Kinaxis Inc KXSCF

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Kinaxis Inc.

(KXS-T) C$154.14

Q1/21 Preview: All Eyes on the Bookings

Event

Q1/21 Results: Tuesday, May 4, 2021, after the markets close. Conference Call: Wednesday, May 5, 8:30 a.m. ET. Registration link.Impact: NEUTRAL

We expect total revenue of $57.9mm, up 10% y/y. We forecast SaaS revenue of $40.9mm, up 20% y/y, which includes $1.2mm of revenue contribution from Rubikloud. Combining SaaS and Maintenance & Support revenue implies that we expect Kinaxis to have a recurring revenue mix of ~76% this quarter. We also estimate Professional Services revenue of $11.5mm, up 8% y/y. We forecast $6.4mm of EBITDA, or 11.1% EBITDA margin, which is driven by lower subscription term licenses and a larger employee base as the company invests for growth.

Optimistic on solid bookings throughout the year. Recall that Kinaxis' sales pipeline grew ~40% y/y in 2020. We believe that Kinaxis could deliver another strong quarter of SaaS bookings growth, evidenced by the three customer deals announced during the quarter. We note that SAP delivered double-digit y/y cloud backlog growth in Q1/21, which we believe is supportive of Kinaxis' cloud-based supply chain solutions. We also note that commentary from major IT vendors, including SAP and IBM, have suggested that IT spending is improving. We believe this is positive for large IT projects, such as those for supply chain modernization, and suggest that Kinaxis could see continued bookings momentum throughout 2021.

Healthy cash balance. We forecast Kinaxis will have $218mm of net cash in Q1/21, as well as generate $45mm of FCF in 2021. As such, we believe that Kinaxis has the balance sheet to support its growth investments across verticals and geographies.

TD Investment Conclusion

We maintain our BUY rating and C$165 target price. We are confident that digital supply chain solutions will remain in high demand. We also believe that Kinaxis will continue to capitalize on the positive backdrop and convert its sales pipeline into deals, especially as economies normalize and spending on large IT projects resume. We will revisit our estimates and target after they report results.