Kinaxis Inc.
(KXS-T) C$209.15
Q3/20 Preview: Looking for Updates on the Pipeline
Event
Q3/20 Results: Wednesday, November 4, 2020, after the markets close. Conference Call: Thursday, November 5, 8:30 a.m ET. Event registration link. Impact: NEUTRAL
We estimate total revenue of 52.0mm, up 10% y/y. We expect our SaaS revenue estimate of $38.6mm, up 24% y/y, to drive top-line growth in the quarter. Combining SaaS and Maintenance & Support revenue, we expect ~81% of total revenue to be recurring. We forecast total EBITDA of $8.3mm, or 15.9% EBITDA margin in the quarter as the company continues making investments in the quarter. Our EBITDA estimate is also affected by an estimated lower mix of subscription term license revenue this quarter.
Potential for accelerating growth. We remain confident that Kinaxis could accelerate growth due to increased supply chain complexities. We expect continued pandemic impacts, geopolitical risks, and accelerating e-commerce volumes to highlight the value proposition of Kinaxis' solutions. RapidResponse is now also extensible, which allows partners to integrate with the platform. We believe this could allow RapidResponse to be used in new verticals and become more defensible. The Rubikloud acquisition should also accelerate Kinaxis' entry into the retail vertical. We expect Kinaxis to cross-sell Rubikloud to CPG as well. SAP's recent results pointed to delays in large deals as the second wave impacts key markets. However, they also noted that core transformation projects, including those in supply chain, remain in focus. We believe supply chain cloud solutions will continue to be areas of investment. Kinaxis did note last quarter that the sales cycle was lengthening for some deals; we will be looking for updates on how those deals are progressing, how the overall pipeline is growing, and how the growth investments are going.
TD Investment Conclusion
We maintain our BUY rating and $255 target price. We remain confident in Kinaxis' growth opportunities and believe the current backdrop remains favourable for supply chain technologies.