Kinaxis Inc.
(KXS-T) C$167.79
Q2/23 Preview: Expecting Resilient Demand
Event
Q2/23 Results: Wednesday, August 9, 2023, after the markets close. Conference Call: Thursday, August 10, 8:30 a.m. ET. Registration link. Impact: NEUTRAL
We expect total revenue of $106.5mm, up 31.9% y/y. We forecast SaaS revenue of $65.3mm, up 27.7% y/y; Maintenance & Support revenue of $4.5mm, up 15.0% y/ y; Professional Services revenue of $32.5mm, up 28.0% y/y; and Subscription Term Licenses of $4.3mm. Consequently, we estimate $17.2mm of EBITDA, or 16.2% EBITDA margin.
Healthy backlog to support strong growth. Last quarter, Kinaxis reported a total backlog of $568mm, up 18% y/y. SaaS backlog grew 19% y/y to $528mm. Despite the slower start in Q1, which was largely expected given seasonality and the timing of deals, we are optimistic that demand will continue as companies invest in projects with proven ROI, such as supply chain modernization. We believe that the backlog and historical growth support the potential for SaaS to crack the elusive 30% growth rate in 2023.
Still the leader in supply chain technology. Kinaxis' annual user conference (see our takeaways here) reinforced our views that Kinaxis remains the market leader in the space, with long-standing and new customers continuing to view RapidResponse's products very positively. Continued product innovation, such as the new Enterprise Scheduling tool, fills a gap in the portfolio for continued differentiation in providing a holistic, end-to-end supply chain platform. Despite sales cycles remaining elongated, which we believe will be temporary, demand for supply- chain resiliency remains strong with demonstrated expansion into new verticals, such as retail QSRs. This could translate into meaningful ARR accretion.
Strong balance sheet for continued growth. We forecast Kinaxis will have $274.5mm of net cash and generate $17.1mm of FCF in the NTM.
TD Investment Conclusion
We maintain our BUY rating and C$210.00 target price. We remain confident that demand for Kinaxis' industry-leading supply chain technology will remain high despite the uncertain macro backdrop.