Kinaxis Inc.
(KXS-T) C$140.61
Q3/22 Preview: Supportive Supply Chain Backdrop
Event
Q3/22 Results: Thursday, November 3, 2022, after the markets close. Conference Call: Friday, November 4, 8:30 a.m. ET. Registration link. Impact: NEUTRAL
We expect total revenue of $91.5mm, up 42.0% y/y. We forecast SaaS revenue of $54.6mm, up 22.0% y/y, and Maintenance & Support revenue of $4.4mm, up 41.0% y/y. We are estimating strong Professional Services revenue of $24.3mm, up 66.4% y/y. We are also looking for Subscription Term Licenses of $8.2mm, up 311.9% y/y, due to the timing of renewals. Consequently, we estimate $14.4mm of EBITDA, or 15.7% EBITDA margin, and EPS of $0.27.
Companies' focus on optimization bodes well for Kinaxis. Persistently high inflation, challenging supply chain environment, and geopolitical risks have made companies to focus on optimizing their operations. We believe that customers will continue looking to Kinaxis' supply chain technologies to discover further cost savings and better planning processes. This is supported by comments from Accenture and IBM that their customers continue to invest in technology to better navigate the dynamic macro backdrop. Kinaxis' long-term strategic partner, Accenture, continued to deliver 20%+ y/y total revenue growth in constant currency (cc) while also seeing 25% cc y/y bookings growth. SAP's results highlighted the importance of supply chain technology, which we believe also reflects positively on Kinaxis. In aggregate, we believe that the complex macro backdrop and continued strength in technology spending reflects positively on Kinaxis.
Strong balance sheet for continued growth. We forecast Kinaxis will have $263.3mm of net cash and generate $31.1mm of FCF in the NTM. As such, we believe that Kinaxis has the balance sheet strength to continue investing for growth and weather through the economic uncertainties.
TD Investment Conclusion
We maintain our BUY rating and C$215.00 target price. We remain confident that Kinaxis' supply chain technology will remain very attractive given the complex supply chain environment.