Post by
retiredcf on Apr 20, 2023 8:49am
CIBC Earnings Preview
Kinaxis Inc.
Earnings Date: Wednesday May 3, after market close,
Conference Call Details: Thursday May 4, 8:30 a.m. ET,
Q1 Overview: Kinaxis continues to benefit from multi-year secular tailwinds, driven by supply
chain disruptions that have reinforced the need for effective supply chain planning. We
forecast Y/Y subscription revenue growth of 27% in 2023, at the higher end of the company’s
guidance of 25%-27% on the back of strong momentum, as evidenced by backlog and the
lack of impact from economic uncertainty. We forecast $7MM in license revenue for the
quarter ($14MM for the full year) and 15% adjusted EBITDA margins, down 640 bps
sequentially as the company continues to ramp up investments to position itself for future
growth.
Key Topics For The Quarter
1. Update On Demand Environment: Kinaxis continues to see a strong demand
environment as the C-suite focuses on supply chain execution, leading to shortened
sales cycles. We expect Q1 subscription revenue growth of 27% Y/Y and forecast a 1%
FX headwind. We will be looking for an update on the company’s expansion to target
smaller customers using VAR and public cloud partners. While Kinaxis continues to look
to partners to fulfill implementation demand, we do expect Professional Services growth
of 30% in the quarter to outpace subscription growth as Kinaxis focuses on implementing
recent client wins as quickly as possible. Longer term, we expect an increasing amount of
Professional Services work to be undertaken by systems integration partners. With the
quarterly results, we will be looking for an update on partner certifications and the ability
to meet demand.
2. 2023 A Year For Investments: Last quarter, management’s 2023 margin guidance of
13%-15% came in below Street expectations of 16.8%. We expect KXS to invest heavily
in R&D and S&M in 2023 and forecast S&M spending to grow 22% Y/Y and R&D
spending to be up 11% Y/Y. We expect margins of 15% in Q1/23E, down from 33.8% in
Q1/22 on the back of lower term license revenue and additional investments.
3. Capital Allocation/M&A: Kinaxis recently hired a head of M&A and we expect the
company to continue to look at acquisitions as it builds out its platform. We expect KXS
will look for adjacent capabilities that allow it to extend its solutions and cross-sell into its
install base. We regard KXS as well positioned to fund M&A, ending last quarter with
$175MM in cash. We will be looking for details on the deal pipeline and commentary on
the company’s near-term capital-allocation strategy.