Kinaxis shares rise as Kanata software firm predicts big jump in 2022 revenues

John Sicard new
John Sicard is CEO of Kinaxis. File photo

Ottawa-based Kinaxis says it expects revenues to rise more than 30 per cent in fiscal 2022 as demand for its supply-chain management software continues to soar.

The company, which keeps its books in U.S. dollars, said Wednesday it’s projecting revenues of between $335 million and $345 million for the 12-month period ending Dec. 31. That’s an increase of nearly $100 million over its total revenues from fiscal 2021 – a year that saw Kinaxis sign a record number of new clients as its sales surpassed the $250-million mark for the first time.

“Momentum in the business is at an unprecedented level, and we intend to take full advantage of that,” CEO John Sicard said during a conference call with analysts on Wednesday morning.

“As we exit pandemic protocols, we continue to see supply chains at the forefront of boardroom conversations and in the news. The need for supply-chain resilience has never been more apparent.”

Stock price up

The markets seemed to respond favourably to the latest earnings report. Kinaxis shares – which have tumbled more than 25 per cent over the past six months as tech stocks in general have taken a big hit – rose to $149.25 in mid-afternoon trading on the Toronto Stock Exchange, up more than $5 on the day.

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. 

With factory shutdowns and other pandemic-related issues triggering a widespread shortage of semiconductors and other key components of a host of consumer goods, Sicard said the pandemic has driven home the need for companies to respond quickly to supply-chain roadblocks.

He said soaring inflation, global conflicts and climate change are also stoking demand for Kinaxis’s software. Sicard touted the company’s blue-chip customer wins in the last quarter – including oil and gas giant BP International, High Liner Foods, Mazda Europe and Rogers Communications – as proof of the growing global appetite for the Kanata firm’s solutions across a range of verticals.

"There’s this appreciation that the only constant in all of supply chain is disruption."

“There’s this appreciation that the only constant in all of supply chain is disruption,” he said. “If anything, (companies) have realized that supply chains haven’t proven to be as resilient as they should be.”

Sicard’s comments follow a banner fourth quarter for Kinaxis. The company reported revenues of $68.5 million for the three-month period ending Dec. 31, up from $54.9 million a year earlier.

Revenue from the company’s subscription-based software – which accounts for the lion’s share of its income – rose 18 per cent year-over-year to $46.9 million. 

The company’s professional services division, which implements Kinaxis software and trains its users, posted revenues of $17 million, up from $11.3 million the previous year. Meanwhile, subscription term licensing revenues for traditional on-premise software fell 26 per cent to $1.4 million, a drop the company attributed to a normal dip in typical three-year subscription renewal cycles.

$2.9M net loss

In addition, Kinaxis’s annual recurring revenues – a 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 – increased 19 per cent from a year earlier to $221 million.

The firm booked a net loss of $2.9 million, or 11 cents per share, up from a loss of $1.6 million, or six cents per share, in the same quarter in fiscal 2020. 

Kinaxis said the increased losses were mainly due to rising salary costs as well as its decision to plow more money into R&D spending – which grew nearly 20 per cent to $16.5 million – as it upgrades its software and builds new data centres to respond to the needs of its growing customer base.

Chief financial officer Blaine Fitzgerland told analysts the additional investments will deliver long-term gains on the balance sheet.

“We’ve seen our bets from 2020 and 2021 pay off, and we see plenty of opportunities for continued growth,” he said.