Kinaxis Inc.
(KXS-T) C$218.26
Q3/20 First Take: Strong Quarter
Event
Kinaxis released Q3/20 results last night. Conference Call: 8:30 a.m ET; Event registration link. Impact: POSITIVE
Strong revenue and margins... Revenue of $55.1mm was above estimates of $52.0mm (TD)/$52.5mm (consensus). SaaS revenue of $39.3mm was slightly above our expectations and represented 26% growth y/y. Term License revenue of $1.0mm was in line with our expectations, while Professional Services revenue of $11.5mm exceeded our estimate of $9.0mm. EBITDA margin of 18.4% exceeded our expectation of 15.9% and consensus at 16.5%, despite additional growth expenses and a full quarter of Rubikloud expenses. EPS of $0.20 beat estimates of $0.15 (TD)/ $0.17 (consensus).
...and strong bookings. As a reversal from last quarter, bookings came in very strong this quarter. We estimate SaaS book/bill was a very strong 1.82 and total backlog grew by $31.7mm, suggesting demand for Kinaxis' solutions remain strong and the deal pipeline continues to progress. Management also noted that the sales pipeline continued to grow. Bookings can be lumpy, so we do not think this is a trend, but it is assuring to see it make up for the weak bookings in Q2 and suggests that Kinaxis can continue to close deals in the current environment, where sales cycles can lengthen from longer contract approval processes and deferred projects.
EBITDA margin guidance remains conservative, in our view. 2020 total revenue guidance was increased to $220mm-$223mm, from $216mm-$220mm. SaaS revenue growth was also increased by 1pp and EBITDA margin guidance increased to 22%-24%, from 20%-23%. If we back into the implied Q4 guidance, it suggests total Q4 revenue of $50.8mm-$53.8mm, which is relatively in-line with consensus at the high end. Backlog to be recognized in Q4/20 is $43.2mm. If we assume professional services of $9mm and additional deals get closed during the quarter, revenue can easily reach the high end of guidance. Implied Q4 EBITDA margin guidance is 1.5%-10.9%, which we believe is being extremely conservative. The virtual users' conference in October may have added some opex q/q, but considering that Q3's EBITDA margin of 18.4% already includes a full quarter of Rubikloud expenses suggests that there could be upside to EBITDA margin