October 23, 2020
Kinaxis Inc.
Fulfilling the long-term vision
Our view: We attended Kinaxis’ virtual user conference this week, which included a Q&A session with management. While the virtual format of the event limited interactions with customers and partners, the company made some significant product announcements. These appear to largely address the company’s long-term aspirations and vision. Hence, we believe Kinaxis’ product roadmap will sustain the company’s competitive advantages and growth momentum. Maintain Outperform.
Key points:
• Extending RapidResponse’s competitive advantages. We see Kinaxis moving from being a next-gen supply chain planning tool to a more holistic, end-to-end data management and analysis platform for large enterprises. In our view, the company made some of its most significant product announcements at this year’s event. Specifically, Kinaxis plans to launch Command & Control Center, which augments RapidResponse’s scenario analysis and concurrent planning engine with the ability to automatically detect and respond to disruptions. This fulfills the company’s long-term aspirations and vision. The company is integrating tools from partners like Resilience360 and project44 to detect disruptions and using AI/ML to showcase multiple scenarios of potential responses to mitigate disruptions. According to management, the feedback from customers has been positive and Kinaxis already has their first leads.
• Creating a category killer. A portion of the event focused on the AI/ ML capabilities of Rubikloud, which Kinaxis acquired for $60MM on July 2. Kinaxis disclosed that it already has two customers in the retail vertical (Rexall and Superdrug) and expects to win additional ones. With COVID disrupting supply chains and forcing a shift in retail to omni- channel, the opportunity for a converged Kinaxis and Rubikloud solution appears large, in our view. Additionally, management sees cross-selling opportunities in the CPG and Life Sciences verticals.
• The platform emerges. After indicating that 3rd party app support for the last few years would be coming, Kinaxis announced the availability of several 3rd party applications running on top of the RapidResponse data model and engine. These applications address specific use cases including transport optimization, production scheduling, and recycling planning. We believe the availability of 3rd party applications, along with Kinaxis’ Command & Control Center, greatly enhance the value of RapidResponse.
• Maintain Outperform, C$240.00 price target. We believe Kinaxis is at the early stages of a long-term growth opportunity. The company, in our view, is well positioned to benefit from the transformation of supply chains and enterprise planning and is expected to see sustained/ accelerating SaaS growth. Our C$240.00 price target equates to 50x CY22e EV/EBITDA, which remains justified above peers (47x), given higher SaaS revenue growth (25% vs. peers at 20%).