalating conflict in Europe and a host of other factors are driving demand for your product to new heights.

“We are at this very moment experiencing what I call a supply chain renaissance – a generational shift in how supply chains will operate for decades to come,” Kinaxis’s chief executive told analysts on a conference call Friday morning to announce the Kanata firm’s first-quarter financial results.

“I really think this is becoming urgent. Momentum begets momentum, and we’re experiencing it right now here at Kinaxis.”

"We are at this very moment experiencing what I call a supply chain renaissance – a generational shift in how supply chains will operate for decades to come."

Kinaxis, which keeps its books in U.S. dollars, said Friday it brought in revenues of just over $98 million in the first three months of 2022 – a whopping 70 per cent jump from a year earlier. 

That burst, plus a bevy of blue-chip customer signings during the quarter, prompted the company to revise its full-year revenue projections to between $345 million and $355 million for fiscal 2022 – up about $10 million from its previous guidance in March.

The markets appeared to like what they saw in the firm’s first-quarter numbers. 

Like most tech stocks, Kinaxis has taken it on the chin over the past six months. Its share price has plummeted from a 52-week high of $229.98 on the Toronto Stock Exchange last November to $138.39 at the close of trading on Friday. But it ended the day up more than seven per cent, or $9.18, as investors seemed to share Sicard’s buoyant outlook.

After signing a record number of new customers in the fourth quarter of 2021, Kinaxis matched that win total in the first three months of this year – a feat that’s all the more impressive considering the dark days of winter and early spring typically don’t see such a flurry of new sales activity.

Kinaxis’s RapidResponse and RapidStart software platforms help companies such as Ford and Unilever ensure they have the right amount of raw materials on hand to manufacture their goods by tracking demand and inventory in real time. 

Carlsberg, Kimberly-Clark sign on

The list of companies that have recently turned to Kinaxis for help with this daunting task reads like a who’s-who of heavy corporate hitters – among them Danish brewing giant Carlsberg and consumer goods manufacturer Kimberly-Clark, the company behind iconic brands like Kleenex and Huggies diapers.

“It serves to boost our confidence in what is to come for the remainder of 2022,” Sicard said of the recent flood of high-profile customer signings. “We are thrilled with our ability to serve such a broad universe of companies and verticals with a single (software-as-a-service) offering.”

Adding more enterprise-class logos is bound to make Sicard smile. Big companies are his firm’s bread and butter – Kinaxis’s 10 largest customers now account for 40 per cent of its total revenues, up from 27 per cent a year ago.

Even better for Sicard and Co., Kinaxis is re-hooking some big fish that had left to sample other waters. 

While the firm has an enviable customer retention rate in the high 90s, some clients inevitably leave when their contracts are up. But Sicard said Kinaxis is seeing more and more enterprise customers return to the fold, augmenting the company’s growing list of new signings and sales prospects.

“We’re looking at the pipeline and we’re seeing very healthy activity in the enterprise class,” he said. “You’re going to see a continuation of those (customer wins), based on what I see in the pipeline.” 

$12.5M profit

In addition to reeling in more customers than ever before, Kinaxis is getting its platform up and running in clients’ factories faster. Sicard noted the company is seeing an uptick in demand for its RapidStart software that can begin delivering results in as little as eight weeks – a much shorter process than the months-long initiation customers used to go through.

The first quarter saw Kinaxis make especially robust gains in subscription term licence revenue – which grew more than 1,000 per cent year-over-year to $23.5 million as a new three-year cycle of customer renewals kicked off – and professional services, which posted growth of nearly 80 per cent to more than $21 million as new customers needed to get trained and onboarded.

All that additional income helped Kinaxis flip from a loss of $1.5 million in the first quarter of 2021 to a profit of $12.5 million this year.

Meanwhile, Kinaxis’s annual recurring revenues – a relatively new metric aimed at giving investors an updated snapshot of the total annual value of all recurring subscription contracts, including SaaS, term licensing and maintenance revenue, at a specific point in time – rose 24 per cent from a year earlier to $236 million in constant currency.

Kinaxis chief financial officer Blaine Fitzgerald said the company is riding a wave of momentum that’s showing no signs of running out of steam. 

“We’re in one of those situations that I think every CFO wants to be in where things are rolling in our favour in a lot of different respects,” he said.