Kinaxis Inc.
(KXS-T) C$176.80
Q1/23 First Take: In Line Quarter, Guidance Raised
Event
Kinaxis released Q1/23 results last night. Conference Call: 8:30 a.m ET; Registration link. Impact: MIXED
In line quarter. Total revenue of $101.1mm was in line with estimates. SaaS revenue of $63.1mm was up 28% y/y. Professional Services (PS) revenue of $26.6mm was up 23.8% y/y, driven by increased deployment activity, suggesting that the market continues to be active in modernising their supply chains. Subscription term licenses (STL) revenue came in at $7.0mm, in line with our $6.5mm estimate. ARR grew $11mm q/q, or 23% y/y.
EBITDA of $17.1mm was below our expectation of $20.3mm and in line with consensus at $17.6mm. The company ramped up its PS and S&M teams faster than we expected, driving COGS and S&M to be 5.9% and 8.7% above our estimate, respectively. The higher COGS is largely from the company growing its PS team. We're not too concerned with the margin miss relative to our estimate given that these investments suggest that the pipeline remains healthy and that management is ramping up its team to capture the opportunity.
Book/bill weak, but guidance raised. Our mixed impact handle is largely driven by a weak book/bill of only 0.65, which could be partially due to seasonality and partially due to lengthening sales cycles. The press release noted that the macro backdrop has driven extra rigour around some deals, but this is consistent with comments from prior quarters. The timing of bookings can be quite variable; we put a greater weighting on the raised guidance. SaaS revenue guidance hasn't changed, suggesting that the overall market remains as active as three months ago. The STL revenue range was raised by $4mm, implying that it accounts for most of the $5mm increase in the consolidated revenue lift. The higher STL revenue is also likely the reason for the 100bp bump in EBITDA margin guidance. Despite the weak bookings this quarter, we believe the raised guidance is a better indicator of the market conditions. We will look for colour on the macro backdrop, sales cycles, and investment plans on the call.