(KXS-T) C$201.49
Q3/21 Results: Bookings Expected to Accelerate
Event
Kinaxis reported Q3/21 results and held its conference call Friday morning.
Impact: SLIGHTLY POSITIVE
See our previous note for a review of the results.
Bookings expected to accelerate as renewals cycle picks up in Q4/21. Similar to Q2/21, Q3/21 had a low volume of renewals driving the SaaS book/bill to come in under 100% again. Management continued to see a high volume of bookings from new customers, as evidenced by the ARR increasing 23% y/y. Renewals are based on the timing of contracts and do not contribute to Kinaxis' growth, unless the deal is expanded. However, we do track the 2022 SaaS backlog as a leading indicator of next year's SaaS revenue. We believe that the current 2022 SaaS backlog sitting at $144.7mm puts Kinaxis on track to hit its 23-25% SaaS growth target next year, but it would require a record quarter of backlog growth in Q4/21. Management sounded very confident that the renewal cycle and pipeline conversion will drive material bookings in Q4/21 and into next year. As a result, we continue to forecast that Kinaxis will grow its SaaS revenue by ~24% in 2022.
RapidStart continues to drive customer wins. Kinaxis' quick deployment initiative, RapidStart, has seen good traction. This is evidenced by the record number of new customers in Q3/21. Kinaxis has more than tripled new customer wins YTD, compared with last year. We believe this is also reflected in the strong ARR growth. We also note that although the company won a record number of new customers in Q3/21, q/q ARR grew by $7mm, less than the $9mm in Q2/21. This suggests that new contracts are starting off smaller, which makes sense for a rapid deployment. Management has already seen expansions with early RapidStart customers, which we believe will materialize for new customers as well. RapidStart has also opened up the mid-market and more than doubled the number of prospective accounts to over 6,000.
TD Investment Conclusion
Increasing our target price to C$230.00. We continue to believe that 2022 is set up for strength as bookings accelerate and the term-license cycle recovers. We believe that supply-chain challenges can drive increased demand for Kinaxis' solutions.